Economics.org.au

Notes from Lang Hancock’s address at the Workers Party Gala Dinner, October 23, 1975. (With thanks to the legendary John Zube and his LMP.)

I have said it many times and I will say it again, “Governments consume wealth — they do not create it.”

Any politician who claims that his government is acting in the national interest is either a fool or a knave, a rogue or an idiot.

Governments only act for the benefit of those in government and not for the benefit of the people they govern nor for the nation as a whole. Therefore, the less we are governed, the better off the nation will be.

Those in government like to perpetuate the myth that the interests of the government and the interests of the nation are synonymous: whereas in fact, the government and the people’s interest are poles apart.

One of the evils of over-government is inflation and in case inflation is just a word to you, let me quote from Milton Friedman:

Inflation is a very serious disease but in a fundamental way it is a manifestation of a much more basic disease and that is the growing tendency of governments to assume more control and power over your life and mine.

Even if a change of government does occur, we shouldn’t expect much change. The great bureaucracies, the communist controlled unions, the powerful manufacturing lobby, will still run the country.

If you don’t believe me, just ask yourself who controls the foreign policy of this country — not the elected representatives of the people but the “commo” controlled unions with their strikes against the cargo of any country of which they disapprove.

INFLATION

Inflation will continue. In fact, it will be stimulated by further monumental government spending and devaluation of the currency (almost sure to take place, if for no better reason than because Dr Cairns emphatically declared that it won’t). It will be further fanned by the pace-setting and spending of the powerful bureaucracies, who virtually write their own ticket regarding wage rises.

Don’t be fooled for one moment by the unions’ offer of a “social contract” involving co-operation with regard to wage rises.

If they had any intention of co-operating, they would surely volunteer to “contract” their wage back by the amount by which it exceeds the current inflation rate.

Now that business has reached the level of non profitability, any further wage increase automatically means a proportionate increase in the unemployment figure, because if a firm exceeds its wage fund limit, then it is axiomatic that it must either become bankrupt or retrench men.

Even Mr Cameron has now made the sensational discovery that companies must make profits if they, and jobs, are to survive.

If profitability is to be restored, then we will need a large scale injection of private capital based on security of tenure and confidence — confidence, that is, of the investor and of the market for our raw resources which at present is predominantly Japan.

SECURITY

In New York on December 12, 1974, Mr Snedden made a momentous statement which should be burned into the mind of every Australian who values his freedom. Let’s quote:

I believe if the individual is successful, then the community is successful.

I also believe that the discoverer should have the right to develop and exploit his discovery.

Australia had to set some rules but those rules and rights must be outlined before the discovery occurs and all agreements that are made must stand.

Such words if converted to action would restore the confidence that has fled Australia in recent years.

The best way to restore this confidence is to write absolute security of tenure into the new Western Australian Mining Bill, something which it now lacks.

In order to be a proper replacement for the existing Mining Act and not something to confer greater “privileges” on the bureaucracy administering the Act, it must set out in unequivocal terms the following essentials:

• (a) The future Act must be built around the discover of minerals.
• (b) Absolute security of tenure must be granted — not subject to ministerial interference — right through to the mining stage.

The Mining Act of 1904 served WA well, while it acknowledged the paramount importance of free enterprise mining. It only fell into disrespect when the bureaucracy by-passed the Parliament, the industry and the well being of the people by aborting the meaning of the Act and altering the regulations at will.

The Liberals should practice the doctrine of less government interference, not doge it. See (a) and (b) above.

We saw a Bill introduced in 1972 which if passed would have threatened WA’s very well being. The Bill relied — not on the rule of law as laid down by Parliament, but “upon the opinion, belief or state of mind of the Minister.”

The dictatorial powers accorded a Mines Minister in that proposed Bill would have allowed him to confiscate deposits from people who found them and people who have risked their money in development of them.

These vast powers would have allowed him to control every facet of prospecting without question, without explanation and without the right of appeal. He could simply have government by regulation and proclamation outside of parliament or any court of law.

The excuse that some dictatorial powers were included in the old Act was no excuse. Application of those powers in a way for which they were never designed resulted in a disastrous pegging ban, as well as a dishonest fiasco over “Temporary Reserves”, with past and present ministers ignoring wardens’ decisions, [e]ven after extensive public hearings.

