Weekend reflections

Weekend Reflections is on again. Please comment on any topic of interest (civilised discussion and no coarse language, please). Feel free to put in contributions more lengthy than for the Monday Message Board or standard commnets.

39 thoughts on “Weekend reflections

  1. Not only that, but we are having an election where there is a clear ideological distinction between the two main parties. Something that is quite refreshing (to someone who has lived in Australia and who grew up in NZ during the 1980s and early 1990s). It’s also something that is rather anxiety inducing given how close the damn thing has been predicted to be…

  2. It appears the NZ election is a repeat of our own 1996 election. A tired Labour Government vs an untried, policy wonk (leader) in the Conservatives. Devil and the deep blue sea.

  3. One of the key limits to development in African nations is the ridiculous level of taxation in those nations. And if taxation is not bad enough many of the nations also have inflation imposed on them by loose monetary policy. Both these problems can be fixed simply by a change of government policy. All it takes is political insight and political will.

    In Ethiopia a farmer that earns more than US$$4235 pays a tax rate of 89%. There is no scope for a farmer to accumulate a surplus or reinvest in his/her enterprise. Not only is there little scope there is little incentive. In Ethiopia if you grow more food than the government deems fair then you have to give it to the central planners for redistribution.

    And in Niger you don’t need to be a farmer to get hit hard with taxes. If you earn more than US$600 per annum then your marginal income tax rate is 52%. On top of that they have a 17% VAT which in April in the midst of famine the government had the audacity to increase to 19% (sparking riots).

    Producers need incentives. They also need to be able to keep a fair proportion of any surplus they produce so that they can reinvest.

    The reason that Africa can not create its own capital, or attract foreign capital is because it is over taxed. The idea that their starvation is caused by bad weather is a most unhelpful myth.

    The IMF does not help much on the policy front. When it takes over running the economy its cure is usually two fold:-

    a) Currency devaluation (ie more inflation).
    b) Austerity (ie more taxation).

    If Australian farmers were taxed at 89% once their income exceeded US$4235 then we would also periodically face starvation. If Australians in general payed 19% VAT plus 52% income tax once their income exceeded US$600 per annum then we would also be stuck in sever and persistent poverty.

  4. Yes elizabeth I was about to say that too.
    john Howard is a lot of things but not even Janette or David Barnett would call him a policy wonk.

    sorry Daivid Barnett would call him that.
    Nationals to win!

  5. Three short issues for the weekend:

    1. The deportation of Scott Parkin should be a major concern for any Australian who believes in what used to be our national ethos of “giving somebody a fair go”. The powers that the Federal Government has given ASIO (is Security Inteligence an oxymoron?) to arrest, detain, deport, whatever without reason or responsibility makes us just as bad as the enemy in the war on terror. We ought to be better than those people not the same or worse.

    2. Poor Mark Latham! Its so sad to see someone who showed so much promise fall so badly. I hope for his/our sake that the whole circus just blows-over as quickly as posible. And a word to Mark: don’t sue your first wife, she is trying to help you mate!

    3. Now for something a bit lighter – Go the Swans!

    Have a goooodweegend!

  6. Would not hazard a guess as to the result of N.Z. election, like Homer.
    Concerning, is the tactics of a group called “The exclusive brethren”.
    From my understading they have spent a large amount of money denigrating the greens ,just before the election,in a style similar to Family First ,in our election.
    Mr Brash has admitted meeting with this group, who do not vote on religious grounds. While denying that Lynton Crosby, of conservative fame, has had any influence Mark Texter, has helped out. The young Nationals have posted suggestions as to Ms Clarks suitability for office, on the grounds of marital status and sexual choice.
    Why would anyone enter politics?

  7. Terje, if you are a farmer in a developing country, any cash income relates to cash crops, not subsistence. The unfairness is not what you might suppose, based on experience of life in a developed country.

    Of course, it’s still unfair to tax at all, let alone at those levels, but to all intents and purposes farmers’ cash incomes in those countries are already net. They don’t have to live off cash earnings.

  8. The Scott Parken deportation issue continues to intrigue me.

    The only reason I could assume why he was deported was becuase he flauted his tourist visa, i.e. engaging in work activities – he was leading and teaching classes in Bruswick, Melbourne.

    The other thing that I find interesting, is how will the Government enforce Mr Parken repaying the hefty fines, if he is based in the US?

  9. Elizabeth ,he was deported as a “threat to national security” and not a visa breech. Presumably,if he re-entered Australia for, whatever strange reason, he would be asked to payback. A tactic used against failed asylumn seekers. Now ,it seems, visitors with different views to the government are able to be shafted, at any time, and have to pick up the tab for their incarcaration and entourage back home.
    As long as Kim Beasley is told, and the rest of us left uninformed as to details.

