While I continue to work on my post on the Australian election, I thought I’d post this quickie. I’ve previously proposed a similar idea to this, and now the concept of a so-called “Robin Hood tax” is gaining traction. Of course, many of the people who would have to pay such a tax say it is “naïve” and “damaging”, but I really don’t think a tax as tiny as the one proposed (0.05%!) would have any significant impact on legitimate trading. It would however limit the sort of speculative trading that led us into the global financial crisis, and it would generate more than enough revenue to pay for the Wall Street bailout. And what fairer way to pay for it? The fact that we don’t actually have such a tax—and there isn’t any indication from our governments that it is even being considered—suggests to me that not much has really changed since the GFC, and that big business is still above the law.

The case against carbon trading—but is it a fair assessment?

It seems the debate over carbon trading just won’t stay out of the headlines at the moment. The opposition party in Australia—in their usual blatant political opportunism—have decided this week to unveil an alternative climate change policy to carbon trading. However, in spite of calling carbon trading “a great big fat tax”, they have yet to specify how their own policy will be funded—and even worse, it will basically mean business as usual for big polluters anyway. So it’s basically a climate change policy for those who don’t believe in climate change, and for those who think profits for big business should always take precedence over everything else. They want to appear as though they are doing something without actually doing anything useful, while incurring costs to the consumer and pretending it won’t cost them anything. This is hardly surprising, given their present leadership.

It appears as though the vast majority of people who oppose carbon trading also oppose action on climate change, period. But as I explained in my previous Let’s Give the Planet the Benefit of the Doubt post, this is both a logically and morally indefensible position. Once again, even if you don’t think the evidence proves that human induced climate change is real, that does NOT disprove it either—if you deny the possibility of climate change, you are simply sticking your head in the sand. And in any case, we need to move to renewable energy resources anyway, as our fossil fuel reserves will eventually run out (very soon in the case of oil), and we do know for a fact that they pollute the environment (even if you don’t think this leads to climate change). Anyone who opposes moving to renewable energy resources is just selfishly looking after their own hip-pocket, pure and simple.

Still, there are some who very strongly support action on climate change, but nevertheless oppose carbon trading as the way to do it. A good example is the video above by Annie Leonard, creator of the famous Story Of Stuff video. She clearly raises a lot of issues that require serious consideration, but as with most criticism of carbon trading, the problem isn’t really carbon trading itself, but how it is implemented. With the right systems and controls, it could in theory still work very well, and could provide a way for the third world to profit directly from our efforts to reduce carbon emissions. Annie thinks we should give some of the proceeds of direct taxes on carbon emissions to the third world, but let’s face it—taxes very seldom go directly to the places they are supposed to. And besides, it really does seem as though aid has done little if anything to help the third world, and may even have harmed them. The people of the third world need a way to make a living for themselves to get out of poverty, and properly implemented carbon trading provides a great opportunity for them to do that.

I also wonder if this video really is a fair assessment of the subject. For one thing, her implication that Enron and Goldman Sachs executives will control the carbon global trading market is seriously misleading. It leads me to wonder if any of the other statements in the video could be misleading as well—if you are knowledgeable on the facts and figures of this subject, I would greatly appreciate it if you could clarify some of the issues it raises. I do absolutely agree with her on one thing though: the current government subsidies of fossil fuels are beyond absurd, and could go a very long way toward covering the costs of our (undoubtedly essential) move toward renewable energy resources.

As to whether carbon trading is a conspiracy or not, I will be devoting a future post to our peculiar willingness to believe in conspiracies, which I suspect is related to our tendency to believe in God. I certainly do not think action on climate change generally is a conspiracy though, as it is very much against the short term interests (in other words, short-sighted greed) of big business. After all, they have always opposed it in the past—and with very good reason, as it hurts their short term profits.

Which brings me to the next part of my good news story. At the recent G20 summit, the leaders of the top 20 economies in the world agreed to a very simple measure that I feel will have far reaching consequences—to end fossil fuel subsidies. I’ve always felt it was both extraordinary and ridiculous that—when we really need to encourage the development of alternative energy—the governments of the world are still subsidising fossil fuel production. I am also proud to say that Australia’s Prime Minister Kevin Rudd spearheaded these changes, even though our economy is currently very highly dependant on fossil fuel exports (particularly coal and gas). It’s hard to imagine that just a few short years ago, both Australia’s Prime Minister and the American President denied climate change, and refused to sign the Kyoto Protocol. Once again, if they were still in government, it is hard to imagine that the lifting of fossil fuel subsidies would ever have been agreed to (for the reasons cited above).