Can anyone conceive of a more serious crime against the people tha[n] to have concentrated such power in the hands of any one man; a man in most cases without mining experience, and therefore subject to the whims of the bureaucracy who themselves in turn have had, for the most part, no experience in large scale mining.

It is fortune that such a bill never became law. It is unfortunate that the Liberals have now introduced a similar bill of May 1st, 1975.

In his second reading speech on that Bill the present Mines Minister intimated that he relied somewhat on the report of the Committee of Enquiry of 1970-71.

Because of some of its impractical recommendations, it is necessary to query the structure of the Committee of Enquiry of 1970-71.

MARXISM

Instead of building the Act around the man who makes mining possible, they laid their foundations on socialist dogma. Their wording is as follows:

[I]n the first place and perhaps fundamentally the paramount right of the State to all minerals … must be recognised.

This is straight Karl Marx; it is simply meaningless jargon to the practical commercial world. Whilst our law undoubtedly says that all minerals in the ground belong the State, they are, in that condition, completely valueless.

Therefore, at that point, the matter of ownership is purely a technical one.

In order to give value to the mineral it is necessary to transfer ownership from the “State” to private hands, and it is in this transfer to private ownership that a Mining Act begins to have meaning.

It must be given full meaning by guaranteeing first rights to the discoverer and security of tenure thereafter. If it does not, it does more than add power to the bureaucracy and bring ultimate stagnation to the mining industry; or open the door for bribery and corruption over the issuing of confiscation of titles on a scale which would far outweigh the Watergate scandal.

The government’s duty is to define rights — not confiscate them and distribute them to its friends as largesse.

The present WA Mines Minister ha failed to achieve the two main fundamentals of a Mining Act which would preserve the industry — namely, first rights to the discoverer, and security of tenure thereafter. He is therefore derelict in his duty.

BUYING VOTES WITH EMOTIONALISM

The emotional ballyhoo that wins elections is in no way related to the practical realities of finance and production.

Let’s looks at some of the catch phrase fallacies which all political parties use to capture votes:

“AUSTRALIAN RESOURCES MUST BE AUSTRALIAN OWNED”

How?

Australian companies like CSR and BHP have neither the capitalist resources and expertise, nor the will to own and develop them. Individual Australians would sooner buy their own homes, etc., than risk money in resource ventures.

They have not got the slightest interest in keeping Australian resources Australian owned if it involves taking one farthing out of their own pocket.

“BUYING BACK THE FARM”

How?

The only way open to the government is to increase the already exorbitant rate of taxation to provide money to do so, and what a mess they would make of it.

“AUSTRALIAN RESOURCES BELONG THE THE AUSTRALIAN PEOPLE”

If this so, why not let them be developed so that the Australian people and not the Australian Government get some benefit from them?

To achieve this end, private risk capital would have to be attracted in such quantities that the development rate out-stripped the growth rate of government departments. This would enable taxation to be lowered and proportionately lower the degree of government interference.

As things stand at the moment, the Government takes 45 per cent of all profit plus 66-2/3rds per cent of dividends plus royalty, plus income tax on all employees, plus direct and indirect tax of sub-contracting companies, plus import duties on materials, etc. In other words, the Government is very much on the receiving end.

GOVERNMENT FAILURE

If on the other hand it is decided to use Government funds for development through AIDC with its track record of 83 per cent failure, all of the above hauls to the Treasury would disappear.

The taxpayer would then be substituted to carry the extra load as well as providing for thousands of millions of dollars of initial risk capital.

Remember, there would not be one man in Canberra who has had the experience of building a major mine, port of railway system. Nor could they be expected to have such knowledge.

Can anyone deny that it is sheer lunacy to have a government institution like the AIDC (which aims to be outside of the control of the Prime Minister, or of the Cabinet, or of the Parliament of Australia) set up on the flimsy excuse of helping retain Australian resources in Australian hands?

Yet it aims to operate with unlimited taxpayers’ funds its disposal plus the right to confiscate and invest 10 per cent of insurance companies’ funds, whilst all the time having the power to operate without submitting its accounts to the Auditor-General.

Can anyone in all conscience support such a threat to the nation? And yet it is seriously suggested that the AIDC, the Minerals and Energy Authority, the National Investment Fund, the Pipeline Authority and so on, are capable of taking and over and investing the taxpayers’ money profitably in giant risk enterprises.