  10. As long as Kim Beasley is told, and the rest of us left uninformed as to details.

    F&%*ing Beasley. I don’t think there’s been a more useless tool in charge of the federal party.

  11. Sigh.

    The message is now clear to anyone who comes here without a cast iron nailed down absolute enforced by gunboats right to stay in the country: you dare to make the slightest cheep in public, we will deport you. No trial, no evidence, no case, no judge, just the slightly distasteful task of whispering lies in the credulous fatboy’s ear.

    At least no-one got drowned to put the message out.

    Why did we abolish the Star Chamber again?

    Maybe he really was a threat to security. Those airport security people who let him into the country with a sackful of semtex better be sacked real soon!

  12. David Tiley: The opposition, after being briefed, dropped Parkin quicker than a hot potato. Despite recieving advice to apply for habeas corpus, thus forcing the government case into the open, Parkin chose instead to be deported. Clearly it is Parkin, rather than the government, who doesn’t want us to know just what it is he was up to.

  13. QUOTE: Terje, if you are a farmer in a developing country, any cash income relates to cash crops, not subsistence.

    RESPONSE: You are making my point for me. The tax rate in Ethiopia says don’t grow crops for market. Don’t accumulate cash reserves. Don’t build capital. Continue to live a subsitence life.

    If Australians were forced back to a subsistence lifestyle then every time we had a drought we would also die like flies. Subsistence is poverty.

  14. >In Ethiopia a farmer that earns more than US$$4235 pays a tax rate of 89%.

    Yeah i’m sure the high marginal tax rates are the pricnipal impediment ot Ethiopian farmers earnign that much.

    Even when most people earn cash in coem in these countries they don’t pay tax – you think a Nigeran peasant selling a cow in a remote town and then spending the money on grai neither declares the incoem or pays GST?

    Virtually the only people in these countries paying tax are western expats and government employees.

    In an absolute sense, yes, excessively high marginal tax rates are undesirable – but to suggest they’re a major contributor to poverty i nthese countries seems incorrect.

    I also find it odd that you complain about the high level of GST – raising indirect taxes to fund cuts in marginal income tax rates has been part of the IMF remedy package for decades.

  15. Terje Petersen,

    89% is a very high top marginal tax rate. However, in the Post WW2 years England also had very high top tax rates – at the same time the economy grew dramatically. So tax rates aren’t everything.

    Secondly, GDP per capita in Ethiopia is about $750 US. So the tax rate you mention affects very few people. Given that farmers are amongst the poorest people in Ethiopia I would venture that the tax rate you mention is virtually irrelevant to whether farmers innovate or not. Perhaps other tax rates remain an issue to farmers in Ethiopia, but the number you site is meaningless.

    Thirdly, according to the CIA World Fact book (you know, those old lefties) CPI inflation in Ethiopia is 2.4%. Is that really an issue?

    Fourthly, while IMF austerity programmes may sometimes involve raised taxes, more often than not they also involve cutting government expenditure (hint: the word ‘Austerity’ is revealing here). Too often in the past such expenditure has been cut from areas such as education and health. Given the externalities associated with health and education, this is the real harm done by the IMF (along with raising interest rates which often triggers domestic recessions).

    Fifthly, a major contributing factor to the underdevelopment of Ethiopia is major international debt (which restricts spending on health etc and, lo and behold, contributes to higher taxes). Fair enough, this debt is the result of past Ethiopian governments borrowing heavily and spending irresponsibly and so, as such, can be viewed as Ethiopia’s fault. However, given that these governments were dictatorships, it seems a little unfair that the people of Ethiopia ought to forgoe medicine and schools to pay for the crimes of governments that they had no role in electing. Furthermore, those western banks and mutli-laterals that lent to these Ethiopian governments often did so knowing full well that the money was being squandered. Because of this it seems fair to me that they, not the people of Ethiopia, should bare the cost of this.

    Finally, like it or not, weather does play a role in Ethiopia’s development. In the drought of 2002 the country’s economy contracted by 2%. Climate ain’t everything, but likewise, its adverse effects aren’t a myth either.

  16. Terence,

    1. Did the English tax rate of 89% cut in at anything like an income equivalent of todays US$4000. US$4000 is roughly 7200 pounds sterling. Adjusting for inflation the tax situation in Ethiopia today would be like if England had a top tax rate in 1950 of 89% on an annual income back then of 360 pounds.

    2. You said the GDP is low so the tax rate effects few. I say the tax rate is punative so nobody has an incentive to increase their personal proportion of GDP.

    3. Inflation may not be an issue in Ethiopia. However in nations such as Ghana it is.

    4. Yes Austerity may involve spending cuts. However with punative tax rates the private sector can not operate. So no substitute services can emerge and it is very destructive.

