Australia has one of the world’s highest standards of living. Income per capita is high and the level of social security is admirably extensive. Indeed, the quality of life (which is not measured alone by economic indices) that Australians enjoy is arguably the best in the world. This nation has had phenomenal prosperity since the export of Merino wool in the 1800s which and the gold rushes of the 1850s.

The crucial dynamic that has facilitated Australian prosperity has been the impact of primary resources underpinning the nation’s international trading position ensuring that domestic goods and services generate local employment. The resultant strength of the domestic economy has consistently enabled Australia to ride out falls in demand for primary exports, be they agricultural produce or minerals.

Current moves (2011) to make Australia reliant upon sovereign wealth funds (SWF) as the future principal determinants of economic activity now imperil the nation’s continuing economic viability. The imposition of a super profits tax regime upon the mining sector (and possibly the banking and finance sectors) also threatens to consolidate a shift to a neo-mercantilist economic “rent seeking” economy that will be fatal for Australia. (The exorbitant cost of the NBN is also being used to facilitate a transition to a “rent seeking” paradigm by indebting Australia so that SWFs will have to be used in the future).

Pressure from the Australian Greens to introduce a carbon tax carbon and disingenuous opposition on the part of the Abbott Liberals is part of political stratagem to facilitate a shift to a neo-mercantile economic “rent seeking” economy. To place in context the gravity of the socio-economic stakes at issue, an overview of Australian economic history and political development is undertaken.

Why the Balance between the Primary and Secondary Sectors of the Australian Economy Must be Maintained

The danger for Australia being over dependent upon the primary sector was vividly illustrated when this continent was plunged into its worst ever economic crisis in the 1890s following a brief international collapse in wool prices. The ramifications of this catastrophe helped precipitate federation in 1901. The adoption of an Australian system of arbitration in the 1900s provided the Australian union movement with a future capacity to grow and to secure wage increases and employee entitlements.

The establishment of tariffs was integrally connected to the development of local industry and employment. Immigration in the 1900s continued to bolster local demand which encouraged the growth of commerce and industry that in turn bolstered the credit worthiness of Australian banks because there was a viable market to lend to. This crucially contributed to economic recovery from the 1890s Depression.

The next economic depression that adversely affected Australia was the Great Depression of the 1930s. However, the effects of this depression were partly lessened by many Australians utilizing family connections to move to the countryside where there were stable food sources and intermittent employment. The onset of the Second World War in 1939 increased production levels which eventually lifted Australia out of economic depression after the war ended in 1945.

The initiation of the Snowy Mountains Hydroelectric Scheme and massive post war immigration by the Chifley Labor government (1945-1949) were vital in sustaining economic recovery because they expanded the nation’s Gross Domestic Product (GDP) and in generating employment. Less beneficent policies of the Chifley government were its attempts to nationalize the banks and gratuitously maintain war time rationing controls. Returned soldiers, their wives and immigrants to make a fresh post-war start were stifled by the Chifley government’s statist direction.

Economic Balance Facilitates Prosperity

The election of the Menzies coalition government in December 1949 was a vital positive turning point in Australian history because this new government supported small to medium business sectors as the drivers of economic activity and employment. The coalition government also gave vital support to the manufacturing sector by providing tariff protection to domestic Australian industry.

Instead of attempting to regulate the economy by state planning controls that would have undermined the nation’s productive capacity, the Menzies government applied a Keynesian approach to engineer demand and influence inflation levels. Keynesianism was most famously and successfully applied in the credit squeeze of 1960-61 in which fiscal and budgetary levers were used to dampen demand thereby, lowering inflation.

The Menzies government’s role in facilitating economic and employment growth was noteworthy in that there was no attempt to stifle the arbitral award system which helped ensure that employees reaped the benefits of economic prosperity. The Menzies era reflected an approach to liberalism which was predicated upon arbitration and employment generation.

The Role of Industrial Arbitration in Maintaining Economic Balance

The rationale behind arbitration was that wages should be as high as economically feasible to help bolster employment levels and social cohesion. The major proponent of this approach was the Australian statesman Alfred Deakin who in alliance with the then Labor Party leader John Watson, helped pioneer the passage of the Conciliation and Arbitration Act 1904 (the 1904 Act).

The 1904 Act facilitated the introduction of arbitration whereby industrial tribunals - through the granting of industry wide awards - established pay and conditions for employees after hearing respective employer and union submissions. The handing down of the landmark Harvester Judgement in 1907 by Justice Sir Henry Bourne Higgins established the benchmark that a minimum wage should be such to enable workers to support their families. The operation of arbitration also helped prevent industrial conflict. This system of industrial relations allowed relatively small craft based unions (which often lacked industrial muscle) to effectively represent employees who might otherwise have missed out from the benefits of a market economy.

Economic Rationalism Challenges Australia’s Economic Balance

An opposing approach to Australian liberalism (which is now in the ascendant) is that wage levels should be suppressed as much as possible and the entitlements that employees could access should be restricted because paid labour is conceptualized as a business impost. Ironically, this approach did not become viable for neo-liberal elements within the Liberal Party in the 1980s until the Hawke ALP government (1983-1991) floated the Australian dollar, removed investment restrictions to allow capital inflows, commenced tariff reductions, introduced enterprise bargaining and undertook micro-economic reform.

The economic reforms of the Hawke government – which were continued by the ALP government of Paul Keating (1991 to 1996) - gave legitimacy and credence to advocates of free trade within the Liberal Party. The two competing approaches to Australian liberalism were fought out in the early 1900s in reference to the issue of protection versus free trade and their respective political proponents, Protectionist leader Sir Alfred Deakin and Free Trade leader Sir George Reid. The triumph of Deakin over Reid ushered in a protectionist economic paradigm for Australia that lasted from the 1900s to the early 1980s.

Ideological neo-liberals since the 1980s have been critical of the Menzies government for maintaining tariff protection. The argument that they have proffered has been along the lines that tariff protection created artificial levels of employment by artificially propping up non-productive elements of the economy. This line of reasoning also maintained that protectionism insulated Australia from the rigors of international competition and was only sustainable due to demand for Australian primary products such as wool.

The most damming indictment by Australian neo-liberals on the right and Whitlamites on the left was their assertion that protectionism promoted “rent seeking”. “Rent seeking” is where revenue from a surplus production/extraction is manipulated for the economic and political benefit of those in power. The proposed carbon tax is actually a form of “rent seeking” because revenue from such a tax could be directed to a Sovereign Wealth Fund (SWF) for the benefit of the business and/or political interests (including industry unions) of those who officially manage such a fund.

Critics of the Menzies government erroneously asserted that “rent seeking” had been facilitated by protectionism because resulting employment levels were artificially underpinned by international demand for Australian primary produce at the expence of inherently productive economic activity. This perspective also maintained that protection was a form of taxation because the cost of the tariff was passed onto the consumer.

The economic policies of the Menzies government in the 1950s and the 1960s were actually the antithesis of “rent seeking”. This was because protectionism then helped foster the growth of small to medium business sectors of the economy by providing them with an actual capacity to be viable and subsequently generate employment. Not only were employment generating industries fostered but the Menzies government’s respect for industrial arbitration helped ensure that wage earners gained the benefits of economic growth and commercial activity.

The Menzies government also promoted the viability of the agricultural and mining sectors by making international trade deals, the most notable of which was a trade treaty with Japan in 1957. Up until the 1980s, Australia was usually in trade surplus with its major trading partners.

Whether the challenges posed to Australia by changing international economic and trading trends necessitated a shift to a neo-liberal paradigm will not be analysed but rather their socio-political impacts because they could now determine if Australia now goes down the precipe of “rent seeking”. Before the 1980s what later became known as ‘economic rationalism’ was advocated in the 1960s by the federal Liberal Party backbencher Bert Kelly. Kelly’s support of free trade was courageous because it was the exception to the rule. But be that as it may, there were substantial political ramifications associated with a shift to economic rationalism that are now placing Australia on course to becoming a “rent seeking” nation and first became evident under the Whitlam government.

Whitlamism: The First Threat of “Rent Seeking”

The future free trade orientation of the Whitlam ALP government (1972 to 1975) was apparent when Whitlam, the then opposition leader in the 1960s, declared himself to be a ‘Rattigan Man’. This was in reference to Alf Rattigan who was the head of the Tariff Commission in the 1960s and 1970s.

The standard narrative of what in Australia became known as economic rationalism commences with Rattigan defying the powerful Country Party leader and deputy prime minister (1958 to 1971) John Mc Ewan by advocating free trade as opposed to Mc Ewan’s ‘protection all round’. It was under Whitlam that the Tariff Board was converted in 1973 into the Industries Assistance Commission (IAC). The role of the IAC was to help ensure that industry became internationally competitive instead of applying tariffs to protect Australian primary and secondary production.

The gauge of the Whitlam government’s unworthiness was the almost equidistant degree to which it was the polar opposite of the Menzies government. In contrast to the Menzies government which ensured that its protectionist policies were effective by supporting the business sector, the effect of the Whitlam government’s free trade policy direction was to cause high inflation and high unemployment.

The free trade orientation of the Whitlam government was illustrated when it suddenly announced a dramatic 25% tariff cut in July 1973! Whatever the inherent theoretical merits of the 1973 tariff cut, its practical ramifications were destructive. Local industry and businesses were not able to adapt to this sudden tariff cut. Massive increases in government spending combined with government support for steep centralized wage increases caused inflation to rise to double digit figures.

The inflationary impact of wage rises adversely eroded business and middle class acceptance of the arbitration system (which business had helped usher in, in the 1900s) and this unfortunately contributed to a shift in the Liberal Party toward an anti-employment perspective in which labour was considered an encumbrance toward economic progress. Any social dividends that might have been gained from the Whitlam government’s increased spending in health, education and the arts were cancelled out by the inflationary impact of the government’s industrial and macro-economic policies.

The Whitlam government was also the opposite of the Menzies government in that it threatened the viability of Australia’s crucial mining sector. Tariff protection had attracted foreign investment to assist in establishing a viable mining sector in the 1950s and 1960s which in turn assisted in establishing an invaluable export source and foreign exchange earner. The appropriate balance between attraction of foreign investment and national economic dividends was struck by company taxes and mining royalty payments. Probably the most important factor that the Menzies government secured was to create a stable investment environment by promoting social and economic stability.

The Whitlam government by contrast threatened the mining sector with its so-called attempt to ‘buy back the farm’. Between December 1974 and October 1975 the Minister for Minerals and Energy Rex Connor attempted to illicitly and illegally raise funds for the government to buy substantial parts of the mining sector from foreign and domestic mining companies. Connor’s hair brained scheme was pure “rent seeking”. Instead of using revenue raised via mining taxes to benefit the nation, the Whitlam government was attempting to gain state control over a vital sector of the Australian economy.

The objective of such a policy was to help ensure the economic and political dominance of the state by controlling the mining sector under a new ownership regime. In such a context, any other group that was not part of the power elite could eventually have been dispensed with, such as the role of Australia’s middle class in generating economic activity and employment.

The merciful end of the Whitlam government in November 1975 saw the confirmation in office, by a landslide vote, for the Malcolm Fraser led coalition in December that year. The Fraser government restored coherent economic policy following the disastrous Whitlam interlude. Due to the inflationary impact of left-wing metal unions deliberately instigating a wages outbreak in 1982 and the major ill-effects of the drought, the Fraser government lost office in 1983.

Retention of the Fraser government in the 1983 election could have seen the continuance of traditional practice (which the Whitlam government’s “rent seeking” had challenged) of Australia achieving a high standard of living by achieving a balance between generating jobs in the services sector and safeguarding the wealth generation derived from the primary sector via exports.

Corporate Power Threatens the Economic Balance: ALP Rule
From 1983 to 1996

The election of the Hawke ALP government in March 1983 resulted in Australia moving to a free trade neo-liberal socio- economic paradigm. The neo-liberal ramification of the Hawke and Keating governments (1983 to 1996) was that full time employment became an optional extra in relation to desired public policy outcomes. The major socio-political consequence of the ALP’s time in power during the Hawke-Keating era was that there was a concentration of corporate power via union amalgamation and the involvement of big business groups (such as the Business Council of Australia, BAC) in facilitating major reforms, such as the introduction of enterprise bargaining in the late 1980s.

