Tasmanian Times

Economy

Turning politicians into corporate servants …

Ed: You want to get to grips with the (true) state of the world economy? Read this – The Social Consequences of Contemporary Financial Markets* – … It is brilliant …

This paper considers the social effects of unprecedented growth in financial trades and speculation. The key claim is that speculative finance capital markets have caused widespread economic and social pressures. Financial speculation has contributed to global instabilities and devastated middle –class homeowner wealth as interest rates remain in low band ranges across most developed countries.

Within nation state tax system structures consumers pay 10 per cent goods and services tax and income tax on earnings. Within the speculative capital systems of derivatives and cross border trades no taxes are levied. Market players have effectively created their own political economy. Wall Street and the City of London are tax havens of long standing1.

An argument is advanced that socio-economic inequalities are resultant of overleveraged, unregulated finance, and market integration over the last three decades. Concomitantly, pressures on civil society have arisen through governments transferring state-based funds to bail out private institutions, and to stimulate economies. Socialisation of debt has been, and is currently, used to strengthen the private sector. Government resources are under pressure and services to those most at need, cut.

Central to this argument is the consideration that two economies have emerged in parallel throughout the developed world. The “real economy” of developed nation states has been depleted by protracted global economic crises. The second, “shadow economy”, has re-emerged (post GFC) as a concentrated economic force with speculative daily global financial trades in excess of US$4 trillion, including AU$41 billion in trades, every day, in Australia.

The majority of trades are enabled by sophisticated high frequency trading corridors between Wall Street and the City of London. Their consequences are felt worldwide. The economic trickle down effect has turned into vast “trickle-up” effects to non-deposit financial intermediaries, hedge funds, high net worth individuals and investment banks. These new concentration of capital systems and wealth have significant consequences for civil society.

For, (now heavily indebted) western economies, global systems are firmly entrenched in a changing international restructure involving the western developed economies and the eastern rapidly emergent economies of India, China, and South East Asia. Prominently entrenched in the new dynamics of global finance is the liberalisation of Chinese finance. Recently The Guardian2 suggested,

“China is making preparations to let its money off the leash, and the repercussions will be felt everywhere – the freeing up of the Chinese economy over the past 35 years has been methodical. First it was agriculture. Then it was industry. Now the next phase of liberalisation planned by the ruling cadre of the Communist Party includes finance”.

The United Kingdom is urging China to make London the trading hub of the renminbi*. This will be a huge fillip for the largest speculative capital market base in the world. An influx of trade from China will increase the daily trades to unprecedented levels. Increasing volatility and instability in markets already fragile, secretive and elitist.

Two key questions are addressed in this paper. First, given the social consequences emanating from global financial markets, and the socialisation of debt in most developed economies, is the introduction of a global or regional financial transaction tax a feasible progressive economic and social reform to partially ameliorate the negative effects of speculative finance capital on nation states? Second, could a miniscule tax on trades, recalibrate the relationships between governments and markets and provide accountability, oversight and stability? This paper argues in the affirmative.

Additionally, this paper supports an argument that transaction tax revenues in Australia, the eighth largest derivatives transaction-trading nation in the world, should be used specifically to strengthen national social policy commitments to the social housing sector and provide a targeted resource for sustainable social services provision.

The financial transaction tax is a socially progressive proposal supported by eminent economists and global leaders. Originally suggested by Nobel Laureate Economist James Tobin in 1961, the idea of the tax has been topical, and highly contested, for five decades. It is, by design, an instrument to deal with the pressures of transnational finance activities, and to provide an oversight on the emerging presence of high speed speculative transactions, commonly described as “flash trades”.

On August 1 2012, France became the first major European country to introduce a Financial Transaction Tax (FTT) into law, with a tax rate of 0.2 per cent on three types of transactions. Fifteen European countries are now supporting or closely examining proposals. Three of the top five liberalised finance states (Singapore, Hong Kong, and Switzerland) have FTTs’ in their taxation structures. The introduction of has been controversial and heavily politicised by financial interests.

Background

The last three decades have resulted in the globalisation and integration of financial markets. This has led to unprecedented growth in global financial trade and speculation causing widespread economic and social pressures. Burgeoning derivatives markets are becoming concentrated. Market share of the 10 largest finance trading firms in the United Kingdom has increased from 71 per cent in 2001 to 92 per cent in 2010 3 . The largest 20 firms accounted for 99 per cent of turnover. In the United States, the largest 10 financial entities accounted for 95 per cent of turnover in 2010. Many entities are based, and operate, from tax havens where $US 21 trillion is currently being held4. The 2012 trading volume for the Chicago Mercantile Group was US$806 trillion (approximately 12 times more than the entire global GDP).

More recently, pressures on civil society have arisen through governments allocating taxpayer funds to bail out private institutions and to stimulate debt-ridden economies. Civil society and public sector resources have been drained in an attempt to strengthen private sector accounts. The socialisation of private sector debt has been a feature of contemporary macroeconomic policy settings across most developed states5. Globalisation of finance has contributed to financial instability.

Banking and financial system speculation and concomitant market fragility has spread rapidly from the United States to Europe and, to a lesser extent, Australia. The International Monetary Fund estimates debt levels in the G20 countries to be $US 30 trillion. Ratings agency Standard and Poor’s forecasts a “global wall” of nonfinancial corporate debt maturities, due from 2012 to 2016, which will need to be refinanced over the next five years, at US$ 43 to US$ 46 trillion6. Standard and Poor’s argues that this factor, amid the current Euro zone crisis, a soft US economic recovery following the Great Recession, and the prospect of slowing financial growth, raise the downside risk of a “perfect storm” for credit markets. There is a growing scenario of global recession that politicians fail to explain. Historian Antony Beevor suggests, “The public have not been told about how desperate the situation is because no politician, then or now, dares to spell it out.”8

As a direct consequence of the global credit squeeze, unemployment, and increasing nation state debt levels have occurred across civil, industrial and resources sectors with millions of workers now facing unemployment, or underemployment. For global citizens, particularly those located in developed states, the horizontal linkages that often integrate social communities are being replaced by vertical ties binding the individual to the state. Global civil societies face considerable inequalities. There is a risk of a job-less generation, disconnected, and left behind.

Two economies have emerged, in parallel, throughout the developed world. The first, the “real economy’ (of developed nation states) has been depleted of resources by the global crisis in finance. Second, the “shadow economy”, has re-emerged (following the 2008 financial meltdown), as a dominant force with daily global currency trades of over US$4 trillion, underpinned by burgeoning derivatives markets. Derivatives markets are recording record turnovers of nearly US$700 trillion. Seventy seven per cent of these trades are speculative. A concentration of wealth and political power is evident in this shadow economy. It is within this context that social accountability of finance becomes the key question of this thesis. Can finance capital be allowed an elite market space, and political protection?

Global political leaders, economists, and civil society groups have endorsed conceptual frameworks supporting a global or local financial transaction tax (FTT). European countries are examining its merits, and motives. In June 2012 the European Parliament voted in favour of the European Commission’s proposal for a financial transaction tax9. Eleven European countries have now supported implementation of an FTT10.

An FTT on financial trades would ameliorate some of the detrimental social impacts from the present financial crisis and provide a framework, and rationale, to prevent further disruption. An FTT would provide oversight and accountability on speculative finance capital activities on a global and nation state level.

For promoters of rapid deregulation of the global economy attached to policy settings pursued under such labels as “Neoliberalism”, “Anglo-Saxon, “Anglo-American Model”, or “the Washington Consensus”, persistent and rising inequality was until recently only a modestly embarrassing imperfection in an otherwise appealing picture of market prosperity11. This prosperity appeared more tangible through booming housing markets and an increasing display of wealth in most developed countries around the globe.

However, this was a prosperity missed by those in civil society who were unable to access the wall of hedge fund enabled finance capital in the “carry trade” credit markets. These were markets where US dollar surpluses held in China and Asia coursed back through the United States and on to Australia for housing, motor vehicle, investment and personal debt. Ferguson argues that over-leveraged personal and business finance is a contemporary feature of modern developed state economies12.

Inequality among nations has been explained by the insistence that the leaders of poorer nations had not been pursuing the right policy mix of deregulated markets, privatised government services, weakened labour unions, and most importantly a readiness to accept carry-trade investments from the growing number of hedge funds and sophisticated financially engineered products13.

These global inequalities were identified and remedied by World Bank and International Monetary Fund operatives preaching “open market” doctrines to new funding recipients. Non-compliance was viewed as a perceived weakness demonstrated by hesitant governments resisting deregulation.

By the last years of the twentieth century, this rationalisation was undercut by a string of economic disasters that had befallen governments whose leaders and policies were considered exemplary of the new capitalist modelling. México, Thailand, Indonesia, Korea, Japan, Brazil, and Russia adorned the gallery of nations whose economies soured shortly after their leaders where lauded by the global policy elite for pursuing sound economic fundamentals.

Around the same time, the failure of Long Term Capital Management in the United States in 1998 exemplified the massive leverage risks in corporations and markets, increasingly decoupled from the real economy and historic financial models of trade and development. New sophisticated hi-tech transfers of capital through unregulated and largely unknown players were emerging within the shadow economy (and shadow banking systems)14.

The first decade of the new century (2001–2012) has witnessed the most extraordinary political and socioeconomic events, startling in scale and veracity, yet not entirely unanticipated given the nature of speculative global capital trades and heavily debt laden economies.

When governments hand control of regulated capital markets to unregulated margin-seeking traders, this disconnect becomes palpable, and dangerous. Policymakers, influenced by lobbyists in the two largest financial trading nations, the United States and the United Kingdom have downgraded and off-shored industrial development, heartland manufacturing, and home-grown research and development, in favour of financial services headquarters in Wall Street and Canary Wharf. Between these two locales, 85 per cent of the total global currency trades of US$4 trillion are transacted every day of the year15.

