Australia’s Carbon Tax raised the Cost of Living so much that it’s hurting the Left’s Reelection Chances

Posted by PITHOCRATES - July 20th, 2013

Week in Review

The political left says we need to stop global warming RIGHT NOW before it’s too late to save the planet.  And the children.  Of course they’ve been saying that we need to do something RIGHT NOW since the Nineties.  When global warming became all the rage.  Leaving poor old global cooling and the coming ice age it foretold behind in the ash heap of fear mongering.

Why the change?  Simple.  What can you do to prevent global cooling?  Force businesses to emit more carbon into the atmosphere?   To remove carbon scrubbing equipment from power plants?  To produce more of our electric power from coal-fired power plants and less from solar, wind and hydro?  Reduce business taxes to lower the cost of electric power?  Thus lowering electric utility costs to encourage people to use more?

As you can see these are all options that benefit taxpayers.  Not the government.  That’s why the 180-degree change from global cooling to global warming.  Because government can combat global warming.  By forcing businesses to emit less carbon into the atmosphere.  To add carbon-scrubbing equipment to power plants.  Produce more of our electric power from solar, wind and hydro (that the government can subsidize) and less from coal-fired power plants.  Raise the cost of electric power generation to encourage people to use less.  These things benefit the government.  Not the taxpayer.  For the whole purpose of fighting global warming is to transfer more wealth to the government.  So they have more money to spend (see Australia to scrap carbon tax for trading scheme by AFP posted 7/14/2013 on Yahoo! 7 News).

Key greenhouse gas emitter Australia on Sunday announced it will scrap its carbon tax in favour of an emissions trading scheme that puts a limit on pollution from 2014, a year earlier than planned.

The move is set to cost the government billions of dollars but Treasurer Chris Bowen said cuts would be made elsewhere to compensate with the Labor Party sticking to its plan to return the budget to surplus in 2015-2016.

Bowen confirmed media reports that the fixed Aus$24.15 ($21.90) per tonne carbon tax would be dumped in favour of a floating price of between Aus$6 and Aus$10 per tonne from July 1, 2014, to ease cost of living pressures for families and help support the non-mining sectors of the economy.

The political left in Australia implemented a carbon tax to save Australia from global warming.  Yet when they’re making changes in that program what is the BIG problem they have to address?  Billions of dollars of lost tax revenue.  As if they’re spending that money elsewhere.  On government pork.  Not just on subsidizing green energy.  Which makes the carbon tax not about saving the planet.  But about giving the government more money to spend.  As governments everywhere have an insatiable appetite to spend money.  So the carbon tax was a lie.  Surprise, surprise.

And how do you get billions of dollars in additional tax revenue in the first place?  By increasing the cost of living and business with more taxes.  People don’t like paying more taxes.  Politicians on the left understand that.  Which is why they lie during political campaigns.

Former Labor prime minister Julia Gillard’s popularity sunk after she announced plans for the carbon tax in early 2011 — after pledging before her 2010 election that it would not be introduced by a government she led.

The policy backflip prompted protests around the country and conservative opposition leader Tony Abbott, who opinion polls suggest will narrowly win the 2013 election, has vowed to abolish it.

Abbott on Sunday said the shift to 2014 was “just another Kevin con job”.

“Mr Rudd can change the name but whether it is fixed or floating it is still a carbon tax,” he said, adding that “it’s a bad tax, you’ve just got to get rid of it”.

Wherever you are in the world liberals make up a minority of the population.  So the only way they win elections is by lying.  President Clinton promised he wouldn’t raise taxes on the middle class.  But after he won the election he raised taxes on the middle class.  President Obama promised that he wouldn’t nationalize health care.  And within his first 2 years in office he signed the most sweeping health care bill into law.  Obamacare.  Which has put the U.S. onto the path to national health care.  And in Australia Julia Gillard promised she wouldn’t allow a carbon tax happen under her watch.  When she apparently planned to implement a carbon tax all along.  And just lied to the people.  Knowing that they never would have voted for her if she had told the truth.  That she intended to raise the cost of living for everyone.

Politicians lie.  Especially those on the left.  And yet they fool the people time and again.  Getting exactly what they want.  By going out of their way promising that they will never do what they always end up doing.  Clinton.  Obama.  Gillard.  They’re all the same.  They get what they want by saying one thing.  And then doing something completely different.

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The EU will have to find another way to Confiscate Private Sector Wealth because the ETS is Kaput

Posted by PITHOCRATES - April 20th, 2013

Week in Review

The Emissions Trading Scheme (ETS) was the European Union’s (EU’s) way of combating global warming.  By making carbon emitters pay for their carbon emissions.  But Europe is mired in recession.  And the Eurozone is suffering a sovereign debt crisis.  Which hasn’t helped to pull Europe out of recession.  And it appears that the economic reality in Europe is dooming the ETS (see If Carbon Markets Can’t Work in Europe, Can They Work Anywhere? by Bryan Walsh posted 4/17/2013 on Time).

