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Source link: http://archive.mises.org/10205/australias-uncreative-destruction/

Australia’s Uncreative Destruction

June 29, 2009 by

It turns out that Australia’s Prime Minister Kevin Rudd is going around town breaking windows by, well, demanding they be built. There are over 35,000 construction and maintenance projects planned across Australia over the next 12 months. This includes AU$49 (US$39.4) billion dedicated to “nation building infrastructure,” or crudely AU$2,200 in taxes for every man, woman, and child residing in Australia. FULL ARTICLE

{ 13 comments }

Fred Furash June 29, 2009 at 9:45 am

So that thing about Australia technically avoiding a recession was based around the broken window fallacy. Well, not surprising. Thanks for doing the research on this.

Liberty Australia June 29, 2009 at 9:58 am

Fred Furash, I would think this plays a considerable factor:

America’s Great Depression by Murray N. Rothbard
http://mises.org/rothbard/agd.pdf

THE FISCAL BURDENS OF GOVERNMENT

“In the pleasant but illusory world of “national product statistics,” government expenditures on goods and services constitute an addition to the nation’s product. Actually, since government’s revenue, in contrast to all other institutions, is coerced from the taxpayers rather than paid voluntarily, it is far more realistic to regard all government expenditures as a depredation upon, rather than an addition to, the national product.

In fact, either government expenditures or receipts, whichever is the higher, may be regarded as the burden on private national product, and subtraction of the former figure from Gross Private Product (GPP) will yield an estimate of the private product left in private hands. The ratio of government depredation (government expenditures or receipts, whichever is the higher) over Gross Private Product yields the approximate percentage of government depredation of the private product of the economy. [21]

In a depression, it is particularly important that the government’s fiscal burden on the economy be reduced. In the first place, it is especially important at such a time to free the economy from the heavy load of government’s acquiring resources, and second, a lowering of the burden will tend to shift total spending so as to increase investment and lower consumption, thus providing a double impetus toward curing a depression.” pg. 291

- For the extended explanatory footnote please see pg 292, via the link above.

newson June 29, 2009 at 10:25 am

mindless waste, agreed, but small in comparison to the destruction that is to be visited on us by the emissions trading scheme.

Jorge Borlandelli June 29, 2009 at 1:58 pm

A good friend of mine, Hernan Bonilla in Uruguay, paraphrasing Schumpeter calls this process “destructive creation”.
Remember that Hazlitt’s lesson also teaches that if you look at the most outspoken groups defending the government measures they will coincide with those which are getting higher and more concentrated short term benefits. How to counter the noise those groups make by organizing the disperse interests of the taxpayers is the herculian task.

BioTube June 29, 2009 at 5:20 pm

Perhaps it’s time to print another Common Sense.

P. Ivanov June 29, 2009 at 6:43 pm

Haha, this is happening at my high school right now as well….

It’s not quite as disturbing as my economics teacher saying that government should have a monopoly on all investment, though.

newson June 29, 2009 at 6:55 pm

close observers of the rudd government will be aware of the critical importance placed on language by this team. count the number of times you hear “working our guts out” in reference to the government’s performance. the focus is on visible activity, which polls well, and not the more subtle wealth generation.

Justin June 29, 2009 at 7:25 pm

Unfortunately for us it’s incredibly hard to get people to start questioning something that has been hammered into them for at least two decades of schooling in the pro-government ways. Plus, to defend what is visible is incredibly easy – e.g. “we’re creating 10,000 jobs – just look!” while to get people to see the minimum of 10,000 jobs that were never created is much harder…not only are most people unwilling to see them, but to explain why takes considerably more time and effort than the former…and then it will probably be ignored or simply drowned out in the endless “jobs” rhetoric anyway.

Nuke Gray June 29, 2009 at 8:27 pm

A few weeks ago, our papers were full of stories about schools with gyms being encouraged to build new gyms, even if nothing was wrong with the old ones! The Federal government is trying to prod the economy, to make it move. At the same time, it is allowing the unions to dictate conditions, and set terms. The (Labor) Government put on a good show of defying the unions, by defying them on a few extreme items, but letting the rest go ahead. It made for great TV!

Justin June 30, 2009 at 12:27 am

I’d just like to add…the latest financial aggregates from the RBA show that financial intermediary loans to the government are up 273% year-on-year.

The inevitable question thanks to this crowding out effect by the government is…will the RBA sit back as banks raise lending rates or will they start printing to keep them down (mmm, inflation!)?

Michael June 30, 2009 at 2:02 am

Australia avoided a technical recession because of increased domestic saving and decreased imports. Every year when Australia’s GDP figures are compiled the current account deficit is deducted from them. Last quarter, that deduction was far, far smaller. Essentially saving saved Australia from recession.

And while the government’s utterly stupid stimulus package is, well, that, the country’s level of government debt will only reach 15% of GDP. Compare this with the United Kingdom, where it approaches 100%.

This, combined with the fact that our reserve bank is keeping rates at a reasonably high 3% (Glenn Stevens speaks out against ultra-low rates and is a devotee of a Swedish economist named Wicksell [if I recall correctly]) should help keep Australia’s downturn from getting anywhere near that being experienced overseas.

newson June 30, 2009 at 10:56 am

to michael:
you’re right as far as it goes, but australians have huge private debts against housing. in a social democracy with a populist leader, my bet is the private debt being socialized in the years ahead.

Nuke Gray June 30, 2009 at 7:27 pm

Our Oz papers are talking about happy days for Unions- they have repealed some of the better features of the old Industrial relations system, and are sounding warlike. That will be bad for business!! What are your unions up to- destroying without creating?

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