The City of London and Wall Street finance and business areas are effectively tax havens. Finance capital and politics provide the platforms for trades and high levels of information technology to enable corridors of high speed trading in 24 hour convoys between these two highly influential entities.

In the five years from the outbreak of the financial crisis the global economy is still unstable as interactions between markets and state economy become more disparate and unbalanced. Aggregate asset values of central banks have grown by over 30 per cent or double the ratio in the last decade. Interest rates are near zero or in negative bands in real terms16. To facilitate this growth new high speed systems have changed beyond recognition. Despite efforts to reform markets they are less transparent, unstable, and high-tech than ever with some exchanges able to execute trades in less than half a millionth of a second (more than a million times faster than the human mind can make a decision), with firms deploying sophisticated algorithms to battle for a fraction of a cent. Programs exploit minute spreads ($1.00 to $1.0001at a rate of 10,000 times a second. Oversight and compliance are left far behind.

Program efficiencies are a critical part of a growing industry dedicated to high or hyper-speed connections for firms.A connection to a trade at a one millisecond advantage could boost high speed firm’s earnings by as much as $100 million a year17. A new race is on in earnest to establish the fastest connections between trading hubs (Chicago – Wall Street – London). Every extra foot of fibre-optic cable adds 1.5 nanoseconds of delay, each additional mile adds 8 microseconds. Specialist firms link trading centres, and charge trading firms high prices to firms who want to place their networks close to exchanges. Industry experts estimate that high-speed traders spent over US$2 billion on infrastructure in 2010.18

In another unparalleled systems change the need for competitive advantage amongst the concentrated group of elitist traders19 is the quest for speed between two rival US traders20. Two rival high-speed market traders are currently building two underwater cables across the Atlantic to link trading hubs in Wall Street and the City of London. The cost is around US$300 million each. When completed in 2014 one of the cables is expected to reduce the current trade speed by between five and six milliseconds. Although human expertise in this secretive sector still run the banks, and write the codes, algorithms now make the myriad of “moment-to-moment” calls on global markets. Politicians set the rules (or non-observance) of oversight, and traders, increasingly build super sophistication into systems that will ultimately benefit very few at the expense of many in the global civil society who remain unaware of the imminent risks.

London, to be precise, The City of London, is the leading international financial centre and holds that status in terms of international banking activity, foreign exchange transactions and, most importantly, over-the-counter derivatives trades. Other international centres include the British Crown Dependencies including Jersey, Guernsey, Isle of Man, and the British Overseas Territories of Cayman Islands, Bermuda, British Virgin Islands, and Gibraltar21.

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The City of London has vast networks of banks, consultants, and legal services to court every need of high net worth individuals, hedge funds and investor22.

Rhodes and Stelter argue that the levels of debt in the global financial system are unsustainable and that the developed countries must immediately address the crisis of debt.

Rhodes and Stelter contend23:

Total debt-to-GDP levels in the 18 core countries of the Organisation of Economic Co-operation and Development (OECD) raised from 160 per cent in 1980 to 321 per cent in 2010. Disaggregated and adjusted for inflation, these numbers mean that the debt levels of non-financial corporation’s increased by 300 per cent, the debt levels of governments increased by 425 per cent and the debt levels of private households increased by 600 per cent. But the costs of the West’s aging populations are hidden in the official reporting. If we include the mounting costs of providing for the elderly, the debt levels would be significantly higher. Add to this sobering picture the fact that the financial system is running at unprecedented leverage levels, and we can draw only one conclusion: the 30-year-old credit boom has run its course. The debt problem simply has to be addressed.

Underpinning this considerable growth in capital markets, and overlaying socioeconomic civil society patterns, has been the continuance, over the past two decades, of a new phase of accumulation associated with the concentration of capital through centralised financial centres. Streithorst argues that since the 1980s, debt has been the world economy’s essential engine of growth24.

Capital centres emerge alongside, support, and influence capital elite stakeholders over real economy socioeconomic outcomes and strategies in all forms of government policymaking. The new macroeconomic structures are underpinned by financialisation of global markets splitting traditional and historical global investment and development funds and trades (real economy); into highly complex linkages between agents and borrowers in finance capital markets (shadow economy). The 2008 financial crisis and the resultant stagnation of economies is often attributed to the spread of shadow banking which accounts for a third of total banking assets globally25.

The impact of financialisation reinforces and enables capital accumulation amongst high net wealth individuals and corporations, influences political outcomes, turns politicians into servants, and, most grossly, develops a new phase of socioeconomic inequity. It has provided the structural vehicle for the socialisation of debt. In pursuit of the next sophisticated instrument to trade fast and with stealth, the recently crippled investment banks including Goldman Sachs have re-emerged with massive profits and rewarded, again, top traders with top packages.

A rising tide of angst and disbelief amongst civil society leaders and policymakers has forced an open enquiry into cash market accountability following disclosure of the LIBOR rate fixing scandal. More incessantly, past and present operatives of Goldman Sachs now occupy top-level government offices in Italy and Greece as most European countries enter turbulence occasioned by a sovereign debt crisis26.

Considerable energy has recently been shown by the former head of the London based Financial Services Authority (Lord Adair Turner), German Chancellor Angela Merkel and newly elected French President Hollande to introduce a miniscule tax on speculative global financial transactions as a means to ameliorate the socialisation of debt. These proposals for a publicly accountable global financial transaction tax have been mooted since the idea was first put forward by Nobel Laureate Economist James Tobin in the 1960s. The case for broader tax imposts on speculative capital had been promoted by John Maynard Keynes decades earlier.

Despite the “unfashionable” nature of the tax and attempts by shadow economy financial institutions and hedge funds to dismiss this progressive idea, the recent signals of financial instability has seen a new investigation of the merits of the tax as a means of countering the deleterious effects of the global recession on civil society.

The proposal for financial transaction taxes (FTTs) has seen renewed urgency (late 2012–13) that has brought French President Hollande, German Chancellor Merkel and European leaders together to discuss and recommend new proposals.

Anni Podimata, the Member of the European Parliament spearheading Parliament’s position on establishing a financial transaction tax, issued a statement about the intention of 11 European countries to press ahead with the FTT. The newly formed Dutch Government formed on 31 October 2012 became the 11th out of 27 European Union countries to support and adopt an FTT. Podimata stated27:

I welcome the decision of 11 Member States to introduce a Financial Transaction Tax under enhanced cooperation on the basis of the Commission proposal of September 2011. It is a socially fair tax, an indispensable part of a complete and coherent solution to exit the crisis. This is a reward for Parliament, which has been calling for an FTT for over two years. It will contribute to shifting the burden from the citizens to the financial industry – which has not yet contributed its fair share to the cost of the crisis. It will target the most speculative activities and at the same time provide finances equal to more than half of the EU’s annual budget at a time of intense fiscal consolidation. We will continue to bring on board the greatest possible number of member states.

Many versions have been promoted by politicians and researchers and have included a tax localised to financial areas such as Europe and Asia. A global financial transaction tax is the most ambitious and encompassing model, as it is fair and equitable, and imposes most effect on speculative capital market players; those that increasingly monopolise the markets in the United States and United Kingdom. A global financial transaction tax on capital inflows and outflows from Australia, the sixth largest global trader, could bring AU$6 billion in revenues28.

Recently the former chief of the International Monetary Fund and now Professor of the Sloan School of Management at the Massachusetts Institute of Technology, Professor Simon Johnson, likened the hold of the “financial oligarchy”, over US policy, with that of business elites in developing countries including Russia. Other commentators agree. Certainly, the mix of capital elites and policymakers is starkly evident in Washington, and in Europe where high profile entities with links to high finance have been chosen, not elected, to power. Professor Johnson argues that the weight of the US financial sector, on government, is preventing a resolution of the current crisis saying29 :

In its depth and suddenness, the US economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets. The similarity is evident: large inflows of foreign capital; torrid credit growth; excessive leverage; bubbles in asset prices, particularly property; and, finally, asset-price collapses and financial catastrophe. But there’s a deeper and more disturbing similarity: elite business interests – financiers, in the case of the US – played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. Moreover, the great wealth that the financial sector created and concentrated gave bankers enormous political weight.

Johnson suggests that the GFC has unearthed many unpleasant truths about the United States and foremost amongst these is that the financial industry has effectively “captured the government”, a state of affairs that more typically describes emerging markets and is at the centre of many emerging market crises and, further, that “recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true recession we are running out of time.”

These views would be challenged by governments in power at the time of considerable growth in financial leverage and technological capacity.

Governments in the United States, United Kingdom, Greece, Italy, Ireland, Spain and Australia, have all been a part of the momentous cycle of financial infusion and cross-border flows of capital over this decade. Each country (apart from the resources-driven and China-focused Australian economy) is suffering a severe downturn that is savagely effecting employment, exports, consumer, and housing markets. Most nation states, developed and developing are undergoing considerable realignment in the face of the crises that have swept aside modern convention and changed global outlooks substantially, perhaps forever.

The realignment is integrated further in the dynamic of developing nations versus the failure of developed nations to absorb the mismanagement of mountains of debt accumulation, particularly over the past decade (2001–2011).

Further, Simon Johnson provides a summary in this end game scenario in The Atlantic:

The conventional wisdom among the elite is still that the current slump “cannot be as bad as the Great Depression.” This view is wrong. What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.