But the ETS—and carbon trading more generally—is not doing well, and its problems are taking some of the green shine off of Europe. Since its launch the ETS has struggled, with the price of carbon falling as the 2008 recession and overly generous carbon allowances undercut the market. In the ETS business are given free allowances to emit carbon—too many free allowances mean they don’t need to reduce their carbon emissions much, which erodes the demand for additional carbon allowances on the market and causes the price to drop. Prices fell from 25 euros a ton in 2008 to just 5 euros a ton in February. There was a way to fix this—take 900 million tons of carbon allowances off the market now and reintroduce them in five years time, when policymakers hoped the economy would be stronger and demand would be greater. As anyone who’s taken Econ 101 would know, artificially reducing the supply of carbon allowances in such a drastic way—something called “backloading”— should force the price back up.

But on April 16, the European Parliament surprised observers by voting down the backloading plan. In turn, the European carbon market collapsed, with the price of a carbon allowance falling by more than 40% over the day. “We have reached the stage where the EU ETS has ceased to be an effective environmental policy,” Anthony Hobley, the head of climate change practice at the London law firm Norton Rose, told the New York Times. The ETS is a mess.

Backloading failed because even in very green Europe, economic concerns seemed to trump environmental ones. European Parliamentary members worried that any action that would cause the price of carbon to rise would add to European industry’s already high energy costs.

This should make China happy.  For there was no way no how they were going to pay for the carbon emissions from their airplanes entering European airspace.  In fact they warned they would cancel their Airbus orders and give them to Boeing if the Europeans tried to force them to help bail out the Eurozone in their sovereign debt crisis.  For this was what the ETS would ultimately do.  Transfer great amounts of wealth from the private sector to the public sector.  Which would have gone a long way in helping the Eurozone to continue to spend money they don’t have.

The ETS was nothing but a new tax on business.  Cloaked in the guise of making the world a better—and greener—place.  But the EU is suffering economically.  A large part of the sovereign debt crisis is due to having less economic activity to tax.  So the EU needs to improve the economy.  So they can generate more tax revenue from the current tax rates.  But increasing taxes on the carbon emitters will not help businesses.  It will only increase the cost of business.  Increasing their prices.  Making them less competitive in the market place.  Reducing their sales.  And killing jobs.  Which will generate even less tax revenue from the current tax rates.

The problem in the EU is not global warming.  Or insufficient tax revenue.  They have a spending problem.  This is what caused their deficits.  That gave them their soaring debt.  Just like every other nation that ever suffered a debt crisis.  Including the U.S.  Trying to fix a spending problem with more taxes just doesn’t work.  Only a cut in spending can fix a spending problem.  It’s not like the old chicken and egg question.  Excessive and unsustainable spending always comes before a debt crisis.  Always.

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The UK is Holding off on Selling EU Carbon Permits as the EU is Holding off Taxing other Countries for their Spending

Posted by PITHOCRATES - November 17th, 2012

Week in Review

The Eurozone is wallowing in a sovereign debt crisis that just won’t end.  Caused by spending obligations made during good economic times.  On the assumption that those good economic times would last forever.  But they created a lot of that economic activity with expansionary monetary policy.  Keeping interest rates artificially low.  By expanding the money supply.  Encouraging consumers and businesses to borrow and spend.  Which they did.  Leaving them with massive amounts of debt.  And inflation.  Which they fought the only way you can fight inflation.  By raising interest rates.  And contracting the money supply.  Or, in other words, with a recession.  Which reduces tax revenues.  Forcing governments to borrow more to pay for these ever expanding spending obligations.  Which led to rising borrowing costs.  And debt crises.  Leaving these Eurozone countries starving for cash.

Enter the Emissions Trading Scheme.  Making high energy uses buy permits to exhaust carbon.  Ostensibly to reduce global warming.  But really just a massive wealth transfer from the private sector to the public sector.  To help those countries with debt crises to pay for their ever expanding spending obligations without having to govern responsibly.  So they can continue to pander and buy votes and advance their liberal agendas.  But there has been some push back.  In particular from other nations flying into the European Union (EU) airspace who don’t want to subsidize the irresponsible governing of the EU countries.  Because of possible retaliation (like China threatening to cancel their Airbus orders for new airplanes) the European Commission is delaying the implementation of their airline emissions law (see Britain says it may review carbon permit auctions for airlines by Nina Chestney posted 11/12/2012 on Reuters).

The UK government will review its forthcoming auctions of European Union carbon permits for the aviation sector when it gets more details from the European Commission about its plan to delay the bloc’s airline emissions law, a minister said.

The UK plans to hold two auctions of around 3.5 million EU carbon permits for the aviation sector on November 26 and December 10…

The EU Commission said on Monday it will conditionally put on hold its rule that all airlines must pay for their carbon emissions for flights to and from EU airports.

Why is the UK reviewing their auction of carbon permits?  Because these permits are basically new taxes for the airlines.  That the airlines will pass on to their passengers.  Raising the cost of flying.  Which, in turn, will make some people forgo flying.  Hurting the airline industry.  Further exasperating a weak economy.

