McKibbin Doctrine triggers rightful angst

As we know, with the end of the mining and housing booms, Australia’s path to ongoing prosperity faces a simple choice. We can set about repairing the nation’s competitiveness and build more productive businesses to improve our external account. Or, we can continue to live beyond our means running twin deficits in part funded by selling assets to foreigners. That’s pretty much all there is.

We are currently pursuing the latter with our usual gleeful disregard for the future under the rough label of a doctrine endorsed by Professor Warwick McKibbin:

Australia is better placed than most countries to benefit from long-term global trends – such as population ageing, fiscal adjustments and the shift in economic clout from Europe to Asia, Professor McKibbin says.

…”If you have got something like a fixed asset in a country and you are globalising the entire world then location becomes a valuable asset.”

“Real estate on Sydney harbour for example is also from a national point of view attractive. But for foreign investors it’s also very attractive because there’s billions of dollars of wealth being generated in China.

“The middle class is expanding, and they’re going to want to buy things, environmental goods – they’re going to want to buy stuff which we actually have in abundance. But much of it is fixed assets so you can’t change the supply of it, and so therefore it’s value is likely to go up a lot.”

But it will also drive up the real exchange rate, hurting the competitiveness of trade-exposed industries such as tourism – currently enjoying good growth with a lower Aussie dollar – and manufacturing. A stronger dollar means Australian goods and services are more expensive for foreigners while competing foreign goods and services are cheaper for Australians.

Notice how this is a binary choice. You can’t sell the kitchen sink to China without driving up your real exchange rate and diverging from the alternative path which is to repair the real exchange rate and build productive businesses. In short, if you take the McKibbin Doctrine path then you will have to keep selling those assets as your productive tradable businesses continue to disappear.

But it comes with strings attached, quite literally. And they are starting to throw up considerable angst, from Laura Tingle:

This week we saw Nick Xenophon and Bob Katter both expressing their concern the possibility that Ausgrid would be sold to the Chinese.

But in a way, their concerns are only a delayed extension of similar, but unresolved political concerns that emerged late last year when the same State Grid was bidding for another NSW electricity asset, TransGrid.

It was all getting just a little hairy when, at the last minute, the issue was resolved by a much higher bid for the asset by a Canadian/middle eastern/ Australian bid.

Just before this resolution emerged, however, there were very different signals emerging about the bid. The word from intelligence sources was that there was “no way that’s going to happen”, even as the word ricocheted around financial markets that FIRB was not going to recommend against the deal.

…Extraordinarily, no-one seems to be exactly sure who owns the Australian power network.

Yet even eight months after the issue erupted because of the TransGrid bid, it seems we don’t have the facility or language to even discuss essential questions like whether the Chinese – whose economic favour we always wish to win – represent a strategic risk if they can flick a switch and turn off our power systems.

The question is not whether they will throw the switch, if they did you can always nationalise the assets, though that is very obviously a context of war. The question is what the implicit and explicit threat of such does to your policy choices beforehand. Peter Jennings explores those issues, also at the AFR:

China’s aggressive behaviour in the South China Sea shows that Beijing operates according to its own strategic priorities. In rejecting The Hague’s Permanent Court of Arbitration ruling against Chinese island building, Beijing flouts the “rules-based global order” that is so central to Australian security.

The same one party apparatus directing Chinese behaviour in the South China Sea is the owner of Stategrid and is the ultimate power in Hong Kong. That should give pause to Australian policy makers wanting to privatise NSW’s electricity distribution system.

Ausgrid provides power to 1.6 million households and businesses in Sydney, the Central Coast and the Hunter regions, this includes critical defence industries and facilities and state and federal government offices.

These facilities are potentially vulnerable to power disruption. While that risk might seem acceptable in current strategic circumstances, imagine a situation where a rapidly deteriorating strategic situation in the Asia-Pacific creates significantly more tension.

Quite right, but I’m afraid these issues run much deeper still. The McKibbin Doctrine is also selling smaller fixed assets to Chinese interests at a stunning rate. Mines and farm land are being built into vertically integrated supply chains that import labour and offer no economic benefit at all. Even houses are now open season with the Chinese bid essential to holding aloft the property prices that fundamentally drive the McKibbin Doctrine as a growth model.

We are literally selling kitchen sink and if push comes to shove in a Great Power conflict within the region there is absolutely no guarantee that the polity will support Australian engagement with traditional allies given its entire wealth will be destroyed by doing so.

Peter Jennings asks that we begin at:

…A necessary start point must be to accept that there are real and pressing security issues that a serious country should address and that this is best done through a predictable and open assessment process.