A very detrimental legacy of the Hawke era was that union amalgamation eliminated worthwhile smaller craft based unions. It is therefore untrue that the hard left of the SL of the ALP did not substantially gain from the Hawke government because they secured a concentration of power via union amalgamation. The concentration of power that emerged in the 1990s between emergent left wing industry unions and the business corporate sector endowed the Hawke-Keating government (Keating formally became deputy prime minister in 1990) with the power to undertake economic reform that was often detrimental to people’s standard of living.

Adverse social conditions, such as increased unemployment, small to medium business bankruptcies and effective de-industrialization of parts of the nation’s manufacturing sector were reflective of the erosion of the traditional balance between the primary and secondary sectors of the economy wrought by economic rationalism during the Hawke-Keating era. Due to the social dividends of the Accord and the free market radicalism of the coalition (as well as internal divisions within the Liberal Party) Hawke won elections in 1987, and 1990 that he should have lost.

The Gillard government will have to decide as an ALP government if it will go down a “rent seeking” path or attempt to ensure that the fundamentals of a mixed economy are retained. A mixed economy in the Australian context has usually referred to a balance being struck between the private and public sectors. Due to the current “rent seeking” threat a mixed economy can now be taken to refer to the balance between an employment generating domestic sector and a primary resource exporting sector.

But if Australia’s hard left (encompassing left wing industry unions, the Greens and associated left wing social movements) support a carbon tax that destroys a mixed economy they will be the ultimate ‘useful idiots’. They do not realize that the effective destruction of the domestic economy will ultimately clear the way for corporate mining interests to dominate an Australian “rent seeking” economy. The current useful idiot in the Gillard government who represents the hard left’s interests in facilitating a transition to “rent seeking” is the Climate Change Minister Greg Combet.

Appropriately enough Combet has been touted by Hawke as future ALP leader and prime minister. Combet is a former senior official with the hard left Maritime Union of Australia (MUA) and is a former secretary of the ACTU. This senior minister is now in a position similar to Hawke’s former role as a go-between for big business and powerful left wing union bureaucracy in facilitating political and economic restructuring that consolidate will their respective power.

How and Why “Rent Seeking” Threatens Australian Unionism

The Hawke government in the 1980s established the current groundwork for the current threat of “rent seeking” by facilitating union amalgamation. The passage of the Industrial Relations Act 1988 (the 1988 Act) set in place processes whereby unions could amalgamate. As a result of union amalgamation union membership plummeted because union members were alienated by their craft based unions being swallowed up into industrial conglomerate unions. The shift toward part time employment that came as a result of tariff reductions and cutbacks in industry assistance further contributed to de-unionisation.

A potentially positive impact of the 1988 Act was that it introduced enterprise bargaining where work conditions could be formulated on a workplace basis with employee input. The possible dividend for Australian union organisations of engaging with rank and file members by having an organising strategy is still however to be fully realized. Indeed the potential for union renewal by pursuing an organising strategy that engages union rank and file members may be a foregone opportunity because of the adverse effect of “rent seeking” in undermining the employment generating capacity of the local sector of Australia’s domestic economy.

Newly amalgamated unions established and administered union industry superannuation funds. This 1986 reform was not in itself a negative policy development because there were social democratic ramifications of potentially securing retirement for sections of the population that might not otherwise have been covered. An associated rationale justifying compulsory superannuation was that unions would invest their members’ funds to provide them with sufficient funds for their retirement which would also help ease the burden on the pension system.

In the current context the quality of the management of the superannuation funds and the extent to which financial dividends will flow to members varies from one union fund to the next. The overall impact of compulsory superannuation in helping wage earners achieve a secure financial retirement is yet to be fully analysed in a contemporary context.

Sovereign Wealth Funds: The Neo-Mercantile Vehicles for “Rent Seeking”

A potentially negative “rent seeking” impact of compulsory superannuation is that such investment funds could (if federal law was changed) be pooled with government, union and private industry funds to finance SWFs to bail out a future cash strapped Australia. Such government, union and corporate funding arrangements in SWFs could undermine the viability of the private sector as the prime generator of employment and wealth.

The senior leadership of ‘left wing’ industry unions and those with links to the Greens Party might fulfil an important role in the economy by being appointed to management boards that administer SWFs. But it is doubtful that union effectiveness will be correspondingly facilitated because a union focus on SWFs could be undertaken at the expence of engagement with rank and file union members via union organising. But for SWFs to become the destructive driver of economic activity there has to be a carbon tax.

The terrible scenario that now confronts Australia is that the carbon tax will destroy employment generating industries. Furthermore the economic uncertainty that this destructive tax will cause will discourage consumer spending thereby undermining the viability of the small business sector and threatening further unemployment. In such a context the only real dividend of a carbon tax will be to create revenue bases for SWFs.

The impact of the carbon tax in destroying established industries and in disrupting employment patterns will create the necessary pretext for SWFs to ostensibly be created to solve the problems that such a tax has initially created. To cut to the chase the only real beneficiaries of the application of SWFs will be the political interests that are appointed to the management boards of different funds and merchant bankers/ investment departments of retail banks that will charge commissions for helping to devise and to administer the various SWFs.

Indeed a future measure of political party effectiveness in a “rent seeking” Australia could well be a party’s capacity to parlay its political clout into financial dividends with regard to the utilization of SWFs. The party that stands to lose the most from a “rent seeking” transition is the ALP.

The Labor Party is already losing its voting base to the coalition parties (the La Trobe Valley in Victoria being a case in point) and the introduction of a carbon tax will consolidate this trend. For disillusioned ALP voters who can never bring themselves to vote for the coalition parties hard right political operatives are already helping political groupings such as the purported DLP to appropriate Labor votes.

Hard left political strategists within the ALP know that the introduction of a carbon tax will cost their party dearly. These strategists envisage that the recently elected (March 2011) O’Farrell coalition government in New South Wales will introduce ‘regionalization’ (sic) which well set the scene for this process to be applied across Australia so that state can be abolished. Under a regionalized regime the hard left strategists of ALP believe that the resources of left-wing industry unions will enable them (in possible alliance with the Greens) to exercise enhanced power via a new regional tier of government. The creation of regional governments will provide the hard left the opportunity to contribute and later access SWFs.

However ‘regionalization’ (sic), the imposition of a carbon tax, adoption of a super profits tax on mining and the utilization of SWFs will ultimately rebound on the hard left of the ALP and those associated with the AWU by inflicting massive social and economic harm on Labor’s voting base. Even at a regional level former ALP voters will vote for a populist right thereby threatening the Labor Party’s continued viability.

There are already signs in the media of Prime Minister Gillard being made into a hate figure to help later draw away ALP votes to a populist right. This is grossly unfair because the prime minister is an independent critical thinker who has previously and successfully secured the rights of Australian school children and employees. Indeed, with the benefit of hindsight the prime minister was clearly manipulated into making the promise before polling day of the October 2010 federal election that a returned ALP would never introduce a carbon tax.

The political reality of a minority government is such that the prime minister cannot now unilaterally drop a carbon tax. However the prime minister can still maintain faith with the Australian people (which she is very well on the way to irreversibly losing) by calling a morally binding plebiscite on the introduction of a carbon tax. The Australian people have a fundamental right to approve or a reject on the proposed tax that will change their lives by transforming Australia into a “rent seeking” nation. The paradox of a plebiscite on a carbon tax is that Tony Abbott will politically lose if such a carbon tax is voted down because millions of Labor votes will stay with the ALP instead of going to a populist hard right.

Promisingly, the corporate big business backers of the Liberal Party are already moving away from a carbon tax due to the economic damage that it will do to Australia’s trading position. The adverse ramifications of a carbon tax is ironically reflected by Paul Howes, the National Secretary of the Australian Workers’ Union (AWU), declaring that he will not support a carbon tax if it costs any jobs (which is tantamount to outright opposition to this tax because it is an inherently job destroying tax). Possible AWU opposition to a carbon tax could reflect the concerns of multi-nationals, such as BHP-Billiton, that their trading position will be fatally undermined.

Big business should appreciate that possible dividends of revenue from a carbon tax going into SWFs that they may be connected to will be off-set by the fatal harm that will be done to Australia’s trading position and social unrest that will result from massive job losses. The only real hope that the hard left have of benefiting in the long term from a carbon tax is for a neo-mercantile mainland China to establish an unfair trading advantage over the Australian economy. This could be facilitated by Chinese SOEs exploiting the opportunities that will be there by a carbon tax creating gaps in the Australian economy.

But even for mainland China economic domination of Australia would undermine the evolution SOEs into conventional share owned corporations if a neo-mercantile trading relationships are maintained with important Chinese trading partners that are rich in primary resources such as Australia. The maintenance of coercive SOEs will possibly prevent China’s transition to being a genuine market economy in which the rights of employees (and/or real unions) are respected. Australia’s importance to China’s economic and political future was reflected by Prime Minister Wen Chia-pao (Wen Jiabao) of the PRC graciously reception (April 2011) of Prime Minister Gillard on her official visit to China.

The Chinese prime minister is having his own struggle against the Chinese equivalent of ‘rent seeking’ elements within the Chinese Communist Party (CCP). These “rent seeking” elements are supported by the Shanghai group within the CCP. This is understandable because the late and great Deng Xiao-ping could not have re-launched his market reforms in the 1990s without the support of the CCP’s branch in China’s major commercial centre.

However an economic and political overdependence upon Shanghai by a Chinese regime can be fatal as Chiang Kia-shek’s alliance with the corrupt Soong clan demonstrated. If the international financial system is to remain viable then mainland China must move away from “rent seeking”. Such a development will be conducive to later introducing a two party model that will guarantee Chinese national unity and socio-economic cohesion.

The PRC government for China’s own sake cannot allow Chinese SOEs to help turn Australia into a “rent seeking economy”. But then again, as the Chinese government probably realizes, a nation’s trading advantage is often determined by its own domestic financial and political settings. In this context Australia could do itself a favour by refraining from introducing either a super profits mining tax or a carbon tax. At the very least the Australian people have a right to vote in a plebiscite on a carbon tax that the prime minister promised the day before an election she would not introduce if the government was returned.

If a plebiscite is held on a carbon tax such a vote should only be on a carbon tax because a repudiation of such a tax does not necessarily mean that strategies to reduce carbon emissions should or need to be abandoned. Former Liberal Party leader Malcolm Turnbull’s position on a carbon tax is important because he believes in human induced climate change and is determined to remedy the environmental situation.

The immediate issue of concern which Malcolm Turnbull can affect is that of SWFs. As a former merchant banker who knows the importance of financial investments Malcolm Turnbull would appreciate that an economy cannot become overly dependent upon SWFs. Malcolm Turnbull is reported to have recently given support to SWFs as a means of paying off Australia’s sovereign foreign debt. This is commendable but when the proponents of SWFs have been policy makers (such as federal Treasurer Wayne Swan) who have deliberately engineered foreign debt as part of strategy to perpetuate the economic and political power of their backers via SWFs, an endorsement of these funds constitutes co-option.

If Australia becomes a rent seeking nation, national leaders such as Julia Gillard and Malcolm Turnbull will have failed in following on from prime ministers such as Fisher and Menzies. Ironically, Malcolm Turnbull, who is Sydney based, can be the political heir to Alfred Deakin (1856-1913) and subsequently to Sir Robert Menzies. This is an ironic because Deakin’s political base was partially underwritten by a previously intense rivalry between Melbourne and Sydney. Due to the passage of time, contexts naturally change but underlying political traditions can continue.

The issue that confronts the contemporary Liberal Party is: ‘will it be a party that supports the continuance of a mixed economy that Deakin and Sir Robert Menzies fought for?’ Under Abbott’s leadership, the pre-conditions and political dynamics are in place for there to be a transition to a “rent seeking” economy. The strength of these dynamics is such that Abbott will probably go down in Australian political history as the most powerful opposition leader. This will be because Abbott will be instrumental in ensuring that the Gillard government is coerced into going down a “rent seeking” path despite his declared policy positions.

