Month: September 2016

Pumped-Hydro the way forward

South Australia, more than almost anywhere else in the world, is ripe for a Pumped-Hydro solution to its electricity supply problem.

South Australia looks to other states to rescue it from its foolish over-investment in wind-farms. Half-baked solutions won’t fix climate change! Pumped-Hydro will fix both.

SA’s experiment in Wind-power

A 2011 study by Australian electrical engineering scientists, Nicholas Cutler, et al., “High penetration wind generation impacts on spot prices in the Australian national electricity market,” provided a useful snapshot of impact of wind power on the dynamics of electricity dispatch (supply) to the grid.

Highlights identified by the publisher from their study were:

  • In South Australia (SA), wind generation has an influence on market prices.
  • Little or no correlation is found between wind generation and demand.
  • Wind farms in SA are receiving a lower average price than in other States.
  • The results highlight the importance of appropriate electricity market design.

From this study, one can conclude that not everything in the SA electricity market is satisfactory. The problems in the system also have the effect of limiting the ability of the system overall to take advantage of the wind power being generated in SA.

As I argued in 2012, the already extensive investment in Wind-power in SA meant that the electricity supply in that state was out of balance. I also argued for an upgrade to the inter-connector with Victoria was needed to fix that problem. Indeed, this was the solution adopted by SA and the national regulator. Yet it has led to even more wind-farms being built in SA, and now the larger inter-connector cannot cope.

A few months prior to the latest electricity generation disaster in SA, the SA Treasurer replied to me that he and his government were proud of their record on approving more wind-farms.

With an electrical storm hitting the towers carrying the wind-generated power  from the north of the state, and a lightning strike on the primary facility for balancing the load in SA a few days ago, the whole state was blacked-out. Yet we can see that the SA government and the advocates of more renewable energy will not accept any blame for this situation. Instead they change the subject and talk about the higher temperatures leading to the storm. While this is likely to be the case, it has nothing to do with the viability of the particular solution adopted in South Australia, where more wind-farms have been built than the electricity infrastructure can handle.

Pumped-Hydro

A primary problem with wind energy is that electricity generated during times of low demand is effectively squandered, being sold for around $10 MWh. In SA, this “surplus electricity” problem has even caused the Pt Augusta electricity generators to be prematurely retired thus building in more instability into the electricity supply system. This has meant that, during the storm, there was not enough capacity in the system to balance the load, and the Torrens Island generators had to be switched off, creating an outage of the whole state, because of “the outage of the state!” (Of course, this explanation, offered by AGL or the State government, does not make sense.)

Inevitably, electricity is generated by wind at times when it is not needed, mainly during the night, while wind generators have no capacity to increase output during times of peak demand. This means that the electricity generated during these off-peak times is effectively wasted, and in fact adds to instability in the grid, as other generators have to be shut down to accommodate the additional power being produced. It also raises the problem that back-up generators have to be provided “just in case” the wind fails at a critical time.

The conventional solution to both of these problems is to store the electrical generated during the off-peak times using hydro. For example, Denmark do this with their wind energy, selling it to Norway and Sweden, who store it in their hydro systems, using this system “as a battery,” by pumping water uphill, and then releasing it later. These countries then sell the electricity back into the European grid at a higher cost than they bought it, thus providing themselves with a nice little earner, provided the capital cost is not too high.

Also, Pumped-Hydro is used in Australia to store electricity generated by more conventional means during off-peak times, for example in the water storage facility on the Shoalhaven River in New South Wales (NSW). Here there is a hydro-electric power scheme operated as this kind of “electricity storage” at the Fitzroy Falls Reservoir.

The idea of storing electricity via Pumped-Hydro should be a popular concept in Australia: it appeals to our natural sense of maintaining a proper balance, and using everything most efficiently. Proposals of this kind can be found on the internet. It is not possible to assess the viability of such Pumped-Hydro proposals without carrying out detailed investigations. Nevertheless, the simple proposition is that, if the pumping cost plus the cost of the off-peak electricity, plus a return on the capital cost, was less than the final sale of peak electricity then we would have a viable proposition. For example, the following rough figures help us to put the concept into context:

  • Electricity stored: 6 hours a day at 500 MW = 1000 GWh per annum.
  • Cost of electricity purchased = $15 MWh = $A15m
  • Electricity sold at $150 MWh = $A150m
  • Gross Margin of $A135m
  • Other costs of $A10m
  • Net Margin of $A125m
  • This could support an investment of at least $A1 billion in infrastructure.