There has recently been a social resurgence and urgency of world leaders seeking global economic and social reform. A global hedge fund research organisation issued results of a survey of member funds that predicted another severe financial meltdown would occur within five years if financial market players continue efforts to avoid any form of regulation.
Further financial dysfunction and social disruption has emerged in Greece, which has implications for the European Union (EU) and particularly debt-laden Spain, Ireland, Italy, and the United Kingdom. The tenuous nature of slow recovery from the GFC has been further heightened by the nature of dealings between European states and Wall Street over the past decade. Revelations of how Wall Street entity Goldman Sachs helped to mask problems with the debt-fuelled Greek and Italian economies has led economists and commentators to forecast a decade of further economic and social unrest caused by the seemingly terminal nature of debt suffocation across European economies.

An example of close political and corporate dealings is the relationship of ex-Goldman Sachs executive, ex-Italian Prime Minister Mario Monti, who oversaw Italian reform in 2011 (known as ‘Salva Italia”)30. Monti had supported the growing push for a European FTT being championed by French President Hollande and Germanys’ Chancellor Angela Merkel.
The European Central Bank President, Mario Draghi, was Goldman Sachs International’s vice-chairman for Europe between 2002 and 2005, a position that put him in charge of the “companies and sovereign” department which, shortly before his arrival, helped Greece to disguise the real nature of its books with a swap on its sovereign debt31.

Mario Monti was an international adviser to Goldman Sachs from 2005 until his nomination to lead the Italian government. According to the bank, his mission was to provide “advice on European business and major public policy initiatives worldwide”. As such, he was a “door opener” with a brief to defend Goldman’s interest in the corridors of power in Europe32.

Lucas Papademos was the governor of the Greek Central Bank from 1994 to 2002. In this capacity, he played a role that has yet to be elucidated in the operation to mask debt on his country’s books, perpetrated with assistance from Goldman Sachs. In addition, perhaps more importantly, the current chair of Greece’s Public Debt Management Agency, Petros Christodoulou, also worked as a trader for the bank in London.

Effectively, the rescue efforts of governments in the immediate past (2008–2012) have been to transfer private corporate debt to the government balance sheet, thus adding additional burdens on the states’ social and economic responsibilities. Taxpayers and citizens who rely on state support systems will see social supports and services wound back, in austerity measures that will not hurt elites with capital secreted in tax havens which add US$ 1.2 trillion each year to the existing accumulated US$ 21 trillion that is secreted in global tax havens and shelters . By contrast Australia loses over AU$20 billion to offshore tax shelters each year33.

The International Monetary fund (IMF) reports34 that G20 nations now owed a combined debt of $US 30 trillion. Economic commentator Associate Professor Steve Keen of the University of Western Sydney forecasts at least a decade of economic and social turmoil caused by an emerging contagion of debt problems across Europe and the possibility that Greece’s problems will spread to the wider global economy. In shades of the sub-prime deals and sophisticated economic architecture to conceal bad debts inherent in collateral debt obligations, financial derivatives are playing a strong role in the Greek issues. In dozens of deals across the Continent over the past decade, US banks have provided “off-the-balance sheet cash to countries in return for payments in the future. In the case of Greece, that cash return comes from traded away rights to the banks to accept airport fees and returns from the Greek national lottery35.

True reform to recalibrate global economies and ameliorate the deep social losses from speculative financial market players will be hard won, against a very highly resourced capital market based opposition, and it will take time. A financial transaction tax is the first step in making markets accountable and resourcing public accounts.

A further argument would then materialise in respect to how a resource from either a FTT or another form of macro taxation reform, could be used to best effect in the processes required to re-stimulate consumer spending into the economy.

In this regard Lord Adair Turner has proposed a form of Overt Monetary Finance (OMF) which could have the specific purpose of off-setting company tax to regenerate employment, provide manufacturers with an incentive to produce goods, and underpin a stimulus in consumer growth. This OMF option would be in direct contrast to the continuing injection of quantitative easing funding into the highly speculative, secretive and exclusive top-end capital markets that have never had richer picking at the expense of civil society. Economies urgently need a renewed balance. Elected representatives have the mandate to respond.

Conclusion.

Decades of unprecedented financial liberalisation have rendered a new global fragility built upon credit accumulation. Despite the severity of financial loss and social dislocation from the 2007 Global Financial Crisis and the past eight years of The Great Recession, governments have been, seemingly, unable to deal effectively with fragile finance. Calls for financial market reforms to regain the ground, and capital, lost by taxpayer funded bailouts the socialisation of debt has been absorbed, and remains as government debt. A FTT in the United States could introduce US$350 billion to depleted government accounts. Reforms and governments initiatives globally could ameliorate losses and give capital markets some credibility.

Refs

1Tax Havens. How globalisation really works. Palan, Ronen, Richard Murphy, and Christian Chavagneu.Cornell University Press. 2010.
2The Guardian Newspaper 6 November 2013. “China prepares to liberalise finance as hedge funds and estate agents salivate” available at http://www.theguardian.com/business/economics-blog/2013/nov/03/china-liberalise
3“Derivatives 2012.”TheCityUK. November 2012. (www.TheCityUK.com)
4“US 21 Trillion hidden in tax havens” Tax Justice Network –McKinsey Consultants. ABC News 23 July 2012
5Public sector finance transferred to cover private sector debts during recent phases of financial crises.
6Hugo Banzinger. “Did the Globalisation of Finance Undermine Financial Stability? Lessons in Economic Stability.” London School of Economics Financial Markets Group Paper Series. Special Paper 211. June 2012.
7Standard and Poor’s. “The Credit Overhang: Is a $46 Trillion Perfect Storm Brewing?” 10 May 2012.
(www.cpfinancial.net/…/the-credit-overhang-is-a-perfect-storm)
8Antony Beevor. “Beevor’s Europe crumbles.” Quoted in Review. The Australian Financial Review. 15 June 2012. (review@fairfax.com.au)
9“EU Parliament votes for financial transaction tax.” KPMG. (www.kpmg.com/…/taxandlegalnewsflashes/)
10Spiegel Online International. Banking and Finance. “Eleven EU Countries Agree on Transaction Tax.” 10 September 2012.
11John Williamson. “What Washington Means by Policy Reform”. In “Latin American Readjustment: How Much has Happened” Institute for International Economics 1989. The concept and the name “Washington Consensus” originated in 1989 through John Williamson, an economist from the Institute for International Economics, an international economic think tank based in Washington D.C. Williamson used the term to shared economic policy themes amongst Washington based institutions at the time (including the International Monetary Fund, World Bank, and U.S. Treasury Department.
12Niall Ferguson. 2011. Civilisation: The West and the Rest. Amazon Press. 2011.
13Investors borrowing at low interest rates (in low rate states including Japan and the United States) and lending long to businesses and ultimately consumers in countries where interest rates are comparatively high (Australia and European countries). “Carry Trade” finance has been a dominant form of credit distribution in developed nation states.
14Bryan J. North and Rajdeep Sengupta. “Is Shadow Banking really banking?” The Regional Economist. October 2011. (The term “shadow banking” has been attributed to remarks by economist and money manager Paul McCulley to describe a large segment of financial intermediation that is routed outside the balance sheets of regulated commercial banks and other depository institutions. Shadow banks are defined as financial intermediaries that conduct functions of banking “without access to central bank liquidity or public sector credit guarantees.” The size of the shadow banking sector was close to $20 trillion at its peak and shrank to about $15 trillion last year, making it at least as big as, if not bigger than, the traditional banking system).
15Bank for International Settlements. 2011.
16Bank for International Settlements. Available at http://www.bis.org/publ/
17http://www.informationweek.com/wall-streets-quest-to-process-dat-at-th/1992002978
19http://www.wired.com/business/2012/08/ff_wallstreet_trading/all/
20Raging Bulls: How Wall Street Got Addicted to Light-Speed Trading. Jerry Adler 08.03.12

21Tax Havens:How Globalisation Really Works. As above
22The CityUK London Employment Survey. Global Economics Report October 2013.
23David Rhodes and Daniel Stelter. “Collateral Damage: What Next? Where Next. What to expect and how to Prepare.” The Boston Consulting Group. January 2012
24Tom Streithorst. “Debt is Good.” Prospect Magazine. 3 February 2012.
25“Shadow Banking: A European Perspective.” Conference Description narrative. City University. London.
26British Bankers Association “Calculating Interest” 17 July 2012.
27European Parliament Press Release. Financial Transaction Tax: Anni Podimata welcomes plan to press ahead. 26 October 2012.
28For background access (http://eprints.utas.edu.au/1034/
29Simon Johnson. “The Quiet Coup.” The Atlantic Online. May 2009.
http://www.theaatlantic.com
30“Financial Transaction Reporting Intensifies Italian Tax Compliance Drive” Tax-News. Global Tax News 5 November 2013. Available at http://www.tax-news.com/news/Financial_Transaction_Reporting
31Colleen Barry. “Monti backs French and German push for FTT.” Associated Press. 11 January 2012
32“Our Friends from Goldman Sachs.” Le Monde Diplomatique, Paris. 16 November 2011
33John Christensen. The Tax Justice Network. “The fight against tax havens, avoidance and evasion”. Australian Broadcasting Commission. 23 November 2011.
34Rick Wallace. International Monetary Fund Report. “Economists Differ on effect of Greek Troubles: Recovery to survive debt crisis.” The Australian Newspaper. 13-14 February 2010.
35“Wall Street Helped to mask Debt Fuelling Europe’s Crisis.” The New York Times. 14 February 2010.

*http://en.wikipedia.org/wiki/Renminbi

*A draft of this article was first published last Monday, November 11.

• Jack, in Comments: Arguing for the puritanical application of an ideal model of what free markets and capitalism could be begs a couple of questions. For just where has it ever delivered the ideal and is it actually capable of doing so? Politics and governance have become the play things of corporations in the name of the free market. This is because the intrusion of capitalism and its influence into the political class is inevitable. Wealth, power and influence will eventually buy up politics for profit as an extension of the free market and capitalist ideology. Many conservatives see nothing wrong with that at all. Most welcome it. Privatisation of public assets is the proof of the ideological pudding. The exchange of politicians between corporations and government another key indicator. Here is the irony. Once the small business you champion becomes the middle sized business and eventually the corporate titan, political intrusion and influence will increasingly be on the agenda. Businesses will be bailed out, loss socialised and the wealthy protected because of self interest. At its heart is respect for the wealth as a greater virtue than morality or even self preservation. Free markets are a free for all for those free of the burden that we live in a community, not an economy.