Of course those in the Eurozone rioting against austerity would love to see the EU go ahead with taxing other nations for flying into their airspace.  Because they don’t like austerity.  And would love to pass on their costs to other nations’ taxpayers.  Something other nations’ taxpayers are none too keen on.  So it’s a mess.  And the Emissions Trading Scheme only compounds the problem.  As it does nothing to address the source of the problem.  Excessive spending obligations that these nations cannot afford.

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LESSONS LEARNED #73: “Politics is about overspending and vote-buying while getting some poor dumb bastard to pay for it.” -Old Pithy

Posted by PITHOCRATES - July 7th, 2011

Great Britain’s Costly World Wars

The 18th century was a time for adventure.  Exploring brave new worlds.  Discovering new species of plant and animal.  And new peoples.  But most of all it was a time for war.  World war.  As the great mercantilist empires raced to establish colonies in those brave new worlds.  And bumped into each other in the process.  Great Britain, Prussia and Portugal fought against against France, Spain, Austria, Russia and Sweden in the Seven Years’ War.  They fought for control of trade routes.  And each other’s colonies.  They fought from 1756 to 1763.  In Europe, Asia, Africa, South America, North America, the Caribbean, the Philippines and on the high seas.

Great Britain’s secretary of state, William Pitt, committed to total war.  He went all in.  Thanks to his allies fighting in Europe on land he had armies available for the colonial theaters.  And he had the Royal Navy.  That ruled the seas.  It was a formidable force.  And the British Empire grew.  From Gibraltar to the Indian subcontinent to the Philippines to the Caribbean.  And, of course, Canada.  It was a great victory.  But a costly one.  As total war tends to be.  And with more empire to manage and protect, Britain needed a larger standing army.  And a larger Royal Navy.  Costing even more money.  Especially in North America.  Where there was a lot of Indian activity on the frontier.  It only seemed fair to King and Parliament that their American colonists paid their fair share.  And the taxation started coming. 

The king needed money.  And the landowners in England were already overtaxed from years of war.  Taxing them further could cause problems in Parliament.  Because they had representation with their taxation.  But there was a lot of untapped wealth across the Atlantic Ocean.  The American colonies.  And they had no representation in Parliament.  So they would tax them to replenish the royal coffers.  And to help maintain the sprawling empire.  So they taxed.  And the Americans balked.  Then Parliament passed some acts to punish the colonists.  One thing led to another that led to a shot at Lexington that was heard ’round the world.  The American Revolution for independence from the British Empire was on.  And it, too, would be costly for Great Britain.  Eight more years of war.  And it would end with the loss of the American colonies.  Worse, it gave the French some ideas that led to the French Revolution.  And, ultimately, Napoleon.  That would plunge Great Britain back into another costly world war. 

Rhode Island:  Smallest State but Biggest Pain in the Ass

But Great Britain wasn’t the only nation with a large war debt.  The new United States of America also had a huge war debt.  And her finances were a mess.  People had debts.  States had debts.  And the Confederation Congress had debt.  Millions borrowed from Holland and France to fight the war.  And money was owed from before the war.  Including to British merchants that had to be honored for America needed trade with the British Empire.  And the protection of that trade provided by the Royal Navy.  So a lot of money was owed to a lot of people.  Which a lot of people didn’t have.  State legislations passed debtors’ laws that provided some relief to debtors by making it okay for them not to repay their loans.  Of course, this destroyed the credit markets.  Because people won’t loan money if the law says no one has to pay it back.  Worse, states were printing their own currencies.  And forcing people to accept it as legal tender.  Even though it wasn’t worth the paper it was printed on.  States were charging import duties on interstate trade.  Other states were charging some states more for their goods.  The love was gone.  States circled the wagons.  The war was over so they said screw the confederation .  It was a mess.  And soon after the war the economy was collapsing.

The United States was the Rodney Dangerfield of the international community.  It got no respect.  And most thought it was only a matter of time before they fell on their face and rejoined the British Empire.  The new nation needed legitimacy.  Which is hard to do when you’re broke.  You have no army or navy.  And the individual states were making their own treaties.  Making their own currency.  Collecting their own tariffs.  Life was simpler for the rest of the world when the Americans were British Americans.  For then she had a single seat of government to treat with.  A single currency.  A uniform tariff.  The Articles of Confederation just wasn’t getting it done.  So there was a drive to revise them to address some of these shortcomings.  Such as a national tariff to help pay down the national debt.  But one of the shortcomings was the revision process itself.  Any change required unanimous consent.  Which was a problem when it came to tariffs.