One does not normally associate hydro electricity with SA – the driest state in the driest continent. Nevertheless, if the Pumped-Hydro concept did prove to be economically viable, one could build such a facility in SA just off the River Murray, with one end of the system being adjacent to Nildottie, where the elevation is 43 metres, and the other being just north of Sedan Flats, where the elevation is greater than 300 metres, giving a very healthy 260 metre drop, in two steps. A rough map of this location (with apologies to the owners of this land) follows:

Pumped-Hydro
Pumped-Hydro – two dam concept

With the UK having recently approved the development of a new uranium nuclear facility, with a guaranteed cost of £92.50/MWh, one could say that pumped-hydro is becoming a more viable concept by the day. The costs of wind + Pumped-Hydro are likely to be less than half the cost of current generation nuclear power, and has none of the very large downsides that can be attributed to nuclear.

It should be surprising that those most concerned about climate change are not pushing this concept, but it isn’t. They are obsessed with solar, and nothing but solar will meet the objective of a de-industrialized world.

It should be surprising that the advocates of nuclear, on the basis of the unreliability of wind for generating electricity, do not endorse this approach. But true believers cannot be shifted.

It looks like the burden of coming up with a viable way forward for electricity generation will be left to the politicians, but even these are so blind that they cannot see the “writing on the wall,” preferring to pursue more “sexy” alternatives.

Partition – a missed opportunity

The region of Syria and Iraq needed a political solution, namely partition. This would have saved lives as well as simplifying the military task. This means that the political map should have been redrawn to reflect political realities, rather than sticking to the arbitrary post WW I boundaries.

If the major powers had been willing to accept that partition was the only solution to the sectarian divisions of these two countries the pain on the last six years could have avoided.

War is brutal and harsh

History has shown that war is difficult to avoid when the political borders join together people groups are not willing to accept each other and to work together for the common good.

Serbian discontent, matched by Austria-Hungary determination to maintain power, can be consider to the primary trigger for WW 1.

The Syrian and Iraqi conflict show a similar pattern.

Partition – a New Political Map

Drawing a new political map for Syria and Iraq would not have been difficult. This is because there was already a defacto Kurdish regime in northern Syria, and another one in northern Iraq. Apart from the Kurdish-Arab divide, the other natural division is between Sunni Arabs and non-Sunni Arabs. A new political arrangement of this region could have provided four stable governments that could have been expected to provide security for their own people, and would not have needed or wanted to turn to either the West or Russia:

  1. Syria – the southern and western part of the current nation.
  2. Iraq – the Arab-Shiite dominated region in the south of the country.
  3. Kurdistan – the Kurdish dominated parts of northern regions of Iraq and Syria.
  4. Northern Euphrates – the Arab-Sunni dominated regions of Iraq and Syria.

In an interview recently given by President Assad, the interviewer raised the prospect of partition. Assad firmly and confidently rejected this. He now expects to win, with most of Aleppo under the government’s control.

President Obama, Commander-in-Chief for the last 7 years, missed a great opportunity for peace by refusing to countenance partition. I just hope that he has not laid the groundwork for another 50 years of strife in that region by trying to maintain old and inappropriate borders.

History

An earlier version of this article was published 12 months ago. It can found here.

Hillary Clinton Can Win Presidential Election

If Hillary Clinton moves away from free trade advocacy she is more likely to win US Presidential election.

Free Trade – an imaginary construct

We cannot escape the fact that nations are in competition with each other. Whoever does not acknowledge this is living in an imaginary world. Indeed, no-one lives in a world that can be realistically governed as if national borders do not exist. In addition, most people value many of the unique aspects of their own national culture and situation. Free trade theory assumes that national borders are of no account. Try winning an election with that 100 kg weight around your neck!

Ending un-restrained free trade will NOT end globalization, or world trade. It will regulate that process and restore economic control to the US congress. It will mean that the Congress no longer has to sit on the sidelines while jobs are lost up and down the country.

Tariffs for Developed Nations

The economies of all western nations are out of balance, with currently unresolved structural imbalances and difficult to resolve unemployment issues. Free trade theory has meant that the word “tariffs” has become a curse-word for economists and the US Congress. Yet tariffs should be in first line of defenses for the US Congress in seeking to advance the economic interests of its own people, particularly when faced with chronic unemployment. Hillary Clinton, tell your own economists to do a bit of thinking outside of the circle.

Tariffs for Emerging and Developing Nations

Any emerging nation that wants to build a diverse economy will use tariffs to help its new industries to develop. China is doing it with great success, and so did Japan, Taiwan and South Korea.

Any developing nation that avoids implementing tariffs, so that its elite can buy imported luxury goods for cheaper prices, will remain the workhouse for the West.

It is impossible for emerging and developing nations to overcome the inherent “first mover advantage” of the western nations without tariffs and other means of assistance.