• davies, in Comments: A very interesting and civil debate …

John Lawrence, Tasfintalk in Comments: It needs to be remembered that the above discussion is only of relevance to a sovereign state with taxing powers and control over its own currency. To try and extend the argument(s) to cover Tasmanian politicians and institutions is a non-sequitur. The Austrian view of the world has been around for almost a hundred years and has a logical consistency. It essentially believes in little or no government intervention. But it does require a lot of faith to accept that, to paraphrase Keynes, the most unscrupulous of men will behave in such a way that will promote the greatest good for us all. Like most people, I am not convinced that governments cannot be structured to provide goods and services to benefit us all and which would not otherwise be supplied by the market. In fact without elaborate constructs of which governments are but one, society would be much poorer. The fact that most governments do infringe on our personal liberties should not be advanced as a reason for their abolition.

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41 Comments

41 Comments

  1. Peter Willans

    November 23, 2013 at 1:12 pm

    Thank you for the comment Frank.

    Melissa Fyle “Rich and Poor Divide Underestimated” (ABS Research Paper)and “Australian Attitudes Towards Wealth Inequality and the Minimum Wage”,(David Neal and Cassandra Gavin), suggest that, in Australia,61 per cent of this nations wealth has been secured by the top twenty per cent of Australians, and overseas interests, whilst at the other end of the scale 21 per cent own less that one per cent.

    Photis Lysandrou “Global Inequality, Wealth Concentration and the Subprime Crisis”, argued that the driving force behind the structured credit products that triggered the financial crisis was a global excess demand for securities, and that the key to the build up of this demand had been the huge accumulation of private wealth”.

    The interdependence of unregulated speculative capital markets and enabling political systems,has also driven regressive taxation modelling at a time when governments are facing high demands for civil society resources.

    The Australian government acknowledged this recently with a call to bolster funds to defend Australia’s position against anticipated adverse global financial market disruptions.

    Thanks again.

  2. William Boeder

    November 23, 2013 at 1:00 am

    An interesting take on politics is via this book; Aristotle’s Politics.
    Translated by Benjamin Jowett, with an introduction by Max Lerner, Professor of Political Science Williams College somewhere in the US of A.
    The best that I can determine here is that this book was published by Random House + – circa 1943.
    This book reveals many of the forms of isms and their alignment to politics as were considered long long ago by Aristotle the Ancient Greek Writer and Thinker during his time upon our planet.

    So based on his idea of a sound government can we compare this to Tasmania’s political contretemps as we understand them to be today.

    First of all we have ministers today that achieved their office as handed down from father to son, despite there being no history of performance as to how well the son might do when he is handed his ministerial portfolio.
    [Hodgman and Bacon are 2 current examples.]
    It is difficult to determine if ‘nepotism’ is the right source for new ministerial material as their is no knowledge or measure of the kind of merit inherent in this type of appointment to public office.
    ‘Cronyism’ is also a feature of our government, the 2 O’Byrne’s as ministers here in Tasmania will bump the number up to 4 present ministers.
    ‘Defaultism,’ will account for 2 more, Bryan Green and Lara Giddings, that gives us six.

    Egad, I don’t like the way this is going, for there is no known amount of merit held by either of these individuals that could vouch them to be the best of what ministerial material we have available here in Tasmania.

    It matters little I suppose as each of these persons will raise the corporate flag long before considering the concerns of the great unwashed.

    ‘Antagonism,’ this is where we can slot in Senator Eric Abetz, for he appears not to provide any other form of action than he just goes about and antagonises the people of Tasmania and places elsewhere.

    Enough, I will return to the study of the writings of Aristotle, this at least in my mind has some sense of positivity about it.

  3. frank nicklason

    November 22, 2013 at 10:25 pm

    The term “high net worth individuals” rubs me up the wrong way. Might they be better described as “high net (financial) wealth individuals”?

    It would be interesting to know just how much value/worth those individuals typically represent to a society or culture. Anyone know of research in that area?

    The work of Richard Wilkinson indicates that economic inequality is the key determinant of a broad range of social ills, from obesity to teenage pregnancy, infant mortality, incarceration rates, and violent crime.

  4. Jon Sumby

    November 22, 2013 at 8:28 am

    Corporate welfare, alive and well

    The Australian company’s malls are typically well-designed and anchored by the finest department stores, such as Bloomingdale’s and Nordstrom. The firm spends gobs of money to refurbish its older malls.

    As a California taxpayer, you should be proud of Westfield’s efforts. That’s because you’re paying through the nose for them.

    http://www.latimes.com/business/la-fi-hiltzik-20130814,0,2211924.column#ixzz2lP6AZrLw

    Taking The Cleaners To Westfield
    An Australian union representing cleaners at Westfield malls shelved strike action in favour of a worldwide sweep through the global retail giant’s books. Now it’s shopping reports of company tax avoidance in the US, UK and Australia.

    Value reported to shareholders; Declared for tax
    Mall 1 $330 million $199 million
    Mall 2 $755 million $481 million
    Mall 3 $921 million $576 million

    http://www.theglobalmail.org/feature/taking-the-cleaners-to-westfield/728/

  5. jack

    November 21, 2013 at 2:46 am

    #33

    It is a really good essay to look at if you would like to appreciate how the essential moral dynamic of politics, prudential regulation, law and the interest and self interests of the people have changed little in 163 years. In particular, rent seeking and the ability for some to legalise and legitimise plunder has stayed the same with the same motivation.

    While the essay is is now used and claimed by various disciplines for different reasons (e.g. The Austrian School), what strikes me is this attempt to look for justice and a better system has largely ended in ruin due to the bitter reality of human nature. In a way, the book was prophetic and realistic about this. As the forward points out, Bastiat once looked to the American system as the ideal. He quite correctly concludes that Bastiat would have been mortified by the reality of the present day USA.

    The rent seekers, plunderers and Robber Barons of today are those using and degrading natural resources, making profit from war, suffering (human and non human) and consuming the future. The irony is that it is mostly for nothing we would call truly productive, other than to expand an ever larger pool of funny money produced by the financial institutions that make spiralling costs, asset prices and debt possible. The ultimate stupidity is that the plunderers are now thought of to be ‘too big to fail’. But unless they do fail they will continue to take the earth down an unsustainable path.

    The con job is that many (most?) people think that this is the way it really has to be and there are no alternatives. To many, Dracula has drunk too much of our blood now to be killed by a stake through his heart. Feed him more blood lest he die!

    Here is the PDF:

    http://mises.org/books/thelaw.pdf

  6. Artemisia

    November 21, 2013 at 2:32 am

    “A very interesting and civil debate” (#28) Yes – mainly because there is no sign of The Lone Sniper anywhere on this thread!

  7. jack

    November 21, 2013 at 1:31 am

    #28

    I think the point about the USA being highly regulated is debatable. If the Fed ‘regulates’ the banks and financial institutes, yet share jobs and people between these institutions, there is little evidence of true independence and a capacity to regulate. I think this was the irony that proves the point that many (including yourself Davies) are making. Regulation is not regulation by name only and certainly not when infected by cronyism. The financial system annexed the regulators and government who were totally ineffective and ultimately complicit. It is a good example of how crony capitalism will prevail because the system has been changed and manipulated to allow such self interest to seem normal.

    ‘Lunatics taking over the asylum’ was never a more appropriate expression. In fact, the bankers lobbied to remove the regulations restricting banks speculating with money from ordinary accounts that had been in place since the Great Depression. Its removal under Clinton caused the funny money (created by such banks) to be pumped into the real estate market that was the cause of the crisis you mention i.e. it was the consequences of deregulation.

    Frédéric Bastiat suggested that plunder results from both greed as well as misdirected good intentions and I think (from memory) his greatest objection to socialism was the fact that people play god and tend to enforce association and fraternity by unions. However, I’d like to think that we have come far enough for most people to identify some social goods that people can agree on. Identifying legal plunder will always be relative to what you feel constitutes a good. Free market and financial crony types may decide that what they do is moral and glorified (as the quote suggests). However, my perspective is that vaccination programs, a new hip for an old citizen, health care for the poor, education, ecologically sustainable development etc are investments and not plunder. We can’t afford them because we value other things more highly that we never question.

    Interestingly, if you dig a bit deeper into that book I think it is the ‘suffering’ caused by plunder that is presented as the issue. Please correct me if I am wrong.

    I won’t argue about Sweden past my prior points, which I think we might have at least some tacit agreement on. I did not suggest Hong Kong was never going to succeed, only that it is not by a free market policy alone that its success can be attributed. It is the oddest of all cases and the land rent tax is absolutely a critical difference.

    I’m not a champion of any school of economics because I think human nature undermines any system where an elite benefit from control. I really do wish I had more faith, but it would be silly to ignore reality. Many systems might work if only the focus was upon the interests of people and the planet rather than for the self interest of the elite making loot. I do not believe that any system without a clear objective, direction, principle and ethic can deliver the type of economic system capable of dealing with the global issues we face today. I do not believe that human nature has proved itself worthy of no regulation.

    In theory, you are right about many of your points but isn’t this the dilemma? Any school of economics does not adequately factor human nature, debt or rent tax on the use of natural resources at all. It avoids confronting the dilemma of what we should value the most and least. In doing so it fails to address what values we must have in order to possess a compass.