The negative ramifications of the ALP succumbing to rent seeking (via a super profits mining tax and the subsequent utilization of SWFs) is that Abbott will be able to remake Australia according to his specifications (or those of his backers) after he becomes prime minister. This will mean the end of the Deakin-Menzies tradition of the Liberal Party because the underlying fundamentals of a mixed economy will not survive “rent seeking”.

Malcolm Turnbull was almost politically destroyed by “rent seeking” elements within the coalition. These same elements have worked in collusion with “rent seekers” in the ALP to engineer a hung parliament so that a destructive carbon tax can be introduced as a revenue base for future SWFs. The paradox of the situation is that Malcolm Turnbull can thwart these “rent seeking” objectives by supporting a plebiscite on a carbon tax.

It is true that the ALP will probably be pulverized if a carbon tax is introduced. However moderate elements within the Liberal Party will be confronted by a new populist right wing that will ultimately undermine their position within the Liberal Party. This will happen not only because of new electoral dynamics but also because of the adverse socio-economic ramifications of “rent seeking” nation.

At the very least moderate elements within the New South Wales branch of the Liberal Party can maintain their position at a state level by opposing a carbon tax. Without a revenue base from a carbon tax SWFs will not viable and this will deny Premier O’Farrell a prerequisite he needs to introduce ‘regionalization’ (sic) in New South Wales. The situation that the Liberal Party finds itself in, particularly in its New South Wales branch, is similar to the challenge that Sir Robert Menzies faced in ensuring that the power of big corporations did not gain control over the nation’s political right wing.

The Tragedy of the Santamaria Tradition

It should also be pointed out that the first major occurrence of corporate Australia undermining the nation’s right wing was with regard to the social democratic right of the Australian union movement as represented by the Federated Clerks Union (FCU). This outcome was due to the Catholic layman and polemicist Bartholomew Augustine, B.A, (‘Bob’) Santamaria purging the industrial wing his organization, the National Civic Council (NCC), in 1982. The Santamaria Purge was vital in enabling the SL of the ALP to wrest of control of the FCU in the 1980s.

The FCU was a union that represented and drew its support from white collar employees who might otherwise not have been involved in Australian unionism. The FCU vitally supported other moderate craft based trade unions such as the Victorian Affiliated Teachers Union and the Manufacturing Grocers Union. The clerks’ union was led by the late John Maynes who had won control of the union from the Communist Party of Australia (CPA) in the 1940s. John Maynes was associated with Santamaria who had helped establish the Catholic Social Studies Movement (‘the Movement’) in the 1940s under the auspices of the Australian Bishops’ Conference.

The Movement fulfilled an important role in fighting communism in Australian unionism from the 1940s until the early 1980s. This then Catholic lay organisation helped motivate and give ideological direction to Australian Catholics who became involved in their unions at a workplace level to fight against communist infiltration. These Catholics were derisively called ‘Groupers’ by anti-Catholic sectarian Australians. (However, most Groupers eventually accepted this label with pride).

Due to the 1915/1916 ALP Split, Australia was for a time riven by Protestant- Catholic sectarianism. This sectarianism was later manipulated by the CPA by their linking up with anti-Catholic elements within the union movement and the ALP to instigate the purge of the ALP following the illegal 1955 ALP Conference in Hobart. This purge became known as ‘The Split’ and it resulted in the formal founding of the Democratic Labor Party (DLP) in 1957. Another ramification of the Split was that the Catholic Social Studies Movement formally separated from the Catholic Church to become the National Civic Council (NCC) in early 1957 which was naturally led by Santamaria.

The NCC under Santamaria’s leadership fulfilled an important role in providing a sense of ideological and policy direction to both the DLP and to Grouper led unions. However in the late 1960s and 1970s, key members of the DLP and moderate union leaders detected an underlying hostility on Santamaria’s part toward their political and industrial work. Indeed, Santamaria encouraged leaders of the DLP to close up their party after it lost federal parliamentary representation in 1974. Santamaria subsequently encouraged the DLP to wind up and in 1978 a party conference vote was taken in which a majority vote was taken to close the party.

The constitutional legality of this conference was questionable because the constitutional two-thirds majority required to close the DLP was not achieved. Party stalwarts such as Frank Mc Manus and John Mulholland continued to help lead a post - 1978 DLP. Despite this, Santamaria and NCC operatives erroneously claimed that they had started the DLP and closed the party up.

Considering Santamaria’s real attitude toward the DLP, with the benefit of hindsight, it should not have come as any surprise to leaders of the NCC’s industrial wing when he purged them in 1982. Santamaria had approached Gerald Mercer and Jim Hewat, who were leaders of the NCC’s industrial wing, in 1980 to establish separate offices. Between 1980 and 1982 negotiations, were undertaken in good faith by leaders of the NCC’s industrial wing with Santamaria and his supporters to divide the organisation’s assets so that the two groups could go their separate ways.

An agreement that the industrial wing receive a third of the NCC’s funds to go their own was agreed. It therefore came as a shock to members of the NCC’s industrial/union section when they were expelled at a stacked conference of that organisation in 1982 and when their Melbourne offices were later raided that year and occupied by Santamaria operatives on a public holiday in November that year.

Throughout the two year period leading up to the 1982 Santamaria Purge, the NCC’s president’s supporters put out the message that they wanted to establish a new and stronger industrial wing of the NCC. It did not make logical sense that those leading the way in the NCC to disengage from the industrial sphere would therefore establish a new NCC industrial wing.

A terrible ramification of the 1982 Santamaria Purge was that it diverted the incumbent FCU Queensland state branch from an election campaign which was consequently lost to the Socialist Left (SL) of the ALP. Due to SL control of the FCU’s Queensland’s branch, Lindsay Tanner was able to eventually gain control of the Victorian branch in 1988 which was consolidated in 1991. This occurred when senior members of FCU’s national office did a deal with Tanner that effectively thwarted a Grouper ticket from winning FCU Victorian branch elections that year (1991).

Grudging respect should be granted to Tanner for the tenacity with which he gained control of the FCU. However, the ramifications for Australian unionism were horrendous. The so-called social conservatism of the FCU under John Maynes’ leadership was aligned with the union’s white collar membership base which was predominately focused on workplace issues as opposed to trendy left-wing social causes. As a result of the Groupers losing control of the FCU, smaller craft based unions were denied the support that they had previously had from the clerks union to resist union amalgamation. As a result of union amalgamation, there was a massive decline in union membership in the 1990s.

The de-unionising consequences of Tanner’s takeover of the FCU (which now lingers on as a division of the Australian Services Union (ASU) with less than 10, 000 members) included bolstering part-time and casual employment in the Australian workforce. Santamaria’s tragic role in undermining the FCU fell into a pattern of where his supposed social Christian inspired actions actually led to neo-liberal outcomes in which the interests and rights of wage earners were actually undermined.

The NCC’s fortnightly magazine Newsweekly in the early 1980s avowedly decried the loss of the FCU to the SL while omitting Santamaria’s previous role in undermining John Maynes’ position. In his Point of View column within Newsweekly, Santamaria later articulately warned of the undemocratic threat of union amalgamation under the processes stipulated in the 1988 Act. The eloquence with which Santamaria wrote against the threat to union amalgamation belied the fact that he had tragically sabotaged moderate unionism by previously purging the NCC’s industrial wing.

A manifestation of Santamaria’s tragic duplicity was his public support for the re-affiliation of four Grouper unions to the ALP in 1984, knowing that such support would make their re-affiliation all the more difficult. Dr. Frank Knopfelmacher’s (a then prominent anti-communist intellectual who died in 1995) support in the media for the re-affiliation of the four so-called Grouper unions to the ALP was crucial in thwarting Santamaria’s attempt to prevent their re-admission.

The 1982 Santamaria Purge did not necessarily harm the NCC president organisationally in the long term. This was because the Santamaria wing of the NCC kept most of the organisations’ finances in the aftermath of the 1982 purge. Disengagement from Australian unionism enabled Santamaria to invest funds which gained substantial returns that have since underpinned the NCC’s financial viability regardless of its donor base.

A broad insight into the NCC’s financial arrangements was provided when The Australian newspaper provided some detail of a split within the post-Santamaria NCC (Santamaria died in February 1998) in 2005. Limited press coverage of the 2005 NCC split indicates that the organisation is itself “rent seeking”, albeit in a relatively successful context.

Santamaria’s appreciation of the utility of investment funds was not lost on him and he often advocated in his weekly ‘Point of View’ column in The Australian newspaper that the nation should move toward a savings based economy that was supposedly similar to Singapore’s and Japan’s. An Australian savings based economy however would essentially mean a transition to a social credit approach to economic policy which would be “rent seeking” par excellence in an Australian context.

Why Social Credit Policies are Conducive to “Rent Seeking”

A social credit policy approach is where the state controls and manipulates the value of money to engineer economic prosperity. This philosophy has been associated with social Christian teaching and as such is purportedly distributionist and decentralist. As an ideological approach, social credit does not regard labour as necessary if finance capital can be successfully invested and subsequent high returns productively utilized.

There is nothing notionally wrong with the concept of social credit except that great care must be taken as to who controls how finance capital is utilized. In the early 1990s, Santamaria publicly expressed his admiration for Sir Arvi Parbo, the then head of Western Mining, later known as WMC, (which is now part of BHP-Billiton). WMC executives such as Ray Evans supported the NCC front group - the Council for the National Interest (CNI).

Despite Santamaria’s avowed wariness of big business and supposed hostility to finance capitalism, his real political relevance to Australian politics in the 1990s was through the CNI providing a network for corporate executives to parlay their influence into the Liberal Party. Consequently, the NCC’s public policy positions could change according to the desires of big business. The NCC later changed its tentative republic stance of 1991 to support Australia retaining its constitutional monarchy.

Newsweekly had previously given qualified support to Australia becoming a republic after a motion was passed at the ALP’s 1991 federal conference in Hobart (historically terrible occurrences happen when ALP conferences are held in the Tasmanian capital) that a referendum be held on Australia’s constitutional status by the turn of the twentieth century! The NCC’s adoption of a monarchist stance reflected the political objectives of big businesses interests who were then utilizing the CNI and Australians for Constitutional Monarchy (ACM) for their political interests.

WMC executive Hugh Morgan became a supporter of ACM which was founded in 1992, (ACM’s board initially included Dame Leonie Kramer who had also served on the board of Western Mining). ACM has been used by big business and corporate mining interests to promote their interests within the Liberal Party. This is a reason why ACM does not have actual voting members but rather supporters, as voting rights are reserved for its senior leaders. As a result ACM can promote policies such as a ‘Crowned Republic’ (sic) without the necessity to obtain prior approval of its enrolled supporters.

Both ACM and CNI became linked to political networks (within the Liberal Party) that became components of the party’s ‘conservative’ wing. Future senior ‘conservative’ Liberals such as Tony Abbott and Kevin Andrews were both avowed admirers of Santamaria who had links to the NCC. Both Abbott and Andrews later adopted anti-employee and anti-union stances when they were Employment and Workplace Relations Ministers. (Abbott held this federal cabinet portfolio between 2001 and 2003 and Andrews between 2003 and early 2007). Their appointments to this key cabinet position was all the more amazing because Santamaria had been loyally supported by sections of the Australian union movement from the 1940s until his 1982 purge. Even after this purge, Santamaria still claimed to be pro-union.

Therefore Abbott’s reputation as a maverick who stands by his principles regardless of the consequences of popular opinion may not be merited. Abbott’s connections to the NCC enabled him to establish links with the corporate mining sector which could serve as a guide to his political actions in supporting this sector becoming more politically and economically powerful at the expence of the nation’s interests.

The Positive and Negative Ramifications of Economic Rationalism

The Australian corporate mining sector’s political and economic power and its future political strategy can be traced back to the Hawke era. Bob Hawke became prime minister in March 1983 on a platform of ‘consensus’ in which he claimed he would end discord between the union movement and the business community. The corporatist approach of the Hawke government provided it with the necessary scope to initiate fundamental economic rationalist reforms. The positive and negative ramifications of this reform are analysed because they could well set the framework for Australia to become a “rent seeking” nation.