If Australia has to wait for development from government departments, a fairly true reflection of what will happen can be seen in the reference to the Ord River.

This project was first dreamed up two years before Charlie Court was born. It has been in and out of government pigeon holes scores of times since, until Court managed to bludgeon the Commonwealth Government into a pre-election spending spree on the scheme.

Despite having sixty years in which to research it and fifty years in which to make up their minds to pour the taxpayers’ money into it, it is a monumental white elephant with the only saleable crop available from it being water.

This suicidal policy of government involvement must be reversed. There must be an absolute guarantee that such crimes against the nation will never again be repeated.

PRACTICAL DEVELOPMENT

If Australia is to be developed, it can only be done by the government making a favourable and secure climate available to the suppliers of large sums of risk capital. This flow of capital must be unmolested by interference from government departments. The driving force must be that of initiative and profit without which nothing much will be achieved.

Given these assurances, Australia’s salvation could come from encouraging capital from the Middle East.

For instance, the Persians have:

1. Vast sums of petro-dollars to spend.
2. Oil which will be run out of in ten years.
3. Industrialisation programs which could provide a market for our raw resources such as iron, bauxite, manganese, uranium, foodstuffs, etc., thus creating a counter market to our almost total dependence on Japan.
4. Defence. The Persians are rapidly becoming the most effective military power bordering Australia’s most vulnerable area — the Indian Ocean.

In order, therefore, to capture this rapidly expanding market, plus the defence, the dollars and the oil that come with it, we must become to them a captive source of supply.

This means that we must temporarily throw overboard our emotional nationalism and trade away a share of Australia’s equity because (apart from the above reasons) they would buy from a mine or a source in which they had definite share rather than from a mine in a country in which they had no ownership.

Once heavily involved they must then obviously, out of self interest, defend us and the Indian Ocean to keep open their ambitious industrial programme.

FOREIGN CAPITAL

There must be an understanding of Australians’ desperate need to:

• (a) Obtain development capital — billions of dollars;
• (b) Differentiate between desirable risk capital and parasitical capital;
• (c) Obtain foreign exchange;
• (d) Reverse the policy of dissipating our overseas funds as practised by the present government;
• (e) Disband Mr McMahon’s Interdepartmental Committee for Foreign Takeover;
• (f) Repeal all laws relating to foreign takeover and foreign ownership as passed by the Whitlam Government and substitute a law which in effect says:

No foreign company shall trade on its name to raise money within Australia to buy assets, property, business or ownership of new resources within Australia for foreign ownership. In other words, a foreign company must bring in its own capital and take all the risks. If this is done, the title of ownership is immaterial because under present taxation laws the Commonwealth and State Governments are virtually silent partners for something like 80 per cent of the profits, in return for taking no risk and contributing nothing by way of capital and know-how.

GOVERNMENT BENEFITS FROM MULTI-NATIONALS

At present the Commonwealth Government takes most of the profits of multi-nationals in taxes. Besides yielding these taxes the foreign owned companies (in the Pilbara, for instance) have built all the schools, hospitals, gaols, custom houses, railways and ports — in fact, for every man employed they have laid out $230,000 in infrastructure — a mammoth exercise in development, decentralisation, job provision and foreign exchange earnings.

Because of government action this development has now dried up. To re-stimulate it and rebuild overseas investors’ confidence in Australia, the Liberal Party must public promise to:

1. Give an absolute guarantee of security of tenure right from the discovery stage through to the final development.
2. Restore the Chifley tax incentives, which helped spark the mining boom.
3. Reduce the Commonwealth Government’s parasitical take of the profits.
4. Guarantee to wipe out the Reserve Bank’s power to reimpose its disastrous embargo on foreign capital caused by its insistence on 33-1/3 per cent deposits.
5. Eliminate export licences on all bulk minerals and bring strategic minerals only under a formula which stipulates that it can never prevent the operating company from earning less than X per cent on its capital. In other words, it must be a definite rule. It must not rest on the will of a bureaucrat or the “state of mind of a minister”, or members of his department, or the whim of his mistress.