What Hillary Clinton can do

  1. Acknowledge that current trade policies have hurt many of the poorer people in the USA.
  2. Accept that only a change to trade policies, so that they are not constructed primarily to help the already successful, will remedy the problems caused by the current trade policies.
  3. Argue that every nation needs some measure of protection against cheap imported goods, including USA.
  4. Undertake to discuss current trade policies with the nation’s trading partners, seeking to find a way to change them so that they work better for all nations, and not seeking only sectional advantages for one nation over another.

Jeremy Corbyn – Labour leadership

Jeremy Corbyn resoundingly won the vote of party members, holding onto parliamentary leadership of the Labour Party.

Most Labour MPs are unhappy with the decision, believing that it will be electoral poison. Some are looking for support via the unions to change the way the parliamentary leader is elected. For them, Corbyn’s re-election was a disaster; for those who like Corbyn’s socialism it was a great victory.

How can a party so fundamentally divided really work. On the one side, British Labour is dominated by members who hate profit and want to socialize everything, led by Jeremy Corbyn. On the other side, most British Labour MPs recognize that we live in a capitalist economy, with this concept being accepted by the majority of voters.

It is time for a new party in the UK that overtly recognizes the role of capitalism in generating new wealth, and also recognizes that only democratic forces will result in this new wealth being more equitably distributed. This is the true central position, and the argument for an “equitable distribution” a basis for a full-throated contest with the Conservatives.

Democratic Capitalism, not socialism, is the way forward for the UK. It is not the “Free Trade Capitalism” of the Conservatives.

Democratic Capitalism

The economic model of Democratic Capitalism recognizes that capitalism is the engine for economic development. It will deliver economic benefits that neither socialism (of the Sanders and Corbyn type) nor communism (of the Venezuelan and Cuban type) is able to deliver. Yet the 21st century has shown that capitalism needs controls, exercised via democratic processes, to ensure that it serves everyone, not just those in control of capital.

It is time that we clearly recognized the two most important economic drivers in a modern economy, Democracy and Capitalism, and stopped toying with dysfunctional alternative models, like that one presented by Jeremy Corbyn and supported by a majority of Labour members. It is quite unlikely that Corbyn’s model will be supported by a majority of UK voters, unless Theresa May badly drops the ball (which seems unlikely).

Muslim Immigration – Australian perspective

An Essential Vision survey of 1000 of its 100,000 selected “eligible” Australians showed 49% would ban Muslim immigration.

This was a shock to most commentators. While it is fair to question the methodology used, it also could be an indication of just how far elite thinking has moved from what ordinary people think. Only a survey of all voters, randomly selected, would really address the reasonable methodological doubts. Nevertheless, this survey and the vote in Australia for One Nation does indicate that there could be a real issue with Muslim Immigration in Australia at the moment.

Ban on Muslim Immigration – Reasons

Surprisingly, the #1 reason cited for supporting a ban is not “Terrorism,” but “They do not integrate into Australian society.”

The perceived lack of integration has been a typical Australian comment on large numbers of new arrivals from a particular country. It has been said about 19th century Chinese immigration. It was probably said about Greek and Italian immigrants. More recently it has been said about Vietnamese immigrants and Koreans, and now about Muslims.

It is natural for people moving to a new country to live and work in places where there are many others of the same ethnic background. As confidence grows, many new arrivals find it easy to locate themselves in the wider community. This is currently the case with Chinese and Indian immigrants, who are widely dispersed in Australian cities, with sociological factors such as education and social standing playing a much larger role than ethnic identity.

While it is possible that Muslims will prove to be a different case, since Islam traditionally has had no concept of a “secular state,” secular states have more recently operated in Muslim-majority nations, such as Lebanon, Egypt, Iraq, Syria and Indonesia. (Turkey is not a good example, as in modern times it has been a Muslim-only nation except in Istanbul.) Also the rise of sectarian conflict in Syria and Iraq, primarily Sunni uprisings against non-Sunni governments, raises questions about the willingness of Muslims to integrate into a secular society and to accept diversity of opinions.

Muslim Response is required

While “elite thinkers” can fulminate against the lack of liberal ideas among the “non-elite,” there is little that can be done to change the community perception of a lack of willingness of Muslims to integrate, unless Muslims themselves demonstrate a willingness to integrate.

Changing perception of Muslims can be led by the diverse Muslim leadership, the Imams, mosque leaders, and so on. It could begin with discouraging the use of full-face covering clothing by Muslim women. This is a cultural conditioning that does not translate well in Australia.

Overt suppression of the place of women in our society does not only apply to those who adhere to Islam. In the religious, but not in the secular spheres, it also applies to some denominations of the Christian religion. However, it appears to be more obvious in the case of Muslims, with reports of genital mutilation, polygamy, and the “bans” on Muslim women relating directly with men who are outside of the family.