That would be nice. But our pollies have shown no spine for the tough choices and short term pain for longer term national interest gain. They put the party and next election before all.

I have no issue with selling assets to foreign interests in principle. Assets like farm land have been horribly mismanaged by Australians so give others a go at improving productivity, I say. If the nation chose to sell itself as an act of strategic integration with Asia then I could even go along with that, though I would advise that the Chinese one party state does not sit comfortably with democratic values, so we’d perhaps be better off with ASEAN interests.

But drifting lazily into a fatal divergence between economic and strategic policy to support a few real estate agents and willfully neglectful pollies? That’s pathetic.

Houses and Holes
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Comments

  1. ” one party state does not sit comfortably with democratic values”. That, is what we are really selling our values. Maybe it’s a natural progression. Who knows…..

    • OT

      ‘Alarm bells should sound’

      The FMA recently had to go to the Court of Appeal to enforce deregistration from the FSPR on Vivier. The Court of Appeal judgment notes that if a financial service provider like Vivier is not providing financial services in or from NZ, nor generating any associated financial activity in NZ, and can’t demonstrate any intention of doing so, “alarm bells should sound.”

      That’s an attitude we like.

      With the Panama Papers having shone a spotlight on NZ foreign trusts, we’ve recently had an inquiry into their very limited disclosure rules. And just last week, the Government completed its review of NZ’s FSPR.

      In the FSPR review there’s one question that should be seriously considered. The FSPR was established in part to help NZ meet its Financial Action Task Force (FATF) obligations before the AML/CFT Act took effect in 2013. FATF is an inter-governmental body established by the Group of Seven that sets international policies and standards on anti-money laundering and combating terrorist financing.

      So now the AML/CFT Act is in place, and most legitimate financial service providers must comply with some form of licensing obligation, does NZ even need a FSPR?

      Here’s hoping some good decisions come out of both reviews.

      Further reading: this is the fourth article in a series about New Zealand’s role in the offshore finance world. Below are headlines from, and links to, the other articles in the series:

      New Zealand: the World’s Tiniest Stock Exchange, ‘a Big Ponzi Scheme’, and Other Crazy Tales From John Key’s Financial Services Hub

      New Zealand: Icon Sachs (Whatever That is), Fennas Finance, a Bank Account at an ANZ Napier Branch, a Conspiracy Theorist And a Ponzi Scheme

      New Zealand: Kea Street Cred and US$1Bn Promise Lures Kiwi to Front Very Peculiar Financial Service Providers

      http://www.nakedcapitalism.com/2016/07/dodgy-new-zealand-companies-the-global-footprint-with-map.html

      Disheveled Marsupial… Glacial comes to mind…

  2. The question is not whether they will throw the switch, if they did you can always nationalise the assets, though that is very obviously a context of war. The question is what the implicit and explicit threat of such does to your policy choices beforehand.

    The most obvious ‘risk’ is that the owners simply not invest in any expansion of an asset and simply run it into the ground, extracting every morsel of here and now value out of it they can. It is not simply a risk with Chinese asset buyers it is a risk with all asset buyers.

    Then at the point where the asset is run down the owners are in a position of extracting more concessions from governments locally by flagging a need for more ‘investment’ (of the very type they were initially expected to bring in) – presumably against a backdrop of the local council, state government and probably federal government being ever more desperate to provide jobs for locals. Amongst the concessions they would be likely to access would be the use of foreign labour (cheaper than the local stuff).

    It doesnt really matter whether it is agriculture (particularly with water rights) or mining, or port facilities, or power grids (all sectors where we have existing foreign owners of assets – and not necessarily Chinese – running them into the ground, or letting them wither).

    – The agriculture sector is prone to ‘investors’ not treating land and water appropriately,

    – Mining company owners traditionally go hell for leather on extracting in the here and now (and if one is concerned about Chinese in particular one could take a look at the gold and copper complex they agreed with Pakistan many years ago on the basis they would hand it back to the Pakistanis after ten years where the Pakis, thought they would get some sort of asset and where the Chinese assumed they had the right to milk it dry)

    – We already have (non-Chinese) companies running parts of power grids purely for the sake of depreciation of hitherto gold plated assets.

    And if this is our fear (that any foreigners would simply buy assets and run them into the ground) then surely wouldn’t we be asking if that was in any way logical or not – and then bumping into the possibility that those foreign buyers we are concerned about are in fact behaving in exactly the same way as economic policy in Australia has been managed over a decade or more? Like, haven’t we stopped investing in our productive capacity somewhere along the line (backed by the stronger for longer approach to the AUD – see manufacturing – but cemented into position by house prices and the banks?).