You see, tariffs are a source of revenue.  Imported goods come in on ships.  That have to dock.  In a port.  Before they offload a customs official reviews the manifest.  And verifies the cargo.  It’s simple math.  You have a list of what’s on a ship.  You apply a tariff.  Get your money.  Then you let the ships unload their cargo.  It’s very straight forward.  All you need is a port.  Which Rhode Island had.  And she refused to give up her right to collect those tariffs.  Because they collected a lot of revenue.  From her merchants.  And from all the merchants in the land-locked states that used her port.  It was very lucrative.  Her taxpayers loved it.  Because someone else was paying their taxes.  They were getting a free ride.  Thanks to those tariffs.  Which was great for them.  But it almost doomed the fledgling new nation.  Because whenever the Confederation Congress tried to amend the Articles of Confederation to include a national tariff, Rhode Island always voted “no.”  She refused to give up her cash cow.  Even if it meant the collapse of the new nation.  (Eventually delegates would meet in Philadelphia in 1787 and write a new constitution to replace the Articles of Confederation.  And some 100 years later America became a superpower.  No thanks to Rhode Island, of course.)

The EU and their Mercantile Emissions Trading Scheme

A clever government is always trying to think of ways to get other people to pay for their excessive spending.  And by ‘clever’ I mean devious.  To find some dumb bastard to pick up their tab.  Preferably not their own taxpayers.  Especially taxpayers who vote.  Because that’s the funny thing about taxpayers.  They don’t like paying taxes.  They will because they understand certain public goods require public funding.  Like an army and a navy to protect their nation from foreign enemies.  They’ll pay for these because they don’t want to be invaded or have their cargo ships boarded by pirates on the open seas.  But they’re not going to willingly pay for a big fat welfare state.  Not if they have to make sacrifices in their own lives so others don’t.  That’s just slavery by another name.  People just don’t like oppressive governments that take their money.  Or their liberty.  But if they could get some nice government benefits without having to pay for them, why, that’s a different story.

This is a lesson governments have learned well.  This is the basis for socialism (from those according to ability to those according to need).  And the progressive income tax (the more you earn the more you pay).  You get the smaller group of rich people to pay more than their fair share.  Then you take their money and spend it on the larger group of poor people who will forever love you.  And vote for you.  It’s a sound theory.  Until you can’t raise taxes anymore without throwing the economy into recession.  Or causing a taxpayer revolt.  So advanced nations that can’t tax anymore have found other sources of revenue.  Thanks to global warming.

Global warming is a hoax created to impose more government control over our lives.  To create more fees.  And a font of new taxation.  The University in East Anglia led the charge in this false science.  Leaked emails have since proven that they did play with the numbers to advance their agenda.  Though debunked it still has deep roots in the UK.  And Europe.  They refuse to let it go because of the riches it promises to deliver.  And with the UK and Europe suffering debt crises, they need those riches.  And the European Union is acting bold.  And extralegal.  They created an Emissions Trading Scheme (ETS).  Anyone that produces carbon dioxide has to pay for that privilege.  And that ‘anyone’ is pretty much everyone in industry and transportation.  By buying permits that ‘allow’ you to emit this product of combustion.  Including all international flights flying into EU airspace.  Which the non-EU airlines have a problem with.  Who are already struggling under the high cost of fuel.  But the EU is standing firm.  To save the planet.  And coincidentally pouring vast sums of money into their coffers.  So they can transfer the cost of their irresponsible government spending to non-Europeans buying tickets to travel to Europe.  But this can’t end well.  Other nations will respond with some measures of their own to ‘tax’ EU planes coming into their airspace.  Worse, when they can no longer sell the fraud of global warming to a gullible people, the nations who bought those permits may want their money back.  To help with their own irresponsible spending.  And with the sums involved, they will no doubt exhaust no legal avenues.  Perhaps even exploring other avenues.  Something extralegal.  Just like they did in the EU when they set up their ETS.

Spend First, Pay Later, then Suffer the Consequences

That’s the problem with spending first then trying to figure out clever ways to get someone to pay for that spending later.  Politicians tend to look at short-term benefits.  Not long-term consequences.  Had Great Britain known what the ultimate price would be for their tax policies they no doubt would have pursued a different course.  And avoided the 8 years of the American Revolutionary War.  And the subsequent Napoleonic Wars.  Which all added up to quite the pretty farthing.

Of course, Great Britain’s woes go back to the costly Seven Years’ War.  Which grew out of a trade war.  Resulting from the mercantile policies of competing empires for overseas colonies.  And trade.  The EU’s ETS is sort of a throwback to those mercantile policies.  That may very well result in a trade war itself.

Funny how history repeats.

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What the Big Planes can teach us about Free Market Capitalism

Posted by PITHOCRATES - June 20th, 2011

The Big Planes are Nimble in the Sky but Clumsy and Dangerous on the Ground

In airplane parlance, the Boeing 747 is a big-ass plane.  And the Airbus A380 is an even bigger-ass plane.  Too big some say.  Like a lot of airport administrators.  With a full-length upper deck, boarding requires a two-story passenger boarding bridge (PBB).  Something no airport had prior to the A380.  The 747 has a smaller upper deck and passengers get there by a set of stairs inside the plane.  Which allows the 747 to fit any wide-body gate.  Not the case with the A380.