Treating women in a way that appears to relegate their role to complete subservience to men will never be accepted in Australian society. Addressing this question is something that only Muslim leadership can address. Laws can prohibit the more obvious cases. For example, a ban on burqas in public buildings and events could be introduced. Laws on genital mutilation and polygamy could be vigorously enforced. But it would be far better if Muslim leadership changed the perception of Muslims by making the case that such things are not an inherent part of Islam.

What is taught in the Mosque?

I have no idea what is taught in a mosque, although we sometimes see a glimpse of a radical speaker sowing hate, either here or overseas. Such images do not build confidence in the willingness of Muslims to integrate.

Surely Muslim preachers in an Australian context are emphasizing the need for individual Muslims to earn and income and pay taxes in order to contribute to society, and not do what Mark Latham has observed, milking the welfare system of Australia at the expense of every other taxpayer. Or are they? I would love to know. On a parallel theme, one could also expect that Muslim preachers in Australia would also be teaching worshippers to pay tax according to Australian law and not blatantly defy it, as I have personally observed.

Integration not defiance

Negative perception of Muslims in Australia can be fixed by Muslims. The Essential Research poll, even if biased, shows that they have a long way to go.

COP21 and Binding Targets

COP21 chose aspirational targets, rather than binding targets. It was a good outcome for the Paris Climate Conference.

An attempt to implement binding emission reduction targets at the Paris Climate Conference, COP21, would not have achieved as much. Under that scenario, only leaders who were being pushed by an ideological agenda would have made substantial commitments. As it turned out, only China held back from making a reasonable commitment, while actually working behind the scenes to take more drastic action (or at least that is what we currently think).

COP21 – not the IPCC

The IPCC has been ideologically blinded by its 1990 ambition to model the climate out to the future. This has proven to be “too difficult.” In response the “true believers” in this strategy have committed themselves to outrageous advocacy of a “climate disaster” position.

This is well illustrated in an article by Glen P. Peters, Robbie M. Andrew, Tom Boden, Josep G. Canadell,  Philippe Ciais, Corinne Le Quéré, Gregg Marland, Michael R. Raupach and Charlie Wilson, “The challenge to keep global warming below 2?°C,” NATURE CLIMATE CHANGE | VOL 3 | JANUARY 2013. In this article, it was claimed that the world was on a trajectory of totally out-of-control climate change (represented on the chart below as RCP 8.5).

The authors constructed a chart to demonstrate their point, and made a prediction of 2012 CO2 emissions that was more like a guess that supported their proposition. The Australian CSIRO even cited this article to me in 2015, even though evidence from 2011, 2012, 2013 and 2014 CO2 atmospheric levels showed that emissions were likely to have fallen below the estimates in this graph.

It is now clear that Peters, et al. were wrong. Despite this, the orthodox position is that the collective known as the IPCC can do no wrong. Yet the politicians at COP21 do not appear to have believed them. They came up with plan that would actually work, which was not based on a “climate disaster” scenario, such as presented by Peters, et al.

We can compare the outrageous predictions of IPCC-linked climate scientists with the actual likely outcome, at least as indicated by hard evidence of the actual known CO2 atmospheric levels up to the end of 2015.

CO2: COP21 outcomes vs IPCC
Likely CO2 vs. IPCC “representative concentration pathways”

A caveat has to be raised for 2016, since the atmospheric levels of CO2 have risen much more than expected. Most of this increase can be attributed to the El-Nino effect, with a higher temperature resulting in more CO2 being released from the ocean. However, this does not entirely explain the increase, and we have to wait until June 2017, when the El-Nino effect has been fully purged from the data to be really sure about this. (Earlier I had written that the extra atmospheric CO2 was possibly due to emissions from the Middle-East war. While the war did increase atmospheric CO2, I am willing to concede that it is both temporary and was dwarfed by the El-Nino effect. I have now a more robust explanation, but publication of that explanation, even in this form, will have to wait until after June.)

CO2

A close to ideal strategy would be something like a 2% reduction in CO2 emissions per year per nation for the next 10 years from a 2013 base. COP21 did not adopt this target, but it headed in this direction.

