Renegade Economists Show 392

As broadcast on the 3CR airwaves 5.30 – 6pm Wednesdays.

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Show Notes

Karl discusses various aspects of monopoly and the power that lies behind these government granted privileges. Imagine owning a bridge that could deliver you $100m p.a? Or trashing past beliefs to claim your multi-million business is mining on behalf of us all? Sorry this is out a little late! Things were pretty busy launching the Prosper Australia Research Institute.

Monopoly Rights by Renegadeeconomists on Mixcloud

Related Links

Property is only another name for monopoly.

William Stanley Jevons

The best of all monopoly profits is a quiet life.

SirJohn Richard Hicks

Abbott’s fallacy that privatisation will deliver a more competitive outcome for the economy

David Irwin, a director of ­Pacific National, has issued a warning today that the $4 billion privatisation of the Australian Rail Track Corporation (ARTC), which controls access to the nation’s 8,500 kilometre standard gauge rail network, could increase the cost of access for above-rail operators and run counter to a push to shift freight from roads to trains. From The Australian:

While much of the freight industry would like to see more freight moved off the roads and on to rail “commercial ownership of the ARTC may not go hand-in-hand with that objective,’’ Mr Irwin told a committee for the economic development of Australia forum in Sydney yesterday.

“Wherever there is a commercial owner that is looking for commercial returns I suggest that for much of the traffic across the country the cost of access will go up, not down,’’ Mr Irwin said.

Irwin has highlighted one the the key problems of privatising natural monopolies, like rail networks. Without a proper regulatory environment being put in place (which inevitable lowers the sale price), such privatisations merely shift a public monopoly to a private monopoly, raising costs for end-users.

As argued by professor Stephen King last year:

The government gets more today because we will all be paying more tomorrow…

Privatisation without competition risks turning a public monopoly into a private monopoly. The owners may change but the public will get ripped off just the same.

LAND

Two more government inquiries:

Inquiry into Home Ownership

The Committee will inquire into and report on:

– current rates of home ownership;
– demand and supply drivers in the housing market;
– the proportion of investment housing relative to owner-occupied housing;
– the impact of current tax policy at all levels; and
– opportunities for reform

The 2nd government inquiry is rumoured to be run by COAG with Tim Pallas chairing. TBC.

National Bank of Australia chief economist Alan Oster says “no bubble exists in Sydney or Melbourne ….. traditionally you’d expect to see the ability to borrow against the house price would be historically high, you’d expect to see very fast growth in credit funding it.”

Hat Tip Lindsay David & Bryan Kavanagh

Caroline springs – $1.6m house, $1m more than suburbs median, 50 mins from CBD

Treasurer Hockey on why Land Tax should replace Stamp Duty – our press release. A significant statement worth noting.

Monopoly Rights and Matty Maroun 

Manuel “Matty” Moroun…the real life Charles Montgomery “Monty” Burns
“It would be hard for Hollywood to invent a cartoon villain on the scale of Manuel Moroun…” – Toledo Blade Editorial Staff

Wiki Maroun

The private ownership of the bridge has been controversial as the bridge carries approximately 25% of trade between Canada and the United States.[22] Although alternate routes exist, including the nearby Detroit-Windsor Tunnel, preventing monopoly status, the route is of significant value since it passes directly though major metropolitan areas such as Detroit and Windsor. It is the shortest possible route from Toronto to many areas in the American Midwest of Michigan, Ohio, Indiana, and Illinois. (The aforementioned tunnel prohibits certain vehicles). In 2010 and 2011, the Wayne County Circuit Court found the Detroit International Bridge Company in contempt for failing to directly connect bridge access roads to the I-75 and I-96, and making other required improvements as part of the Gateway Project.[23] These improvements would normally be under the control of the state government; however, the Detroit International Bridge Company withheld the improvements as part of a negotiation strategy.[citation needed] At one point, Matty Moroun and his chief deputy at the Detroit International Bridge Co, Dan Stamper, were jailed for non-compliance with orders to complete the on-ramps.[33] After many years of legal battles, activism by local people against neighborhood truck traffic, and stalling by Matty Moroun, the Michigan Department of Transportation (MDOT) took over the I-75/I-96 on-ramp project and opened the ramps in September 2012 after a six-month construction period.[34] One possible motive for the Gateway Project delays is Moroun’s desire to route traffic past his lucrative duty-free store and fuel pumps,[35] one of only two border locations to sell untaxed fuel (the other is International Falls, Minnesota).[10] Critics of the duty-free fuel operation object that sixty cents from each U.S. gallon goes not to paving Michigan’s underfunded highways but instead directly to Matty Moroun.[36]

Bridge Battles

This Bridge is …. 

– a number of videos providing context to the battle for a new publicly owned bridge.

Let it Rip

MINING

Fortescue boss Andrew Forrest declares ore war on big miners BHP Billiton and Rio Tinto
The price of iron ore, the nation’s biggest export, has plummeted in recent months.

Mr Forrest argues that for every dollar lost the economy loses $800m and the government loses $300m in company tax revenue. This would put the cost to the Budget at $18b in the wake of the $60 per tonne price drop over the past six months.

Mr Forrest cited comments from BHP Billiton Iron Ore CEO Jimmy Wilson that “we’re oversupplying at the moment and we’ll oversupply in the medium term” and Rio Tinto CEO Sam Walsh declaring “a lot of my friendly competitors are going to disappear”.

Fortescue Metals boss Andrew “Twiggy” Forrest has confirmed the company is cutting up to a 100 jobs a day as the troubled iron miner attempts to reduce debt and slash its workforce of 4500 by some 700 positions.

Mr Forrest renewed his call for BHP Billiton and Rio Tinto to be the subject of a parliamentary inquiry into “predatory volume behaviour” and “distorting the free market”.

****Twiggy is acting contrary to economic convention, complaining about lower prices. Here’s the guy who took centre stage in attacking the MRRT, now saying Australia’s common-wealth – the iron ore – is our iron ore.

Strikes at the heart of the revenue raising system, where many organisations find themselves at the behest of wealthy philanthropists, rather than public expenditure allocated according to democratic mandate.

Mining Booms and Busts can do funny things to a bloke – just look at Twiggy

The national interest conveniently coincides with Twiggy’s personal interest – that much hasn’t changed since 2010. Fortescue is now funding a “grassroots” group called Our Iron Ore, which makes out that the commercial interests of Fortescue are the same as the public interest. The stock photo of “the face of the Australian community” on the website is also used by a Florida rehab clinic.

Twiggy’s concern for people and communities didn’t stop his company, just three weeks ago, from sacking a chunk of its workers on the spot and having their belongings returned from the mine camp in garbage bags.

This sort of digital astroturfing to provide cover for a campaign of narrow self interest, with the primary target being an narrow political audience, is a disease in Australian public life. It’s widespread, and ideology-agnostic.

Twiggy diversifies into …land

In a recent deal, Fortescue Metals Group chairman Andrew ‘Twiggy” Forrest, bought 7300sq km of land — an area almost six times the size of New York City.
The Australian has reported the $4.5 million deal, which saw Forrest acquire two vast Pilbara cattle stations from the collapsed empire of former tycoon Ric Stowe, making him one of the biggest individual landowners in Western Australia.

Nathan Tinkler, owner of the Newcastle Jets, has placed the A-League club into voluntary administration with debts of $2.7 million.
But Tinkler says a sale to Scottish club Dundee United for $5 million is imminent.

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