Of course, that isn’t the only good news to some out of the G20 summit: it is also good to see such widespread co-operation in dealing with the economic crisis (which already appears to have averted another great depression), and that they are taking affirmative action to try and prevent corporate greed from creating such a situation again (such as the measures to control executive salaries).

In the discussion of my previous post, the topic of universal health care came up, and as Obama’s attempts to bring it in in the US is very much in the news at the moment, I thought it might be worth a post to itself. Like gun control laws and legalised prostitution (something I will also be devoting a post to in the future), universal health care is the sort of thing that many (perhaps most) Americans consider to be very radical, but which is in fact already in place in most other first world countries.

I haven’t lived in Australia long enough to have seen it myself, but apparently when universal health care was first brought in here, there was a lot of scare mongering from doctors and the conservative side of politics, just as we see in the US every time this issue comes up. And yes, you will find a lot of horror stories about failures of the public health system in Australia, just as you will anywhere—of course, no system is perfect. However, it has been a very long time now since anyone in Australia has seriously called for the abolition of Medicare—these days, whenever we have a serious problem, it is blamed on what is actually the cause of the issue: simple incompetence, bureaucracy, or a lack of funding. The public health system works very well in Australia (or it least it works a lot better than a completely private system did), just as it does in Canada, Japan and many European countries.

Of course, the big question mark is: where does the money come from? The answer, of course, is taxes, something which many Americans seem to have a pathological hatred of. Of course none of us like paying taxes, but most Australians, Canadians and Europeans seem to realise that services cost money, and that they have to be supported by an appropriate level of taxes. Many Americans, on the other hand, simply seem to think the less tax, the better. This is why Ronald Reagan was so popular, and what got the US started on its current astronomical and ever-increasing national debt.

Of course, many people will argue that introducing the expense of universal health care now—in the middle of a recession and at a time of unprecedented government debt—would be very financially irresponsible. This fails to take into account, however, the cost of not having universal health care. For example, in the case of the current swine flu pandemic, more people would be far more likely to seek medical attention (hence help contain the spread of the virus) if they could afford it. A healthy population is a happy and prosperous one, and universal health care helps greatly to achieve that.

Now Google was supposed to be interested in Twitter because of their search capabilities, which apparently was the main reason they bought YouTube—Google just wants to control all the different ways people can search for things on the internet, even if they don’t make money in themselves. I guess there’s a logic to that. But in the case of Facebook, we have a massively popular web 2.0 darling that still can’t make money, wanting to buy another massively popular web 2.0 darling that doesn’t have any source of revenue at all, to the tune of $500 million! Yet even though they have no revenue (or even an actual business model), Twitter not only rejected Facebook’s offer, they also managed to raise another $35 million in venture capital!

Surely I can’t be the only person who looks at this and wonders what the hell is going on here? Isn’t the massive investment in these web 2.0 companies that haven’t found a way to make money yet just like the dot.com bubble all over again? And all this at a time when it is so hard for people to get capital for longstanding, legitimate businesses? Something just doesn’t add up here. Is there some rule of doing business on the internet that I’m missing here? If so, I’d really like to know what it is!

Perhaps Twitter’s strategy—and perhaps the strategy of all these web 2.0 companies in fact—is simply to generate a lot of buzz, so they can get bought out at the best possible price. If so, Twitter obviously thinks it can get more than half a billion. But how many times will people keep buying out these companies that don’t make any money, before they realise it just isn’t a good deal any more?

The other alternative of course is that Twitter thinks it eventually will be able to find a way to make money. The only obvious way to do this would be through advertising and/or paid subscriptions. I can’t see any reason why the first will have any more success than other social networking sites—indeed, given the nature of Twitter, it would almost certainly be less successful. And if people have to pay to use it, you can watch its popularity fall through the floor, and get taken over by another, free alternative with yet more venture capital to burn behind it. They’ll likely adopt a “pay for no ads” model, and still not make any money. And who knows: it might just make people think about whether Twitter actually really is useful at all. I remain mystified as to what possible use it could be myself.

Perhaps what they’re hoping to do is sell information—e.g. we can tell you what people are thinking and saying right now. Now that does sound compelling for a political party or an advertising firm, but apart from the obvious potential privacy issues, is it really very useful information? After all, it can only tell them what Twitter users are thinking and saying—and I’m not sure I’d want to know that.

