ALS: thoughts on freedom

Australia as a model for unilateral tariff cuts

Lukewarm support for tariff cuts is consistent with a central contention of public choice that voters are rationally ignorant of policies that would benefit them. In a democracy, it is theorised, good policies are an underprovided good. As the costs of tariffs are spread across an entire population while the benefits concentrated in particular industries, consumers naturally have little monetary incentive to investigate government policies. For this reason, polls do not show overwhelming opposition to protectionism. The protected industries, on the other hand, are motivated to lobby the government as they stand to lose significantly from open competition.

This explains why, for much of Australia’s trading history, a mentality of mercantilism was dominant. It took 60 years from federation for politicians to begin dismantling the protective state. It wasn’t until the Tariff Board began surveying the evidence for and against free trade in a systematic manner during the 1960s, that the costs of trade barriers were de-mystified. In response to the economic ailments caused by protectionism, three major tariff cuts — in 1973, 1988 and 1991 — were implemented.  Read more »

July 15, 2008 Posted by Sukrit Sabhlok | Economics | 10 Comments

Dependent on the government

In the early 1960s, 3% of Australians relied on the government for most of their income. By 1980 that had increased to 14%. And now, despite a decade of strong economic growth and increased employment opportunities, 17.5% of Australians rely on the government for most their income — including 5% of Australians who are apparently disabled and 5% who are carers (mostly single parents).

It is easy to sympathise with the social-democratic desire to protect the most vulnerable. But does anyone really believe that nearly one in five of Australians are vulnerable and can’t look after themselves? That is about 4 million people!

And this massive growth in government dependency has happened at the same time as we’ve seen huge increases in total wealth — where the rich have gotten richer and the poor have gotten richer. And we have also seen a consistent growth in private charity, which should mean that fewer people need government hand-outs.

In a CIS publication being released tomorrow, Eugene Dubossarsky and Stephen Samild address the issue of government dependency. One of their suggestions is that people who “declare dependence” on the government are effectively admitting that they are unable to run their own lives… and consequently it makes little sense to give them a vote which lets them contribute to running other people’s lives.

Dubossarsky & Samild also point to the potentially negative dynamic that comes from having a large percentage of the population dependent on government and voting themselves more hand-outs.

Perhaps this dynamic explains the steady growth of government throughout the developed world. If so, it raises some very difficult questions about how this trend can ever be reversed.

July 15, 2008 Posted by John Humphreys | Economics | 7 Comments