Bob Brown's loony economic policies
Gerard Jackson
To understand the Australian Greens' economic stupidity one must start, I believe, with Bob Brown, the mastermind behind their recipe for economic catastrophe. In a letter to The Australian (27/6/91) he revealed a staggering degree of economic illiteracy that he obviously still clings to.
This brilliant economic thinker defined logging and mining as "resource robbery" and called Tasmania a "post-industrial" society, despite the fact that it has never been industrialised. According to this genius Tasmania's blissful economic condition exists because its economy "is not based on dinosaur industries like pulp mills, zinc mills and aluminium mills."
What this potential Nobel Prize winner in economic theory overlooked is that without pulp mills there would be no paper, and certainly no newspapers to promote his loony economic. This simple observation is obviously beyond his powers of deduction. The same man who uses numerous electrical appliances, drives cars, travels by train, ship and plane is the same twit who argues that the industrial processes that make these things possible are "dinosaur industries".
Brown's attitude toward these industries resembles Ralph Nader's insane idea that America's petrochemical industry "might need to be abolished."
Is Brown too stupid to realise that the industries he sneeringly calls dinosaurs are at the very highest stages of production and that damaging them would inevitably halt economic growth because their products are vital inputs for the lower stages of production that produce consumer goods?
Brown argued "that it is in the green-backed arena of … labour intensive … small businesses that Tasmania's future job creation lies." Judging by other comments this must go for the economy as a whole.
It ought to be clear that Brown's economic views are incompatible with Australians aspirations for higher living standards.
Let us focus on a couple of economic facts. Finding work is never a long term social problem so long as there is sufficient land and capital to employ people. The problem is generating economic growth, the process that creates evermore higher paid jobs. And it is this process that the likes of Brown hate.
Sustainable real wages for everyone can only be brought about by increasing the ratio of capital to labour can higher-paid jobs. The Austrian school of economics describes the process as one in which an integrated capital structure with many stages of production is continually lengthened by adding more capital intensive stages that embody superior technology.
It is this process of 'capital lengthening' that raises the marginal value of labours' product and hence real living standards. Abandoning this process in favour of small-scale labour intensive firms is a recipe for a massive collapse in living standards — making Brown's green paradise a living hell for the mass of people.
Ernest Callenbach's book Ecotopia was brutally honest about the greens' aims to savagely lower living standards. He freely admitted living standards would have to be massively cut and energy prices kept deliberately high. Ralph Nader showed how Ecotopia was representative of the green movement by giving it his stamp of approval.
The greens' economic policy promotes the idea of intergenerational equity, something they have been pushing for years. But a moment's reflection should make one aware of the absurdity of this concept, according to which intergenerational equity is guaranteed by allegedly reserving resources for succeeding generations.
One does not need a Ph.D. in logic to realise that so-called 'intergenerational equity' means no resource would ever be used. Any generation's claim to resources — including this generation — is just as worthy of consideration as that of any future generation.
Furthermore, resources are not just used up, as the greens claim, they are transformed into higher valued goods; the consequence of using resources today instead of leaving them idle in the ground is to make future generations richer. How does Bob Brown and his disciples think they would be living today (if at all) if our ancestors had not exploited 'non-renewable' resources that these greenies now want left undeveloped?
This brings us back to capital as a production structure consisting of heterogeneous capital goods. As the structure expands it raises the marginal productivity of labour and hence real wages. Because capital embodies technical knowledge it actually creates additional resources while continuing to expand existing reserves of natural resources, making many of them obsolete in the process. In other words, growth is a resource generating process.
One would think that no economist worth his salt would support Bob Brown's economic lunacy. Not so. John Quiggin, a socialist and a professor of economics, wrote: "Anyone who decides to vote for the Greens . . . should be encouraged to know that they are also choosing a party with a policy that is economically as well as socially responsible."
This is pure garbage. But then again, Professor Quiggin is the same character who argued one can cut unemployment by simply putting people on the public payroll (Keynesian economics lessons, the Australian Financial Review, 16/7/98). He also argued that the so-called equity premium justified socialising the economy (The Australian Financial Review, 6/5/99).
I really loved his modest statement that all that a country really needs are "well-designed industry policies", i.e., a return to central planning. This reminded me of 1947 Britain. More people were in work than in 1938 and the national income accounts showed that aggregate output was 15 to 20 per cent higher, and yet living standards were much lower than before the War due to government planning, or should I say "well-designed industry policies"?
Socialists never learn.
Gerard Jackson is Brookes' economics editor
BrookesNews.Com
Monday 13 September 2004