POLITICAL INFIDELITY

It has been said that political platforms are made to run on, not to stand on. The truth of this saying has never been more aptly demonstrated than by the lack of performance of the Federal ALP Government in the big WA mineral fields, where no major project has got off the ground during the present regime.

In fact, all the instruments of socialism and nationalisation which were so conveniently set up for it be the previous Liberal governments have been used in no small measure (acting under the most impractical of advice) to prevent development, to destroy confidence in Australia and to lead us into depression.

Originally the Whitlam Government offered a development platform of a very constructive nature. It stated that “the development of the the whole of North Australia is both necessary and urgent.” To this end then it promised to:

[I]nitiate income tax free provisions to assist industries in Northern Australia during their initial development period.

[L]ead Australia into the nuclear age.

[P]rovide realistic low rates of interest (2-3 per cent per annum) for long term development loans in line with successful policies offered by overseas governments.

[H]elp with infrastructure.

At present it is the must despised multi-nationals, who, with their private capital provided, by all the towns, schools, hospitals, gaols, custom houses, etc.

Our parasitical governments provided nothing.

TARIFFS

On the credit side, Mr Whitlam (despite the opposition of his colleagues in Caucus) performed one of the most statesmanlike acts that this country has witnessed — namely, the execution of the across-the-board cut in all tariffs.

This is something which has been needed for a long, long time but which no government has been game to do, and which regrettably Caucus spoilt by forcing its leader to execute an undignified somersault and go into reverse on this vital issue; just as the ALP have no been forced by economic circumstances to somersault over almost the whole of their socialist policies.

No criticism should be rained on the ALP for somersaulting — rather should they be congratulated for at long last coming of age in one aspect of the economic field.

Similarly Clyde Cameron has emerged from dreamland to make the startling discovery that unless companies are allowed to make profits the economy must collapse.

It is refreshing to see such an awakening although it is a wonder that Cameron, who has spent a lifetime peeling wool off sheep, has taken so long to have the wool pulled off his own eyes.

Also on the positive side the Whitlam Government has gone a long way towards curing the disease of over-employment (admittedly unintentionally).

Another by-product of its efforts is the creation of a folk hero in the person of Bjelke-Petersen who is now termed as “Charlie Court with brains”.

INHERITANCE FROM LIBERALS

Before tipping a bucket on Gough’s goofers, one should look at what they have inherited from the previous governments.

Firstly, there are the enormous powers of the Reserve Bank, an institution which was set up by the Menzies Government and which is now of such socialist significance that it lends point to Lenin’s stated belief that “any government which has control of the central banking system is already 90 per cent on the road to communism.”

The Reserve Bank’s complete disregard of the effects of continued revaluations of our currency; the embargo effects of their ruling on foreign capital and their dominance of the ALP Federal Government made that government surrender abjectly to the Reserve Bank bureaucracy, after promising “honest” John Tonkin they would lift the 33-1/3 per cent no interest requirement for the development of Alwest alumina.

All these factors led to the fall of “honest” John Tomkin’s government, resulting in the stoppage of several large mining developments in Western Australia.

Next we have the AIDC which is the instrument of nationalisation and confiscation by which private Australian industries become government owned.

Thirdly, the formation of the McMahon Interdepartmental Committee on foreign takeovers which, together with the Reserve Bank’s 33-1/3 per cent no interest embargo on much needed development capital, has caused the drying up of development in this country and the diversion of risk capital away from Australia to Brazil and other competitive countries, who have a more realistic outlook.

We then have the withdraw[a]l of the Chifley tax incentives which helped so much to establish giant mining ventures in the outback of Australia. How any Labor Government could chop the feet of their idol Chifley is almost beyond human comprehension.

Perhaps the most damaging blow of all was the enactment of a series of drastic revaluations of the Australian currency (initiated by the McMahon government) which virtually, at one fell swoop, made the establishment of new giant mining enterprises in Australia impossible.

It had the effect, as well, of reducing to a level of little or no profit the existing big iron mining ventures in Western Australia.

In WA alone this had the effect of wiping off overnight some $700 million from the value of existing contracts with Japan. It also had the effect of antagonising our best customer, upon whom Australia’s whole economy is at present based. The saying is “if Japan sneezes, we get pneumonia.”

STATE RIGHTS

There is wide disenchantment with both the Liberal and Labor parties because in practical terms there is little economic difference in their socialistic practices.