The benefits of economic reform by the ALP during the 1983 to 1996 period were: an internationally competitive Australian dollar, the introduction of enterprise bargaining (with an underpinning safety net) and a stronger banking sector resulting from allowing capital inflows and outflows into and out of Australia. The Hawke also government promoted international free trade by being instrumental in establishing international trade networks such as the Cairns Group. However, Australia moved away from a position of trade surpluses with most of its trading partners in the1980s and 1990s. This negative trend in Australia’s trading position did not seem to perturb the Hawke and Keating governments.

These two ALP governments were however enthralled by their allowing the entry of foreign banks into Australia. The entry of foreign banks compelled local banks to become more internationally competitive, even if the domestic dominance of local banks ultimately remained intact. (Foreign banks did not displace Australian banks in a domestic context due to the Australian banks being too well entrenched). In relation to financial reform the ALP did introduce compulsory superannuation in the 1980s which potentially offered the prospect of facilitating financial retirement security for wage earners.

However a major problem with economic management during the Hawke-Keating era (1983 to 1996) was that no concerted attempt was ever seemingly made to stop Australia’s public sovereign debt rising to unacceptably high levels. There was also an over-reliance on increasing interest rates to dampen inflation which created tremendous burdens for small business and for Australian farmers. The negative impact of tariff cuts causing unemployment levels to rise, and the associated social costs, were not adequately addressed by either the Hawke or the Keating governments.

Although low inflation was achieved by the Hawke and the Keating governments unemployment levels were too high as these respective governments seemed to welcome the shift to part-time and casual employment. The rise in unemployment in the south east state of Victoria, due to tariff cuts in the 1990s threatened its traditional manufacturing sector seemingly reflected a bloody mindset on the part of the federal ALP.

Had it not been for the public’s reservations concerning the then federal coalition, the ALP probably would have been voted out in a landslide in the 1987, 1990 and 1993 elections. (The ALP undoubtedly would have lost the March 1993 election had it not been for the super neo-liberalism of then federal opposition leader, Dr. John Hewson).

The apparent stubbornness of the Keating government in not addressing public concerns regarding unemployment and high interest rates contributed to the coalition’s landslide election victory in the March 1996 federal election. This election victory probably could not have been achieved had the then Liberal leader John Howard not re-assured the electorate that his government would be for all Australians (‘For All of Us’). This subliminal reference to Hawke style consensus was simultaneously an oblique criticism of the corporatism under the ALP in which the interests of big business and big unions seemingly predominated at the expence of the broader public interest.

The promised benefits of economic rationalism under the Howard government (1996 to 2007) in raising people’s living standards were seemingly achieved in the latter part of coalition rule between 2002 and 2006. This was ironic because the Howard government was a neo-liberal regime which sought to create an employers’ labour ‘market’ by driving wages down and facilitating the continued expansion of casual and part-time employment.

The unexpected longevity of the Howard government was two-fold. Firstly, the rise of the One Nation Party under Pauline Hanson siphoned off votes from the ALP to secure Howard’s improbable October 1998 election victory. This extremist party’s electoral appeal encompassed blue collar workers who were afraid that a returned ALP government due its previous neo-classical economic rationalism would harm their economic interests.

One Nation also drew its vote from rural and regional communities. The major problem for the coalition concerning One Nation was that many National Party voters transferred their support to this new party. Indeed, had the ALP not preferenced the National Party in October 1998 federal election, the junior coalition the National Party would have lost most or all of its seats to One Nation!

The second major reason for the coalition’s longevity in federal office was its ultimately effective running of the economy. From the time it first assumed office, the Howard government was dedicated to retiring foreign public debt which was a major economic impost. The major successful economic reform of the Howard –Costello era was the introduction of the GST in June 2000.

The GST was an eminent success because a new revenue stream was created by taxing at a consumption level. Fears that the GST would have an inflationary impact did not eventuate because manufacturers could recoup charges on production. The inherently regressive nature of a GST was mitigated due to the Australian Democrats using their balance in the Senate to exempt food from the GST. Furthermore, because Australia does not have as wide socio-economic discrepancies of many nations that have Valued Added Taxes (such as South Africa*), the Australian GST did not become as regressive as was originally feared.

(*VAT/GST taxation regimes have been introduced in countries where elites are indifferent to high unemployment. Revenue can still be raised despite high levels of precarious employment by applying indirect as opposed to direct taxation. If Australia becomes a “rent seeking” nation the GST will be used to raise revenue due to the nation’s domestic economic base being undermined).

The benefit of the new GST revenue stream being transferred to Australian states was that other federal funds were freed up to pay off Australia’s public foreign debt. The benefits of the mining boom were also harnessed by Australia having transparent federal corporate taxes for mining rights that were measurable. Therefore, corporate company tax derived from the mining boom could be reliably calculated and applied to pay off the nation’s public foreign debt.

The inflow of revenue to states from mining royalties enabled them to undertake public spending that had a multiplier effect of boosting employment by contributing to the expansion of the nation’s Gross Domestic Product (GDP). The size of a nation’s GDP is the prime indicator of a nation’s economic well-being and strength. GDP is the monetary value of a country’s goods and services and income produced in an economy. The economic rationalism of the Howard-Costello era was eventually positive because Australia’s GDP expanded and this consequently facilitated employment growth.

The Howard government’s achievement in paying off the nation’s public foreign debt led to a substantial easing in interest rates that took the pressure off small business so that this vital sector of the Australian economy was an important generator of employment. Employment growth in itself had a multiplier effect which contributed to further employment growth. *The general success of the Howard-Costello government’s economic policies was that after 2005, there was virtual full employment with employers often struggling to recruit employees due to a labour shortage!

(* Criticisms of the neo-liberal component of the Howard government’s employment policies are undertaken later in this article).

The benefits of having a floating exchange rate also became apparent under the coalition. The easing of interest rates due to public foreign debt being paid off bolstered the value of the Australian dollar on the international money market. The dividend of the ALP government floating the Australian dollar in 1983 is now being reaped during the mining boom. This is because mining trade transactions are undertaken in Australian dollars which has increased the currency’s value and its subsequent purchasing power.

Criticism can be potentially made that a higher Australian dollar*makes Australian exports less competitive because of the currency’s increased value. But this potential draw back is not yet a problem for Australia because of high international demand for the nation’s primary products such as minerals.

(*The Australian dollar is currently the sixth most valuable in the world. This is an incredible feat for an internationally medium sized economy).

Because the Howard government had previously formulated and applied prudential controls, the Australian banking and financing sectors were amongst the safest in the world when Global Financial Crisis (GFC) broke out in October 2008. The resultant credit worthiness of Australian banks was crucial in insulating the real estate and small business sectors of the Australian economy.

The former coalition government’s economic achievements (which were apparent after it lost office during the 2008 GFC) were such that a case could have been made for its retention. However, the ideological disposition of this former government was a neo-liberal one. This was manifested by the passage of the Workplace Relations Act 1996, (the 1996 Act) and the passage of the Work Choices (sic) legislation in late 2005.

The 1996 Act notionally provided for freedom of association by establishing individual contracts between employers and employees called Australian Workplace
Agreements (AWAs). The introduction of AWAs followed on from the Keating government’s 1993 Reform Act that had introduced non-union enterprise bargaining. The problem with the 1996 Act was that, in reality employees without bargaining power could be compelled to sign AWAs which denied them the benefits of union enterprise bargaining agreements (EBAs). The award ‘simplification’ that the 1996 Act provided was similarly intended to remove the award safety net for Australian employees.

The only redeeming aspect of the 1996 Act was that, due to the amendments of the Australian Democrats, the Australian Industrial Relations Commission (AIRC) retained its central role in the industrial relations system. Consequently, award simplification was undertaken by the AIRC but it did not undermine the integrity of the award system because a safety net was maintained. The Howard government therefore seized the opportunity, when it gained a working Senate majority following the October 2004 election, to pass the ‘Work Choices’ (sic) legislation in 2005.

This legislation effectively eliminated the award safety net by utilizing the corporations power of the Australian constitution as the source of industrial relations power instead of the *interstate powers of the Australian constitution. The corporations power of the constitution provided a legal framework that denied unions and/or employees the right to negotiate basic entitlements or to access them.

(*It is a pity that the abuses of the ‘Work Choices’ legislation (sic) did not lead to a wider appreciation of the crucial importance of maintaining for the public good the constitutional and financial integrity of Australian states).

The other major problem concerning the Howard-Costello era in relation to labour was that there was never a concerted attempt to generate full employment or at least promote greater job certainty. To be registered as ‘employed’, it is necessary in Australia to only have one hour or more of paid work a week. Indeed the one hour of paid employment a week remains the current official measure for officially being employed. For the sake of accuracy and to establish the scope for future social action, a broader definition more realistic measure of what constitutes employment should be adopted.

The former Howard government’s neo-liberal approach to employment - in which labour was considered to be an impost as opposed to a source of competitive advantage - denied it the scope to replicate the Menzies government’s stupendous achievement of achieving genuine full employment. Thankfully, the potential now exists for the promotion of full-time employment due to the passage of the ALP’s Fair Work Australia (FWA) legislation in July 2009.

This legislation established a Fair Work Australia industrial tribunal which now utilizes the corporations power to protect employee rights by introducing new practices such as good faith bargaining. The scope for union enterprise bargaining under FWA could lead to union renewal and with it the scope to achieve full employment. Employers can utilize enterprise bargaining so that their employees become a source of either competitive by contributing to the formulation of EBAs. Union industrial officers could negotiate EBAs that incorporate employee ideas that improve a company’s commercial position while ensuring that employees share in the benefits. Such an approach could actually advance the interests of semi-skilled and non-skilled labour whose interests are more often than not overlooked.

Although the neo-liberalism of the Howard-Costello era in relation to employment relations is thankfully gone (for now), it is up to the Australian union movement to adopt an effective organising strategy that engages with its actual and potential membership. As important an advance as FWA is, it should be appreciated that there is a danger that a powerful industrial relations tribunal becomes a ‘one stop shop’ that facilitates de-unionisation by rendering unions as obsolete third parties to the employer-employee relationship.

The above scenario should be avoided because union participation, by both union officials and rank and file members, in industrial relations via enterprise bargaining can facilitate the complementary objectives of full-time employment (or enhanced employment security) and the increased productivity necessary to deliver improved employment conditions.

As terrible as industrial relations was during the Howard-Costello era, the overriding economic (and even social) achievement of this period was that a balance was still struck of fostering a complementary relationship between an employment generating goods and services domestic sector of the economy and the minerals export sector. This balance between the primary and secondary sectors of the Australian economy has been a long standing one going back to the first exports of Australian wool in the early eighteenth century from the colony of New South Wales.

Why a Carbon Tax will convert the Costello Economic Legacy into “Rent Seeking”

What distinguished the Howard-Costello era from the Hawke-Keating government was that the former coalition government restored the balance between the primary and secondary sectors of the Australian which had been undermined by economic rationalist reform. Whether the Hawke and Keating ALP governments or the Howard government should take ultimate credit for the economic reforms (or even if these free market reforms were really ever necessary) are contestable points of analysis. The essential point that should be appreciated is that the critical balance between the primary and secondary sectors crucial to Australia’s economic survival is now imperilled by a carbon tax or by the prospect of moving to a super profits mining tax regime.

A carbon tax is different from a GST because it will be a heavy impost on production which will subsequently be inflationary. Too much of Australia’s domestic energy production at both industrial and consumer levels is carbon based. The result will be that a carbon tax will automatically drive up prices that will not only be inflationary but will severely undermine Australia’s international trading position by making vital exports such as iron ore too expensive.

The Australian Greens and elements of the press are disingenuously claiming that there will be a transition to new ‘green’ industries that will create new jobs and export markets. Australia does not have the industrial capacity to create new export markets to compensate for the trade disadvantages that will come from undermining carbon based primary exports. SWFs could well be cynically constructed to create new green industries but their capacity to actually create new employment will be at best an optional extra because the utilization of these funds is to facilitate “rent seeking”.