    5. I agree with the debt issue.

    6. Droughts happen in Australia and the US and Europe. But in those instances people don’t starve as a result. Drought will cause death in a subsistence economy. However the real problem is the economy not the weather.


  17. Steve, I guess you are supporting fatboy’s judgement. Personally I think the situation is such a travesty of what our society stands for that the ALP should have opposed it no matter what Parkin’s alleged “crime”.

    I am having great difficulty imagining what that actually is. The facts in public are that he once ran around in a tiger suit, uses a megaphone in the street, and teaches people non-violent resistance. If he has committed yer actual crime, he should be charged by yer actual criminal law.

    If he has committed some crime for which he can’t be charged, there must be something wrong with the law. I would be interested to hear how you would fix it.

    As to the matter of habeus corpus, we don’t know his situation or the legal advice he was given. Let’s not forget he is involved in campaigning against Halliburton, a vast multinational he thinks is gouging billions from his government and helping to propagate an ugly foreign war.

    He probably thinks that half a dozen cops dragging him from a Melbourne cafe and giving him a taste of Bulgaria on the Yarra is too tin-pot to bother with.

    It matters more to us than him, because it is our government, and our opposition. In which, as a lifelong ALP supporter, I am deeply disappointed.

  18. Terje, there’s more to subsistence lifestyles than that. In essence, those income tax rates do not force people into true poverty – so long as true subsistence remains available. Even at those high disincentive rates, it does remain possible to increase in wealth and make the transition to cash crops (but only just).

    So the high rates are foolish unless desperately necessary, but in applying them the government is not condemning people to poverty – since true subsistence lifestyles are not poor. But the other changes going on at the same time are making those lifestyles less and less viable, so those countries are not “developing” after all.

    It was my second paragraph that was making your point for you. The first one was pointing out that the income tax levels didn’t amount to a regressive system in themselves, not for so long as the subsistence alternative remained as a fall back position. In fact, for a country in that position tariffs are probably the best, i.e. least burdensome, method of raising cash. It’s what the US frontier experienced in the mid-19th century, where there was much subsistence and little cash.

    But those countries are faced with debt servicing commitments in cash terms, and so they are forced into those destructive approaches to raising cash. Compounded by kleptocratic comprador stuff, of course.

  19. David Tiley,
    I have politely asked my local M.P. as to why Scott Parkin was detained and ejected.
    Aussies do something about it!

  20. David Tiley,

    As a peace activist, Scot Parkin will have his hands full protesting in China to the Chinese government about their most unpeaceful threats of military action against Taiwan.

    I look forward to reading about his endeavours & outcomes in Beijing!

  21. Global warming ‘past the point of no return’

    I just hope that any idiot global warming deniers still left out there, such as Michael Duffy, choke when they read this article from The Independent of 16 September. It begins :

    A record loss of sea ice in the Arctic this summer has convinced scientists that the northern hemisphere may have crossed a critical threshold beyond which the climate may never recover

  22. Steve, for arguments sake, down at the pub, can’t you do better than that?

    Sadly,closing time and good wishes.

  23. TP,
    Just briefly as I need to get to work.
    1. The real issue here is not absolute numbers but what proportion of the population is affected by the top marginal tax rate. As the top marginal tax rate that you state kicks in at over 5 times GDP per capita, I suspect that the proportion of the population impacted is minimal. And that, because of this, the tax rate that you mention is of minimal relevance to any discussion on Ethiopia’s economy.
    6. Two reasons why Australia and the USA don’t have mass famines. 1 – They are wealthy enough to have the resources to redistribute if necessary. 2. They are democracies. As Amartya Sen noted (and this is one of the reasons that he won his Nobel Prize) famines generally don’t happen in democracies with a free press. However, despite reasons 1 and 2, external shocks (usually droughts or wars) still play a role in famines. What happens is that the ‘shock’ takes place and then because of the reasons listed the governments of the countries affected are either unable or unwilling to help the people suffering.
    Ideally, to rid the world of famine, what is required is development (something that may be limited by geographical constraints) and democratisation; however, until these things occur, (and they are not easy or instantaneous) there will be a need for outside assistance when famines occur.

  24. QUOTE: The real issue here is not absolute numbers but what proportion of the population is affected by the top marginal tax rate. As the top marginal tax rate that you state kicks in at over 5 times GDP per capita, I suspect that the proportion of the population impacted is minimal. And that, because of this, the tax rate that you mention is of minimal relevance to any discussion on Ethiopia’s economy.

    RESPONSE: This ignores the uneven nature of development. Development never happens evenly across a population but rather it is like a rope laying horizontal that gets slowly lifted at some point in the middle. The bulk of the rope (ie the tails) may not be effected but the part being lifted first is.