They are both overridden by the bureaucracy in its effort to build the bureaucracy even bigger with an abundance of socialist schemes.

This disenchantment has led to a host of proposals and movements, with suggestions for creating new anti-socialist political parties and reviving the cry of “state rights”.

The only way to recover “state rights” is to take them. The only way to do this is to secede economically from Canberra.

This is something that is vitally necessary for WA because its economy is totally different to that of the eastern seaboard.

WA is a primary producing economy; it is responsible for earning something like 22-1/2 per cent of Australia’s foreign exchange from the efforts of only 7-1/2 per cent of the total population of Australia.

WA needs no tariff walls; in fact, the imposition of tariffs to maintain the Eastern States industries has the adverse effect of adding something like 35 per cent to the cost of production of the primary producers of Western Australia.

WESTERN AUSTRALIA MUST SECEDE TO SURVIVE

The aim of “secession” is to reverse the present rush of power to Canberra so as to obtain economic freedom and justice for WA.

Such economic freedom would smartly lead to a marked increase in our standard of living and population, to the point where we would have considerable “commodity power” with which to ensure the safety of the whole of Australia.

At the moment Australia is defenceless. It could well be under attack in 10 or 15 years from even a minor power with dictatorial dreams of aggrandisement.

With a “seceded” Western Australia functioning within a free economy our “resources diplomacy” should be to make ourselves indispensable to several of the nuclear powers; and thus remove our entire dependence on Japan.

In this way, each of the major world powers would be jealously alert to see that none of their rivals or even smaller powers marched in to grab the whole of Western Australia’s resources for themselves.

Defence for WA means defence for Australia.

But federalism, with its resultant stagnation, recession and economic injustice for WA spells invasion for Australia.

If we do not “secede” and develop so as to supply the powers of the world, then even one of the minor countries could be tempted to step in, take us over and become economically powerful by doing so.

THE BLATANT MURPHY APPOINTMENT IS PROOF POSITIVE THAT CANBERRA INTENDS TO CONSTITUTIONALISE TOTAL CENTRALISM, LEADING TO THE TOTAL ABOLITION OF “STATE RIGHTS” AND PARLIAMENTS

The question therefore arises as to how we can best engineer a reversal of power (decentralism) from Canberra. It is futile even to talk of “State rights”.

Only a politician seeking votes by hoisting the banner of “State Rights”, or a very naive person, or a person too lazy or dumb to think, would even imagine that the head of any of the huge Canberra bureaucracies (which virtually rule Australia) would ever voluntarily relinquish one shred of his power and return it calmly to the States.

This would be contrary to human nature; particularly the nature of a person whose lust for power has driven him to the top in the Canberra Hierarchy.

It is equally naive to imagine that WA’s lifeblood — namely, the mining industry — will not continue to be mercilessly persecuted by Canberra even though it is national suicide to do so.

Kimberley-Pilbara-Kalgoorlie, the world’s largest electorate, has only one Federal Parliamentary representative. Seeing that it is a solid Labor seat there is no political mileage to be gained by either party taking up cudgels on its behalf.

“State Rights” — a wonderful vote catching cry, but if you want them you will have to take them — nobody is going to give them to you. The only way you can take them short of an invasion of Canberra is to “secede”.

Now this does not mean breaking ties of language, blood, customs and denying freedom to move around, mingle and marry within the island continent of Australia. It simply means economic freedom from Canberra, and from the type of suicide to which Australia has been subjected because of Canberra’s power lust.

The potentially richest part of Australia — namely, the Pilbara — is stagnant from want of fresh development.

It has been killed by three Canberra currency revaluations, the Reserve Banks 33-1/3 per cent no interest bearing deposit, Canberra’s removal of the Chifley taxation incentives, the fright of the proposed enlarged nationalisation powers of the AIDC and the establishment of the proposed National Investment Fund — all darlings of the Canberra central power dictatorship.

OVERRIDING BUREAUCRACY

This brings us to the very meat of the “secession” movement.

It is absolutely futile to secede and at the same time set up the same type of overriding Canberra bureaucracy in Perth.

We must only secede if we do so under a constitution which limits the power of government to win elections by buying votes with promises of huge government spendings on handouts to the populace; for all this involves the build-up of huge government departments, which in turn virtually take over the governing of the country.