Analysis of contemporary Spain shows that government engineered attempted transitions in a domestic economy to ‘green’ industries cause steep unemployment and dangerously challenge a nation’s financial credit worthiness without any discernable environmental benefit. The Spanish experience has also demonstrated that government coercion in facilitating the development of green industries (such as solar panel production) undermine existing industries and services to the extent that this kingdom’s overall financial credit worthiness has been very adversely affected.

The cruellest aspect of current moves to convince the public to accept a carbon tax is that the government’ and the Greens’ claims that there will be compensation for the carbon tax that will actually improve people’s financial situation while achieving lower carbon emissions. Going by the experience of the Building the Education Revolution (BER), the pink bats scheme, the madcap ‘cash for clunkers’ project and the current profligate National Broadband Network (NBN) roll-out, it is inevitable that the administration of a compensation programme for the carbon tax will be too unwieldy to be viable.

Professor Ross Garnaut’s 2008 report on how to achieve C02 emissions was predicated on the assumption that the pricing of carbon would cause consumers and producers to reduce their carbon emissions. The ultimate indictment of a carbon tax however will be that this new tax will not substantially reduce carbon emissions*because there is an absence of viable low carbon production alternatives. Consequently there will be insufficient scope for coerced reduced carbon consumption to lead to meaningful lower C02 emissions.

(*Australian carbon emissions constitute approximately 1% of the world’s C02. In this context, it is unnecessary for Australia to adopt a carbon tax because its potentially positive scientific impact will be negligible and unnecessary until carbon reduction schemes are adopted by major carbon emitters such as mainland China).

Even when there has been a capacity to utilize lower carbon alternatives, Australian consumers have so far being unenthusiastic about making the transition. The capacity to convert cars to gas has been available in Australia for over thirty years. Gas is substantially cheaper than petrol but consumers still overwhelmingly prefer petrol to gas. This preference for petrol is reflective of the predominant Australian mindset that, no matter how expensive this fuel is, it is an essential commodity that will be persevered with.

Furthermore, if petrol falls under a carbon tax, how will it be possible to compensate all (or a substantial proportion) of Australian motorists? Any financial compensation for motorists would still be off-set by the inflationary impact of the carbon tax on petrol. In the improbable event that consumers were compensated for the carbon tax, this would be counter productive because the incentive to change consumer behaviour will be lost.

The question that subsequently arises is how can substantial tax cuts as compensation for the carbon tax eventually be funded when government revenue sources will eventually be depleted? The carbon tax will destroy jobs and the productive components of the economy as well as adversely affect Australia’s trading position. For all the hype being generated by the media to compel Prime Minister Gillard to introduce a carbon tax, she will not be able to avoid the electoral retribution that will be meted to the ALP for introducing such a fundamentally flawed tax.

The issues concerning the challenge of substantially altering consumer behaviour via a carbon tax are reflective of the fundamental problem in relation to effective Australian climate change policy – the lack of government financial support for carbon reducing alternatives. In Queensland, underground coal seam gasification is producing a fuel that is substantially lower in C02 content than regular petrol while being considerably cheaper. Similarly, a new bio mass production technique has been scientifically developed that produces an economical ethanol fuel which emits a lower rate of carbon.

If consumers are to move away from carbon sources, then there have to be viable non-carbon alternatives. The focus of government policy should therefore be to finance scientific research and provide tax breaks to manufacturers who develop non-carbon alternatives. This form of industry assistance should be undertaken instead of undermining existing carbon production processes and products via a carbon tax when there will be no consequent reduction in C02 emissions.

The fundamental reason why low carbon industries will not be supported before applying a carbon tax (and why such a tax cannot be successfully applied in Australia) let alone have a positive environmental impact - is the negative and selfish motivation behind the carbon tax and a super profits mining tax regime. The underlying political and economic objectives behind introducing both a carbon tax and a super profits mining tax are to undermine Australia’s domestic economy in relation to the generation of goods and services so that SWFs will be the future determinant of economic power in Australia. This objective is shared - by elements of - the coalition that are connected to big business corporations (including the big three mining companies), by left wing industry unions affiliated to the SL of the ALP, the Greens and by elements of the right of the ALP that are linked to the *AWU.

(*The AWU, as its name suggests, is an all encompassing trade union. In the 1990s a swag of craft based unions such as the Federation of Industrial Manufacturing and Engineering Employees (FIME) were swallowed up into the AWU in which they eventually lost their identity. Amalgamations of craft based unions into the AWU were de-unionising because former members of superseded unions did not transfer their support to ‘their’ new union. This non-transferral of allegiance was partially due to a failure (or reluctance) on the AWU’s part to arrange new internal structures that accommodated superseded craft unions because their former officials too often lacked sufficient industrial and political clout to protect the rights of their members within the AWU framework.

To be fair to the AWU this union has often fulfilled an important role in representing employees in precarious sectors of the economy. The AWU has also often prevented left wing amalgamated industry unions such as the Construction, Forestry, Mining, Energy Union (CFMEU), from gaining membership coverage due to employer preference for the AWU. Left wing industry unions are currently not opposing AWU coverage which could be setting the scene for configurations of management boards of future SWFs).

Economic Pulverization in the Guise of Carbon Reduction

The economic and social destructiveness of a carbon tax in pulverizing the domestic non-mining sector will create an overdependence on the mining sector. A transition to a super profit mining tax regime (which was a policy of the defunct Communist Party of Australia, CPA) will facilitate the necessary arrangements for revenue to be directed into SWFs that will be created in the future. SWFs are investment pools of government money that can also include funds from other sources, such as private industry.

The idea behind SWFs is that, by their going into astute investments, there will be positive long term financial dividends. A SWF can be directed to a specific aspect of the economy to engineer a specific socio-economic outcome in lieu of regular government spending. Substantial contributions from corporations and/or union industry super funds into SWFs via joint ventures could determine the future composition of management committees for these funds.

The rationale underpinning a SWF is sound so long as there is an absence of selfish political interests. Trading nations, such as Singapore, have effectively utilized SWFs. But Singapore and Japan are not endowed with natural resources so they must, and do take great care, to ensure that the money that the state raises for investment purposes actually advance their trading and commercial position.

Reference in the Australian press has been made to the SWF successfully established in Norway derived from funds from that kingdom’s off-shore oil revenue. Norway is a smaller nation than Australia with a focus on a particular natural resource. It has therefore not being possible in Norway for shadowy corporate investors and political interests represented in union industry super funds to establish an unaccountable financial domination via their equivalent SWF.

Due to the overriding political factors in Australia behind introducing a carbon tax and adopting a super profits regime for the mining sector, money for SWFs could eventually overwhelmingly come from mining revenue via a Resource Super Profits Tax (RSPT). In such a context, Australia will consolidate a transition to being a “rent seeking” economy reliant upon fluctuations in commodity prices for economic survival.

It is plausible to envisage a future scenario in which Greens leader Senator Bob Brown waxes lyrical about creating a new SWF for a sector of the economy that the carbon tax has destroyed. In such a context, Senator Brown could make assurances that, out of the immediate economic and social destruction, the situation would actually be improved by creating a new SWF for the adversely affected sector of the economy. The probable outcome of a newly created SWF would be to enhance the particular political and economic power of the interests represented on the management board of the newly created fund.

Why a Mining Super Profits Tax Regime is “Rent Seeking”

Crucial to making SWFs the determinants of economic and political power in Australia is facilitating a transition to a super profits mining tax. Because super profit taxes apply after expenditure it is plausible that large international corporations will be able legally to minimize their tax threshold. This can be facilitated by mining corporations shifting the formal location for tax purposes and by establishing legitimate but non-measurable revenue flows within a global economy.

Under a super profit mining tax, the scope is there to establish the above mentioned taxation arrangements. This in turn could deprive Australian companies of the capacity to rely on the ebbs and flows of international trade to have a bargaining capacity to sell at a higher market price.

Another real danger of Australia adopting a super profits tax regime for the mining sector is that mining companies outside the big three (BHP-Billiton, Rio Tinto and Xstrata) will not have the economies of scale and international connections to minimize their taxes. The most prominent potential victim of a transition to a super profits mining tax is the iron ore producer Fortescue Metals led by its director and CEO, Andrew (‘Twiggy’) Forrest. The transition, from an encompassing RSPT to a Mining Resource Rent Tax (MRRT) that was announced by Prime Minister Julia Gillard just after her assumption of office, was welcome in a relative context to the extent that the latter tax is limited to iron ore.

The operation of an MRRT may provide an initial revenue windfall that creates later momentum to transit to an attempt to reintroduce an RSPT so that the three big mining companies can eventually establish a tripartite monopoly in the mining sector. This could eventuate due to the smaller mining companies being unable to compete because they lack the economies of scale and the international business connections to legally minimize their taxes.

Is should also be pointed out iron and ore is not a scarce commodity in an international context. China and Brazil (which in different ways are “rent seeking” economies) have untapped iron ore deposits. Consequently countries such as these with iron ore deposits could eventually displace Australia as major exporters of iron ore if the Gillard government proceeds with either a carbon tax or an MRRT.

The big three mining companies may be secretly supportive of the later introduction of an RSPT (which is why an MRRT is currently in place) so that an eventual transition to a “rent seeking” economic system can eventually be facilitated. Having a super profits tax regime in place for the mining sector will enable revenue to go into SWFs.

Strategic considerations concerned with facilitating future “rent seeking” could be a reason why the CEO of BHP- Billiton*, Marius Kloppers, recently (February 2011) called for the introduction of a carbon tax. This support for a carbon tax by Australia’s biggest company raises the question why some big Australian manufacturers really support the introduction of a carbon tax? Could it be that a carbon tax would help them eliminate smaller sized competitors or to allow them to have representation on the management boards of future SWFs? Australia is therefore confronted by the dangerous paradox that, while the mining boom lasts, (which will probably be for five years), there will be acute pressure from powerful economic and political interests to engineer a transition to a “rent seeking” economy.

(*As previously mentioned canvassed opposition by AWU National Secretary Paul Howes to a carbon tax could be a reflection that BHP-Billiton possibly opposing this tax due to the damage that it will inflict on Australia’s international trading position).

Instead of utilizing the financial windfall from the mining boom to negatively restructure Australia’s economic foundations (via a carbon tax and a super profits mining tax regime), the revenue raised from corporate taxation on mining should be used to pay off the nation’s sovereign foreign debt. It would be an absolute tragedy if the traditional benefits that Australia has enjoyed because of the balance between having a strong employment - generating goods and services sector and a predominately primary export revenue - generating sector was to be squandered during the current mining boom.

Politicians Should Mean What They Say and Say What They Mean

The big three mining companies, their respective allies in the two major parties and the Greens must therefore not be allowed, through either a carbon tax or a super profits mining tax, to facilitate a transition to a “rent seeking” economy via the utilization of SWFs. In the context of the national importance of Australia avoiding a super profits mining tax, it was interesting to note that, in February 2011, the federal coalition Treasury spokesman Joe Hockey seemingly supported in principle a super-profits tax.

Hockey criticised Prime Minister Gillard for supposedly forgoing $60 billion in annual revenue by dropping the proposed RSPT for a MRRT in response to a twenty-eight million advertising program spent by the mining companies just prior to Julia Gillard becoming prime minister. This was a peculiar criticism on Hockey’s part because it implied support for a super profits mining tax regime.

Hockey’s criticism of Prime Minister Gillard’s dropping of an RSPT is also noteworthy because Tony Abbott had previously declared that he would fight against this proposed tax. Surely senior Liberal federal politicians would have tentatively welcomed the move from an RSPT to an MRRT as a step in the correct direction. But then again Hockey’s dark horse candidacy actually cost Turnbull the Liberal Party leadership in late 2009 even though Hockey was supposed to be a stalwart Turnbull supporter. Given these precedents, should Hockey’s avowed opposition to a carbon tax be taken at face value?

The story that was put out by Malcolm Turnbull’s opponents was that he had negotiated an ETS without prior Liberal Party room approval. This was not the case! The then Liberal leader had been careful to secure his party’s support for negotiating an ETS. Malcolm Turnbull was actually deposed at the instigation of the party’s Sydney based ‘conservative’ faction because of his support for state rights and his attempts to make major changes within the Liberal Party’s party organization.

