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September 3, 2010
The Australian's attacks on the Labor-Green alliance continues to gather pace. Mostly it's a fear campaign whose narrative is that the Labor-Greens coalition could be the most left-wing government since the days of Gough Whitlam. The political reality being constructed by News Ltd is that such a government would destroy Australia in the name of the gospel of sustainability.
The latest bullet comes from Robert Carling, a senior fellow at the Centre for Independent Studies in his Tax policy devised by party that is green with envy. Behind the material on tax lies an economics.
Carling says that the Greens would back-pedal on the economic reforms that have helped deliver 18 years' uninterrupted economic growth and greatly enhanced living standards. He adds:
The Greens' tax policy, if taken literally, paints them as a party of "tax and spend" and as a party that is more interested in redistributing wealth than encouraging its creation. Their tax policy is green from envy. The main parties should be very cautious in courting Green support to form a government. Those 1.25 million voters may or may not have voted for less economic growth and lower living standards, but we can be confident the others did not.
So the Greens are part of the social democratic tradition that has been traditionally premised on equality and the welfare state. Carling stands for personal income tax be cut to with a top rate of 35% that is indexed. This would reduce government revenue. But that can be offset by gains to revenue from cutting back on selective tax breaks and by imposing a tight rein on government spending. So Carling is low tax and small government man.
It's a fear campaign based around the talking point of anyone who earns a reasonable quid in Australia would be made to pay big time so the Greens could introduce more energy-efficient industries and turn their backs on the conventional mining sector. These are dangerous hands to be holding holding the balance of power. Carling's assumption of less economic growth and lower living standards is not plausible because he ignores the possibility of wealth creation from the emergence of green industries as Australia makes the shift to a low carbon economy.
How then is infrastructure investment in renewable energy going to take place with small government? The invisible hand of the free market (meaning spontaneous order) of course with the standard appeal to Adam Smith's The Wealth of Nations, even though Adam Smith did not credit the invisible hand metaphor with the importance that authors, from the mid-20th century onwards, give to it.
Gavin Kennedy in his Adam Smith and the Invisible Hand: From Metaphor to Myth at Econ Journal Watch says:
Significantly, and contrary to the assertions of the modern consensus, he [Smith] gave the invisible hand no role in his theory of competitive markets in books i and ii of Wealth of Nations. such roles given to it since the 1950s rely solely on assertions and interpolations by modern economists...modern benign invisible hand explanations from the second half of the 20th century elevated the metaphor into ‘principles’, ‘theories’ and ‘paradigms’ of markets, which do not correspond to anything written by smith and neither do they explain anything.
Could we not, in the context of climate change, imagine a spontaneous order in which people were led as if by an invisible hand to promote a perverse and unpleasant end--eg., the tragedy of the commons? Self-interested actions are not necessarily always socially benign.
Surely, ‘the desirability of the market order that emerges as the unintended consequences of human action depends ultimately on the kind of rules and institutions within which human beings act, and the real alternatives they face’ ? It is the rules and institutions that are crucial for understanding how markets function, not metaphors like "the invisible hand."
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Hockey and Robb are asserting that the ALP alliance with the Greens makes them the most left-wing government Australia has had. Forget about Chifley's attempt to nationalise the banks or Whitlam's free higher education, we are faced with something so sinisterly left-wing that . . . the mind boggles.