    Is it not ourselves that we fear about the Chinese? Somewhere along the line we might feel ourselves to be somewhat spineless as a nation about identifying to another nation that X are our concerns and Y is the response we would like to see from potential purchasers of assets we have to offer? (and if that nation were looking at our miniscule gonads approach to identifying foreign buyers of Australian housing and thinking that would be the benchmark in how this particular nation treats its sovereign interests as a society when it comes to policing them?). Every time I read about a potential Chinese buyer of a productive asset and the Australian response, I find myself thinking about those mid 1980s Australian cricket sides and wondering if there will be a collapse just around the corner (maybe this week we can be Darling and Wood running each other out, or perhaps the catching brilliance of Greg Ritchie, perhaps we could get ourselves 6-60 chasing 150)

    The whole approach to looking at foreign investment in Australia needs to move from simply looking at any contributing to GDP (that discredited measure) in the here and now, and looking (measurably) at the ongoing contribution an investment proposal is going to make to the long term national economic interest. We don’t do that, why would we expect other nations to do it for us? If they can buy and run into the ground, to what extent is that just the business model of the era?

    There is definitely a strategic issue, however, with the Chinese which Australia lacks the preparedness to state openly and measures its activities against.

    I was actually at Defence briefing a few years ago in Canberra where a ranking officer openly stated that ‘Australia has an economic imperative of removing redundancy, and a strategic imperative of building in capacity which is economically redundant’ – Truer words I have not heard said in the Defence sphere. If our Defence types are stating that then why would we not expect that Chinese types could identify the same phenomena and work with it to run the economic imperative while removing the capacity of a nation not just to defend itself (through removing investment in facilities or capacity to manufacture/service anything) but in many respects to determine its own economic course of action, or to face the sort of economic decisionmaking dilemma our leaders have shown themselves more than prepared to put in short steps on addressing housing/superannuation/tax concessions…….once you’ve got ‘it’ there is no looking back without considerable ramification (which everyone wants to avoid) – so for the Chinese (or any other investor) it is simply a matter of getting ‘it’ and then negotiating the aftermath later from a position of relative strength.

    • So who is Border, and where are the Boons, Jones’, Taylor’s and Waughs to carry on what AB begins?

    • ‘and then bumping into the possibility that those foreign buyers we are concerned about are in fact behaving in exactly the same way as economic policy in Australia has been managed over a decade or more? Like, haven’t we stopped investing in our productive capacity somewhere along the line (backed by the stronger for longer approach to the AUD – see manufacturing – but cemented into position by house prices and the banks?)’

      Precisely Gunna! Unfortunately if it was just one decader it might be able to be fixed. The fact is this attitude has been running for six decades. We, long ago, surrendered the soul of our country in favour of self-indulgence.
      The answers lie back in time.

  3. surflessMEMBER

    what is concerning is the lack of public transparency of the deals to companies based in Any country where there is no transparency and no separation between state and ‘capital’ , no human rights and aggressive foreign policy. On principle of ethics and morality these deals should not accord.

  4. “..Assets like farm land have been horribly mismanaged by Australians so give others a go at improving productivity, I say..”

    And if they prove to be even worse what happens?

    Do you impose regulations on what they are doing wrong?

    Do you seize their holdings?

    Do you compensate or face ISDS clauses?

    Or do we do nothing because the foreign owners threaten us in other ways such as blocking access to their markets.

    Hmm – isnt that the reason we are agreeing to transfer title in our assets. So we can a few more chops to China, jumbucks to Japan…..etc.

    Keep in mind that, according to you, we have been unable to manage the Australian ownership of land productively. What hope would we have ensuring that foreign interests farm for the future and not just the short term?

    Economic theory divorced from political reality is what has got us into this mess.

    If we want to import farming skills (from all those foreign experts in the Australian landscape and climate) we should import the people who have those skills – not sell off the assets.

      • Nah, that is one area where we have a real competitive advantage. The sooner our tertiary educators start offering degrees “Rent seeking for fun and profit” the sooner we will fill all those skyboxes in #Hellbourne.

    • desmodromicMEMBER

      Pfh007, we have chosen not to care. Approving the building of water assets on Cubbie Station in the 1990s was poor policy because it steals from the future and any landholder/citizen downstream. Selling Cubbie to the Chinese or anyone else is just dumb, it should have been demolished. Cubbie was sold for $380M and the NSW government is about to spend $500M to build a pipeline to Broken Hill because the Menindee Lakes are no longer a reliable water storage. The relationship between Cubbie and Menindee Lakes is not 1:1 but linked by complex ecological processes that are highly non-linear. The precise pathway that got us to where we are today wasn’t knowable but many knew destination.

      • Not sure how many exercised a choice or had any real appreciation of the implications.

