What the Real Public Interest Is

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After a flurry of arguments and debating in the last few days, we’re turning today’s Daily Reckoning over to a few learned readers. No, we haven’t run out of ideas or salient, socialist-destroying arguments to make. But there are deadlines to make in the publication of our trio of investment newsletters. We’ll be back tomorrow on the great super triple lindy back flip dive.

In response to yesterday’s letter, Argument from Authority:

Morning guys. As you can see, I am reading your latest at 1.53 am , this is one of the most brilliant essays on the complete ignorant upstuff of the rudderless socialist government ever. Well done. About 25 years ago my doctor, a Hong Kong born Chinese true Aussie told me. “You whities will become the poor white trash of Asia.” WERE DOOMED!! DOOMED!!

Hmmn. Maybe not try to read the DR after mid-night?

More yesterday’s piece:

Dear Dan,

I am sorry, but I can’t let your recent Daily Reckoning commentary pass without some reply. Your attempted rebuttal of the letter concerning the Resource Super Profits tax was weak and misleading. After saying you’d attack the argument on its merits and then proceeding to regurgitate your ravings against economists in general for a couple of tedious pages. While amusing the first few times and no doubt justified, they tend to get monotonous and repetitious and did nothing for your argument here. I have no idea which school of thought the economists who wrote the letter are from and, frankly, don’t care, as it is their claims which are under question not their personal beliefs. I am no fan of current economic thinking and am a forester not an economist. Thus, perhaps you will be happier to listen to my interpretation of the tax and its implications.

When you finally did get back to the subject, your arguments are weakened by selectively quotations and misguided logic. You appear to be suggesting that miners should pay nothing to the public for the use of non-renewable resources. You also suggest that if miners were to pay for the use of these resources then everyone should pay because, apart from a few industries such as agriculture and forestry, we are all basically using up non-renewable resources derived from somewhere or another.

The first point would result in us effectively having no rights over our countries own resources. The miner could simply take the resource sell it and only be liable for normal company tax (that it wasn’t able to avoid paying through other means). While some might benefit from increased employment etc. while the resource is being extracted, once it is gone there would be nothing. In this way miners are different from other industries which may be able to access non-renewable resources from other geographic locations without having to physically relocate to another region or country. Thus, mines tend to be more disruptive socially, than other industries unless there is some way of investing some of the profits for future benefit of the population. This is exactly what some Scandinavian countries and now oil rich countries are doing with oil revenues – investing them into renewable resources and technologies which will maintain employment and wealth long after the oil has gone.

The second point – that it is unfair to single out miners is perfectly true. Furthermore, such a tax would ensure that all industries depending on non-renewable resources sourced from Australia or other countries with a similar system would have to pay their fair share for the use. This is because the miners will simply pass whatever portion of the tax the market can bare to downstream users of those resources. The key difference between miners and other industries is that, for many, the largest cost is not the raw materials used but a perfectly renewable resource – labour.

Finally, you completely miss (or ignore) the point that this tax will actually benefit miners during downturns in the economy because it is a tax on profits from selling resources not the resources themselves. Currently miners are taxed for digging up resources regardless of whether they are making a profit or not. In this way, the tax payer will be assisting miners during downturns when they might otherwise close down and will benefit from them during upturns thus helping cool a potentially overheating economy. This is what the writers mean by a “more efficient tax” not that it is easier for the Government to collect.

So I think the tax is generally a worthy idea. It is certainly worth a more thorough rebuttal than your half baked attempt. The more important argument is “How can we stop the Government by wasting any profits on mindless schemes such as first home buyer grants, baby bonuses, subsidies for inefficient industries and new freeways”.

Cheers,

Barrie

And finally, in response to our claim last week that there is no such thing as “the public interest“:

Dear Dan,

What has rattled your cage? I think you are being a bit fundamentalist today. No public interest?? Try telling that to BHP, Rio , the Banks, and property owners. The public interest is the law, the people who maintain it, the system of law enforcement, property rights, the parliament, free speech, infrastructure, hospitals – in short, the Commonwealth. And as its name implies, it does not exist in a vacuum but takes vast amounts of money to run and maintain. The market system does not provide the stewardship of private property. People do with the backing of property rights and the law.

While there may be some truth in your assertions about the use of the term “the public interest” by lawyers, litigants and policy makers, more often than not it is the large corporations who use the lawyers to run roughshod over any that get in their way.

By your way of thinking there was no public interest involved when BHP and the PNG government poisoned a whole river system with the OK Tedi mine. BHP then secured a cheap get out of jail card from an impoverished government and walked away. Certainly, in some people’s eyes there is no public interest. Your use of the Tragedy of the commons argument is exceptionally glib and misleading.

You say that “The general welfare is best promoted by people being free to pursue their own interests under the equal protection of a transparently made and enforce law.” Trouble is corporations may be run by very powerful people using other people’s money but that is in no way the same thing as an individual going into the Pilbara with a pick-axe and a wheelbarrow. You equate people with corporations and while corporations may be treated in law as people, in reality they are very different beasts, does a corporation have a conscience for example?

I may be getting a bit off the track here but your American gung ho attitude has its merits but there are other ways of going about things too. It would be hard to argue in light of the events of the last 3 years that the American way has been a shining light to the rest of us. You like taking a swing at Aussies. I do too. I am a Pom. However, having lived here for 35 years (my entire adult life) I respect the Aussie way. It does not pay to be gung ho here. It is a very unforgiving continent. Drought and bushfire define this nation. The first colony barely survived although the aborigines had done the hard yards for 50,000 years but had hardly achieved anything along the lines that had been achieved in the golden crescent of the Middle East over 6000 years ago. No disrespect to my aboriginal friends – this is one tough country and I take my hat off to them. Self interest takes on a slightly different reality under such circumstances.

Provoking thought is one thing, Dan, but insulting people’s intelligence is not helpful.

Yours sincerely,

Nick M.

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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