When spenders outnumber producers

This speech was delivered at the 1993 conference of the Pastoralists’ and Graziers’ Association of WA.

It was George Washington who said: “Government is not reason, it is not eloquence; it is force. Like fire, it is a dangerous servant and a fearful master”.

The points I’ll cover here are:

• The damage being done to our nation by the Federal Government’s promotion of divisive issues.
• Why the real state of our economy is concealed from us
• How the growth of the poverty industry destroys human dignity
• There is only one tax on the people
• Who is to blame for the mess?
• A solution
• A second best solution
• Is there any good news?
• Why I remain an optimist

In our Federal Government’s desire to generate side issues as a distraction from Australia’s economic decline, they are generating divisive issues such as the republican debate, ‘Mabo mania’, reconciliation and the matter of ‘treaties’ between one group of Australians and another.

To shroud the degree of decay in our economy the government usually presents Australia’s statistics alongside selected other decaying economies from around the world. It’s never against the vibrant Asian countries with whom we compete and look to for our markets.

I was with Dr Ed Shann of Access Economics last year with the Canadian Bank Credit Analyst group in Hong Kong and China. They had analysed the emerging economies of the Asian region. Ed asked why Australia was not included in the comparison charts and was told that to include Australia they would need to change the co-ords on all the graphs. Embarrassingly enough, the Australian economic statistics just did not reach up to the comparison stage.

I am afraid that the degeneration of our external image is progressing at a rate that the shrinking percentage of Australia’s hard-working producers may not be able to reserve. That small group, that continues to bear the load, is carrying too much weight on its shoulders in the form of government spending. More and more of these people are shrugging off the load just like Atlas, who carried the world on his shoulders.

I regularly receive phone calls from hard-working, productive people (mainly from Melbourne or Sydney) looking for investment advice so they can punt some mining shares. I don’t give advice like that but I do ask them why they don’t invest the $100,000 or so in their own business.

The answer is always the same. They are never going through that again, they would rather have an empty floor in their office building than employ more people and be faced with all the taxes, regulations, redundancy payments and trauma. Sad that in a country like this people are deterred from investing in themselves and their own expertise.

Practical example

Let me give a brief example of this economic environment confronting a small Kalgoorlie listed gold explorer, of which I am Chairman. Our average loss for the last three years has been $1.8m per annum.

We have just analysed our past twelve months to find out where the money is going. Guess what we found? A total of 308 cheques written for various government taxes, not including fuel tax, sales tax and other indirect taxes. The dollar value of these cheques is $800,000, which is almost the same expenditure as our annual exploration budget.

In one year, that is 308 cheques for government taxes and not one single cheque for dividends to shareholders. It’s hard to win a game when you are playing to a set of rules like that. We pay $800,000 when we are making a loss, so I shudder to think what we would pay if we actually made a profit. While we are delighted with the results from our $800,000 spent in the ground as exploration, we are most unhappy with the way governments are spending our other $800,000. Most of it seems to vanish into this huge chasm called ‘welfarism’.

Here we are in the Kalgoorlie region with a population of around 30,000 with almost no unemployment — but there are 9,300 individuals receiving welfare of various kinds. That’s about a third of the population. I wonder why they are on welfare? When we translate that sort of expenditure all over Australia we come face-to-face with the real problem.

Poverty used to be a condition but now it’s an industry. All these grants and entitlements (as they are called) develop bureaucratic empires, which depend and thrive on poverty. There are so many vested interests at work that the truth about how many Australians are in real need is often buried under a blizzard of rhetoric and myth.

Many of the recipients of these payments seem to prefer to have their freedom supplemented by political manoeuvring rather than enjoy the undiluted freedom to compete personal responsibility. Unfortunately, such as stance thwarts the primary personal benefit of dignity, one that cannot be obtained through coercion, pity or guilt.

In plugging into so many of these welfare systems these people have lost the freely conveyed respect of their peers. The media must also share some of the blame by continuing to turn the spotlight on poverty, crime and hopelessness as they find it difficult to write grabbing headlines about the hardworking, well-adjusted middle class that blindly continues to work hard and pay their taxes like good little citizens.

I acknowledge there is a problem in Australia of genuine people requiring special help, however our ‘rewards system’ only generates more of the problem, due to the failure of welfarism as an industry. The politicians’ idea of helping the poor to become helpless is no act of kindness.

At last there are some constructive studies being done on saving the poor from their saviours. Many of those who make their living supposedly servicing the poor are the principal beneficiaries of social programs originally intended to eliminate poverty. At last here are some studies and steps being taken to train youth to be entrepreneurs rather than statistics.

Unfortunately there are few votes in politicians drawing attention to the proven failures of decades of often well-intentioned but fundamentally mistaken government programs, so meanwhile this ever growing snowball of government spending continues. The taxing, spending debate has been scrambled recently with the debate on various taxes, GST, CGT, FBT and the list goes on.

There is only one tax on the people, and that is government spending. I expect no good news for Australia until there is a dramatic reduction in government spending (waste) and it really must start with governments learning to say no to all the pressure groups rattling their begging bowls — and that includes businesspeople demanding export subsidies and government sponsored trade missions.

It’s no good dwelling on examples of government waste as each of you must have your favourite examples. I understand that we send over $100m in foreign aid to Indonesia, a country that produces 15% of the world’s oil as well as being so rich in minerals and agriculture that it is the envy of the world.

I also understand that our government spends vast sums of money beaming ABC Radio and TV programs into the Asian region on the presumptuous theory that we are an advanced culture and we should inflict our culture on other nations. Fortunately for us, Indonesians are not as presumptuous and wasteful so they don’t respond by beaming their radio and TV into Australia.