The A380 also has something the 747 doesn’t.  The world’s longest wingspan on a commercial passenger jet.  The A380 is big.  And heavy.  It takes for big turbofan jet engines and lots of wing area to heft that incredible bulk into the air.  This causes an even bigger problem than the 2-story PBB.  Because it’s not easy to widen taxiways or runways.  Or move buildings and other infrastructure out of the way.  Which makes them a hazard when taxiing.  Which is when a plane is most vulnerable.  And dangerous.  More accidents happen while taxiing than flying.  Even the greatest aviation disaster of all time occurred on the ground.  When a KLM 747 on its takeoff roll crashed into a taxiing Pan Am 747 at Tenerife.  Killing 583 passengers.

So airport people are nervous about planes driving around their airports.  Especially the big ones.  With long wingspans.  Because things like this can happen (see Not again! World’s biggest airliner loses wingtip after striking building at Paris Air Show – two months after doing the same thing in New York by Daily Mail Reporter posted 6/20/2011 on the Daily Mail).

An Airbus 380 lost its wingtip in a taxiing collision with a building, just two months after another superjumbo was grounded for striking a private jet in New York.

The A380 superjumbo was grounded after the smash at slow-speed at the Le Bourget airport, where the Paris Air Show is taking place.

The collision mirrored an incident at JFK airport earlier this year when a private jet was spun round after it was hit by the wing of an A380.

And someone caught that JFK accident and posted it to YouTube.

The big planes soar majestically through the skies.  But they’re clumsy as an ox on the ground.  And dangerous.  But they’re also something else.  Profitable.  Because the more people you can put into a plane the lower your per-passenger costs are and the greater your profits can be.

Big Dollars and thin Margins

‘Can’ being the operative word.  Because it takes a lot of money to make money in the airline business.  Because airplanes are very expensive.  And the business is ultra sensitive to oil prices and recessions (see Aircraft Makers Not Put Off by Excess Capacity by Daniel Solon posted 6/20/2011 on The New York Times).

The carriers are being squeezed between high oil prices — expected to average $110 per barrel this year, against $96 in 2010 — and an overly rapid expansion of capacity relative to demand. Global airline capacity this year is slated to rise by 5.8 percent, while demand is expected to expand by only 4.7 percent.

“But with a dismal 0.7 percent margin, there is little buffer left against further shocks,” I.A.T.A.’s director general, Giovanni Bisignani, said at the annual meeting, referring to the $4 billion profit on projected revenue of $598 billion.

Despite these paper-thin margins some still have confidence in the air transportation industry.  And they’re making big bets.  Some 33,500 in all.

Looking ahead over the next 20 years, Mr. [James] Albaugh [chief executive of Boeing’s commercial airplane unit] forecast global demand for 33,500 new commercial aircraft, worth nearly $4 trillion, of which $1.7 trillion worth would be in the 100- to 200-passenger 737/A320 size range.

That’s a lot of money.  $4 trillion dollars.  It’s bigger than the annual GDP of Germany, France and the UK.  And every other country except the U.S., Japan and China.  It’s more than the sum total of all economic activity in most countries.  But for Boeing it’s just a sales projection.  Incredible.  How do they do it?  How do they do business in a world with such large numbers and such large risks?  Do they get special help from the government?  No.  They have a simpler business model.  They try to deliver what their customers want better than their competitors do.

Airline mergers — like United with Continental, Delta with Northwest, Air France with KLM and British Airways with Iberia — mean that fewer decision makers will be controlling larger purchases as the combined fleets are renewed or expanded. This has major potential consequences for both the large manufacturers in cases where the existing fleets include both Boeing (Continental, British Airways) and Airbus (United, Northwest and Iberia) planes.

Near-term, this may offer Airbus an edge in orders for its A320 New Engine Option, or A320neo, which could cut average fuel consumption immediately while allowing airline managers more time to evaluate the eventual Boeing response. At mid-June, A320 new orders totaled 362, with Airbus’s sales and marketing chief John Leahy targeting 500 by the end of the air show.

On the sidelines of a recent meeting of the chief executives of Star Alliance airlines, Harry Hohmeister, chairman and director general of Swiss, said the flexibility of engine choice offered by Airbus, between Pratt & Whitney’s 1100B and CFM International’s Leap-X, made it easier for him to opt for the A320 neo.

It’s a very complex industry.  Each part of it has its own concerns.  But no one is managing the overall industry.  The market is.  Airlines want to buy planes that cut operating costs.  So they can sell tickets at prices passengers can afford.  Manufacturers want to sell planes.  So they try to make planes that cut operating costs.  Each does their own part.  In response to market forces.  This is Adam Smith‘s invisible hand.  Everybody working independently to maximize their own interests.  And this benefits everyone in the aggregate.  Because planes with low operating costs are brought to market so airlines can buy them in turn allowing them to sell tickets that passengers can afford.