        Even most of the ticket clippers etc involved in the sell off fully believe the “…in theory the asset will go to the most productive and rational highest bidder….” line that HnH referred to above when noting its limitations.

        Lazy Aussies clinging to vaguely remembered bits of post 70s economic gibbierish they picked up from school, uni or reading our national advertising supplements AKA newspapers.

      • Assets don’t belong to public, liabilities do, good God man what have been reading now Winston?

      • Big Bro has a pithy style

        “If Bank created money – Public created money = zero = happiness”

      • Big bro needs to work on his maths

        “Public created money = zero = happiness
        Bank created money > zero = happiness”

      • As a mate of mine who was downstream from Cubbie remarked ‘There were a few people at Cubbie were a bit lucky they didn’t end up UNDER a few of the banks they were building.

  5. There once was a country called Australia
    Proud of its God-given large genitalia
    But it sold the farm to one and all
    Pissing its wealth against the wall
    Oh what a dumb and flaccid big failure

  6. So say XYZ power company is foreign owned. We then pay electricity bills by selling other assets. The more of us there are the more assets we have to sell.

    This is going to turn out great.

    • Unfortunately there is nothing can be done about this as long as we pursue the BS economics of the modern world.
      The FFFFEFR has to go
      Totally free and open capital markets have to go
      We must be able to raise interest rates so that we induce saving and we must be able to do this without sending the FFFFFEFR to uncompetitive levels.

      We are at exactly the situation so well predicted by John Stone and many others at the time of the Float.
      Note that the Float was done to allow the distortions that had been set in place by that stage to continue. We were running heavy CAD’s and the Float and open capital markets were enacted precisely to allow that situation to continue….until it can’t…one day!

      • You know what Fraser would say “got it wrong way round flawse, problem is too much savings, need consumption” ????

      • But then Mal also said that life wasn’t meant to be easy.

        oh are you talking about a different Fraser?

        Hmmm – I think that other Fraser would also say that – in a non-political way :0

  7. fitzroyMEMBER

    Serfdom is now an aspiration. The lords of the manor appear to be totalitarian. The laws of the land do not apply to the lords. The serfs pay all the tax, the lords pay very little. The children of the serfs have no future but to be serfs. The lords have a rosy future unless there is a popular uprising.

    The “professor” should go back to primary school. If he ever left.

    • Beautifully put. “serfdom as aspiration”.

      Maybe that’s what the LNP mean when they refer to working class as aspirational vote.

  8. If the farms are workable yet unproductive then prod the land holder with a stick. One of the goals of the Land Value Tax is to encourage the productive use of land, not just in the city but also in the regional areas. Has this aspect of the idea ever been investigated or modelled by its proponents?

    • “If the farms are workable yet unproductive then prod the land holder with a stick”

      Glad you put ‘if’ in front of that foots. As per my post elsewhere it is BS – nothing but BS propagated by people who don’t have a clue what they are talking about.

      Just one other thing – farmers do pay Land Tax one form and another.

      • Flawse,

        I spend a lot of time in rural Victoria.
        And while our agri-science and methods are miles ahead in lots of regards, there is also a lot of waste occurring on many workable lots.
        Anyone who believes that the country folk are without sin is as foolish as those who think that they are all useless bumpkins.

        In regard to the land value tax, the query was about the modelling of it as it proposed in things like the Henry Tax Review, or the full Georgist take where replaces taxes on income and capital and the many others they list.
        For while its benefits seem to be clear in an urban environment, and the fringe agricultural land that is only held for land banking reasons, I’ve never come across anything in regard to how it might affect agriculturists and smaller farmers.

      • foots

        Every industry has its distribution of good average and bad. In my experience across a few industries on the whole Ag is POSSIBLY less guilty of mis-mangement than most. It has had to be because of the stringent economic conditions applied to it over 60 years.
        In any case I just dislike (in an extreme way!) the attitude of people who sit around on their arse in the city and their greatest skill is to drive a desk then blanketly criticise (P.S. I know that was not your intention) people who run as complex a business as a farm of any size.

  9. Just on the power aspect, with the improving economics of going off grid and the resulting suggestions that connection being made essentially compulsory, i wonder how that will sit with australians?
    Know your new overlords.

    • Mining BoganMEMBER

      I’d suggest Australians like overlords. History certainly shows it. We like to think we’re in charge but realistically we’re too lazy to think for ourselves. Maybe too greedy. One of those anyway. Probably both.

      Life’s easier when you don’t have to make the hard decisions. Those nice overlords can do it for us.

