Tuesday, 1 June 2010

KRIS SAYCE: Why Scrooge Isn’t The Bad Guy

Guest Post by Kris Sayce of Money Morning Australia 

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_Kris_Sayce_headshot_thumb[2] So, was Ebenezer Scrooge really such a bad guy?

He’s certainly got a lot of bad press. Especially for a fictional character.

Now, I’ll be honest, it’s been a while since we read A Christmas Carol, but you could argue that all Mr. Scrooge was trying to do was run a business.

Sure, he could have let Kermit the Frog, er, I mean, Bob Cratchett put another coal on the fire, and he could have given him a pay rise. But then again, maybe Bob Cratchett was just grateful he had a job.

We’ll have to assume employment prospects couldn’t have been that great at the time if Bob considered working for Mr. Scrooge as the best alternative. The worse alternative would be a stint in a workhouse we’ll guess.

The reason we bring this up is the headline on page 13 of today’s Australian Financial Review (AFR), “Czechs choose Scrooge.”

And then it has a photo of Czech president Vaclav Klaus. Who isn’t the Scrooge in question, but a glance at the headline and the photo could easily leave you with that impression.

In fact president Klaus wasn’t even up for election, it was a parliamentary rather than a presidential election being held by the Czechs.

Headlines are a tricky thing. We know that. Sometimes we get it right, and sometimes we get it wrong. Ideally the headline should offer something that encourages you to read the accompanying story.

And equally ideally, the headline should accurately reflect the story as well.

Anyway, we read through the article that the AFR had syndicated from Bloomberg. And then we searched online for the original Bloomberg article which the AFR article was adapted from, which you can read here. Although Bloomberg’s headline was, “Czech Deficit Cutters Plan Coalition Cabinet, Boosting Koruna.”

Funnily enough, the Czech article in the AFR is below another headlined, “Spain loses AAA credit rating.”

But if the Czechs chose Scrooge, surely the headline for the Spanish credit downgrade could have been a little more colourful. What about, “Spain punished for p***ing tax dollars up against the wall.” Or what about, “Spain loses rating after blowing dough.”

It seems as though the headline writers and indeed the majority of mainstream financial journalists just don’t understand the massive debt problem the Europeans have gotten themselves into.

While the AFR writes, “All three campaigned for reduced spending, indicating they may be able to form a cabinet committed to cutting a deficit that swelled to 5.9 per cent of gross domestic product last year, almost twice the EU limit.”

It forgot to point out that Spain has a deficit of 11.2% of GDP. To read that you’d need to read the article on Spain that I mentioned before. And if you want to see just how the Czechs stack up compared to the Eurozone countries, just take a look at this:

Deficit disasters:

Source: BBC

Seems to us that the Scrooge-like Czechs have decided to vote for a bunch of people who don’t want to send the taxpayer and country broke.

Although to be fair, there’s barely a politician we’ve got a positive thing to say anything about, so we wouldn’t be surprised if the new mob in the Czech Republic fell into the same old tax and spend trap.

Perhaps the Czech people have good memories. They probably remember what it was like to live under a regime that believed it had all the answers. A regime that left nothing up to the individual citizen and instead made all the spending and investing decisions for them.

Dare we say that the Czechs remember what it was like to have bureaucrats pulling levers and thinking they know how to micro-manage an economy.

Not that the old Czech government is innocent of being spendthrift. The online version of the Bloomberg article points out, “The Czech Republic’s debt will rise to about 40 per cent of gross domestic product this year, from 18 per cent in 2008.”

That seems bad enough to us, but almost nothing when compared to many of the Eurozone countries:


Source: BBC

Perhaps they’re keen to avoid debt reaching the 53.2% level of Spain, or the 73.2% of Germany, or even the 115.1% level of Greece.

It seems they are. According to Bloomberg,

    “In rejecting parties that promised to increase welfare spending, voters sent ‘a very clear message’ to politicians that they want ‘a stable fiscal path,’ Simon Quijano-Evans, head of emerging-market research at Credit Agricole Chevreux in Vienna, said in a note to clients.”

It’s a contrast to the mainstream thinking in the West. Perhaps that’s because the West still has the misplaced view that government knows best. That welfare spending is essential to ensure the overall wealth of an economy and society.

That’s why you’ll have seen the ridiculous arguments supporting [Kevin Rudd’s] new mining super tax. The case is made that it’s essential that profitable [Australian] mining companies pay for welfare and other [Australian] government spending. Because it’s right that everyone pays their fair share.

We look at it differently. We believe that initiative and endeavour should be rewarded, not punished. And we certainly don’t believe that initiative and endeavour should result in you being fined (taxation) for having taken the risks.

The way we look at it is like this – but the end result is the same.

In some economies you have governments going heavily into debt now to pay for bureaucratic spending, requiring its citizens to repay the debt in the future through higher taxes.

While in other economies you have governments imposing higher taxes now to pay for bureaucratic spending and will require its citizens to become indebted at a later date as productivity and entrepreneurial activity are extinguished through excessive taxation.

The former would include the Europeans and the US, the latter would include Australia.

As I say, the end result is the same. Both involve hapless bureaucrats spending money which isn’t theirs on projects which no-one really needs. And furthermore coercively controlling the lives of its citizens at its own whim.

And none of it provides any benefit to anyone. Take the following as an example of coercive government incompetence, cruelty and wasteful spending. This headline from ABC News last week really says it all, “Government to get tough with jobless.”

The article says,

    “More than 350,000 job seekers will be targeted as the Federal Government toughens the rules for obtaining unemployment benefits. From July, those that do not turn up for regular interviews with Centrelink will risk losing the dole.”

As you know, we’re no fan of welfare. But it comes to something when a government punishes the very people that its own rules cause to be unemployed.

Yep, that’s right, it’s one of our favourite subjects, the minimum wage. The government implements an arbitrary minimum wage level that means tens or hundreds of thousands of people are prevented from getting a job.

Because it’s against the law for an employer to pay even 1 cent below the minimum wage, many people become unemployable. Their level of skill makes it uneconomic for a business to employ them and therefore the business will seek alternative solutions, such as exporting the jobs overseas.

Not content with having forced these people out of work and onto welfare, the government is then determined to punish them a second time. This time for not having a job.

But get this, it’s comments quoted from Human Services minister Chris Bowen:

    “This is about making sure that they are … doing their bit to get a job and that we are doing everything we can do to assist them get a job. It’s about mutual obligation. It’s about them doing their bit and us doing our bit. The interviews in the past for many years have been largely, frankly, a ‘tick and flick’ exercise. In the past they’ve been one-minute interviews with about 30 seconds focused on compliance, which is not capable of allowing Centrelink to come to a considered view of the individual’s efforts. These will be interviews that are five times as long and with a very substantial proportion devoted to compliance measures and making sure that the person is looking for work and actively seeking work and checking to ensure that what they’ve told us is correct.”

Talk about victimisation. Whether you like it or not, the fact is simple, without a meddling, coercive and victimising government and bureaucracy, odds are that each one of those 350,000 people would be gainfully employed.

It may not be their perfect or ideal job, and it may pay less than they’d like, but they would have a job.

Scrooge may not be the most popular fictional guy in town, but it should be remembered that at the end of the story, Scrooge does give the Cratchett family something they actually need, a slap-up feed, oh, and a job for Bob.

Meanwhile in the old days the government shoved the poor in the workhouse to do such enlightening work as stone-breaking, corn-grinding, and bone-crushing. Today they may not physically put them in the workhouse, but is it less cruel to forbid someone to work at a wage they’re willing to accept and then force them to beg and plead from the same government that put them in that position?



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