The Labor government in Australia needs to stand firm on the new super profits tax on mining. Caving in to pressure from the big mining companies would set a most unfortunate precedent and have ramifications into the future.
The mining companies have millions to spend and are able to buy the support of the federal opposition as well as funding a couple of spurious political parties supposedly formed from the ‘grass roots’ to fight the new tax.
They are following the usual strategy of bullying and threatening to close mines and sack thousands of workers. This has been tried before, many times, in the face of measures to improve the lot of the majority of the people at the expense of the wealthy and powerful minority. The strategy has often succeeded, sometimes permanently.
We in Australia need to stand firm in this case. The companies can pay the tax, get back to work, and other countries around the world can follow our lead and introduce a fairer tax regime. Otherwise, we can cave in and wait for years until some other country introduces this type of tax, and then struggle to follow their lead. Also, the precedent will have been set, that a well-funded campaign of bullying and threatening by the wealthy and powerful minority, can prevent any government from introducing measures to improve the lot of the majority.
An argument put forward by the mining companies is that if they don’t get the government to give in and withdraw the new tax, then they will pack up and go and mine in some other country where they can pay less tax.
This argument is classic ‘flat earth economics’ as opposed to the ‘Economics for a Round Earth’ that forms the foundation of this blog. Classic economics assumes that the planet’s resources are essentially infinite and that we can go on consuming more and more indefinitely without cost. The mining companies’ argument assumes that mineral resources are infinite and that they can jump around the world until they find the lowest tax regime.
I can suggest an analogy. Classical or Newtonian mechanics made certain assumptions that worked very well for centuries, and will always work well up to a point. But with technological and scientific progress it became apparent a hundred or more years ago, that classical mechanics couldn’t explain more and more phenomena that were being observed, and was starting to obstruct technological progress.
Similarly, classical economics assumes no limits to resources, or doesn’t even consider the question of limits. This worked for centuries, but in our time we are starting to run into resource limits on multiple fronts. So a new economics must be developed that provides prosperity and wellbeing in a limited system. This was the idea that motivated me to write ‘Economics for a Round Earth’. I hope that others can carry the ideas further.
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