      • Sounds mean, but most Aussies just seem to want someone to blame, someone to point the finger at when the SHTF. Give Aussies this go to excuse and they’re happy to surrender control to everything and I mean everything. Maybe it’s as simple as nobody wants to be the person that others are pointing at so we all shirk our responsibilities as Aussie citizens and gladly off-shore that function to the first outsider that comes along. History indicates we’re very willing servants but terrible masters of our own destiny.

  10. Re: Australians could always re-nationalize our Power Grid assets and retake control.
    If you’re talking about the Power grid of yesteryear than this is a fairly easy and straight forward task. Traditionally if you controlled the control room than you controlled the grid. OK fast forward say 10 to 15 years and the situation is likely to be VERY VERY different.
    There are a few changes that could have a huge impact in the nature of Grid control.
    1) Grid security (concerns for terrorism is leading to grid designs where passwords (enable codes) are required to activate / deactivate sections of the grid.
    These enable codes need to be closely integrated with the actual switch so that by-passing the control path is not an easy undertaking (I cant go into the details). This is all part of an anti Terrorism Grid hardening undertaking, (basically what if a terrorist actually broke into the grid control room or hacked into the control cables)
    2) ToT (Time of Use) metering with automated Meter read and control functions.
    This is adding the ability to switch off / on power at each and every residence / business at the meter.
    There’s a great case to be made for this function and it’s slowly being rolled out nation wide, but there are some possible downsides.
    If you look at it from the perspective of a Government wishing to retake control of the grid (nationalize the asset) than it is entirely possible that the Owner of the asset could refuse to hand over the encryption keys that ultimately enable the meters to be read and controlled. It’s also very likely (in a hostile salutation) that the foreign owner would intentionally build a parallel control path enabling them to exercise Grid control over the Internet or via satellite. Remember they have the control codes you dont.
    You could run around bypassing all the meters/control point in the system but is that really how you want to deploy your qualified Electrical experts during a time of war? And how long would it take? and at what risk to your Grid stability (grid connect/disconnect control points are there for a reason)?
    There are a lot of unanswered questions and lots of very good reasons to keep the transmission grid itself as a state owned monopoly, but that’s just my opinion

    • Interesting & good points.

      Also in a time of tension with whatever country owns an asset like the power grind we would likely move thou take control before things descended into actual fighting, however this would then provide the pretext of the foreign nation invading to protect it’s interests. Seems unlikely now but if the Donald withdraws the US protection shield it suddenly becomes more likely. And as for China their long hold assertion that they are not aggresive, have no ambitions to take control of other countries land or resonances has been well and truly shattered by their actions in the South China Sea.

      • Not sure of your background but if you have ever worked on network security for any large company Intranet you’ll have probably come across a Virus/worm that replicated itself faster than you could eliminate it. The final solution is often to turn everything off and clean each computer before you reconnect it to the network. The problem is that you don’t really know where the virus/worm is hiding or what the control paths are.
        Same logic can be applied to control of the electricity grid when smart switches are installed all over the place, you just don’t know where someone could have buried a control access point.
        Dont get me wrong there are lots of failsafe network design / control methods used in the construction of an electricity grid that prevent what I’m saying from ever happening but this all assumes that the people actually designing and implementing these control structures dont have an agenda to implement a hidden control structure. IF anyone intentionally builds this Hidden control path intro the systems than you’re back to the Network worm problem where every node needs to be simultaneously powered down and cleaned.
        I’m not saying this is happening, just pointing it out as a risk.

    • I posted yesterday about ARM being sold for $32Bn and the possibility that it is in fact an intermediatary step to selling to China. The Smart Grids being installed will have vast numbers of ARM chips from top to bottom.

      It is possible (Intel already does this) to put a completely independent “supervisory” computer on about 1% of the chip area. This can be activated by a backdoor and do lots of mischief.

      It might be a good idea to insist on all vital infrastructure to use open source chips (like RISC-V). The politicians should really be getting better advice on this I think.

      • You’re absolutely correct but I can’t discuss this issue on an open forum.
        BTW Open source is not the solution because it is far to easy to hide control structures within open source code. In the end analysis you get back to the age old problem of not wishing to educate the hacker by alerting people reviewing code to watch out for XXX. Better strategy is to keep XXX unknown to the hacker, or at least temporarily unknown, they’ll figure it out eventually but hopefully by then you’ll have inserted the YYY gotcha gate….and so teh game continues.