Such a target is only fairly applied to those nations above the world average per person of CO2 emissions of around 5 tonnes per person. Using 2010 data, the following are the most important countries in regard to CO2 emissions:

China – 8 billion tonnes per year – 6 tonnes per person – 2% target applies
USA – 5 billion tonnes per year – 17 tonnes per person – 2% target applies
India – 2 billion tonnes per year – 1.6 tonnes per person – no reduction target
Russia – 2 billion tonnes per year – 12 tonnes per person – 2% target applies
Japan – 1 billion tonnes per year – 9 tonnes per person – 2% target applies
Germany – 750 million tonnes per year – 9 tonnes per person – 2% target applies
Iran – 570 million tonnes per year – 7 tonnes per person – 2% target applies
South Korea – 560 million tonnes per year – 11 tonnes per person – 2% target applies
Canada – 500 million tonnes per year – 13 tonnes per person – 2% target applies
UK – 500 million tonnes per year – 8 tonnes per person – 2% target applies
Saudi Arabia – 460 million tonnes per year – 16 tonnes per person – 2% target applies
South Africa – 460 million tonnes per year – 9 tonnes per person – 2% target applies
Mexico – 440 million tonnes per year – 4 tonnes per person – no reduction target
Indonesia – 430 million tonnes per year – 2 tonnes per person – no reduction target
Brazil – 420 million tonnes per year – 2 tonnes per person – no reduction target
Italy – 410 million tonnes per year – 7 tonnes per person – 2% target applies
Australia – 370 million tonnes per year – 16 tonnes per person – 2% target applies
France – 360 million tonnes per year – 5.5 tonnes per person – down to 5 tonnes
Poland – 320 million tonnes per year – 8 tonnes per person – 2% target applies
Ukraine – 300 million tonnes per year – 7 tonnes per person – 2% target applies
Turkey – 300 million tonnes per year – 4 tonnes per person – no reduction target
Thailand – 300 million tonnes per year – 4.5 tonnes per person – no reduction target
Spain – 300 million tonnes per year – 5.5 tonnes per person – down to 5 tonnes
Kazakhstan – 250 million tonnes per year – 14 tonnes per person – 2% target applies
Malaysia – 220 million tonnes per year – 7 tonnes per person – 2% target applies
Egypt – 200 million tonnes per year – 2.5 tonnes per person – no reduction target
Venezuela – 200 million tonnes per year – 7 tonnes per person – 2% target applies
Netherlands – 180 million tonnes per year – 11 tonnes per person – 2% target applies
Argentina – 180 million tonnes per year – 4 tonnes per person – no reduction target
UAE – 170 million tonnes per year – 18 tonnes per person – 2% target applies
Taiwan should also be included, but is not listed in the UN data.

Methane

It is interesting that Methane is not the problem that IPCC predicted it would be. However, holding Methane emissions levels constant could be a good aspirational target.

Nitrous Oxide

Nitrous Oxide, particularly from transportation, is not open to easy attack. A solution to the growth in nitrous oxide emissions will probably depend upon the development of electric cars as a viable alternative to petrol and diesel vehicles. That is likely to be 10 years away. The target here could be to develop alternatives to current vehicle engines in that period.

HCFCs

Similarly, while atmospheric levels of CFCs are declining, atmospheric levels of HCFCs are growing. The target here could be to develop alternatives to HCFCs over the next 10 years.

History of this discussion

An earlier version of this article was published before COP21. It can found here.

Same-sex marriage – Australian plebiscite

Fiercely contested social questions, like same-sex marriage, are rarely the basis of voters’ decision-making during an election, but they can be.

Why a Plebiscite?

A plebiscite was chosen by the Liberal and National party room as a way of giving the NO vote a chance of winning.

However, from a theoretical point of view, a plebiscite is not without merit. Parliaments are mostly elected on economics, foreign affairs, and very importantly, on competence. Same-sex marriage does not fit in this set of criteria.

In addition, the advantage of a “people’s vote” on this matter is that such things are uncomfortable for many politicians to discuss. This is because most politicians want to be preselected and elected on economics and competence. Mostly, they do not want to stand or fall on social questions.

The cost of plebiscite is trivial – about $10 per working person. The significance is great – changing norms that have existed for over 2000 years in the western world.

Who will win the same-sex marriage plebiscite?

The advocates for same-sex marriage believe that, with the ALP virtually purged of those who oppose that change, and the minor parties in favour of that change, they reckon they will win if it comes down to a conscience vote of Liberals. So the ALP, Greens and Nick Xenophon Team are against a plebiscite and for a parliamentary vote.

The opponents of same-sex marriage hope that a plebiscite will see the measure defeated.

Neither the proposers, or the opponents of same-sex marriage have made their case clear. Both parties discuss the matter in the ether. For proposers it is all about love, but in a non-sexual context; for opponents it is all about preserving the ideal of a heterosexual couple bringing up a family.

