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Doyle is screwing the Liberal Party on green policies
Gerard Jackson
Mayor of Melbourne Robert Doyle is a prominent member of the Liberal Party and a walking embodiment of insufferable arrogance and unbelievable ignorance, characteristics shared in abundance by the Party's self-appointed elite, which no doubt accounts for the Party's steep political decline. Another unfortunate characteristic of this galere of political incompetents is their thoroughgoing disdain for the aspirations of ordinary Australians. The people — unlike Doyle and his cronies — who actually make this country work.
In his typical authoritarian fashion Doyle has decided that "urban sprawl" should cease. For those of you too young to remember urban sprawl used to be called urban development. However, the word development has positive connotations so it had to be banished in favour of sprawl, a word that connotes waste, sloth and sin. So there we have it. According to Doyle those miserable Australians who want to improve their lot in life and create a better future for their children by moving to new estates in the suburbs are in fact wilful sinners who need to be put in their place and confined to residences that are more in keeping with their lowly status. And this from a creep who lives in a spacious multimillion dollar pad. Is it any wonder these Liberals want to make me throw up.
What Doyle is really proposing is an attack on the standard of living of the masses. The effect of such restrictions would send property prices and rents rocketing. (Even without further restrictions BIS Shapnel predicts rents will continue to rise by 5.8 per cent per annum for the next 3 years). A situation that would be greatly exacerbated by severe building restrictions that Doyle strongly supports. Therefore, on the one hand this green snob wants to coerce ordinary Australians into smaller and smaller homes while at the same time enforcing building codes that would makes those homes enormously expensive.
Not content with attacking the Australian Dream of owning a decent home, this lovely piece of work is a fervent supporter of green policies that would see energy prices hit the astrosphere which would drive the final nail into jobs and living standards. And Liberals wonder why they are not connecting with ordinary Australians.
Back in 2003 when Doyle was leader of the Victorian State Liberal Party he declared that the state needs to implement "sustainability" policies because free markets are a menace to the environment. This is an echo of the green canard that markets are wasteful, that they use up natural resources too quickly and that they ignore the needs of future generations and pollute the environment. Another so-called green critique is the assertion that entrepreneurs are short-sighted, greedy and seek only quick profits at the expense of the community. Moreover, markets lack the foresight, knowledge and the resources that only the government can muster.
In other words, the country needs socialism, whether it be of the Soviet kind or the fascist kind. Yet the only economic system that these accusations could honestly be made against is socialism. It is socialism that stands guilty of these offences, not the market. The proof is to be found in every society that socialism blighted. But I doubt if Doyle or any of his advisors would be aware of this fact — or even that they care.
The green cultists who influence the likes of Doyle and Malcolm Turnbull constantly warn us that economic growth is rapidly using up the planet's resources and that we should call a halt before it is too late. On the surface this seems a perfectly reasonable statement. After all, the planet is finite so it is obvious that the planet's resources must also be finite. Not so.
This argument, which is not new, always fails because it ignores the fact that estimates of reserves of any resource do not represent estimates of the total amount of that resource in existence. Known estimates of a resource only represent reserves that are worth finding at a certain price, including price expectations, and the state of technology. This is why estimates of resources change with prices. It would be irrational for any resource company to employ labour and capital in trying to discover just how much of a certain resource actually existed. It is simply pointless trying to make such an inventory.
So despite the greens' doom-laden predictions that the supply of natural resources would lag behind demand thus raising their prices has been falsified. In fact, the reverse happened. The discovery of new reserves as they were needed plus the development of a wide range of substitutes made resources so abundant that their prices have actually fallen, moving the terms of trade against the developing countries. The following chart is The Economist's inflation-adjusted industrial price index with 1845-50 = 100 as its base. It can be easily seen that by 2000 the index had dropped by 80 per cent.
BrookesNews.Com
Monday 11 January 2010
But there is absolutely nothing new about dire green predictions of resource exhaustion. For example, the 1946 Paley report, sponsored by the US government, predicted exactly the same thing. The supply of domestic minerals would, according to the report, dwindle, so rising demand for imported supplies would increase and their prices rise thus turning the terms of trade against the industrialised world. But from a human perspective vital resources unlimited as shown by the table below.