      • As an example of Open Source code security problems.
        Differential Power Analysis was a well understood hacking technique as early as the 1970’s/80’s (you’ll need to take my word for that) but you wont find any reference to this technique in open literature before about year 2000. Actual hacks that used DPA didn’t appear until about 2005-2010 and code that had been snuck into Open source to specifically enabled DPA attacks came even later. Unless of course you include the code and protocol attacks that were snuck in before 2000 (before anyone really knew about the method hmmmm)

      • RISC-V is open source hardware – so at least you can see the extra processors.
        How will you “see” these processor cores? have you ever personally reviewed a Chip to be sure there is nothing else added? Something like an 8051 or PIC core creates a great backdoor and takes less than 10K gates to implement, these modern chips have 100M gates, a really stripped down RISK core could be probably done in 1K gates. So your task is to find this 1K gates in 100,000K gates, sure you’ll be able to find it but will you be able to identify how it is controlled and for what it is used assuming your adversary is intent on hiding the control path.
        As I said I can’t really go into this, suffice to say it ain’t a simple problem.

      • BTW If anyone is Really interested in this Electricity Grid security stuff, especially wrt consumer end point management and distributed generation (Solar /Wind etc) than please leave a message.

    • Ronin8317MEMBER

      You are thinking the China wants to control Australia thus leave the network intact. In the event of nationalization or in times of war, they can overload the network and blow up all the critical equipment. Without electricity, how long before Australia descend into cannibalism? A week?

      • Ah NO, my point was it’s naive of us to think we can sell off critical infrastructure and just take it back whenever it suits us.
        IF China is a possible adversary THAN we must treat it as such and deny them direct access to nationally critical monopoly infrastructure.
        My only point about China developing and maintaining backdoor control of our Electricity Grid rather than just nuking the network before they leave (assuming nationalization or something similar) is that this gives them the ability to turn off, or continually disrupt the network at the time of their choosing.
        I guarantee you they wont choose a time that’s convenient to us, leaving Australia to divert a lot of critical engineering resources to understand/fix the problem at the least opportune moment.
        And that’s just really bad strategy.

  11. Well Nick Xenophon, if you’re against selling off the family silver to foreign investors, then tell us how Oz is going to finance its hollowed out population Ponzi-RE bubble “economy” that you reckon is the best? Come on, give us an example of your massive brain at work, G E N I U S.

    • Yes Jacques – crtitical point. Everyone wants not to sell farms but still wants to go on with our self-indulgent over-consumptive lifestyle! These p…ks should be made to face the whole truth of what they have done!

  12. you are globalising the entire world…middle class is expanding, and they’re going to want to buy things..but much of it is fixed assets so you can’t change the supply of it, and so therefore it’s value is likely to go up a lot.”

    Every conclusion as to what makes rational economic and political and business sense is predicated on those particular assumptions, taken as gospel, as the natural order of things, and not part of some ideologically driven project to denude nation states of their sovereignty, manipulated by and handed over to the private sector, to be softly monitored by supranational neoliberal trade and finance organisations.

    If the nation chose to sell itself as an act of strategic integration with Asia then I could even go along with that

    What the actual fuck ? I hope that statement was intended ironically. Because if you’re serious, then for the benefit of your readers you should expand on what terms it is acceptable for a sovereign democratic country to strategically integrate itself with a One Party communist dictatorship via a sale of its significant, strategic assets. Our natural strategic allies are the UK, US, Canada, France, Canada, New Zealand. It is foolish to think those ASEAN countries are going to exert any power against China.

    McKibbin, like most economists and business leaders playing in the shallow end of the pool, has all the foresight and courage of a Neville Chamberlain

    Resist this nonsense while you still can.

  13. The only person of note in the federal circus aka parliament, who seems to have a clue and is not a clown (now that his coal fantasies are hopefully dead and buried) is Katter. Hanson goes by gut feeling but is too dumb, she should talk to him to get a clue, although sometimes I play with the idea she’s actually an LNP agent provocateur, who’s purpose is the old divide and rule. But then OTH, her lack of understanding makes her useful to the LNP.

  14. “Assets like farm land have been horribly mismanaged by Australians so give others a go at improving productivity,”
    Don’t want to take away from the good thrust of the article but……Sorry! That is simply a BS statement too often propagated by people who have no knowledge whatsoever of agricultural industries or the people who work in them.
    Further Ag has suffered from an exchange rate that has been over-valued by, on average, about 30% for the last 60 years. This is an effective confiscation of 30% of an Ag enterprise’s GROSS income. The fact that it has managed to continue to even exist, let alone develop the way it has, is a tribute to the skill and dedication of those who work in it.

    • Hay flawse…

      OK so Keynes and Kaldor debunked the loanable funds theory decades ago, then post Keynesians demonstrated it – so why – did – the neoclassicals suffer such an epic case of path dependency when all the evidence was to the contrary….