The Story of Stuff

Although there’s probably some exaggerations here and there, I certainly agree with the gist of what they’re trying to get across. I think it is especially important to examine these issues in light of the current economic crisis—many people seem to want to put the environment on the backburner until we get our finances in order, but not only can we not afford to do this, I see the destruction of the environment and the financial crisis as symptoms of the same problem: an economic model that is based on endless growth, and encourages ever increasing (over) consumption. We just cannot have limitless growth on a planet with finite resources—at some point, we need to reach an equilibrium with what our planet is capable of sustaining. Switching to renewable energy resources will help a lot, and is essential if we don’t want to face a resources crisis in the near future. Yet even then, we need to ask tough questions about population control and other difficult issues, if we are to survive.

A graph of US government revenue and spending vs. President since 1964—click for a larger view.

In my previous Why Does Anyone Vote Republican Any More? post, I exploded the commonly held myth that the Republicans are more fiscally responsible than the Democrats: indeed, with the rise of neo-conservatism since Reagan, they have been by far the most fiscally irresponsible governments in US history. Perhaps even more remarkable though is the fact that the Clinton administration was actually very fiscally responsible: by the end of his term, he had brought increases in debt down to almost zero (0.32%), and if the Democrats were elected for another term, we very likely would have seen the first decrease in national debt since 1961. But instead of course we got George W. Bush, who has brought debt up to such an astronomical level, that 10% of the US budget is now devoted to servicing it—one can only imagine what will happen if and when interest rates go up significantly.

In spite of these facts however, there is still a hard core of Republicans who will continue to vote for them, no matter what. I doubt there is anything anyone could do or say to turn these people around, but fortunately, they will not decide the outcome of the November 4 election. Nor for that matter will hard core Democrats. The people who will decide it are those in the middle: the swinging voters, and those who might vote independent or for a minor party. Amongst these, perhaps the most significant group are Libertarians. It seems they are basically made up of two types of people: disenchanted Republicans who are not happy with the extreme fiscal irresponsibility the neo-conservatives, and idealists looking for an alternative to the major parties, as they are disenchanted with both of them.

But what is Libertarianism, and does it really work? Basically, it is the idea that government should be as small as possible, with minimal taxes. Services should be provided by private enterprise, not by government. But doesn’t this sound familiar? Of course it does: it is the stated electoral platform of the Republicans! Reagan was elected on the idea that “the government doesn’t solve problems—it is the problem”. And in a sense he delivered: he cut many government services such as Medicaid, Food Stamps and education, and slashed taxes across the board (although the vast bulk of these cuts went to the rich). That’s why he won the 1984 election by the biggest landslide in US history (it seems Americans really hate taxes!). The result? 2.6 trillion dollars in debt—260% more than all the debt accumulated by all the previous Presidents of the United States combined! And of course, George W. Bush has basically done more of the same, by slashing taxes for the rich and government services even further. The result? An increase in government debt of half a trillion dollars per year!

It’s all very easy for Libertarians to sit back and say both major parties are wrong, when they know very well that their party will never actually have to be tested in office. And as we’ve already seen, when Republicans have tried to apply Libertarian principles, the result has been a massive increase in government debt. Of course, Libertarians will say the government still hasn’t gotten out of the way of free enterprise enough, but once again, that’s very easy to say when there never has been (and is never likely to be) a Libertarian government. All we can do is look at the results of the deregulation of services that has already taken place, and quite frankly, the record’s pretty appalling. The current financial crisis should be proof enough that deregulation of the financial system has already gone way too far, and fixing the problem has basically meant that government has had to buy it out. The privatisation of utilities has had pretty disastrous results in many countries where it has been tried as well—witness the California electricity crisis, for example. And the US probably has the most privatised health care system of any first world country, and it very likely has the lowest health care availability of any first world country as well—it is basically only available to the highest bidder. Where is there any evidence that private enterprise can be trusted to deliver basic services at all?

It is interesting that Libertarians consider themselves to be the “middle ground” between the two major parties, when their ideas are in fact very extreme—indeed, they are in a sense just one step short of anarchy. On the other hand—due to the general shift toward the right of all politics across the western world since the 80s—the “left wing” parties have actually become quite moderate: for example, the labor party here in Australia, “new labor” in the UK, and the Clinton administration in the US. And not only did Clinton bring government debt accumulation down to almost zero, he also created what is widely regarded as the strongest economy the US has ever seen. He structured the tax system to benefit those who spend the most money (the middle class) the most, which actually created a better business environment than has been the case under any Republican administration, despite nominally “higher” taxes for the rich (as history shows, any increase in taxes was more than offset by increases in profits). It was the kind of economy where everybody won (at least relative to any Republican administration): the poor, the middle class and the rich. In short, almost every time a government has moved toward a Libertarian ideology, the results have been terrible, whereas the modern Democratic party has a proven track record of delivering a strong economy, with low debt.