    Overall, such ‘school’s of thought risk something more fundamental when we champion them. For the present battle ground is for the cognitive map of what the problem is at a far more fundamental level. People have to decide what is right, sensible, caring and desirable. These ‘schools’ provide the illusion that there is only a choice between A or B, take it or leave it. They also suggest that complex ethical and environmental problems are addressed by mindless market mechanisms that are set and forget. Like magic they will remove the toughest of human stains, if only you believe.

    The question of whether the environment should be legally plundered by those who pay no rent for its use and in doing so cause suffering and damage the opportunity of future generations, is not a choice of adopting the Austrian or any other school of economics. It is a moral decision that only people can determine if provided with the right information unaffected by crony bias and manipulation. The choice is to live in a community within an environment first in the manner people see as fit, and to produce an economy to provide for this.

  8. john lawrence

    November 20, 2013 at 10:20 pm

    Steve(#33) if you’re interested in Frederic Bastiat you should read his classic:

    A PETITION From the Manufacturers of Candles, Tapers, Lanterns, sticks, Street Lamps, Snuffers, and Extinguishers, and from Producers of Tallow, Oil, Resin, Alcohol, and Generally of Everything Connected with Lighting.

    You won’t find a better parody of protectionism. Almost 200 years later it is still the best.

    It’s only a page or two. It can be found at
    http://bastiat.org/en/petition.html

  9. Steve

    November 20, 2013 at 8:20 pm

    #28; Interesting quotations from Bastiat.
    I am not familiar with this author. Does he continue to be interesting reading for a non-economist who enjoys well written and thought provoking books?

  10. John Lawrence

    November 20, 2013 at 4:57 pm

    “In relation to the debt ceiling, we would note that it is a purely voluntary constraint imposed by government on itself, which reflects the logic that provided the fixed exchange rate system that was abandoned by the world in 1971. It is totally unnecessary and we would rather see the government move to a system where it stops issuing federal debt altogether. The issuance of debt in a fiat monetary system is just an elaborate system of corporate welfare for the parasitic financial sector.”

    ( Read Bill Mitchell, here: http://bilbo.economicoutlook.net/blog/?p=26083 )

    Peter Willans’ article referred to overt monetary finance. All that means is the central bank credits the government’s bank account with sufficient funds for whatever purpose, with just a click of a mouse. No borrowing required.

    When one looks at the accounting operations of a central bank and a government, the latter does not need to raise money, from borrowing or by taxation, before spending. Quite clearly if it did neither, there would be a lot of money in the system. Arguably it borrows for monetary reasons, to drain liquid funds from the system. And arguably it taxes for income distributional reasons.

    In a perfect world with more equality, taxation could be very much reduced. The government could build up its assets and provide services simply by ‘overt monetary finance’ as it was described in the article. Why borrow when it doesn’t need to?

    It would be inflationary. I hear it said. Possibly. That what was said about quantitative easing and it hasn’t happened.

    The world is moving towards secular stagflation as Washington insider Larry Summers said recently. Paul Krugman commentating on Mr Summers said:

    “Mr. Summers began with a point that should be obvious but is often missed: The financial crisis that started the Great Recession is now far behind us. Indeed, by most measures it ended more than four years ago. Yet our economy remains depressed.

    …Mr. Summers went on to draw a remarkable moral: We have, he suggested, an economy whose normal condition is one of inadequate demand — of at least mild depression — and which only gets anywhere close to full employment when it is being buoyed by bubbles.

    …Why does all of this matter? One answer is that central bankers need to stop talking about “exit strategies.” Easy money should, and probably will, be with us for a very long time…More broadly, if our economy has a persistent tendency toward depression, we’re going to be living under the looking-glass rules of depression economics — in which virtue is vice and prudence is folly, in which attempts to save more (including attempts to reduce budget deficits) make everyone worse off — for a long time.

    We’re making slow progress on finding a replacement for our old discredited beliefs about money debt and the role of government.

  11. John Lawrence

    November 20, 2013 at 4:56 pm

    It needs to be remembered that the above discussion is only of relevance to a sovereign state with taxing powers and control over its own currency. To try and extend the argument(s) to cover Tasmanian politicians and institutions is a non-sequitur.

    The Austrian view of the world has been around for almost a hundred years and has a logical consistency. It essentially believes in little or no government intervention.

    But it does require a lot of faith to accept that, to paraphrase Keynes, the most unscrupulous of men will behave in such a way that will promote the greatest good for us all.

    Like most people, I am not convinced that governments cannot be structured to provide goods and services to benefit us all and which would not otherwise be supplied by the market.

    In fact without elaborate constructs of which governments are but one, society would be much poorer. The fact that most governments do infringe on our personal liberties should not be advanced as a reason for their abolition.

    On the specific matter of monetary and fiscal matters it is easy to agree with Austrians that most financial institutions shouldn’t have been bailed out after the GFC.

    Austrians also believe, or most do, that the GFC was caused by too much government intervention, too much meddling with interest rates and money supply. Central banks should be abolished, and the creation of money handed to private banks and/or we should revert to the gold standard is the mantra.

    Financiers however are hardly blameless. Almost all the money created in the lead up to the GFC was created endogenously, as the economists say, by private banks, so it is a little difficult to believe they weren’t a large part of the problem.

    Very few people believe in the loanable funds theory whereby bank deposits are necessary before loans are advanced and that behind it all is a government exogenously creating money and feeding it into the system.

    Governments may have had a role in interest rate policy but almost all money has been created privately.

    Loans create deposits not the other way around.

    On the matter of debt any discussion should at least acknowledge there are alternatives .Did the Australian Government really need to borrow $8.8 billion to recently prop up the Reserve Bank, thereby increasing debt. Can’t the Reserve Bank just create its own? The sum involved in this instance is peanuts compared to what private banks created, which eventually led the world economy over a cliff.

    Bill Mitchell in a recent post on the debt ceiling pantomime as he called it, took a well aimed swipe at Christine Milne’s stance on the debt ceiling. Bill claimed, they (the Greens) “were just neo-liberals on bikes ……. they lapse into neo-liberal macroeconomic mumbo-jumbo, that they neither understand nor, when pushed, a
    gree”
    Specifically on the matter of debt Prof Mitchell said:

    Cont …

  12. Jon Sumby

    November 20, 2013 at 3:50 pm

    Consider history;

    Robber Barons
    ‘By the late 1800s, the term was typically applied to businessmen who used what were considered to be exploitative practices to amass their wealth These practices included exerting control over national resources, accruing high levels of government influence, paying extremely low wages, squashing competition by acquiring competitors in order to create monopolies and eventually raise prices, and schemes to sell stock at inflated prices to unsuspecting investors in a manner which would eventually destroy the company for which the stock was issued and impoverish investors. The term combines the sense of criminal (“robber”) and illegitimate aristocracy (a baron is an illegitimate role in a republic).’

    http://en.wikipedia.org/wiki/Robber_baron_(industrialist)

    and:

    ‘Most of the fortune building was done legally, with the collaboration of the government and the courts. Sometimes the collaboration had to be paid for. Thomas Edison promised New Jersey politicians $1,000 each in return for favorable legislation. Daniel Drew and Jay Gould spent $1 million to bribe the New York legislature to legalize their issue of $8 million in “watered stock” (stock not representing real value) on the Erie Railroad.

    The first transcontinental railroad was built with blood, sweat, politics and thievery, out of the meeting of the Union Pacific and Central Pacific railroads. The Central Pacific started on the West Coast going east; it spent $200,000 in Washington on bribes to get 9 million acres of free land and $24 million in bonds, and paid $79 million, an overpayment of $36 million, to a construction company which really was its own. The construction was done by three thousand Irish and ten thousand Chinese, over a period of four years, working for one or two dollars a day.’

    http://www.historyisaweapon.com/defcon1/zinnbaron11.html

  13. Chris Harries

    November 20, 2013 at 3:41 pm

    Not quite, Davies (#28),

    I was arguing a point about who does the regulating and very much doubt if you are arguing for no regulation.

    The favoured term used by the industry sector is ‘light handed regulation’. Reading between the lines, this usually stands for superficial regulation.

    There is of course a good argument against hopelessly inefficient red tape, but that’s another debate and another extreme.

  14. davies

    November 20, 2013 at 1:00 pm

    This is a good debate.

    Sorry Chris but I do not follow your logic. You say a regulated market in effect becomes an unfettered one so the solution is greater regulation??? I think Einstein has a salient comment on that approach.

    For the record, the US finance sector, even before the GFC, was quite probably the most regulated industry in the world. It had over 1500 authorities/bodies regulating it. I cannot see how an additional couple of hundred bits of legislation and bodies would have made the slightest difference.

    I can tell you however that the bubble in the housing market in the US was in large part created by the government themselves through deliberate manipulation of the interest rate to keep it low, and also through legislation forcing Freddie Mac and Fanny Mae to lend to people who quite obviously could not afford it. Loans of over $1M to couples on less than $40k were common.

    Jack thanks for your coments. I think Sweden is an excellent example of the superiority of libertarian policies. Sweden went through it’s financial bust up in the early 1990s. Basically, as soon as the Swedish economy hit some headwinds it found its expensive cradle to grave social welfare unaffordable.

    It just goes to show how unsustainable comprehensive welfare programs are that Sweden, even with some of the highest income tax levels in the world, and a highly educated population on high incomes (was 9th highest globally),and it still could not afford to keep its welfare programs.

    Since that time Sweden has reformed much of its economy. Sure it is still relatively high for tax revenue. I believe about 43% of GDP in 2011 but it was 48% in 2006. And it has dropped even further since. As a comparison, Australia is currently in the mid to high 30s and going up.

    Corporate tax rates are 26% and dropping to 22% next year. The business/industry sector is only 5% owned by the Government the rest is privately owned. Sweden goes out of its way to encourage entrepreneurs and people of wealth to live and invest in the country.