Dysfunctional Arguments

One suspects that the underpinning proposition for male proponents of same-sex marriage is to achieve community acceptance of sodomy / anal sex. I believe that they do not talk about this in public or private because they do not think that the community will look favourably upon that proposition. So it could be argued that many male proponents hide their real agenda behind the mantra, “Our love should be acknowledged!” For most female proponents of same-sex marriage it would appear to a genuine case of arguing for acceptance of their relationship, combined with a certain defiant militancy.

For male and female opponents of same-sex marriage it is definitely about sex. Having lost the argument that sodomy should be a criminal offense, they are not prepared to use this as an argument, on the grounds that they will be labelled as “out of touch bigots.” However, an objection to sodomy lies at the root of the case against same-sex marriage, combined with a real attachment to the heterosexual relationship as the basis for nurturing families.

Possible outcome

For Christians, this is a particularly difficult question, since same-sex relationships, without sex, have been an important part of the Christian experience since earliest times. This idea even goes back into the Old Testament, with the relationship between David and Jonathan being a particularly important example (even though some have, without any evidence, claimed this to have been homosexual). So there should not be any question for Christians of acknowledging love between people of the same sex.

For Christians, sex outside of marriage is not allowed. It is considered to be a moral failure. In addition, each person is expected to only have one sexual partner during their whole life (except in the case of the partner dying), just as Jesus taught. Taking this a step further, there is no place in the Christian life for heterosexual promiscuity or for sodomy. However, there is a place for loving and committed relationships between people of the same sex. However, the debate over same-sex marriage has left no place for this Christian standpoint: it is consigned to dust bin of “elite thinking.”

Therefore, if the same-sex plebiscite goes ahead, it is likely that it will be lost.

However, a parliament vote formalizing same-sex relationships, yet without appearing to endorse sodomy as a normal part of life, is likely to receive bi-partisan support.

In a democracy, it is a question of the achievable, and of achieving a reasonable consensus. On this question, we are far from that point.

 

 

 

Australian Exceptionalism is alive and well

In an entertaining article in The Australian, 17 Sept 2016, Paul Kelly discusses the idea of Australian Exceptionalism.

According to Kelly, the idea of Australian Exceptionalism goes back to Alfred Deakin, PM 1903-4, 1905-8 and 1909-10. It included control of immigration, protection of industry and wage arbitration, leading to (or arising out) a sense of egalitarianism.

Apparently, Paul Kelly, Peter Costello, Henry Ergas and William Coleman (an economist at ANU) all want to smash Australia’s egalitarianism in the search for a now elusive platform of “reform.” However, those who support Democratic Capitalism love the Australian sense of egalitarianism, and would dearly love to bring these blind economic reformers to their senses.

Immigration

There is only a minority of people in Australia who want to throw open our borders, like the US did at the beginning of the 20th century, and say, “Whoever wants to come, come now!” Australian know that their precious and hard-fought-for “exceptionalism” could not stand in the face of millions of uninvited arrivals. Europe now knows the same thing: it learnt that lesson the hard way.

Protection of Industry – $A

Australia now knows that its hard-won industrial base cannot survive (and has not survived) an over-valued currency. Led by the Reserve Bank of Australia, the nation has made every reasonable effort to bring the currency down to a more manageable level.

The relative value of the $A is not divinely or even particularly rationally set. It is a balance between those who want to buy $As and those who want to sell $As. As the Central Bankers of the world continue their ridiculous plan to revive their national economies by cutting interest rates, their national economies dive into a hole. This is because they are obsessed with a zero-tariff regime (but they haven’t worked yet that this is the source of their problems).

Tiny Australia is at the end of the line. We have to cut our interest rates in order to slow down the flow of funds into the country in order to stop our currency becoming overvalued. Yet there is little we can do to make investing in Australia less attractive. It is a safe haven for hot money from Asia; and the Australian economy is better run than any other G20 nation. Who wouldn’t want to invest in Australia, or live here for that matter? (A few, like Germane Greer!)

So, industry protection can be established indirectly by managing the exchange rate. This can be done with measures designed to make it harder to invest in Australia. (We have enough of our own money to fund all existing Australian businesses – we didn’t need to sell the Melbourne ports to China and other overseas buyers.) The RBA can also keep interest rates low, in order to discourage hot money chasing higher interest rates in this nation.

Protectionism – Tariffs

Industry protection can also be established by re-introducing tariffs. Yet with the current exchange rate regime, a uniform tariff of 20% on all goods is likely to over-cook the economy. However, an increase in all tariffs up to 10% is certainly worth examining. If that is too difficult to accept or implement, then an implicit 20% tariff on all goods and services being purchased by an Australian government authority could be introduced.

In regard to services, establishing a 20% “International Outsourcing Tax” would offset the massive cost differential hurdles of current international outsourcing. These include: Payroll Tax, Superannuation, generous leave arrangements, health and safety regulations.