I think the reason that people are attracted to Libertarianism despite the objective evidence is that we all want to think there is a simple ideology that solves all of the world’s problems. And I think the fact that communism has been tried and has failed naturally leads a lot of people to think that the opposite approach—unrestrained capitalism—must be the way to go. In my opinion though, what I think it actually proves is that extreme ideologies of any kind don’t work. People can be very greedy and selfish, so unless there are checks and balances, corruption is inevitable. Communism failed because of the lack of accountability, and our attempts at unrestrained capitalism have shown that it quickly gets out of control without checks and balances as well. I think we need to have a balance between government regulation—when that government is answerable to the people, so democracy is essential—and free enterprise. Ideally, I think we should have government owned, corporatised companies competing with free enterprise in all essential service areas. This naturally leads to an environment where neither one of them gets out of control, or moribund. The government (hence taxpayer) owned company will ensure the minimum service standards expected by voters are met, while free enterprise will provide competition which will keep prices down. Not only that, but these corporatised companies will deliver their profits to all citizens, rather than just a few shareholders.

But how do we know such a system will work in practice? Simply by looking around the world. The countries whose social and political systems come closest to this sort of model, such as Australia (despite John Howard’s attempts to turn it into America), Canada, New Zealand and especially the Scandinavian countries are consistently rated the highest on most socioeconomic indicators. The Scandinavian countries in particular have very strong public sectors (along with quite high taxes to support them), but they are constantly rated as amongst the best countries in the world in terms of general happiness, health, crime rate, education, employment levels, working conditions, income equality, living standards per capita and science and technology per capita (interestingly, they are also amongst the most atheist and agnostic countries in the world!). And lest anyone reading this thinks such a system will naturally lead to corruption, they are even ranked as amongst the least corrupt countries in the world (I am happy to say that Australia also ranks very highly on most of these indicators as well). Of course, none of this necessarily means such a system will work in the US, but at least it has been shown to work extremely well—several times over—while Libertarianism has never been shown to work at all. Besides, when the US had a more even tax distribution such as they did under Clinton, they had a better economy for all Americans, including wealthy businessmen—and that’s what they’d be returning to under Obama.

A graph of US national debt vs. President since World War II—click for a larger view.

In the final few days before the US Presidential election, I thought it might be prudent to ask the question: why does anyone vote Republican? After all, from an outsider’s point of view, the crimes against humanity, the US constitution and the economy by the Bush administration are just so outrageous, it is hard for any sane person to imagine why Americans would even consider voting Republican! So I thought I should take a look at the common answers to this important question.

One thing people keep saying is that Obama’s tax changes will bankrupt the US economy. It’s as if he has some kind of radical tax plan, the likes of which America has never seen before. But really, all he’s actually proposing is to restore the same kind of tax distribution we had under the previous Democrat (Clinton) administration. But hang on! We all know that Republicans are far more fiscally responsible than Democrats, right? So we can’t go back to the tax system we had under Clinton, right? In that case, I suggest you take a very good, long hard look at the image above—a graph of US national debt vs. President. And what better way to judge a government’s fiscal responsibility?

Wait a minute! That graph must be the wrong way around, right? Actually no, it isn’t. In spite of their claims of being “fiscally conservative”, since World War II, Republicans have out borrowed and out spent Democrats by an average ratio of three to one! Even immediately after the war, Republicans were already out borrowing and outspending Democrats, but in fairness the difference wasn’t really significant. Until the first neo-conservative (Reagan) administration, that is. Reagan was elected on a platform of adding a balanced budget amendment to the US constitution, yet he actually increased debt to levels never seen before (needless to say, he never made good on his election promise!). The raw statistics of the Reagan administration’s borrowing and spending are absolutely stunning—the debt accumulated during Reagan’s two terms in office was larger than all the debt accumulated by all the previous Presidents of the United States combined! It went from just under one trillion dollars when he came into office, to over 2.6 trillion dollars when he left—an increase of over 260%! Republicans try to make the excuse that this debt increase was actually the fault of a “big spending” Democratically controlled congress, but this goes against the facts: the Republicans controlled the senate for the first six of Reagan’s eight years in office. And even worse, when the Democrats really did control congress during his last two years in office, the increase in debt actually slowed down!