    So as I said previously, surely Sweden is a great example of how well libertarian/Austrian school principles can improve an economy, even an economy that has been heavily socialist in the past. Furthermore, at a time when all the countries around went heavily into debt and experienced negative or at best anaemic growth.

    In reference to Hong Kong, I think you underestimate the chances of it being a success. There are plenty of old colonial trading posts that did not become economic powerhouses.

    I noticed your comment that ‘income tax and other taxes that normally crush ordinary people’. I agree, so why are you for a new tax (FTT) which you know the financial institutions will immediately pass onto the consumer?

    But I have to wonder whether your not a secret admirer of the libertarian/Austrian approach. You quote one of the key historical libertarian thinkers in Frederic Bastiat! A bit cheeky I thought to downplay the positives of libertarianism policies on economies and then quote one of their champions!

    I have copies of Bastiat’s ‘The Law’ (where your quote comes from and also his ‘That Which is Seen, and That Which is Not Seen’ and some of his essays on Political Economy.

    Remember these books came out after the French Revolution of 1848 and were designed to illustrate the fallacies of socialism that were sweeping his country.

    According to Bastiat, how do you identify a bad law? Simple it is one that legalises plunder…

    “See if the law takes from some persons what belongs to them and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.”

    “Then abolish that law without delay – No legal plunder; this is the principle of justice, peace, order, stability, harmony and logic.”

    He describes legal plunder so accurately for todays circumstances that you have to remind yourselves he foresaw this in 1848 after a mere few months of socialist rule.

    “Now, legal plunder can be committed in an infinite number of ways. Thus we have an infinite number of plans for organizing it: tariffs, protection, benefits, subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, a right to the tools of labor, free credit, and so on, and so on.”

    Just to reiterate. A very interesting and civil debate.

  15. jack

    November 20, 2013 at 6:00 am

    “When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.”

    Frédéric Bastiat
    1848

  16. Chris Harries

    November 19, 2013 at 6:12 pm

    Yes to the cronyism bit. Also yes to Jack’s view that cronyism is inevitable.

    Once you have an almost unfettered free market, market players then dictate the public debates and provide the political system with the arguments and even the legislation that helps sustain their influence.

    What looks like, in theory, a regulated market in effect becomes an unfettered one because the so-called regulatory system is so very weak compared to that of the market players, and so it in effect becomes a subsidiary of them.

    At the end of the day money speaks louder than anything. You need very strong governance to protect other values.

    Once you go beyond a certain point this trajectory becomes virtually unstoppable. We are seeing visible aspects of this in the lack of media regulation and its consequent sublimation of our electoral system. Many other examples are out there too.

  17. jack

    November 19, 2013 at 4:12 pm

    As I mentioned, I agree in theory yet this is a long way from actuality. I will not claim to be an expert on the economies you mention, but here are a few facts that suggest to me that they are far from free market economies of your theoretical want.

    1. Sweden: A socialist society with some of the highest tax rates and perhaps the world’s largest most expensive cradle to grave social welfare programs. If you are holding Sweden us as a model, I think you have accepted social welfare in the extreme. You were arguing that these were regressive and should be left to the free market in your last post. By this definition, Sweden is the last country you would hold up as an example of a free market economy/society.

    2. Hong Kong: You could hardly have picked an economy with a more unique set of circumstances. Old colonial trading post that became a financial hub now part of the fastest growing economy in the world (China) and a port of dispatch for foreign investment and products through shipping. However, the key factor in the success of Hong Kong was land rent tax replacing income tax and other taxes that normally crush ordinary people. This is pretty well known formula. However, taxing land is viewed as the work of the anti christ in Australia or the west generally. HK has very little land and needed to make it productive. The very bottom line is quite ironic as HK is ultimately administered by the Chinese communist (central) party. Hardly a free market champions poster child until they turned a massive profit with exports/finance.

    Overall, I don’t think that we disagree on much. Cronyism? Absolutely. The difference between us is that I think that its influence is inevitable and part of the system we have. You seem to be of the view that it is an extraordinary problem that can be tidied up. Sorry, but crony capitalism and free market privateers have managed to destroy lives and distort society through an ideology that the market is always right. Doing away with regulation was the agenda and this requires the annexing of politics. It always will. Politics always will be an extension of the free market, capitalism and its cronies and we badly need protection from this.

    Unions don’t privatise public resources or call for the socialising trillions in loss. Their corrupt crony types play for peanuts in comparison and use union credit cards to buy hookers. This has always been largely a nice sworded distraction as the crony capitalists and their criminal mates slip into parliament change the system to best suit them and mine the loot. Yes, unions have let themselves down for much the same reason; self interest.

    #23 is absolutely on the money. Let’s move on from the semantics of what might suit our ideology and who is our economic poster child to this simple truth.

  18. davies

    November 19, 2013 at 12:47 pm

    But my arguement is we have not had a free market economy. We have not given it a chance.

    The ills you highlight of the current government/corporate world are the result of cronyism. Sure, a good percentage of this could be classified as crony capitalism but the overiding concept here is cronyism.

    And it doesnt have to be just with large corporations. Unions around the world are great at exploiting cronyism. In fact, a number of examples commentators give for crony capitalism (eg bailing out the car industry both here and in the US)is actually union cronyism. Those bailout packages were designed to keep large numbers of union members in jobs. Not coincidentally, union members of a powerful union.

    Religious groups can also exploit cronyism along with political parties, families and individuals.

    But it doesnt and shouldnt be that way. Other countries have shown what can happen when a free market approach is adopted. Ever wondered how Germany recovered so strongly from WW2 when it was feared it would never recover?

    The answer is Ludwig Erhard. A good friend of Ludwig Von Mises, the father of Austrian Economics, Erhard did three simple things in 1945. He reformed the currency using Von Mises sound money principles, he eliminated all price controls, and he drastically reduced marginal tax rates. His book ‘Prosperity through Competition’ is well worth a read.

    How about Hong Kong? How did this small principality become one of the foremost trading centres and economic powerhouses of the world?

    The answer is Sir John Cowperwaite. He specialised in positive non-intervention. He spent the vast majority of the time refusing to interfere in the market. He even refused to produce economic data because he thought that would encourage bureaucrats to start tinkering.

    A current example is Sweden. Their Finance Minister, Anders Borg, is a Libertarian. When the IMF and other international bodies where demanding countries print more money to save their economies the Swedes went the other way. The Libertarian way. The result was a faster growing economy than all of it’s peers whilst at the same time reducing it’s debt! It will be interesting to see if Sweden keeps to this path.

    As for which Tasmanian politicians would embrace the Libertarian/Austrian School approach…basically none. I have heard Tony Mulder talk about libertarian principles and some Independents trying to get into Parliament (Willink in the recent Nelson election springs to mind) but otherwise nothing. This includes our Federal politicians.

    What this means is Libertarianism and the Austrian School economic approach are ideals and ideas right on the periphery of political thought. They are radical and dangerous ideas for politicians because to follow them successfully means governments deliberately adopt a position of positive non-intervention.

    I fear they do not have the intelligence and discipline to follow such an approach.

  19. Simon Warriner

    November 19, 2013 at 9:48 am

    Thank you Jack. You comment neatly brings us back to my opening comment at 2.

    Unless we have those who make the laws and regulations working for the mass of humanity, and we hold them to that task ferociously, and dispatch them ruthlessly when they look like slipping, the corporate world will do what its psychopathic mindset dictates and corrupt the lawmakers and regulators to its own ends.

    This is where the war is won or lost, not in debates about the actions of lawmakers already corrupted.

  20. jack

    November 19, 2013 at 4:22 am

    Davies #20

    While I agree with much of what you say (in theory) about how a free market capitalist economy should work, I fear that the reality is far more important than being bogged in arguments that boil down to semantics. As always in such debates, championing the dogma of what a free market could look like is not nearly as important as what it has actually delivered. Arguing for the puritanical application of an ideal model of what free markets and capitalism could be begs a couple of questions. For just where has it ever delivered the ideal and is it actually capable of doing so?

    Politics and governance have become the play things of corporations in the name of the free market. This is because the intrusion of capitalism and its influence into the political class is inevitable. Wealth, power and influence will eventually buy up politics for profit as an extension of the free market and capitalist ideology. Many conservatives see nothing wrong with that at all. Most welcome it. Privatisation of public assets is the proof of the ideological pudding. The exchange of politicians between corporations and government another key indicator.

    Here is the irony. Once the small business you champion becomes the middle sized business and eventually the corporate titan, political intrusion and influence will increasingly be on the agenda. Businesses will be bailed out, loss socialised and the wealthy protected because of self interest. At its heart is respect for the wealth as a greater virtue than morality or even self preservation.

    Free markets are a free for all for those free of the burden that we live in a community, not an economy.

  21. William Boeder

    November 18, 2013 at 11:47 pm

    An interesting concept davies.
    ‘This is something we can do fairly quickly and save agricultural businesses a few hundred million dollars per year.’
    Now how would you go about pursuing our government ministers to go along with your suggested concept?
    Do you really believe our supposed caring responsible mainstream of government ministers will salute you and act accordingly?

    First of all try and tell me how you could get someone like Eric (the anti-Tasmanian Senator) Abetz to support your concept.

  22. davies

    November 18, 2013 at 7:04 pm

    There is a solution and it is not another TAX. One put forward by the Austrian school of economics that picked both the GFC and why it would happen and then the looming sovereign debt crisis as soon as countries started bailing out their banks.

    And yet not a single mention of this branch of economics by the author and not a single mention in 17 comments. Instead you look to a Financial Transaction Tax that was promoted by Keynes back in the 1930s to alleviate the debt issues facing countries that are following the Keynesian model!