Wages Policy

Some reform is certainly needed in the industrial relations area. Here a new government could take advantage of the “reforms” implemented by Julia Gillard under the Fair Work regime. The result or her reforms is that there is no longer any real need for unions in the wages area, since the government sets minimum wages for every class of work.

Now there is only a place for unions in negotiating enterprise agreements, conditions and in health and safety. These can also go if Fair Work takes over these roles and gets rid of the rorts currently supported by unions. These include employment-destroying double time penalty rates for Sunday work.

Fair Work Australia could also be prohibited from promoting union membership.

Egalitarianim

It would be a great loss if Peter Costello’s vision for Australia, invoking the perceived need for hyper-competition for the nation’s businesses, became the order of the day. If only the best-in-the-world can thrive in his Australia of the future, we can say goodbye to social cohesion, and hello to the dysfunctional situation currently found in so many American towns and in north of the United Kingdom.

May heaven preserve us from this kind of future.

Tariffs are not a curse-word

If international trade is to be of benefit to every nation upon the earth, then tariffs must come back into our economic vocabulary.

Tariffs are not evil

Tariffs are a supplement to the automatic stabilizer of an exchange rate. They help iron-out the development disparities within a nation and are necessary if a national government is determined to do whatever it can to ensure that there are jobs for people of every skill and education level.

If handled correctly, tariffs will have two results. While all imported goods will be more expensive, some sectors of the economy that would otherwise die without tariffs will survive. The question to be considered is, “What is the trade off for more expensive imported goods?” The answer should be, “Jobs for those who would not otherwise have jobs!”

The corollary of imposing tariffs is, “What is the trade off for cheaper imported goods?” The answer has been, “Jobs will be lost, with no sign of them ever been regained!” For those who are skeptical about the “never” aspect of this answer, just consider the Enclosure Laws in England in the 17th-18th century. They resulted in 100 years of chronic unemployment and poverty in England. This is not just a historical aberration. Modern attempts to fix the structural imbalances of Western economies via monetary policies, have not worked. Here is a prediction that is beginning to be recognized as true in the world of Central Bankers: they will never work! BoJ’s “decision” to aim for 10 year interest rates at 0% must soon be recognized as nuts!

Rather than Tariffs being “evil,” it is the zero tariff objective of the WTO that is evil, and has brought on the unremitting distress of the current economic situation.

Tariffs will not end World Trade

Re-instating tariffs will not end globalization, or world trade. It will just regulate that process and restore economic control to national legislators.

Even if every nation imposed a 20% tariff on all imported goods and services most items of global trade would continue. This is because the Real Advantage held by some nations in the production of those goods and services will mean that trade in those goods and services will continue.

Take an example of simple manufactures. Australia buys most of its clothing from China and Bangladesh. Even at retail, a T-Shirt often costs only $A6. With a 20% tariff it will cost $A7.20 (if the margins stay constant). No-one will notice!

Take an example of complex manufactures. The NSW government is planning to buy trains from South Korea, because they are less expensive than Australian-made trains. Also the history of train-manufacture in Australia has been fraught in recent times. It is quite unlikely that a 20% tariff would change that decision, although it would impact the dynamics of the decision-making process a little. Once again, since the decision is likely to be unchanged, and the cost will only be 20% more (rather than, say 40% more if made in Australia) then no-one will notice.

Tariffs will Save Jobs

Although, under the scenario I have painted, the introduction of tariffs, even at the relatively high level of 20% on all goods and services, would not end world trade, in other areas it will mean that domestic production can continue.

In cases where the imported cost is currently less than 20% below the locally manufactured cost, a 20% tariff would mean that local manufacture will be preferred over imported supply. For an Australian example we can look at steel manufacture. Here the existing South Australian plant is balancing on the brink of being uneconomic. A 20% tariff would change that situation overnight.

Tariffs will Restore Prosperity

Most Western nations are now consumer societies, where most jobs are created by providing goods and services for other consumers. However, for consumer societies to work, there must be jobs for everyone, for everyone is a potential consumer. Here potentiality is converted into action by having money, and for most of us money comes from having a job.

The USA is the most telling example of the failure of this principle because of defective economic orthodoxy. Here we see the impoverishment of US “Middle Class” since the 1980s. This has followed the zero-tariff ideology pushed by the economic elite. This ideology was even supported by the Democratic President, Bill Clinton, and also by the Republicans. The consequences of the Democratic Party’s acceptance of this bogus theory is now being felt on the streets of their impoverished cities. Since Hillary Clinton also believes that America should continue down the same path upon which her husband set the country, there will be no saving American cities if she is elected. Just more ringing of hands and ineffective “black lives matter” protests.