How did our political leaders lose their way and become so involved in issues that are not the legitimate role of government? It is our fault, we have given them the job without giving them a job specification. We would never sign up a plumber, electrician or shearer without specific guidelines on what we want them to do. Without these guidelines, politicians are running around responding to every well-researched submission from lobby groups large and small.

Our present political and taxing structure is designed to perpetuate this nonsense so nothing will change. Currently it is set up as though someone else is always taxing us and someone else is always spending the money. The system is designed with absolutely no accountability at any level.

Talking about accountability reminds me that someone once likened government to a very small baby. At one end it has an insatiable appetite; at the other end, absolutely no sense of responsibility. We, the voters, are equally to blame as it is us who demand altruism and welfare from the governments. We have forced them to tax more so they can spend more, to the point where there are no logical limits. People are taxed to the point where there are no incentives to earn or produce anything.

Now, having identified the problem and discussed it, what is the solution?

The preferred solution

There is one bold solution that would solve the problem completely. This is for us to take hold of the republic debate and widen its terms of reference, leaving us to study and adopt a democratic political system that has a proven track record elsewhere. I suggest the system that has been in use for many years in Switzerland. It is almost the reverse to our system and is very accountable.

In our system, taxes are collected from a great distance (by Canberra). We end up paying the freight on those taxes, both ways, and appear to receive little back in return. We never come face-to-face with the federal tax gatherers, who have legislated to cast the employers in the role of unpaid tax gatherers. We then have to plunder the pay packets of those who work for us and then send the money over to this bottomless black hole.

In complete contrast, the Swiss system has the local Canton Government collect the taxes from these people. The tax gatherers are clearly identifiable and they live in the same communities as the taxed. If there is a tax hike, you know exactly who to get angry with. It could be like the old biblical days when they occasionally stoned the tax collectors to keep them under control.

Translating the Swiss system to the Australian context a Canton would, in our case, be something like the Goldfields Esperance region. That level of government essentially combines Local and State Government with responsibility for collecting and servicing specific responsibilities.

The Swiss also have a Federal Government which they finance by each of the 14 Cantons sending 10% of the tax collected, thereby keeping them on a strict budget. Their Federal Government has a list of things that it can do and instructions not to step outside those responsibilities.

The President is elected from the 14 leaders of the Cantons and the President only presides for one year, and can’t stand for re-election. The President and the Federal Government get absolutely no advertising budget. It has no ‘great and glorious’ media office churning out press releases and other propaganda.

There is an old story from World War II when a German Tank Commander invaded Switzerland and confronted a Swiss farmer in his paddock. The Commander demanded that the farmer take him to his leader. The farmer scratched his head for a while and took the Commander up to the farmhouse, where he introduced him to his wife.

Could you imagine how pleasurable it would be to watch the TV, listen to the radio news of read the papers in Australia if all the political nonsense was drained out? We could focus on excelling in our respective fields.

I get excited when I think about an Australia with a true sense of purpose. Well, that’s the preferred solution but unfortunately the entrenched vested interests may not even let us examine it as a possibility.

A second solution

A second and most likely solution would be for us to simply continue stumbling into the future with our eyes firmly fixed on survival. There are encouraging signs that Australians are learning to fight back and protect their freedom in a more effective manner.

There are four ways for individuals (or companies, which are only groups of individuals) to achieve real political and economic freedom.

1. Education is a pre-condition for any meaningful increase in freedom and this comes from a study of free market economics and its economic social benefits.
2. Economic self-protection and self-preservation. This is how individuals can protect themselves against inflation and other government policies.
3. Non-violent, peaceful forms of civil disobedience (against government and bureaucrats when they go beyond their legitimate functions).
4. Political action and its use to roll back the power of the various governments and restore the rights of individuals.

The French economist Frederic Bastiat once said: “Government is that fictitious entity by which everybody seeks to live at the expense of everyone else”.

Limiting the power of government or state is a pre-requisite for the survival of Western Civilisation and I urge you to take every opportunity to vote for or support anyone who has a program for curbing the excesses of government.

An optimistic outlook

Now, having said that, why am I such an optimist in respect to both Croesus Mining NL and Australia?

With respect to my company, I am totally confident in our politician’s ability to continue their policy of currency destruction to the stage that it guarantees a high Australian dollar price for gold. In this recession, as was the case in 1873-78 and 1920-32 depressions, gold production rose strongly. In both cases a long period of very profitable gold mining followed. In the 1930’s, for instance, gold production doubled internationally.

Another plus is that our industry now has some very advanced exploration tools that were just not available to earlier generations. That certainly increases our chances of being “lucky”.

Matching these encouraging economic indicators is another equally encouraging political development both in Australia and overseas. The Socialists have been winning for 70 years — not because their program is practical (it’s not), but because their vision has attracted the young. It is said that “without a vision the people perish” and the Socialists certainly gave the young people a vision, however misguided.

History has now written the sorry story of how that vision has failed. A recent poll of student attitudes in Australia showed that 74% supported ideas of libertarian free enterprise and 65% of those young people blamed governments or unions for our economic problems.

From this new generation the mining industry and the pastoral industry needs to exclusively recruit and employ these “black belt libertarians” as I call them; young people skilled in understanding and explaining how well the world has worked during the brief periods of free enterprise, and how well it can work again if we only remove the Socialist shackles of both our major political parties

Meanwhile, I am very proud to be here today as we are all part of the shrinking but surviving productive sector. I’m sure that the future will give us many opportunities to keep on honing and practising our survival skill, always keeping in mind the vision of what a great country like this could be if our political manipulators would only “cut the Krap” and let us get on with our jobs.