    Yet instead of blaming the Keynesian economic model, you instead blame the free market and capitalism, but neither have existed in the vast majority of countries for decades.

    Let me state very simply and clearly, a free market capitalist economy would NOT under any circumstances bailout irresponsible financial organisations that had ignored risk in a mad-long rush for profits. In a free market economy those financial organisations would have been allowed to fail. Iceland let them fail. Ireland tried but got bullied by the EU to conform to EU policies. Interestingly, Ireland had a debt to GDP ratio fairly close to Australia’s current ratio. It was only AFTER they bailed out their banks that their debt per GDP ballooned out to unsustainable levels.

    Congratulations to the author for highlighting Rhodes and Stelter’s study of the global unsustainable debt levels, even if he does come to the wrong conclusion later. Rhodes and Stelter paint a very bleak future, one the Austrian Business School has warned about that would occur since the US dropped the Gold Standard in 1971.

    To give you an idea of what Rhodes and Stelter mean about the ‘hidden’ costs of providing our current welfare systems, US debt officially stands at around $17 trillion. An amount that more than likely cannot be sustainably repaid. BUT if you include the current cost of pensions, health care etc the actual debt is calculated to be over $238 trillion (ref Niall Ferguson).
    Europe is in a similar boat. Australia going down the same path.

    And your solution? Another tax! Let’s not worry about the debt levels. Because the new tax won’t be paying off debt. Instead you want to increase the cost of unsustainable welfare programs!

    And let’s not worry about the Keynesian economic programs and policies that in large part have delivered these financial problems and hence there is no need to look at alternatives like the Austrian School.

    And heaven forbid if we actually start to examine unsustainable welfare policies. No instead we want more.

    Well you can introduce another tax. But it won’t be enough, and it won’t go where you want it to go. In the meantime governments will keep bailing out its buddies in the financial sector. After all, they provide each other with lucrative careers.

    The middle class and poor will continue to be rooted by government policies designed to create inflation on basic essential items they are heavily reliant on, and even worse, policies designed to create asset bubbles in areas predominantly belonging to the wealthy elites.

    You want to know the real solution here? The only sustainable solution?

    Insist upon sound money principles. E.g. currencies backed by something real, usually silver or gold, like they have been for thousands of years previously. This also means getting rid of the central banks. No more manipulation of the interest rate to keep it deliberately low to allow governments to borrow excessively and to allow financial institutions first dibs on the newly created money.

    Do not bail out failed businesses. All corporate welfare to stop. Welfare for individuals to be curtailed. We cannot afford DisabilityCare so don’t go ahead with it. Chop through regulations and free up the market. Give the entrepreneur and small business an opportunity to flourish.

    It wasn’t too long ago when Jan Davis from TFGA was telling TT that some farmers are facing costs of 25% of their revenue on unnecessary red and green tape.

    Where is the outrage? This is something we can do fairly quickly and save agricultural businesses a few hundred million dollars per year.

    Don’t waste time on even more taxes. Spend the time productively on what regulations and taxes can be cut.

  23. William Boeder

    November 18, 2013 at 4:12 pm

    That this form of incorporating itself by any major business entity is so simply done on the basis that it offers a form of innate exclusivity from the norms of business controls regulations and constraints, is in itself an enormous blight upon the whole of our societies.

    We have seen the Big 4 Banks here in Australia quickly adopt this model that now allows the Banks to grasp even deeper into our communities and their people by way of a lessening degree of accountability by any of Australia’s supposed ever vigilant regulatory authorities.

    A fine example of this has been identified as happening with the Commonwealth Bank Australia corporation and by the aid they were receiving from both ASIC and The Prudential Regulator to clean up their former financial advisory division, ‘of the enormous magnitude of customer files that were deemed to be approved, but were in contravention to this very Bank’s Codes of Conduct’ and to which had now become a major defalcation marked against the CBA.
    (Yet not officially acted upon.)

    *(A copy of a Melbourne Age article will go on to confirm this untoward empowerment by this corporatized Banking Institution is to be found in the archives or even the present listings of The Age Business Page articles that refer to singularly to this Bank.)

    Now tell me how evil ruthless and overlording dire are the powers now enjoyed by those of today’s major high-tower corporates.
    A ‘white card’ immunity from the Australian regulatory authorities is about as loathsome and vile as a business entity can become in that their integrity and fealty could ever ever sink to such an abyssmal depth of deceptive conduct one would hope never to personally encounter.

    I myself have an action against this Commonwealth Bank on a matter of an entirely different nature but just as fetid as that of which I have presented in the above.

    William Boeder.

  24. William Boeder

    November 18, 2013 at 3:25 pm

    It was so very pleasing to read this article that my day suddenly became all the brighter,
    the roses here in Rosebery silently riffled even more their delicate fragrant airs.

    My having become a radical oppositionist to the whole concept of corporatization
    has become an item of concern and a research item from time to time to more readily establish how their malign cancerous tentacles have increased their range and their stranglehod upon the
    consumer/people at large, hence many of my former comments to Tasmanian Times articles dwelling upon this government-aiding scurvy of corporatization.
    However I would like to bring this ‘government-minister-purchasing’ non-regulated
    financial vehicle of deception even closer to home by my now mentioning that Tasmania
    itself with its corporatized GBE’s, (State Government Business Enterprises) are a
    product of that same absurd notion that corporates are mererly an acceptable and
    convenient platform for conducting the role of tending to their business reponsibilities
    and to the carriage of their products.

    Yet even further arrives the knowledge that Tasmania’s GBE’s are acting in their own
    interests and are generally acting under their own established regulatory control systems,
    being that are immune from any accountability to the Federal government business regulators
    nor be they accountable to the prudential authorities meant to be the policing inspector
    of these types of business house constructs and conducts.
    The classic example of this negative to Tasmania phenomenon is that of Forestry
    Tasmania.
    A recent letter from the DPIPWE minister himself in reply to a correspondence directed
    to him and his office would go on to cause me to add more scorn toward this insufferable profitless Limpet Fish that feeds itself from the people of Tasmania, came into my computer inbox, however it was to be in such a form that on reading this correspondence and then moving on to other matters of interest, it suddenly vanished,
    evaporated itself, or disappeared as if it never existed.
    (I invite comments that could provide some insight to this mysterious electronic message
    manifestation.
    )
    Naturally the Bryan (the giggler) Green correspondence carried within it, its flaming torch of support for this State’s GBE that is little more than an insidious forest-destroying entity that returns next to nothing to the Tasmanian people, nor adds to this State’s revenues.
    Then in even more of a provocative claim, minister Green stated this GBE will soon be
    operating in a profit producing manner.

    I have to say that the time taken to construct this correspondence, (more likely by one of
    the giggler’s minders) failed in every way to sway my attitudes toward this self-serving scurvying State GBE.
    to be continued/

  25. Chris Harries

    November 18, 2013 at 11:33 am

    I’ll say it again and again – especially to those on the progressive side of politics – handing over political power to The Market is degrading to the integrity of our parliamentary system and the chief reason that the status of politic and politicians has plummeted so badly.

    Every transfer of ownership and control of decision making and public owned assets aids that degradation. Worse, it is like stepping on a tube of toothpaste. Once its out its almost impossible to get back inside.

    The dogma of The Market took off in the late 1980s and then reinforced during the 1990s and, ever so slowly, even became accepted by many even on the Left and Green side of politics. Little did they know that they were doing.

  26. A.K

    November 18, 2013 at 10:04 am

    Absolutely hilarious, this scenario was fully viewable and understandable when the ideologues begun giving away the people assets and control over the economy to rich ideological elite, with privatisation.

    The last 30 odd years has amazed me at how far from reality the majority live, that they couldn’t see what was being broadcast in mile high neon signs, we are being conned. Yet the vast majority lauded the continuing sell off, by supporting the clearly corrupt and fatalistic political system.

    Now we are at a point of no return as the incumbents continue blindly down their destructive path, waiting on their ideological god/s to save them. If any of the incumbents get elected next year, this state will collapse within 2 years and anarchy will prevail. In the next year or so, they will sell off TT line, the Hydro, Aurora energy, Metro buses and privatise our hospitals, in line with liberal and labor policy of giving everything they can to their corporate masters. Watch the NBN disappear for the people and only available for certain elite suburbs, corporations and in urban areas they require votes. Tas will miss out completely and they want to continue hanging power, NBN etc on poles to be burn or blown down.

    All the people can look forward to is rising prices, diminishing services and collapsing infrastructure. Add to that the removal of freedom of expression, a legal system which only represents the rich elite, whose only aim is profit growth for them. The collapse of farming, rising fuel prices, climate change, the growing reliance upon imported goods and you have our future, under the hands of ideologues.

    Only one answer referendum style government, nothing else can or will work now. How do you implement it, simple you elect those who sign stat dec’s that upon election, they will put in place the facilities for the people to vote on line, for every major policy direction and expenditure. Using open source OS and software, that would take less than 3 months to have up and running, as long as the bureaucracy and legal profession are kept out of it. Then change our laws and regulations to simple English and rework our Constitution to fit what the people want and not elites.

    To get things going, fuel and energy proof the state by getting the farming industry to grow seed crops for fuel, put solar and wind on as many building as possible and put all power and NBN in the ground where it will be safe and require little maintenance in the future, saving millions over the years. These two things would reduce our cost of living by more than 50% and give us the ability to export hydro to Aus for a good profit. No need for profit growth wind farms, gas or wood fired generation, plus would lower TT line fuel costs by at least 60%. Then buy at least one 150m Incat, to carry our freight and walk on passengers to Aus and Singapore, much faster than any other freight line currently can. Once the business plan has been established, we could buy a number of cats and capture a large part of the fresh food freight market for Aus and Singapore, increasing our state income potential, providing export industry security.