    The other point is that if so few are effected by the tax then what is the point of it. It certainly can’t be about revenue. Clearly the intent then is to stop anybody from getting ahead. Which is silly because if you want development you want people to get ahead. It is only by getting ahead that private sector jobs can then be created for others.

    QUOTE: Two reasons why Australia and the USA don’t have mass famines. 1 – They are wealthy enough to have the resources to redistribute if necessary. 2. They are democracies.

    RESPONSE: Indeed. Democracy of itself does not feed people but it does mitigate the extent to which really stupid policies persist. However as the asian Tiger economies showed, democracy is not entirely necessary for development. Good economic policies are.

  25. James,

    The denialists will deny to the last that global warming is happening; then retreat to “it’s happening but it may work out as a net positive” then to “it’d cost even more to fix it” and then to “Whoops, too late to do anything about it now”.

    It seems to me that the majority, not all by any means but the majority, of those arguing that global warming is either not real or that it shouldn’t be addressed as a matter of urgency are doctrinaire supporters of the Ameircan right.

    We’ve already seen in their response to the Iraq war their willingess to ignore and distort evidence and to shift their rationale according to the latest directives from Minitru.

    I’m sure that in a few years time they will have concocted an argument linking global warming to gay marriage/uppity blacks/European socialists/free trade with China/balanced budgets and issued a new manifesto explaining how their decision to nuke Tehran is all part of their noble struggle to save the world from this threat.

  26. http://www.abc.net.au/news/newsitems/200509/s1462909.htm

    It looks like the outcome of the German election is something like this:

    CDU/CSU – 35%
    SPD – 34%
    Free Democrats – 10%
    Greens – 8%
    Left Party -8%

    So, broadly speaking, the Right got around 45%, the left got around 50%.

    But there’s little chance of the Left Party – made up of SPD dissidents and former East German communists for the most part – can form a coalition with with the SPD and Greens.

    At this point i’d say a minority CSU/Free Democrat government is the most likely outcome, followed by a grand coalition of those two parties plus the SPD. There might even be a small chance of the Free Democrats forming a ocalition with the SPD and the Greens. (It hasn’t happened recently but there have been SPD/Free Democrat coalitions in the past.)

  27. Ian,
    The climate change non-denialists will say that it is happening, it is the worst thing to ever happen to the planet, it will cost nothing to fix (in fact it may even be a net positive) and then, when it turns out to be not as bad as they thought, they will have already moved on to the next prospective global tragedy, to which the solutions will be remarkably like the currently suggested solutions to global warming. It has happened several times before and it will happen again, far into the future. Remember the fear of global cooling in the late ’70s and early ’80s?
    A position somewhere between the two extremes is, as usual, likely to be more correct.

  28. Andrew,

    Its a good thing that the planet is no longer cooling because its costing a lot to run my oil heater these days.


  29. >Remember the fear of global cooling in the late ‘70s and early ‘80s?

    Not really.

    The “scientists were predicted global cooling” seems mainly to be a beat-up and a distortion based on the work of a handful of scientists whose work were widely disputed in the sceientific mainstream and which they retract when the evidence proved them wrong.

    A better analogy is probably ozone depletion.

  30. PrQ,
    Are you planning a post on the National’s flat tax discussion? It is interesting to see the Nats come out with a policy discussion point that does not involve a direct subsidy to the bush.

  31. Perhaps Scott Parkin was deported for having once dressed himself as a pig named “Hallibacon” when protesting against Halliburton’s alleged graft in Iraq.

    It is well known that the Muslim dietary laws condemn pork as haram (unclean). Thus, Attorney-General Ruddock may well have seized upon Piggy Scott Parkin as an opportunity to make a much needed gesture of cultural outreach to his Islamic brethren.

    On the other hand, Howard’s handful of Ruddock’s goolies may have persuaded him that one more episode of cheap populist alarmism cannot do more harm than has already been done.

    And given the large recruitment of ASIO staff, they must be given something to do beside burnishing their Groucho Marx eyebrow, spectacles, false nose and moustache disguises.

  32. Deported peace activist blameless

    November 1, 2005

    AN AMERICAN peace activist deported from Australia on the grounds he was a threat to national security was not involved in any dangerous or violent protests in Australia, ASIO revealed yesterday.

    Scott Parkin, 36, from Houston, Texas, returned to the US in September after his visitor’s visa was cancelled on the grounds he posed a national security risk. He was kept in solitary confinement by Australian Federal Police in Melbourne following an adverse security assessment by the Australian Security Intelligence Organisation.

    ASIO chief Paul O’Sullivan denied his agency was pressured by the US into making the adverse assessment. Asked if Mr Parkin had been violent in Australia, Mr O’Sullivan said he had not.



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