Surely, you ask, wouldn’t it be more efficient if one entity did all this coordinating?  Wouldn’t it improve market efficiencies?  Reduce redundancies?  Make sure we use resources to maximize their value?  To have someone tell the manufactures what to build.  Someone to tell the airlines what to buy?  So the passengers get the lowest possible price?  Actually, it’s been tried. 

The Soviet Economy Collapsed because of too much Government

And it doesn’t work.  And never has worked.  Nor will it ever work.  Because one person or entity cannot be smarter than the millions of decision makers working to maximize their own interests.  Because a business prospers when it sells.  But to sell someone must buy.  Hence a business does best when it best pleases a buyer.  And that’s something a bureaucrat just can’t do.  For if he or she could, the Soviet Union would still be here.  And her GDP would be greater than the U.S., Japan, China, Germany, the U.K., France and every other nation on the planet. 

Well, the Soviet Union is no more.  Many probably don’t even remember the Cold War or the war between capitalism and communism.  (For those of you who don’t, capitalism won.)  Boris Yeltsin‘s right-hand man recounts the events of August 1991, the beginning of the end of the Soviet Union in Foreign Policy.  Key to her collapse was the state-managed economy (see Meltdown by Gennady Burbulis and Michele A. Berdy posted 6/20/2011 on Foreign Policy).

For months we had half-expected something like this. By the summer of 1991, the Soviet Union was falling apart at the seams. The economy was imploding, the deficit was ballooning, hard currency and gold reserves had been decimated, and Gorbachev’s stopgap reforms had only exacerbated the crisis…

…Yeltsin and the other democratic candidates had been elected to the Russian parliament in 1990 with the goal of securing more legally protected rights and freedoms, as well as a market economy, and Yeltsin had been elected president of Russia in June 1991 with almost 60 percent of the vote. But while we were secure in our popular mandate, we were utterly powerless to deal with the greatest threat to Russia: economic collapse. More than 93 percent of the economy, by our estimation, was controlled by the Soviet government. Yeltsin and those of us in his circle of closest associates soon came to believe that unless we were to content ourselves with being nothing more than a ceremonial body, we had to change the legal and economic bases of the union itself.

The government controlled 93% of the economy.  And it was falling apart at the seams.  Because bureaucrats are bad businessmen.  As demonstrated in the Soviet Union.  However, bureaucrats are good at something.  Being a bureaucrat.  And maintaining power.  The Soviet communists resisted the market reforms.  In fact, that August, the old hard-line communists effected a coup d’état.  To resist the Westernization of their country.  To hold on to their power.  At the expense of a suffering citizenry.  But Boris Yeltsin prevailed.  And the Soviet Union is no more.

Of course, it was not an easy road.  The rule of law did not quite catch up to the market reforms.  So there was a lot of corruption.  And crony capitalism.  Which is something that China saw.  And they are being very careful with their market reforms to avoid a similar fate.  But China, too, is rife with corruption and crony capitalism.  But these two nations are shaking off their communist lethargy and are becoming serious competitors in the global economy.  And China will soon be building commercial aircraft to compete against Boeing and Airbus.

Free Market Capitalism provides the Path to Success

Aircraft manufacturers are doing big and bold things.  Because they can.  By providing what the market wants.  It can do this despite the huge dollars involved.  And they don’t need any help from the government telling them what they need to build.  Or buy.

Government is full of bureaucrats who don’t know the first thing about business.  In fact, their involvement only hurts business.  Case in point:  the Soviet Union.  But that doesn’t stop bureaucrats from sticking their nose in where it doesn’t belong.  Especially in the aviation industry.  They see all that money.  And they want a piece of it to bail out their budget deficits.  The latest scheme by the Europeans is to tax carbon emissions in an Emissions Trading Scheme.  Not only are they going to tax themselves, but they’re going to tax any airline flying into the EU for their carbon emissions.  Some are concerned that this may result in a trade war.  Probably because it will.  But that’s government.  They want the money first.  Then they’ll consider the economic damage their policies cause.

One has to marvel when looking at a 747 or an A380.  Incredible examples of what private enterprise can do.  One can only imagine what other great things people could do if they didn’t have to spend so much time and money fighting their governments.  And we can only scratch our heads when we see emerging economies move towards capitalism (to emulate the success of others) while established economies with bloated bureaucracies move away from capitalism (to emulate the failures of others).

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Save the Economy or Save the Planet, it’s One or the Other

Posted by PITHOCRATES - June 5th, 2011

Pushing back against the EPA’s Assault against Business

With the economy in the toilet where it will probably remain for a long time to come, a lot of people have given up on environmentalism.  They take a look around them and see that things look pretty good.  Environmental-wise.  In fact, it’s a regular paradise compared to all the environmentalists’ alarmist predictions from a decade or two ago.  Which look rather silly today.  Children in the UK will no longer know what snow is.  The overwhelming stench of dead fish decaying on America’s beaches (killed by warming ocean temperatures).  Flooded coastal areas due to melting of Arctic ice.  None of it happened as predicted.  We got all worked up over nothing.  That’s why environmentalism is more of a young person’s game.  Because after you lived through 20-30 years of failed predictions, you tend to grow a little skeptical.  Especially during times of high unemployment.

