On protectionism

Geoff Edwards writes: Re. “Protectionism provided few jobs and made life tougher for working families” (Monday). Bernard Keane: an economy is a complex network, not a balance-sheet of isolated transactions. One cannot assess the effect of tariffs on employment by tabulating unemployment at isolated times.

I have yet to see a defence of free trade that satisfactorily answers these questions: 1. If free trade is universally beneficial, there must be a theory to explain it – otherwise success would be circumstantial. What theory of comparative advantage applies in a globalised world where producers’ competitiveness is determined by speculation in disconnected currency markets? 2. What future is there for shipping or flying goods across oceans in a world that might eventually take carbon emissions seriously? 3. If free trade is universally beneficial, is there a limit? Should Australia close down all productive assets in the name of saving costs to consumers? 4. If we purchase most goods and services from overseas, and borrow from overseas to pay, what productive industry can we crank up to earn the income to pay foreign suppliers and lenders? What is to stop us continuing to sell farms and houses until we are all tenants?

Marcus L’Estrange writes: Once again Bernard has strayed from his politics reporting to write about economics of which he clearly is only partially informed. This report as referenced in The Guardian found that the cumulative legacy of the hollowing-out of manufacturing and the year-long miners’ strike of 1984-85 was a far heavier concentration of people claiming incapacity benefits than in the richer parts of Britain and a more widespread use of tax credits to top up the wages of those in low-paid jobs. The report’s co-author, Prof Steve Fothergill, said: “The long-term effect of job destruction in older industrial Britain has been to park vast numbers out of the labour market on incapacity benefits, these days employment and support allowance (ESA). The cost to the Treasury is immense, especially if all the top-up benefits are included.

“Added to this, low wages in these weaker local economies have jacked up spending on in-work benefits such as tax credits and reduced income tax revenue. None of these impacts have diminished over the years, despite the recent upturn and efforts to cut claimant numbers.

“We estimate that the ongoing cost to the exchequer, in extra benefit spending and lost tax revenue, is at least £20bn a year, and possibly nearer £30bn. To put this another way, approaching half the current budget deficit is the result of job destruction in Britain’s older industrial areas.”

The report – Jobs, Welfare and Austerity – said there was a continuous thread linking what happened to British industry in the 1980s to the welfare cuts being borne by communities in the north, Scotland and Wales today. The loss of manufacturing jobs fuelled spending on welfare benefits which in turn had added to the financial problems of successive governments and led to pressure for cuts.

“The welfare reforms implemented since 2010, and strengthened since the 2015 general election, hit the poorest places hardest,” the report said. “In effect, communities in older industrial Britain are being meted out punishment in the form of welfare cuts for the destruction wrought to their industrial base.” Bernard Keane continues on with his report using discredited ABS ‘Labour Force’ unemployment figures as the basis of his analysis. Dodgy figures lead to a dodgy analysis and therefore to Bernard’s inaccurate claims.

Spill the beans, AusPost

Denise Marcos writes: Re. “AusPost fails to deliver the goods on CEO pay packet” (Monday). It appears the CEO’s salary is in inverse proportion to AusPost’s slumping profitability. Perhaps one of the independent MHRs (such as Andrew Wilkie) will raise the subject of CEO AhmedFahour’s remuneration in Question Time. One has the impression Fahour is reluctant for its release, possibly an embarrassment of riches? The availability of this information will be a community service providing hope for fellow Australians currently down on their luck – proof that failure can bring great reward. Contrary to AusPost purporting ‘there is no public interest’, we taxpayers disagree. We are ever so curious to know exactly how much we indulge the man responsible for eroding our mail service.

Peter Fray

Help us keep up the fight

Get Crikey for just $1 a week and support our journalists’ important work of uncovering the hypocrisies that infest our corridors of power.

If you haven’t joined us yet, subscribe today and get your first 12 weeks for $12.

Cancel anytime.

Peter Fray
Editor-in-chief of Crikey