The elite pushing zero tariff policies now has its own world body, namely, the World Trade Organization. That body, and those who support it, can take the majority of the credit for the current economic malaise impacting on the West. Its malign influence is now spreading to emerging nations, since they are finding limited scope to sell their goods. This has happened because the consumer/worker in the West has been crushed by the trade policies of the US.

The same elite who pushed for zero tariffs are now “subtly urging” the WTO to making it more difficult for UK to leave the EU. The best outcome of that talk could be for the UK not to join the WTO and for the UK to prosper without its dead weight of WTO rules around that nation’s neck.

Tariffs are better than Quotas

While quotas can have a place in food production, since it is natural objective of every nation to maintain a large measure of self-sufficiency in food for cultural and defence reasons, tariffs are more economically efficient than quotas. This is because they allow the market to establish a close-to-optimal division of labour between economic sectors.

Quotas are not economically efficient. They can result in much higher prices of now-scarce goods, even leading to a doubling of prices. They can also result in super-profits for importers who have a licence to import up to the quota level, since they are now dealing in scarce goods. Of course, that can be partially compensated by using an auction system for selling the licences to import.

Sectional Impacts

There will be downsides in using trade controls via tariffs for those sectors of the economy that are very heavily dependent upon exports. This, too, will require a balancing act by the national government in order to ensure that no sector of the economy is unreasonable impacted by the introduction of tariffs. This can be done via rebates for the tariffs embedded in their exports, and by targeted measures designed to offset the extra costs that they have to bear compared with producers in other nations. It is worthwhile to address all such matters, since everyone in the nation benefits from a cohesive society in which everyone has the realistic chance to obtain a job.

Democratic Capitalism & 21st century economics

Democratic Capitalism is the way forward. Capitalism + empowered democracy is the key to restoring economic fairness throughout the world.

George Cooper

Recently, George Cooper, in his Money, Blood and Revolution (2014), and in his new Fixing Economics (2016), explained that the economic leveling tendency of the twentieth century was a result of the processes inherent in democracy itself. While capitalism is intent on increasing shareholder returns, other forces tend to reduce these returns. Obviously, competition between firms is a contributing factor in this process, but Cooper was able to show that democracy plays a major part.

Whereas capitalism can be expected to improve the wealth of those at the top of the economic pyramid, Cooper argued we should not ignore the fact that, in a democracy, the majority of the people actually have the power to elect those who favor their own cause. For Cooper, this has resulted in taxation being used to redistribute income, most notably seen in the impact of inheritance taxes in England. Other welfare measures meant that those at the bottom part of the pyramid shared in part of the economic prosperity of the nation. Even wage policy can help to share the wealth.

Therefore, on Cooper’s model, capitalism helps to improve the economic value of each person’s labour and effort, and democratic forces ensure that this increased value is spread more fairly between capital and labour.

Trade policies

The relatively fair income distribution of the 20th century has come under direct threat with the beginning of the new millennium. The gap between the rich and the poor has increased in all developed and undeveloped nations, whether they are democratic or not. The old mechanisms are no longer working, and there is little chance that this will change unless there is a change in our economic thinking.

The first thing to accept is that nations are in competition with each other. We do not live in a world which can be realistically governed as if national borders do not exist. They do, and most ordinary people (if not the elites running the show at the moment) want them to continue. Most people value many of the unique aspects of their own national culture and situation. Most people would like the economic situation of their own nation to improve. They are prepared to co-operate in order to achieve that result, and look to their own national government to advance the economic welfare of their own nation. Democratic governments that ignore that imperative do not get re-elected.

The economies of western nations are out of balance, with currently unresolved structural imbalances, and difficult to resolve unemployment issues. These can be fixed, but the first thing is to win the argument against the dominant economic theory, Ricardo’s Comparative Advantage theory. This theory has meant that “tariffs” has become a curse-word. Yet tariffs should be in first line of defences for any national government seeking to advance the economic interests of its own people, particularly when faced with chronic unemployment.

Tariffs are a necessary part of any nation’s economic weaponry, and are certainly essential if the forces that are pushing nations to more and more inequality are to be countered. I say, put democracy ahead of a failed economic theory.

Democratic Capitalism

The economic model of Democratic Capitalism recognizes that capitalism is the engine for economic development. It will deliver economic benefits that neither socialism (of the Sanders and Corbyn type) nor communism (of the Venezuelan and Cuban type) is able to deliver. Yet the 21st century has shown that capitalism needs controls, excised via democratic processes, to ensure that it serves everyone, not just those in control of capital.

It is time that we clearly recognized the two most important economic drivers in a modern economy, Democracy and Capitalism, and stopped toying with dysfunctional alternative models.