Malcolm Turnbull attempted internal party administrative changes so that he could not be sabotaged from within when he went to the next federal election. The scenario that confronted Australia as Mr. Turnbull attempted to assert his authority was that of a re-elected Rudd government proceeding to dismember Australian states in collusion with anti-state “rent-seeking” elements within the Liberal Party at federal and state levels.

It is also interesting to note that after Malcolm Turnbull’s deposition, the previously devised bi-partisan ETS still went to the Senate where it was defeated because in addition to the coalition, the Greens voted against it. This was not really surprising because the wider and actual reason why elements within the Liberal Party deposed Malcolm Turnbull as leader was to ensure that a re-elected ALP government brought in a carbon tax so that SWFs would be the future determinant of economic power in Australia. In this context, the Abbott Liberals were just as hypocritical as the Greens who defeated an ETS for “rent seeking” motivations despite avowedly different reasons.

How Climate Change Policy is be abused to Facilitate “Rent Seeking”

An ETS is a centrally administered program that seeks to curb carbon emissions via an industry wide cap. There is a degree of flexibility with regard to an ETS that an encompassing carbon price cannot have. Formulating and applying an ETS would still be a formidable undertaking. Even with a co-ordinated approach under an ETS to regulate carbon emission, there will still be wide scope for economic, social and, ironically enough, environmental disruption.

The most promising ETS currently in the world is the one that the European Union (EU) is proceeding with. This ETS is still a work in progress, and as such, it is too early to tell if the European version will be effective as a carbon reducing mechanism or as a model which demonstrates the inherent viability of an ETS. (Problems concerning allocation of carbon credits are bedevilling the operation of the EU’s ETS).

But the EU (in contrast to Australia) has broader, long standing economic inter-continental mechanisms in place to potentially implement an effective carbon reducing ETS. Australia, by contrast, currently does not have the necessary scientific infrastructure, the requisite economic strength as a medium manufacturing nation and the trade capacity as a predominately primary exporter, to devise and implement an effective carbon reducing ETS, let alone devise one that does not cause fundamental social and economic dislocation.

An argument will be advanced that Australia should proceed with either an ETS or a carbon tax for moral reasons. However, it is next to impossible to devise an effective ETS or carbon tax when its avowed proponents, i.e. senior members of the Greens Party and elements of ALP, are more concerned with establishing revenue for future SWFs. To establish the fundamentals for a “rent seeking” economy, it was (and still is and will be) necessary for an Australian federal government to introduce a carbon tax (a far more reliable and efficient revenue source for SWFs than an ETS) and a super profit mining tax regime.

The ALP federal parliamentary caucus’s reservations in 2010 concerning the abrupt way that Mr. Rudd unveiled the RSPT undermined his leadership. AWU components within the federal ALP who were already disillusioned with Mr. Rudd’s supposed autocratic leadership style linked up with those in the federal caucus who were alienated from the then prime minister due to their reservations concerning the proposed RSPT.

It is a tremendous pity that Julia Gillard, on becoming prime minister, compromised with Treasurer Wayne Swan by agreeing to an MRRT to replace the proposed RSPT instead of dropping super profits regime for the Australian mining sector altogether. This concession, which included the establishment of the Argus Committee representing the interests of the big three mining companies, creates future scope for re-introducing an RSPT.

To ensure that the new Gillard government did not establish an independent direction that deviated from the predetermined course of moving Australia to a “rent seeking” future, the new prime minister was therefore compelled by internal forces within her party and elements of the media to call an early federal election for the 21st of August 2010. As the 2007 federal election had shown, inter party collusion can result in change of office. The 2010 federal election had the same dynamic of inter party collusion but this time the objective was to ensure that a minority ALP government was returned so that a carbon tax and a super profits mining tax regime could be introduced.

Establishing A “Rent Seeking” Paradigm for a Future Abbott Government

Because it would have been impossible for an Abbott government to introduce either a carbon tax or a super profits mining tax, the objectives of the Abbott camp were to allow the return of a minority ALP government to introduce these pre-requisites for a “rent seeking” economy. Respective bulletins, on the ABC’s Lateline and Landline programmes before the August 2010 federal election was called, prophetically canvassed the prospect of rural/regional independents holding the balance of power after the election.

There was, (similar to what John Howard endured during the 2007 election) internal sabotage within the ALP campaign with very damaging internal leaks being made in the middle of the campaign. However, the “rent seeking” elements within the two major parties did not intend Prime Minister Gillard to lose the 2010 election but rather place her in a politically vulnerable position so that a carbon tax could later be introduced.

The dynamics for pressuring the prime minister to implement “rent seeking” measures are in place with the three regional independents and a Greens MP holding the balance of power in the Australian federal parliament. The pressure for the prime minister to go down the dangerous “rent seeking” road will increase after the Australian Greens assume the balance of power in the Senate from the first of July, 2011. However, the prime minister has manifested independence and determination with regard to protecting the nation’s genuine national interests since the 2010 federal election.

How and Why Viable States are Essential Barriers to “Rent Seeking”

The prime minister’s recent (February 2011) agreement with the Australian states, ending the GST clawback with regard to health funding, is a case in point of Ms. Gillard’s independence and determination. The May 2010 health agreement was essentially a federal grab of state GST revenue aimed at eventually phasing out states as part of establishing a “rent seeking” economy. Internal weaknesses concerning how clawed back state GST revenue would have being devolved for the purposes of hospital funding would probably have led to a massive wastage of expenditure similar to the BER.

The new February 2011 health agreement jointly devolves federal and state health funding to local hospital networks to ensure that hospitals actually receive increased funding. The provision under the 2011 agreement for a ‘my hospital’ website (similar to the ‘my school’ website that Ms. Gillard established when she was previously education minister) to monitor how local hospital networks administer federal/state funds must ensure sufficient transparency for the benefit of patients and hospital staff.

The involvement of the states in the February 2011 health agreement raises the broader point concerning the importance of states in safeguarding Australia against “rent –seeking”. Australian states, in contrast to some American states, do not have histories that invoke a strong sense of contemporary local identity*. However, states have been a mainstay of Australian history since federation in 1901 as they were six colonies until the welcome advent of federation.

(*The Australian post-war politician who was the major exception to this national orientation was Sir Johannes (‘Joh’) Bjelke-Petersen, premier of Queensland between 1968 and 1987. Sir Joh even deliberately engendered a sense of state patriotism for electoral purposes. This premier’s allegiance to Queensland undoubtedly superseded his loyalty to Australia. Indeed, at Sir Joh’s funeral in April 2004, this New Zealand born Danish speaking migrant to Australia had previously insisted that his coffin be draped by the Queensland state flag. This was not surprising because, as Queensland premier, Sir Joh had ferociously resisted any extension of federal power that he believed encroached upon his state’s constitutional sovereignty or financial viability.

The other major Australian politician who fought for states rights was Sir Henry Bolte (who was a personal friend of Sir Joh’s), premier of Victoria from 1955 to 1972. Sir Henry never deliberately sought to engender an overt sense of Victorian patriotism but he was vigilant in safeguarding what he regarded as Victoria’s constitutional rights, even to the point of clashing with his friend and political ally, Sir Robert Menzies when he was prime minister of Australia (for a second time) between 1949 and 1966).

Most Australians probably do not regard their particular state as reference point for a rival local patriotism that challenges their sense of national identity. Although this is a positive probable reality, overt attacks by federal politicians on states or advocacy that they be abolished would probably engender negative local reactions because state based patriotism tends to be a latent but still powerful sentiment.

For the above reason, the Howard government and anti-state elements within the successor ALP federal governments of Kevin Rudd and Julia Gillard have surreptitiously attempted to phase out Australian states by trying to seize important state services and/or assets such as public hospitals. Naturally, such power grabs have been portrayed by political hacks as being in the public good (‘ending the blame game’) so that Australian citizens would be ignorant of the wider centralization agenda being foisted on them.

Support for Australian states tends to be non-ideological because they have been mainstays of Australian political history and the nation’s two major political parties have always taken part in state elections with the objective of winning power. Ironically, two ostensibly ideologically opposite governments, the Whitlam government (1972 to 1975) and the Howard government (1996 to 2007) were similar in their determination to replace states with a new regional tie of local government.

This similarity was really not that surprising because these two governments were eventually both beholden to political forces supportive of “rent seeking”. It would be the respective failure of Whitlam and Howard to rein in these “rent seeking” forces that caused their respective dramatic but deserved falls from power.

Just as opposition to Australian states can transcend party lines and ideological divisions, support for states can also exist across these aforementioned divisions. Advocates of state rights have often been portrayed as reactionary conservatives who support states to utilize them as barriers to socio-political change. But the existence of Australian states has been crucial to facilitating social democratic outcomes. This has been because state institutions have been (and are) above commercial and power considerations.

Australia’s Anti-Rent Seeking Political Tradition

The service function of states was inherited from the time before 1901 when they were colonies. It was vitally important that colonial legislatures, courts and bureaucracies were service orientated because this was crucial to enabling former convicts and later gold rush migrants to positively contribute to the development of social, economic and political structures.

The granting of a democratic suffrage* by the colony of Victoria in the 1850s led the way for the other Australian colonies to avoid the pitfalls of “rent seeking”. This was because an extensive voting suffrage deprived landowning elites (‘the squiretocracy’) in the colonies of the capacity to dominate and shape embryonic public institutions following the population explosion that came with the 1850s gold rushes.

(*Albeit a then male only suffrage was then granted in the Australian colonies. However the colony of South Australia was the first place in the world to grant women the vote in the 1890s).

The quality of colonial democracy was advanced by the formation of craft based trade unions, the election of trade union endorsed candidates to colonial parliaments and a free press which was often radical. Colonial politicians, particularly those from a union background, were generally honest and lateral. It was therefore not surprising that the colony of Queensland in the 1890s led the world by having the first ever social democratic government!

The tradition of high quality governance and public policy continued after federation in 1901 up until the Whitlam government’s election in late 1972. The 1904 Conciliation and Arbitration Act (the 1904 Act) - and Justice Sir Henry Bourne Higgins of the Arbitration Commission delivering his land mark 1907 Harvester decision guaranteeing the extensive application of a minimum wage - were further positive barriers against “rent seeking”. The positive impact of such barriers against “rent seeking” was contingent upon public policy protecting the value of exports of the primary sectors of the economy and upon the goods and services component of the domestic economy generating high employment levels.

“Rent Seeking”: The Essence of Neo-Whitlamism

The first real post-federation threat of the introduction to a “rent seeking” economy came with the Whitlam government’s steep tariff cut of 1973, its inflationary policies undermining local industry and, most dangerously of all, its ludicrous attempt to buy mineral resources with illicitly borrowed international loans coming mainly from petrodollars. Establishing federal government control over mineral resources was the key to having a “rent seeking” economy because economic and political power would predominately be derived from who exclusively controlled this vital sector of the Australian economy.

The “rent seeking” ramifications of the Whitlam government’s policies it adopted probably would have pulverized the middle class and hit hard the economically vulnerable. Had the Whitlam government lasted longer then what it did it could have achieved its objective of exclusively controlling the lucrative mining sector. Consequently the state* could have dominated the manufacturing and service sectors of the domestic economy while undermining the export value of the nation’s agricultural sector. Elements of the hard left now delude themselves that a similar scenario will occur through future SWFs.

(The ‘state’ in this context refers to the sovereign public authority of Australia as a nation state).

The overseas financing arrangements (‘petro dollars’) that the Whitlam government covertly attempted to arrange created the danger of Australia losing the scope to be internationally competitive in its trading relations. The Whitlam government’s tentative arrangements with Baathist Iraq to sell uranium to that regime were reprehensible enough but the Bagdad regime’s role as a financier of petro-dollars could have given this dictatorship secure access to uranium to develop a nuclear bomb.

The Whitlam government’s orientation toward engineering a transition to a “rent seeking” economy was also reflected by its policy direction of phasing states. The constitutional and financial viability of states were institutional barriers against levelling Australia out so that “rent seeking” could be foisted on the nation.

