Just as the truth is
the first casualty of war, principled policy is the first casualty of election
campaigns. Even in Australia's era of 'economic rationalism' that ended a long
time ago, the economic dries took a back seat role during election campaigns (the
Hewson-led Liberal campaign of 1993 being the exception). In the 2013 campaign,
however, the dries are not just in the back seat but locked away in the boot,
and it is not at all clear that they will be allowed out after the election
regardless of who wins.
Economic rationalism cannot
be tightly defined, but broadly speaking it is a set of beliefs in free markets
and the price mechanism; a minimum of regulation; openness to trade and
investment; raising government revenue through broad-based and neutral taxation;
subjecting public investment proposals to rigorous cost-benefit analysis; and
wrapping all of this in fiscal discipline.
Working from this
definition, it is easy to demonstrate with examples that economic populism, not
rationalism, has dominated the 2013 campaign.
In industry policy, while
Labor upped the ante on subsidies to vehicle manufacturing and then
pledged $25 million for the SPC fruit canning operation
in Victoria, the Coalition came out with its own plan to 'co-invest' $16
million of taxpayers' money in an expansion of the Cadbury factory near Hobart.
These are egregious departures from liberal economic principles.
Next we have both sides
promising a plethora of small, local grants for things like sports fields and
facilities, surf clubs and security cameras. These grants will not bust the
budget, but they have nothing to do with the national government. The principle
being violated here is that we have three tiers of government for a reason, and
federalism works best if each tier sticks to its knitting.
'Think Big' projects have
been constrained by fiscal realities in this campaign, but that has not stopped
Prime Minister Kevin Rudd from offering up distant visions of northern
development, super-fast trains and a brand spanking new navy base somewhere
north of Tweed Heads. The problem is that none of it is supported by rigorous
analysis that says it would be a wise use of resources (which the government
doesn't have anyway).
Both sides have dipped
their toes in the waters of foreign investment xenophobia, particularly when it
involves agricultural land.
Taxation is always a
fertile field for populism, and taxing 'big business' is an old favourite. Tony
Abbott's scheme for funding his pet parental leave scheme springs to mind - a
'levy' (aka increase in company income tax) on big business.
Not only does this attempt
to side-step the reality that businesses one way or another pass taxes on to
people, it also creates a messy two-tier company income tax system - something
that was done away with decades ago. Into the bargain, double taxation of
dividends makes a reappearance via the non-franking of 'levy' payments. This is
nothing but opportunistic revenue-raising.
Many more examples of
economic populism have come from the lips of the Queensland populists, Bob
Katter and Clive Palmer, but at least they won't be sitting in the Cabinet
room.
If the economic dries are
allowed out of the boot, they had better hope that whoever wins the election
didn't really mean a lot of what they said to win.
1 comment:
Proof that an election is an advance auction of stolen goods
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