So where did all that money go? That’s the most tragic part of all. It wasn’t used to fund investment, infrastructure or anything else that might have benefited the nation as a whole (indeed, he actually cut back on many government programs, such as Medicaid, Food Stamps and education). Reagan didn’t even have to finance a war. Most of that money went to tax cuts, the vast bulk of which going to the rich. And he didn’t compensate for the loss of tax revenue with reduced spending, so he had to run up that 2.6 trillion dollar debt to make up for it. Before Reagan, the gap between the rich and poor was narrowing, and people were working less and less hours on average. But with the election of the Reagan administration (along with the similarly inclined Thatcher administration in Britain), this trend was completely reversed: the gap between the rich and the poor has been widening ever since, and low to middle class people are now working longer and longer hours. The conservatives blatantly and unapologetically implemented policies that gave advantage to the rich over the poor and middle class, and yet, Reagan is one of the most highly ranked former Presidents in popular opinion polls!

George Bush Sr. actually ended up co-operating with the Democrats to try and bring the debt down, but it was too little too late. Yet even though Clinton inherited this massive (and still growing) debt—and had to deal with a very hostile Republican congress for the last six of his eight years in office—he still was actually able to bring the growth in debt down to almost zero (0.32%) by the time he left office. He also oversaw what is now widely regarded as the greatest period of economic prosperity in America’s history—and all this while the Republicans were trying to impeach him for a blow job! Had the Democrats been returned for another term, we very likely would have seen the first reduction in US national debt since 1961. But of course they weren’t returned—instead we got George Bush Jr.

Almost as soon as he got into office, Bush gave a massive tax cut to the rich, which immediately turned all of Clinton’s progress around—in his last year in office, Clinton borrowed 18 billion dollars, while in his first year, Bush had to borrow 133 billion! Two years later, he brought in another huge tax cut, while at the same time he not only didn’t reduce spending, but actually increased it, largely to pay for the folly of his senseless and illegal war in Iraq. As a result, he has been increasing the national debt by an average of half a trillion dollars every year since! One tenth of the US budget is now dedicated to servicing the national debt! What happens if interest rates go up significantly, as they surely will eventually? It is outrageous that Republicans suggest that Obama’s tax policies will bankrupt the economy, when he’s largely advocating a return to the proven policies of the Clinton administration. Even worse, the current tax policies of the neo-cons (along with the Iraq war) are already being shown to potentially bankrupt the economy. And McCain wants to continue them!

The most outrageous thing of all though is this: how can the party that has consistently given tax cuts to the rich at the expense of the poor and middle class claim to represent “Joe Sixpack”? He was far better off under Clinton, like just about everybody else except the very wealthy. So why the hell does he keep voting Republican? I really don’t get this; it just doesn’t make any sense at all! In short, the Republicans are not the fiscally responsible party, they are the fiscally irresponsible party. And a party that keeps giving tax cuts to the rich at the expense of the poor and middle class does not represent the average American! So unless you are very wealthy, why would you vote for them? (If you vote Republican for religious reasons, please read my article here before you cast your vote.)

For a more detailed and technical discussion of the issues I cover here, I highly recommend reading this article (it was the source of the image above).

If we can’t simply abolish the stock market entirely (which would be an ideal but almost certainly impractical solution), then we clearly have to find a way to bring these speculators under control, so the stock market can work for the purpose it was originally designed for: investing in businesses. Basically, we have to encourage people to buy shares as a long term investment, rather than using the stock market as the world’s biggest casino, where the players use other people’s money. So how can we achieve this? One way to discourage speculative stock trading would be to tax the buying and selling of shares. I mean, we tax just about every other profit making exercise these days, so why not this? A mere 1% should be enough to discourage speculative trading, while not deterring long term investment. And the tax revenue generated would be huge—it would quite possibly go a long way toward paying for the Wall Street bailout! What fairer way could there be to generate the revenue needed to fix the mess the stock market created in the first place? Of course, all the stock markets of the world would have to work together to introduce this at the same time, otherwise the speculators will just move to markets without this tax. But the governments of the free world have already shown a remarkable degree of cooperation in dealing with this crisis, so this would seem to be an ideal opportunity to implement something like this. The phoenix from the flames, so to speak.

POSTSCRIPT: I’ve been giving this idea further thought, and I think it might be even more effective if we start with a higher tax rate, and reduce it over time. Anyway, feel free to post your own ideas!