Measures of Mineral Consumption (in years) |
|||
÷Annual Consumption |
|||
| Copper | 45 | 340 | 242,000,000 |
| Iron | 117 | 2,657 | 1,815,000,000 |
| Phosphorus | 481 | 1,601 | 870,000,000 |
| Molybdenum | 65 | 630 | 422,000,000 |
| Lead | 10 | 162 | 85,000,000 |
| Zinc | 21 | 618 | 409,000,000 |
| Sulphur | 30 | 6,897 | NA |
| Uranium | 50 | 8,455 | 1,855,000,000 |
| Aluminum | 23 | 68,066 | 38,500,000,000 |
| Gold | 9 | 102 | 57,000,000 |
| Source:: Nordhaus (1974, p. 23) | |||
What confounded the Paley report findings was exactly the same thing that confounded the predictions of green doomsters and that was the market process, of which Mr Doyle his pals are completely ignorant. The vital role that prices play in the market place are not understood by the market's critics who tend to show a disdain for economics and seem to make a virtue out of economic illiteracy. They do not understand that market prices are and why we cannot fully exhaust any natural resource because its price would simply rise to a point where it becomes uneconomic to use. But the process is more subtle than this suggests. The criticism that the market cannot strike the necessary balance between present and future consumption because of its ‘excessive' depletion of both non-renewable and renewable resources is rendered absurd by the process of capitalisation.
It is always in the interest of entrepreneurs to maximise the present value of their land and capital assets. Excessive depletion of resources would lower their capital value. The present value of any of these assets is the sum of discounted future rents. The market tendency will be for these rents to become equal to the rate of interest. In fact, capitalisation becomes an argument for the privatisation of state owned lands.
The market does not require the very visible hands of politicians and bureaucrats to achieve a rational allocation of natural resources. Incompetent entrepreneurs who lack foresight and undervalue and mismanage their resources are soon displaced by entrepreneurs with superior knowledge and forecasting ability. (Alas, if only the same thing could be said of incompetent politicians and inept bureaucrats.)
It is through time preference that the balance between present and future consumption is struck. Time preference is simply the consumers' preference for present consumption over future consumption. The less consumers spend on consumption the more of their income is allocated to investment in future goods and thus to a greater conservation of natural resources. But, resources like coal and oil could be the exception to this rule if there is a significant increase in demand for their use in new activities.
It must not be forgotten, however, that a reduction in time preference, ie, a switch from current consumption to future consumption, will lower interest rates and thus raise the value of the land. This creates the obvious incentive to conserve the resource and maximise its present value. Not only do market prices act directly to conserve natural resources through the process of capitalisation they also expand the supply of resources by discovering and exploiting new reserves and by substituting new materials for old resources.
The higher demand for the final products (consumer goods) increases the value of the resources that go into their production. These higher prices stimulate conservation and investment in exploration, new technologies and substitutes. In short, increasing scarcity reflected in higher prices increases supply. From this we can correctly conclude that in a free market consumer prices determine the costs of production.
Economic history is full of examples of the market process finding new resources and substitutes when they have been most needed: from the substitution of coal for charcoal in eighteenth century England; of kerosene for whale oil and of gas for kerosene; of steam for wind, animal and waterpower and of electricity for steam; of aluminium for cast iron pots and pans; of transistors for valves and of optic fibres for copper cables, and so on.
In fact, the market has created an abundance of resources, regardless of green propaganda to the contrary. This is because economic growth is also a resource generating process. But for this to have come about the prime mover in the market process, the entrepreneur had to be free to explore and to experiment — just as farmers do, Mr Doyle. It is entrepreneurship that makes the market's dynamic discovery process so successful.
So-called conservation laws are not needed in a free market. Where such laws are implemented they have a number of undesirable effects. The laws restrict the use of depleting resources, ie, they force a greater inventory in the stock of depletable resources and also force owners to excessively invest in replaceable resources.
If, for example, the government imposed a conservation tax on oil, the effect would be to slow down — depending on the size of the tax — oil consumption and direct investment into finding a substitute, probably shale oil. But this would be a waste of resources, a malinvestment. extending investment to the conservation of any natural resource to the point where the return is lower than the opportunity cost of the investment is truly wasteful.
These laws can also extend the conservation of resources beyond the point where they become obsolete, a possibility with an oil conservation tax. In fact, Industrial development would have been greatly retarded if past warnings of the imminent exhaustion of natural resources had have been heeded.
The only argument advanced in support of conservation laws is that the market will use up resources too quickly and deprive future generations of their use. The critics forget or ignore the fact that future generations are provided for through present savings and investment, the cost of which is the consumption that previous generations sacrificed.
The free market argument is completely lost on Liberal politicians and their advisors, for whom 'ideas' are for ivory-tower intellectuals. It has been my experience that these people consider themselves to be practical men for whom ideas are not necessary. It was men like these that Jean-Baptiste Say had in his sights when he wrote:
Nothing can be more idle than the opposition of theory to practice! What is theory, if it be not a knowledge of the laws which connect effects with their causes, facts with facts? (A Treatise on Political Economy, 6th edition 1834. p. 21.)
I fear that all of the preceding is wasted on our Liberals, even those who strongly oppose Doyle. These people seem congenitally unable to see that greens want policies that would destroy our standard of living.
Gerard Jackson is Brookesnews' economic editor