A Viable Domestic Economy is an Important Barrier to “Rent Seeking”

The financial and industrial reforms of the Hawke and Keating ALP federal governments also posed a danger of facilitating “rent seeking” due to the dramatic impact of tariff cuts and financial deregulation challenging the capacity of the domestic manufacturing, rural and service sectors of the economy to adapt. The over-reliance by these two governments on fiscal policy, such as sustained high interest rates, challenged public fortitude in the late 1980s to the 1990s.

The erosion of the domestic economy’s goods and services sector - and high sovereign foreign debt levels under the Hawke and Keating governments - had potential “rent seeking” ramifications because an over reliance on primary exports (including minerals) was created. The arguable saving grace of these two federal ALP governments was that social dividends were gained by its Prices and Incomes Accord (the Accord) with the Australian Council of Trade Unions (ACTU).

But even this above mentioned benefit was ultimately contestable because the Accord helped facilitate union amalgamation which contributed to steep de-unionisation in the 1990s. Another contributing factor to de-unionisation was the expansion of part time and casual employment which came from financial deregulation and tariff cuts restricting domestic industry. Undermining a nation’s employment capacity is conducive to “rent seeking” because there is a corresponding shift to revenue from extractive industries due to a substantial reduction in the domestic goods and services sectors of the economy.

During the Howard-Costello era, there was a promising move away from the dangers of “rent seeking”. As previously mentioned, the overall positive impact of the coalition government was a balance between the goods and services sectors of the domestic economy and of the primary exports. Consequently by the late 1990s the Howard government reaped the benefit of economic reforms of the Hawke-Keating era because the federal coalition achieved a balance between the primary and secondary sectors of the economy. This balance was facilitated by the federal coalition government paying off public foreign debt and creating a new non-inflationary revenue stream via the GST which was, in the main, productively utilized.

The Howard – Costello Era: The Nexus between an anti-Employee Agenda and “Rent Seeking”

The fundamental problem of public policy during the Howard-Costello era was that a harsh anti-employee/anti-union approach to industrial relations was pursued. There was a still a considerable gap between the respective interests of labour and capital because there was extensive casual, part-time and precarious levels of employment.

Had a genuine attempt been made during the Howard-Costello era to generate full time employment, a case could have been put in favour of the federal coalition’s continuance in office. Unfortunately, this was beyond the bounds of possibility because the Howard government retained a fixation on weakening employee rights by adopting a stridently anti-union agenda. This federal government’s anti-employee orientation was most notoriously manifested by the 2005 passage of the ‘Work Choices’ (sic) legislation. High levels of employment (albeit too much of which was part-time and casual employment) and low inflation alleviated public concern regarding the Howard government’s anti-employee direction.

Therefore, even with ‘Work Choices’ (sic), it must be admitted that the Howard government probably would have held on to office in 2007 had it not been for internal sabotage due to a desire to abolish states and ultimately facilitate a shift to a “rent seeking” economy. Howard paradoxically undermined his own cause due to his hostility towards states. He did not realize that anti-state elements within both the coalition parties and the ALP would link up to bring the coalition government down in 2007, so that a transition to a “rent seeking” economy could be made by introducing ‘reforms’ such as super profits tax on mining.

Despite Howard’s anti-states agenda the positive fiscal inheritance that his government bequeathed to the incoming Rudd-Gillard government - combined with the new government’s social democratic orientation - could have made for a golden age not experienced since the second Menzies government. Although the Rudd government did not serve a full parliamentary term its outstanding positive achievements were:

- replacing ‘Work Choices’ (sic) with FWF,
- repeal of mandatory detention for refugees,
- apology to indigenous children who were removed from their
families,
- introduction of transparent evaluation processes which gave economically disadvantaged primary and secondary students leverage teaching quality.

(Furthermore, Kevin Rudd as prime minister gave Australia a distinct advantage in foreign policy due to his knowledge of international relations and rapport with world leaders).

The Forces of “Rent Seeking” Advance

The first fatal misstep of the Rudd government was its dramatic increase in public foreign debt resulting from its stimulus packages following the advent of the GFC in October 2008. Although the first stimulus package was arguably necessary, the subsequent packages were definitely not required. This lack of financial rectitude was also evidenced by the excesses of the BER and the pink bats fiasco which could well go into negative Australian legend.

The worst of the Rudd government’s excesses were the chalking up of a foreign public debt of over $90 billion and a blow out in the budget deficit due to profligate spending. This financial deterioration was all the more reprehensible because the Rudd government had inherited zero foreign public debt and a budget surplus! Culpability for this state of affairs rests with Wayne Swan, who is incontestably the worst ever Australian federal treasurer. Swan’s actions are reprehensible because they are leading (and are probably intended to lead) the way for Australia having a “rent seeking” economy.

Fortunately, the demand for Australian mineral exports is underpinning Australian prosperity as manifested by low inflation and high employment (albeit with levels of casual and part time employment that are too high). The long term viability of the domestic economy is ultimately dependent upon the strength of the Australian dollar, upon local demand for Australian produced goods and services and upon the credit worthiness of Australian financial institutions. Simply put, if the purchasing power of the Australian dollar erodes due to burdensome foreign public debt, the above mentioned factors necessary for a sound economy will eventually evaporate.

Wayne Swan has promised the Australian people something for nothing by saying that the problems of the budget deficit can and will be solved by application of the MRRT. By implication, there is an implicit assumption on Swan’s part that more revenue can and should be raised by again moving to a RSPT. For reasons (that have been previously detailed), a super profit regime is ill-advised because it broadens the scope for multi-national corporations to exploit their international connections to minimize tax, thereby creating an unfair advantage over business rivals.

The current maintenance of an MRRT (which is still detrimental to the Australian economy) in lieu of a RSPT and the prime minister’s laudable decision to forgo the GST clawback in relation to the so-called ‘health agreement’ of May 2010, was probably conceded in return for the federal government imposing a carbon tax.

Julia Gillard and the Carbon Tax: Winning the Battle but Losing the War

The prime minister’s rhetorically brilliant defence of her government’s endorsement of a carbon tax in parliamentary debate in February 2011 could well be regarded as the point at which her government actually lost its way. Therefore, the political dynamics of the February 2011 sitting of federal parliament require analysis.

The government’s minority position led it to engage in wedge politics in relation to Australian multi-culturalism. ALP parliamentarians attacked Tony Abbott’s parliamentary secretary, Senator Cori Bernardi* of South Australia, for his comments on Islam. Had Abbott come to Senator Bernardi’s defence ideological divisions within the Liberal Party between moderates and ‘conservatives’ could have come to the fore to challenge party unity. Abbott brilliantly countered by avoiding the multi-cultural issue by instead focusing on the issue of a carbon tax, thereby ensnaring the prime minister in the trap of articulately advocating in parliament a tax policy that could ruin the ALP.

(*Senator Bernardi is at the fore of applying the Lasch strategy on behalf of the ‘conservative’ faction within the Liberal Party. The Lasch strategy in an Australian context is applied by avowed conservatives consciously cultivating the support of economically vulnerable people to shift their support away from the ALP by appealing to their social conservatism while undermining their actual economic interests.

The anti-carbon tax rally (March 23rd, 2011) in Canberra was a manifestation of the Lasch strategy par excellence. This rally was addressed by Tony Abbott before demonstrators who waved vitriolic placards in which they attacked the prime minister. Such demonstrators are currently considered to be extremists but when the ill-effects of the carbon tax take effect they will become the vanguard of a viable populist right wing movement.

Such a movement could siphon millions of ‘battler’ votes from the ALP to either the coalition parties or a populist right wing party such as One Nation or the purported DLP. Indeed the former One Nation leader, Pauline Hanson, who almost won election to the New South Wales upper house, attended the March 23rd rally. Hanson claimed that the state election result was a repudiation of the two major parties.

This analysis of Hanson’s was incorrect because the Greens vote still did not rise above 10% of the popular vote and the coalition parties won the bulk of votes from the ALP. But if a carbon tax is introduced the potential will be there for a new populist movement, which Hanson might be part of, to snare stalwart ALP votes. The coalition parties might lose some votes to a new populist movement but the political dynamics will be such that the aggregate advantage will remain with the Abbott Liberals).

If a new populist movement becomes viable because the ALP adopts a carbon tax the tragedy for its supporters will be that their socio-economic interests will be greatly harmed while the respective backers of Abbott and Senator Brown exercise economic and political power through SWFs. With a carbon tax causing substantial (if not massive) future job losses, the political environment will be polarizingly conducive to both a right wing populist movement (which pro-Abbott political operatives will ensure they always ultimately control) and the Australian Greens. Consequently, the present priority for the Gillard government must now be to drop the proposed carbon tax and the proposed MRRT.

By the Gillard government dropping any notion of either a super-profits mining tax or a carbon tax political leaders such as Abbott and Senator Brown know that they will be deprived of the necessary revenue stream to underwrite future SWFs. Already, the manifestations of collusion between the Abbott Liberals and the Greens are apparent with both respectively guaranteeing passage of a corporate tax cuts and passage of the MRRT legislation.

For public consumption, Abbott and Senator Brown will each denounce the respective policy positions of the other with regard to company tax cuts and introducing an MRRT. The current machinations are already reflective of a paradigm shift to a “rent seeking” economy. Company corporate tax cuts will later serve to increase a future dependence on SWFs by diminishing existing government sources of revenue.

But it will be the Gillard government that will be the ultimate dupe by facilitating a new “rent seeking” framework that will destroy the moderate elements within the ALP and the Liberal Party. The impact of a carbon tax in destroying employment generating industries will further deplete government revenue sources - company and individual taxes - while simultaneously creating a revenue stream for SWFs. People should therefore be aware that when politicians speak about ‘the people’ gaining a share from a super profit tax regime that it will really be a shadowy “rent seeking” elite.

The need for the public to be wary of political chicanery was amiss when it came to analysing recent New South Wales state politics and such negligence should not be repeated with regard to recent and future developments in federal politics.

Why the Gillard Government Must Avoid the New South Wales Scenario

If Julia Gillard is to avoid becoming an ALP federal equivalent of Kristina Keneally, then she will have to stop both an MRRT and a carbon tax. If she achieves these two inter-related objectives, the prime minister will hopefully succeed where Morris Iemma unfortunately failed: securing the ALP’s capacity to avoid being engulfed by a detrimental pre-formulated political strategy aimed at pulverizing the Labor vote.

Whatever the merits of electricity privatization, it was a pity that someone as decent as Morris Iemma failed to implement this policy because this failure assured the ascendancy of the “rent seeking” elements within the New South Wales ALP. These elements deliberately pulverized their state party branch to lay the current groundwork for the future dismemberment of New South Wales as a state by the new state coalition government led by Premier Barry O’Farrell.

The new O’ Farrell government will invoke the acute financial mess that New South Wales is in to later introduce its version of ‘regionalization’ (sic). This will set the dangerous precedent for ‘regionalization’ (sic) to be undertaken by other state governments with the belated support of a coerced Gillard government. This scenario is similar to the political pattern that previously occurred in New South Wales when the state coalition allowed the Iemma to win re-election in March 2007 and when the O’Farrell led opposition blocked electricity privatization in September 2008.

Any benefit that Premier Iemma might have gained from winning the 2007 state election, that the New South Wales ALP deserved to lose, was undermined by the state council of the state union movement, Unions New South Wales, opposing electricity privatization in 2008. The Iemma government still passed legislation in the state’s lower house of parliament to privatize state electricity due to the determination of then New South Wales Treasurer Michael Costa. However the Barry O’ Farrell led the coalition prevented electricity privatization by voting with ALP dissidents in the upper house.

Denied the capacity to effectively remedy New South Wales parlous financial position without revenue from electricity privatization Premer Morris Iemma resigned in September 2008, to be succeeded by a then relatively unknown Nathan Rees, who in turn was succeeded by Kristina Keneally as premier in December 2009. These leadership changes which were engineered by Sussex Street (the Sydney ALP state headquarters that is dominated by the Right faction) - exhausted public acceptance of the post-2007 ALP state governments thereby substantially contributing to the state coalition’s 2011 landslide victory.