      • Skippy
        I suspect it is simply a result of the con-trick of the US setting itself up as the world reserve currency. This gave them leeway to practise all sorts of shenanigans without ever seeming to absorb the consequences. The lunacy of this is mind-boggling.
        I suspect, to find the original ‘seed’ of all this, you have to go back a bit further to the adoption of GDP as ‘the’ measure of economic progress despite the furious debate that surrounded the original concept. It was blindly and totally accepted.
        Unfortunately further the whole world of economic academia swallowed the crap the US was peddling and it became accepted across, especially, the anglo-saxon world. Note this process hasn’t stopped with the extreme extension of the same doctrine embodied in MMT – whatever the Americans peddle we adopt – whether it applies to us or not.

      • So we agree that Bretton Woods was basterdized by the US neo Keynesian, which most view as tribute in order to fund the military deemed necessary to combat ev’bal Communism and the projection of force wrt trade routes [worlds police].

        Also wrt GDP, the author himself decried its broad sweeping use, when its original intent was just another tool to add to the mix, tho not make it the all encompassing universal law like gravity which must be obeyed.

        You lose me at “doctrine embodied in MMT” as MMT is not a doctrine but a descriptive, who its used is a matter of doctrine imo…. see aforementioned points.

        Disheveled Marsupial…. imo flawse… nothing was stolen…. it was bought…

      • Skippy
        The problem with MMT is this…Sectoral analysis is not ‘Modern’
        The only things that are ‘Modern’ is crap like
        ‘Imports are good’ because they add to an economy
        Exports are bad’ because they deduct from an economy
        CAD’s don’t matter and have no effect on the Exchange rate (well in a world where you think you van print unlimited money at no cost there are short term issues that over-ride thew basic long term effects…until they can’t!
        We can all print money forever
        etc etc etc
        This all stems from a ‘Reserve Currency forever’ concept. i.e. the world will forever accept bits of paper in exchange for goods and demand no retrun – forever. The UST’s will NEVER be surrendered!!!! They will never be used to buy US assets – a matter already acknowledged as untru except by those in power and MMT advocates.
        Now please note – what I rage against is the idiocy of applying fixed universal solutions to econom,ies that are very different in structure and stage. Of course applying the rules the US holds for itself, as the reserve currency, to every other economy is foremost amongst my dummy spits. However take Japan..or maybe even China – in their case one could claim imports are good and more imports should have been done a long time ago!!!
        Also dozey crap like we are entirely different to Greece because we can print our own currency. yes we can and we finance it by selling our assets to foreigners – like the Chinese who have lots of foreign currency or the US who just print the damned stuff. We pretend there is no cost to printing our currency!
        I just can’t understand the total either inability to think or refusal to think within modern economic academia. Yet these clowns, and their minions, are redesigning the world economically and socially???????? Strewth!

      • “print unlimited money at no cost”

        You lost me there flawse, MMT does not make any such claims, so I would behoove you not to make groundless references, it fogs the discussion.

        “‘Imports are good’ because they add to an economy”

        I think you will find the basis for that macro generalization* is firstly from a post industrial developed economy perspective where up lift consumed the cheap easy stuff and in terms of AGW and ROI on renaming resources – the export of ‘national savings’ is not in ones best interests long term e.g. water scarcity is a known known in the near future i.e. there is a reason water derivatives were set up imo.

        “Exports are bad’ because they deduct from an economy”

        Again this is a macro perspective and not representative of a more nuanced implication e.g. as you suggest sectoral is not a case of net export or import i.e. bad economics to be too beholden to either or nor mercantile. Good trade is about taking little bites out of each other and not consuming the whole carcass.

        Now your issues wrt UST is applicable to all autonomous momentary sovereigns where the vagaries have more to do with ideological – political ramifications and not operational realities.

        You”ll pardon me but your emotive statements seem to stem from an ideological stance, which on one hand is hard currency based and on the other leaning more to the understanding that we don’t have to dig currency out of the ground any more…. but…. want to ascribe certain qualities from the previous case to currant one.

        Disheveled Marsupial… were not living in antiquity anymore flawse…. why should we drag that millstone around our necks… especially when confronted with the challenges we face…

  15. Most importantly – any angst is too bloody late!!! ^) bloody years too bloody late.

    It’s alright for some to get self-righteous about it now! Where have they all been the last 60 bloody years of this BS????????????

    • Yep, something should have been done years ago, but we don’t possess time machines.
      Yelling at the past won’t accomplish much.

      • No foots – but the problem, is the same thoughtless myopic morons are going to be designing the future. They’re coming out now pretending that they were always onto this just to ensure their place in teh future. Their brains will be no more in gear in the future than they have been in the past!!!