It is no fluke that Germany has an inflation rate of only 4 per cent approximately (due to imported oil), while we are fast approaching a 30 per cent inflation rate.

Germany’s capable handling of the situation is brought about by the vast experience that they have had of pre-Hitler inflation, and their determination to guard against it in future. They have done so by limiting the power of their government to squander money.

What then should be the platform of the secession movement, remembering that we are seeking economic freedom only? Only day to day issues are not vital to the secession movement.

BASIS FOR SECESSION

Set up a constitution to:

Limit the power of government to squander taxpayers’ money. This would prevent a “dutch auction” being conducted to buy votes by the uncontrolled and irresponsible expenditure of the taxpayers’ money by either party, in an attempt to gain office.

An example which could be followed is West Germany where the inflation rate is only about 4 per cent. This is achieved because the Treasurer is free of control of the Cabinet, is limited to what he can spend by the Constitution, and has to report directly to Parliament only.

PROGRAMME

In the meantime the Federal Government should:

• Cut government spending.
• Reverse Parkinson’s Law.
• Reduce the power of and size of the bureaucracy.
• Make certain that such institutions as the AIDC (which is the main instrument of nationalisation and confiscation), the NIF, the Reserve Bank and the Financial Corporations Bill can never again by brought into existence.
• Reduce taxation drastically, particularly in areas that are employment providing.
• Wipe out payroll tax which is a penalty on people giving employment.
• Abolish import duties and excise. This will lower and our cost of production by 30 per cent, and increase our profit by 30 per cent. It will lower cost of living, motoring and directly benefit the housewife.
• Break the rising cost spiral by abolishing sales tax overnight and temporarily subsidising cost of living items on which the Unions’ claims for increases are based.
• Guarantee security of tenure and security of investment. Uphold the principle of private ownership and state categorically that the government’s duty is to “define rights”, not to confiscate them and distribute them as largesse to its friends.
• Come into line with the rest of the would competing for capital, and attract large scale risk capital with generous tax allowances.
• Decentralise without cost to the taxpayer by encouraging the development of large scale mining and primary industry.
• Rebate taxes to offset the rising cost of oil to the public. For instance, the risk-taking producer at present gets 5 cents per gallon. The government adds 22.5 cents per gallon by way of tax; therefore, in the interests of the producer raising his price there is plenty of scope for the government to rebate without the added cost being passed onto the motorist.

POWER

In order to prevent being held over a barrel by the oil barons of the world we must develop our own source of cheap, clean, safe power. We must:

• (a) Enter the nuclear age so that Australia (which will be out of oil in ten years) is immune to any power crisis. Risks to the public from nuclear power plant accidents are less than from any other man-made or natural disaster: e.g. in comparison with Darwin deaths, the same chances of killing an equivalent number from a nuclear plant is one in two million years.
• (b) Develop tidal as well as nuclear power.
• (c) Encourage the search for oil, coal and gas.
• (d) Work towards an alliance with those Middle East countries who have industrial ambitions, the achieving of which will provide a market for our products, a market which will need as a counter towards Australia’s almost total dependence upon Japan. The Middle East also has surplus capital and oil to supply our power needs.

Reference (a), (b), (c) and (d) above — no country can industrialise without cheap power.

SACRED COWS

• De-socialise medicine by degrees.
• Dispose of as many government agencies as possible; the order of priority being that those which are losing the most should be the first to go.
• Transfer the emphasis on education spending away from the erection of costly building which are only used for a low percentage of hours in the year. In other words, use a business-like approach to the utilisation of thousands if millions of dollars that are tied up in those buildings — e.g. factories and mines are run on a 24 hour basis 365 days a year.
• Broaden education. Remove its base from that of Socialist State education to as many varied private fields as possible. It should be axiomatic that the more affluent the society the less the taxpayer should pay for education.
• Slaughter a number of other sacred cows that consume inflationary government funds.
• Encourage the establishment of WA in any defence aid that will not only help to lessen the risks to Norwest Australia, but, by having it established on our soil, will add strength to the whole of Australia, e.g. the Omega Navigational System.
• Invite the Americans to establish a naval and air base on Norwest Cape at no cost to the Australian taxpayer, and make it available to the navies and air forces of the western world, together with an Omega Navigational System for Australians’ protection.