The wryly amusing aspect of the 2011 election rout of the New South Wales ALP is the widespread misperception that the power of the perpetrators of the state ALP’s incredible regression has been extinguished. The election of John Robertson as the new New South Wales opposition leader is testament to the continuing power of those who are responsible for the state ALP’s rout by previously opposing electricity privatization.

A major foe of Robertson’s within the Iemma government was Michael Costa. The former state Treasurer was a neo- liberal within the Carr and Iemma state governments. However, Costa was the major figure within the New South Wales ALP who could have placed his party on a financial and political course that might not have secured re-election in 2011 but at least helped avoid the recent castrophic election result. The essentially self-inflicted decimation of the New South Wales ALP has now set the scene for union and party power brokers to achieve the pre-2007 objective of ‘regionalization’ (sic), albeit under the auspices of a state coalition government.

The installation of Kristina Keneally as premier did save the state ALP from virtual annihilation and this was reflected by the party winning over twenty seats (albeit in a lower house with ninety-three members). Had the ALP won fifteen or less lower house seats, then the party name brand might not have been sufficiently strong to partake in the spoils of future ‘regionalization’ (sic) that the O’ Farrell government is now planning. A ‘regionalized’ (sic) New South Wales will set the scene for the future dismemberment of other Australian states.

The recent March 2011 New South Wales election result is reflective of the fact that the Australian people are currently not inclined toward political extremes on either the left or the right. The Greens Party only scraped in to win two lower house seats and its below expectations performance illustrates that the electorate at present is generally wary of allowing this extremist party into government by electing them to lower house seats. However, the Greens will have a greater capacity to convert their power on a localized level to link up with left wing industry unions that are with the hard left of the ALP. This will in turn alienate many mainstream Australians from the ALP who could well go over to the coalition parties or a rightwing populist party.

The pulverization of the ALP will probably not disturb the party’s hard left (in probable alliance with the Greens) which will envisage having economic and political power via connection to SWFs. But ALP strategists should be aware that a political leader as shrewd as a future Prime Minister Abbott will ensure through populist measures that the ALP does not retake the massive ground that it will lose due to a carbon tax. Already Prime Minister Gillard is losing her major political asset – the trust that many Australians have in her.

When the nation economically and socially regresses due to the imposition of a carbon tax the ALP’s federal voter base will correspondingly erode similar to the New South Wales 2011 election result. Ms. Gillard’s will be too distrusted to make up the ground because she broke her promise before polling day that a carbon tax would never be introduced if her government was returned. Consequently a plebiscite on the issue of introducing a carbon tax is now the only way that Prime Minister Gillard can maintain faith with the Australian people while allowing the ALP to see what is before it in terms of possible future voting patterns.

Giving the Environment the Benefit While Avoiding “Rent Seeking”

The fundamental problems that a carbon tax poses to the Gillard minority government are reflective of a series of adept political manoeuvres by “rent seeking” elements within the two major political parties and the Greens. Therefore, the litmus test for confronting the extreme danger of introducing a carbon tax (or ‘pricing’ of carbon) is how to counteract “rent seeking”.

Prime Minister Gillard is someone who does have the nation’s genuine interest at heart but the success or failure of her leadership will hinge upon stopping “rent seeking” in relation to climate change policies. There is scientific controversy (to say the least) concerning the validity of human induced global warming, but the environment should be given the benefit of the doubt. If government climate change policy is genuinely undertaken with scientific objectives at the forefront, then the traditional balance between the primary and secondary sectors of the Australian economy could be retained and “rent seeking” avoided.

With regard to the issue of reducing carbon emissions, which the carbon tax is supposed to address, the interests of the Australian environment could actually be advanced if the Gillard government established a federal Environmental Protection Agency (EPA) to co-ordinate with existing state environmental protection agencies and the CSIRO to develop non-carbon alternatives that will actually lower carbon emissions. Such a development would not only help the environment but save the nation from adverse economic and social impacts of a carbon tax while thwarting the application of SWFs.

The major gap in relation to current government climate change policy is the mis-assumption that Australian consumers and industry can make a transition to green alternatives when these alternatives do not currently exist. The situation that the Gillard government is therefore confronted with in relation to a carbon tax is akin to the profligate NBN: the absence of a proper cost benefit analysis. The real focus of the government should currently be on undertaking an objective and credible cost- benefit analysis of a carbon tax to assess its socio-economic and environmental impacts.

Consideration will hopefully be given by the Gillard government establishing an impartial federal environmental protection authority to undertake a genuine cost-benefits analysis of a carbon tax, of an ETS or of putting environmental controls in place to actually lower carbon emissions. An important function of such a federal environmental authority could also be to assist in promoting alternatives to currently high carbon emitting processes.

There is a danger that a future federal environmental authority could become a vehicle for “rent seeking”. Unscrupulous politicians could utilize such an authority to impose prescriptive policies to regulate industry and consumer behaviour to the extent of destroying the existing socio-political order so that safeguards against “rent seeking” can be removed.

As with the fiasco concerning the NBN, lessons can be applied to potentially remedy the situation, in this instance with a future federal environmental protection agency avoiding the dangers that the Murray Darling River Basin Authority (MDBA) poses to the viability of communities that live in the Murray Darling Basin. The MDBA was established as a federal government statutory authority in 2007 by the Howard government to ensure the environmental protection of the basin area in Victoria, Queensland, South Australia and New South Wales.

Unfortunately, there are elements within the ALP (similar to the Greens) which would like to see the MDBA buy back water rights in order to destroy rural and regional communities so that a more economically and socially homogenous society is created. Even though the recent floods have currently endowed the basin states with more than sufficient water for irrigation purposes, the danger still exists for the MDBA to be utilized by unscrupulous political forces.

The ALP should be aware that, as with the proposed carbon tax, if the MDBA is abused to wreak economic and social destruction, then many talented Australians will give of their time and energy not only to see that Labor is voted out but that the party stays out of office. Tony Abbott’s recent (February 2011) reference to Sir Robert Menzies being the friend of the motorist when he opposed petrol rationing is indicative that the opposition leader appreciates the contemporary relevance of history.

The imposition of a carbon tax on petrol (which the Greens advocate) could well provide the critical mass necessary for the Liberals to maintain a long term political ascendancy. In contrast to former Liberal leaders such as Dr. John Hewson, Tony Abbott has a broader understanding of history and of political strategy to provide him with the capacity to maximize the political advantage that results from socio-economic changes.

Future ALP culpability for economic and social destruction via either a carbon tax or unfair denial of water irrigation rights in the Murray Darling Basin will provide Abbott with the trust and credence as a prime minister to pursue populist policies that really consolidate “rent seeking”.

Genuine Federal-State Co-Operation can save the Environment and Stop “Rent Seeking”

The 2010 election victory of a coalition government in Victoria led by Ted Baillieu has provided irrigators of the Murray Darling Basin in all four states a reprieve from the threat of the “rent seeking” left in the ALP and the Greens. The new Victorian government has utilized its membership of the *Murray Darling Basin Ministerial Council (MDBC) to voice its concerns on behalf of irrigators and surrounding communities to advocate that the MDBA decrease its buy - back of water.

(*The MDBC is composed of the federal minister for Water and five ministerial counterparts with responsibility for water from the four affected states and the ACT).

If a federal equivalent of an Australian environmental protection agency were to be created, it would hopefully provide a coordinating role for the excellent state based environmental protection agencies that are in place. In contrast to the MDBC, a future federal environmental protection agency should reflect and respect the sovereign constitutional power and role of states.

Representatives of the respective environmental state protection agencies* could serve on a new federal body but without usurping the roles of the long standing state environmental protection agencies. Furthermore, support from state Liberal Party governments for a federal environmental protection agency would counteract the political polarization that would be needed to facilitate a “rent seeking” transition.

(*State environmental protection agencies have previously devised scientifically viable ideas in regard to irrigation practices such as inserting plastic pipes from rivers to crops because water storage in plastic pipes can reduce water evaporation by up to 40%. This failure to implement an effective and scientific rational idea is reflective of the similar gap in relation to climate change policy and reference to reliable state agencies. Unfortunately, financial analysts who are advising avowed supporters and opponents of a carbon tax are not being remiss in formulating future SWFs).

Genuine federal-state co-operation (as manifested by the outstanding February 2011 health agreement) could be engineered by a voluntary interchange of state and federal powers in relation to environmental matters. Representation on the management board of a federal environment protection agency will hopefully encompass a broad cross section of community concerns with representatives from unions, from big and from small business, from farmers’ groups and from environmental groups.

An important role of such a federal environmental protection agency could be harmonization of environmental laws and codes of conduct. Hopefully, one role of a federal protection agency would be to actually promote the development of carbon industrial and consumption alternatives. Because Australia approximately emits 1% of the world’s C02, time would be on the nation’s side to support such a transition without necessarily or immediately pricing/ taxing carbon.

Australia’s International Competitive Advantage in Climate Change is its Scientific Research and Development (R&D)

If a tax/price is to be imposed on carbon, then the charge should be as a fine for pollution on industry for breaching scientifically set carbon emission levels. Carbon emission levels should be set by a future federal protection environmental agency (in conjunction with state environmental protection agencies) to avoid scope for “rent seeking”. Environmental agencies (state and federal) should also undertake research and development (R&D) into non-carbon alternatives to address the current gap.

The social and economic costs of destroying Australia’s coal industry would be too high particularly because the potential environmental gains cannot be secured in the context of an absence of an international agreement on carbon emissions. However, revenue raised from corporate taxation on coal mining could be allocated to developing lower or non - carbon alternatives without undue job loss or disadvantaging Australia’s trading position in the intermediate period.

Australia is a low carbon emitting nation that can due to the breadth of available research expertise lead the way when it comes to developing tackling human induced climate change. The Commonwealth Scientific and Industrial Research Organisation (CSIRO), established in 1926, is one of the world’s leading, if not the world’s leading, scientific and research agencies. However, CSIRO and the nation’s state environmental protection agencies are currently grossly under utilized in addressing human induced climate change or in developing new carbon reducing alternatives.

The absence of an impartial and independent federal environmental protection agency is a tremendous pity because Australian history has shown that successive, independent bureaucracies, be they colonial, state or federal, have been important checks against self-aggrandizing would - be elites. Non-bureaucratic state institutions such as courts and industrial relations commissions have similarly fulfilled a vital role in protecting the common good.

Since the colonial era, impartial and honest bureaucracies have served the nation well in preventing domestic and foreign interests from establishing concentrated economic and political control*. The great challenge in Australian politics is having politicians and members of the public involved in ensuring that impartial institutions and associated processes are again utilized to thwart “rent seeking” in relation to climate change.

(*The current threat that the Coles supermarket chain poses in eliminating rival local dairy producers by selling its milk at a substantially lower rate is reflective of the Australian paradox: a nation with ample natural resources and space but with a comparatively small domestic market sometime necessitating intervention by statutory authorities to actually protect market competition and employment generation).

The Fork in the Road: Will Australia Go Down the Fatally Dangerous “Rent Seeking” Path?

Australia is now at the cross roads as to whether the ALP Gillard government will safeguard the traditional balance - between the primary and secondary sectors of the Australian economy - that has usually countered “rent seeking”. The greatest social and economic cataclysm that confronted Australia since European settlement in 1788 was the 1890s Depression. The balance between the two major sectors of the economy was restored by Australian federation, by renewed immigration, by the establishment of Australian industrial arbitration and by a first class banking sector with appropriate prudential controls.

If Australia becomes a bankrupt nation with a domestic economic sector incapable of generating sufficient employment and a decent standard of living due to the introduction of a carbon tax, the dark irony of this outcome will be that those who will benefit from the ensuing social and economic morass will continue to thrive by their connections to SWFs and finance credit lines- such will be the reality of a future “rent seeking” nation. Australia will therefore finally become a nation where its natural resources are converted from being a source of economic power and prosperity into a source of economic and social power by a new self-seeking “rent seeking” elite at the expence of a pre-existing common good. At the very least justice and equity demands that the Australian people be allowed to vote in a plebiscite on the issue of whether a carbon tax should be introduced.

Dr. David Bennett is the Director of Social Action Australia Pty Ltd.