    • “… the problem, is the same thoughtless myopic morons are going to be designing the future. They’re coming out now pretending that they were always onto this just to ensure their place in teh future. Their brains will be no more in gear in the future than they have been in the past!!!”

      Indeed, fight the good fight but there’s no point giving yourself an aneurysm over it.

      • 🙂
        Mate when you’ve been at this argument for over 50 waking economic years…the stupidity is a bit inclined to get to you!

  16. If there is one thing that I really dont get about this whole direction it has to be the acceptance of the positive feedback effect that Selling local assets has on the Exchange rate.

    When we sell “the farm” it looks just like any other export and has the effect of pumping up the exchange rate, same goes for selling Government IOU’s (bonds) to foreign entities, both pump up the exchange rate.
    OK if this is agreed, than what happens when the SHTF and the RBA is forced to print?
    Sure the RBA can print to it’s heart’s content and flood the local market with cash BUT before this cash can be translated into Foreign assets (Imports) someone must provide the hard currency ($/yen..) that the seller of the goods finds acceptable. Logically the RBA sells more IOU’s to balance this trade And logically the exchange rate goes up when they do this.
    You dont need an Economics degree to see that this cant go on forever some maximum will be reached and the whole system will need to reset. In control systems theory we call this type of system a Hysteretic control…positive feedback drives it toward some upper limit and then resets rinse and repeat for system control. Logically this type of control ONLY works IF the hysteretic / reset function happens at a rate about 10 times higher than the highest Frequency response/control rate required by the network under control. It’s a worrying thought when you realize it took us over 20 years to get to where we are today (20*10 years to recover) #$%^-me.

  17. SupernovaMEMBER

    Simply astounded sections of our Auz community believe most farmers intentionally allow their farm and main productive asset to decline. I can assure those people they don’t…not willingly anyway! Farmers, more than other businesses have increasingly become serfs to larger corporates as they have continually squeezed them since around the time the gold standard was dumped in 1971, and especially since Glass Steagall was also dumped in 1999. Farmers like many other PhD’s, professors and 170 IQ’s have been fed a diet of Prof. McKibbin’s global debt based model of development trollop for too long. Deregulation Professor IS A FAILURE because it has not always covered a farmers costs for too long, if you don;t make adequate profit you cannot maintain your land in a sustainable way.
    Parity Pricing covered a dairy farmers minimum cost/overheads and MAINTAINED his land until it was abandoned to a global competition policy. Australia needs parity pricing for agriculture if we are to maintain our agricultural lands. We need to reintroduce further solutions of minimum pricing that MAINTAIN FARMERS as well as their land. We also need to maintain as many assets in Australia’s interests, irrespective of whether we are allied to the US or China….its what responsible independent long-term thinking countries like China do. Yes we are past Prof. McKibbin and his theoretical models of development that sound impressive but are simply slowly destroying this country. Yes we need to protect our farmers but we also need to protect our country because like a farmer in the Professors global world we are simply too small to thrive.

    • Supernova…

      I think you will find the gold standard has nothing to do with it, as the “Green Revolution” which was a corporatist agenda to increase both consumer base and market share shaped Ag and animal husbandry more than currency.

  18. I firmly believe that natural monopolies, which, by law are prevented from competition and are generally speaking, physical networks or hubs with broad public utility, should be publicly owned.

    Just the network and its essential hubs. I don’t give a crap about supply. Go for your life. Privatise that till the cows come home. There’s actually healthy competition in that space. There’ll never be competition in the distribution space.

    Whether it’s poles and wires; pipes and pumps; tracks and stations; roads and lights; airports and traffic control they are all protected network monopolies with broad public utility.

  19. WRT increased Farmland productivity we need to begin to ponder the effect this has on the worlds Nitrogen Cycle.
    http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1247398/

    Many people are quick to point to Diesel cars polluting the Environment with NO2 but conveniently forget that this represents about 5% of the additional NO2 released into the atmosphere, about 60% of the remaining 95% comes from farm/household fertilizer use. The residual 35% comes from a variety of industrial Transport and Chemical sources.
    Think about this next time you’re shocked by the actions of VW to fake their NO2 pollution results, but more importantly think about it when you suggest that “better” farming methods can result in increased yields and Productivity gains.

    • CB
      The Nitrogen comes from the air in the first place in the Haber process. Note that a hell of a lot of energy is expended to get it which is a bit of an issue!.

  20. My understanding is that Energy Australia is owned by Hong Kong interests. So the ultimate owner has to be….you guessed it. My understanding also is that Origin Energy is owned by Australian big business, and so Australians have a chance to be part “owners” of this enterprise through the vagaries of the share market. So those of you here who are billed by the Hong Kong owned entity…what’s your next move?