That’s why a lot of people don’t give a rat’s rear end about global warming now.  They want a job.  And the way they see it, all this environmentalist nonsense is killing the job market.  And the Republican-controlled House they’re starting to push back on the job killer itself.  The EPA (see Soaring emissions posted 6/2/2011 on The Economist).

The Republicans’ chief concern is the EPA’s authority, as affirmed by the Supreme Court in 2007, to regulate emissions of greenhouse gases. But more broadly they worry that the EPA is constantly tightening restrictions on pollution, at ever higher cost to business but with diminishing returns in terms of public health. They point to a slew of new rules about industrial boilers, cooling water at power plants, the disposal of coal ash, and emissions of mercury, ozone and other chemicals from smokestacks, which cumulatively, they say, will have a crippling effect on power generation and other industries. “Even God,” says Joe Barton, a Republican congressman, “couldn’t meet some of the ozone standards.”

…The Republican leadership in the House has accused the administration of plotting to raise the price of energy through onerous regulation, in an effort to promote otherwise uncompetitive green technologies. It wants the EPA to give more weight to the impact on the economy and jobs when drawing up future rules.

The Obama administration has.  And is.  Trying to raise the price of ‘cheap’ energy to promote their green energy initiatives.  It’s on record they want gasoline to cost as much in the U.S. as it does in Europe (as in $8/gallon).  To make more costly and shorter-range electric cars easier to sell.  And they want to do the same with cheap fossil fuel-produced electricity.  To make more costly and less reliable wind and solar generated electricity easier to sell.

EPA officials appear baffled by this barrage of hostility… The agency, they say, already conducts cost-benefit analyses of all important regulations, in addition to submitting them for expert review and public comment. Every dollar spent on pollution controls mandated by the Clean Air Act, including the ozone restrictions that Mr Barton is complaining about, will bring $30 in benefits to public health, the EPA reckons.

Expert review and comment?  By who?  It certainly isn’t the businesses affected by their regulations.  Who know exactly the costs their regulations will add.  No, they can’t be the experts.  Not when they are protesting the onerous costs these regulations are adding.

And the $30 in benefits for every dollar spent on pollution controls is a specious argument.  No one can know this.  It’s made up math based on fallacious assumptions and unrealistic projections.  Much like the math they used some 2-3 decades ago when they made all those alarmist global warming predictions that never came true.

Saving the Trees but Killing the Planet

We were saving the trees going to a paperless world thanks to the Internet.  Little did we know that we were killing the planet by saving those trees (see Could the Net be killing the planet one web search at a time? by Alex Roslin, for Post Media News, posted 6/3/2011 on The Vancouver Sun).

Ironically, despite the web’s green promise, this explosion of data has turned the Internet into one of the planet’s fastest-growing sources of carbon emissions. The Internet now consumes two to three per cent of the world’s electricity…

The bulk of all this energy is gobbled up by a fast-growing network of huge “server farms” or data centres that form the backbone of the Internet. They are hush-hush facilities, some the size of five Wal-Marts, packed from floor to ceiling with tens of thousands of computers…

All those computers have a voracious appetite for energy, especially for cooling equipment to prevent overheating.

This means that every time you do an Internet search you’re releasing polluting carbon into the atmosphere.  Because the majority of our cheap and reliable electricity is produced with cheap and reliable fossil fuels.  And some of these server farms are fossil fuel beasts with voracious appetites.

Apple’s mega-facility is part of a cluster of gigantic new data centres coming on line in North Carolina that are powered largely by cheap and highly polluting coal power. Google has a 44,000-square-metre data centre in the state that eventually will consume an estimated 60 to 100 MW. Facebook has a 28,000-square-metre facility under construction there that will eat up 40 MW.

Greenpeace calls the three facilities “North Carolina’s dirty data triangle.” Coal, it says, is the most polluting of all fossil fuels and the world’s single largest source of greenhouse gas emissions.

“The technologies of the 21st century are still largely powered by the dirty coal power of the past,” the environmental group said in a report card on the IT sector in April, titled How Dirty is Your Power?

There is a reason why we use so much coal.  And it’s not because we hate the planet.

North Carolina offers industrial customers one of the lowest electricity rates in the U.S. — 5.8 cents per kilowatt hour, versus the U.S. average of 6.7 cents.

It just so happens that the state’s electricity is also some of the dirtiest in the country. Nearly two-thirds of the state’s electricity comes from coal.

And here is the tradeoff between global warming and jobs.  Coal is dirty but cheap.  Which keeps electricity costs down.  Which attracts business.  Like in North Carolina.  Other locations lost these new jobs because their environmental policies made energy more expensive in those locations.

The real solution, [Bill St. Arnaud, an engineer and green IT consultant in Ottawa] said, is for governments to impose measures like carbon taxes and emissions caps that make dirty energy less attractive financially.

“The planet is warming up, and it’s going to get very bad. We need a price on carbon. It’s the only way to get people to move off coal because coal is currently so cheap,” he said.