    Sell one current ferry and slow the other one down to give people a low cost all inclusive real oversea experience, Now it’s like a cattle truck, expensive, horrible food, shocking service, warm grog and the majority comes from Aus, not Tas. It’s the same with maintenance and supply, all done in Aus.

    No good babbling on or complaining, the future is in our hands if we want it. Otherwise sit back and enjoy the final fiasco, it won’t be pretty for anyone, especially for all those who rely completely upon the dying system and wont change..

  27. Christopher Purcell

    November 18, 2013 at 9:06 am

    This is exactly why a NEW separation of powers has to happen. Business has to be separated from government & politicians. Politicians cannot be involved in business & business cannot be involved in politics.

  28. jack

    November 18, 2013 at 5:50 am

    #10

    Actually, we have never pretended to have a true democracy in Australia. Our model (as with the USA) is closer to that of a republic because we have a constitution. We vote democratically for those to make decisions only consistent with the constitution, upheld by the judiciary. It can work too.

    It is the party system that has corrupted our representation because it has become an extension of corporate interest. We’ve collectively allowed this to happen. It pays for corporations to get involved in politics, as money buys politicians because the system allows it. Few with different values will now bother to join a party and try and change it or overwhelm party interests. So both big parties have become clubs for people with a similar mindset and values.

    However, if every person pissed off with party politics in Australia joined one, we could overhaul the system quite quickly.

    Our problem is mainly community apathy. We have collectively turned away from the odious dung heaps that are the present self interested parties rather than taking them over and changing them.

    Ultimately, our constitution and law could be changed to better separate corporations from the business of government and protect the interests of people. That’s a far better type of revolution. It is also possible to do using the system we have.

  29. Steve

    November 17, 2013 at 10:09 pm

    #2; Interesting conclusion Simon. I read the article in the conventional way and came to the exact same conclusion.
    It brightened my day to read that you got there by starting at the finish!

  30. Simon Warriner

    November 17, 2013 at 7:45 pm

    Mike, I concur completely. Where we differ, if I may assume as much, is that I realize that we first need to put OUR representatives into the legislature in order to rewrite the rules so that direct representation is possible. In other words, we need to use the current system to change the system.

    The alternative is a revolution, and history suggests that the outcome of that is far from a certainty, and may be far worse than what we have now. And, Mike, that is what they are expecting and gearing up for.

    One step at a time, in other words.

    If you can think of a quicker, more effective method than the INDIPOL idea, please don’t be shy, lets hear it.

  31. TH

    November 17, 2013 at 3:16 pm

    Politicians always have been slaves to the World’s predominant financiers. However, in the past such rulers of the day tended to chop off heads if their debt levels became too tedious and an overwhelming number of long suffering under-classes began to demonstrate their outrage. Today, the financial manipulators are obscenely rewarded even if their work record is abysmal. The reality is that modern Capitalism is struggling to find populations that can be exploited without question. Slavery and by extension, colonialism, long underpinned the capital market place. Current manipulators are being paid big bucks to develop short term answers, as Capitalism struggles to re-invent itself as a more moral entity. World communities now ask more questions of those with whom they are dealing and those that don’t, generally, are not worth dealing with anyway, as they are too big a financial and political risk.

    Just some Monday musing,

    Cheers

    TH

  32. Mike Bolan

    November 17, 2013 at 1:28 pm

    #2 In this new age of instant electronic information and communications, why can’t we represent ourselves?

    True, because the ‘system’ won’t let us, but from all other standpoints, we can represent our own views more quickly and more relevantly than they can be canvassed and ‘represented’ by political parties.

    Not only would that be a massive cost reduction, it would also provide something a bit closer to democracy.

  33. john Hayward

    November 17, 2013 at 12:16 pm

    If you missed the GFC doco Inside Job, you can get a good idea of what’s going on by watching the Abbott Gummint, which is either too arrogant or too dumb to hide the fact that they are there to serve the international plutocracy.

    Very few elected governments in the world have had the temerity to openly defy the imperatives of climate change. Australia is one of them, which shows the benefits of having both a government and a news media free of statutory ethical guidelines.

    John Hayward

  34. John Hawkins

    November 17, 2013 at 11:26 am

    Tasmanian pollies are owned by big business and they soon learn to toe the corporate line or they are out. The trouble is they seem to pick losers rather than winners to back with our money.

    Think locally Gunns, Ta Ann, Federal Hotels and the TFA with special deals or concessions for mates with hundreds of millions of taxpayers money paid to private companies and individuals and not a squeak from the press.

    Think Federally when Rudd proposed a mining tax the big mining companies using an advertising campaign destroyed him.

    Think General Motors, think Ford, think the now bankrupt MIS scam companies. Millions poured down the drain against good monetary policy all to buy votes.

    Think Murdoch the Gillard / Rudd / Labour government was destroyed using the Greens as a scapegoat.

    A hung parliament is a small step towards constraining bad policies promoted by the Lib/Lab vested interests.

    The Examiner and the Mercury do not like competition from Pollies with brains for it tests their readers. Murdoch and his newspapers will not survive the likes of TT. They will and are morphing into comics designed to sell advertising.

    Corporate Australia has for a short while turned its stare of approval onto Abbott.

    In Tasmania Abbott promised private enterprise millions:

    Hobart Airport a new runway for a private company.

    The multi national rich and powerful Cadbury/Schweppes millions for a museum.

    It is our money we pay the taxes and we seemingly love to be bribed.

    Tasmanians and their allegiance can be bought for a pittance. The 12 Senators sent to Canberra provide cheap access to the balance of power in that parliament.

    This system will collapse.

  35. phill Parsons

    November 17, 2013 at 9:53 am

    MRRT. FTT you name a redistributive tax and the greedy and their lickspittle agents are against it, moving to end it or wanting to outlaw it through a TPP or some other treaty.

    The supposed carbon tax is also redistributive, designed to end Carbon emissions by making the polluters [CO2] pay, initially part but eventually the full cost.

    This payment may be put off but rest assured the cost will come home to roost as we roast.

  36. Keynes

    November 17, 2013 at 9:35 am

    Brilliant article … and I can add this amazing vid showing who-owns-what in the good ‘ol US of A:

    9 Out Of 10 Americans Are Completely Wrong About This Mind-Blowing Fact

    http://www.utrend.tv/v/9-out-of-10-americans-are-completely-wrong-about-this-mind-blowing-fact/

  37. Jon Sumby

    November 13, 2013 at 12:39 am

    This is an interesting read:
    ‘In the first such analysis ever conducted, Swiss economic researchers have conducted a global network analysis of the most powerful transnational corporations (TNCs). Their results have revealed a core of 737 firms with control of 80% of this network, and a “super entity” comprised of 147 corporations that have a controlling interest in 40% of the network’s TNCs.’

    http://planetsave.com/2011/08/28/who-runs-the-world-network-analysis-reveals-super-entity-of-global-corporate-control/

    What Willans also describes is also known as the’P/PGame’ dating back a few decades, ‘Privatise the Profits/Publicise the Cost’ which was developed to examine how companies put pollution into the commons and the public has to pay for remediation/health effects while the company keeps it’s profits, e.g. the Superfund in the US in the 1970s to clean up pollution from companies.

    Growing wealth inequity in Australia was recently described in The Age, ‘In the last decade in Australia, the richest 10% enjoyed almost 50% of the growth in incomes. The richest 1% had 22% of the gains…’

    http://www.theage.com.au/comment/the-age-editorial/commonwealth-built-on-the-fair-go-20131011-2vdui.html#ixzz2kNcrGxGU

  38. Ben Quin

    November 12, 2013 at 5:34 pm

    Great article.

    The conclusion seems so obvious. But what are the actual barriers to introducing FIT legislation in Australia? Would we become a financial pariah in the short term and if so, what may the effects be?

  39. Tony Hagar

    November 12, 2013 at 4:50 pm

    A masterful summary of a complex issue that ultimately affects all of us.
    Unfortunately, and as the author states, in this interconnected age there is often no real distinction between the financial levers available to governments and the profit-driven policies of banks and other financial institutions.
    When the financial crisis hit those South-East Asian countries mentioned by Dr Willans, the Western world came to the “rescue”, pouring in capital which was immediately scooped up by the Western financial institutions whose investments had evaporated; they then packed their bags and left, leaving the host countries to bale themselves out as best they could.

  40. Simon Warriner

    November 10, 2013 at 10:32 pm

    IN a spurt of calculated ignorance I started at the finish and found this:

    “Elected representatives have the mandate to respond.”

    I suggest the answer to the problems elucidated in this and many many other articles need to start with the source of much of the ill that riddles out financial systems.

    The source of that ill is elected representatives whose representation of the needs and aspirations of the mass of humanity are constantly put aside to represent the greedy and the grasping who devote their lives to acquiring more than the rest of us, and invest in “our” politicians in the expectation of profiting from that investment.

    We need to take back ownership of our elected representatives if we are to have even a small hope of positive change. Failure in this regard will deliver failure in every other endevour those representatives are attached to.

    Now to go to the start and see if I finish the whole lot with a different opinion.

  41. john lawrence

    November 10, 2013 at 2:55 pm

    Good post Peter.

    The stuff that Adair Turner has written this past year certainly deserves wider coverage, two papers in particular.

    Credit, money and leverage: What Wicksell, Hayek and Fisher knew and modern macroeconomics forgot

    http://ineteconomics.org/sites/inet.civicactions.net/files/Adair Turner Stockholm School of Economics September 12.pdf

    Debt, money and Mephistopheles: How do we get out of this mess?

    http://www.fsa.gov.uk/static/pubs/speeches/0206-at.pdf

    Every public policy maker should read them.

    But isn’t OMF just MMT by another name? Which goes all the way back to Abba Lerner’s 1943 article on functional finance?

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