The environmentalist want to raise the cost of electricity.  So cheap coal-generated electricity isn’t so cheap.  So business have no less costly solution.  Thus guaranteeing their costs will rise.  Making them look elsewhere to cut costs.  As in not hiring people.  Or laying them off.  All the while passing these higher costs onto the consumer.  Increasing their utility costs.  As well as the goods they purchase.  Leaving them with less disposable income.  Thus reducing economic activity.  With them buying less business will sell less.  Which means they won’t expand.  Instead, they’ll probably cut their production.  And lay off people.

However you look at it, increasing the cost of energy ends badly for the consumer.  And that’s exactly what the EPA wants to do.  And the Obama administration.  So they can implement their green initiatives.  And, of course, adding a tax on carbon, the most abundant byproduct of energy production, provides a lot of revenue for an overextended federal government.  Which is, I’m sure, just a coincidence.  And by coincidence I mean it’s the driving force behind all green initiatives.  Increasing tax revenue.

The EU wants to Emission Tax the World’s Airlines

But this is not an American phenomenon.  It’s even bigger in the European Union.  And they’re looking to export their regulations to other nations (see Airlines, EU in escalating trade row over emissions by David Fogarty and Pete Harrison posted 6/5/2011 on Reuters).

Global airlines attacked the European Union on Sunday over its plan to force them into the bloc’s emissions trading scheme, as the EU vowed to stand firm against threats of retaliation…

The EU will require all airlines flying to Europe to be included in the Emissions Trading Scheme (ETS) from January 1 next year. The system forces polluters to buy permits for each tone of carbon dioxide they emit above a certain cap.

You want to fly to the EU?  Well, that’s fine, but there’ll be an additional tax.  You see, we’re trying to save the planet.  And our treasury.  As these EU bailouts are getting expensive.  And don’t appear to be ending any time soon.

Airlines say the scheme will increase costs and comes at a time when fears are growing about a faltering global economy, which could slash industry profit expectations…

“The last thing that we want to see is a trade war,” said Giovanni Bisignani, director-general of the International Air Transport Association. The EU had to heed a “growing chorus of countries strongly opposing an illegal extraterritorial scheme.”

“We have to absolutely avoid this because the risk of retaliation for Europe that is in survival mode would be the kiss of death,” he told Reuters on the sidelines of IATA’s annual meeting in Singapore.

The younger people today may not know what a trade war is.  It’s when one country raises the price of doing business in your country to every other country trying to do business in your country.  This is to protect the higher-priced domestic industries.  By removing lower-priced consumer alternatives.  When countries retaliate by doing the same you get a trade war.  And it is the consumer who suffers.  Because everything they buy becomes more expensive.  Oh, and it was a trade war that caused the Great Depression.

Under the scheme, the aviation sector will receive 213 million carbon permits, called EU Allowances (EUAs) in 2012 and then 209 million from 2013 to 2020, representing the cap. As many as 82 percent of them will be given free to airlines, meaning most of the rest will have to be bought from the market.

With six months before the sector joins the ETS, opposition is growing.

A China Southern executive has said the China Air Transport Association is preparing to sue the EU over the issue, a Chinese media report said.

“The opposition is broad,” said Andrew Herdman, Director-General of the Association of Asia Pacific Airlines, which represents 15 airlines such as Cathay, Japan Airlines and Singapore Airlines…

China says Europe should adjust the ETS to reflect the differences between rich and poor countries, while Vijay Mallya, chairman of India’s Kingfisher Airlines, said he could not accept it.

The EU may know what’s best for the planet.  And their bank.  But the world doesn’t appear that it will sit back and transfer sovereignty and money to them without a protest.  Or a fight.  Perhaps even a trade war.  Which would be a bad thing as much of the world tries to pull itself out of the worst recession since the Great Depression.  And it would be a terrible shame for history to repeat itself on that score.  For one Great Depression was quite enough.

Carbon Taxes and Carbon Trading kills Jobs and crashes Economies

Green energy initiatives are just a cover for massive tax increases.  For desperate nations who can’t control their spending.  That’s why nations everywhere are fighting against carbon taxes and trading.  They see the cost to business.  And the jobs they will kill.  It’s not that they want to kill the planet.  They just don’t want to subsidize another nation’s financial problems.  Or see their own economies crash.  Which it will under a carbon taxing/trading scheme.

Environmental policies and economic activity are a trade off. You advance one by reducing the other.   Which makes advancing environmental policies during recessionary times difficult.  Because it’s one thing to save the planet when you have a job.  But another when you don’t.  At such a time, yes, you care about the planet.  But you care more about your family.  You think to yourself that the planet can take care of itself.  It survived ice ages.  Cataclysmic meteorite collisions.  Huge volcanic explosions.  Droughts.  Fires.  Hurricanes.  Tornadoes.  Earthquakes.  Plagues.  And if it can survive all that, you think it’ll be able to survive your having a job so you can support your family.

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