26 February 2011

Gillard Announces Carbon Tax in Australia

Australian Prime Minister Julia Gillard has announced that a carbon tax will be implemented by July 2012 in Australia. This carbon tax will be an interim measure that will eventually transition into a cap-and-trade system.

Assuming that humans burning fuels is what is causing climate change, then a carbon tax makes sense. I personally would prefer a carbon tax over a cap-and-trade system simply because of the simplicity, although a cap-and-trade system may be better in theory.

Gillard has not released any details of her carbon tax. The details will matter a lot. For example, will the tax be applied on companies that burn fuels with carbon in it or will it apply to the extraction of oil, coal, or natural gas from the ground (like a mining tax)? If it is the former then I worry that if companies will have to pay a tax on burning fossil fuels then they will simply export it to another country, burn it there, and possibly wire the electricity back to Australia. A mining tax based on the carbon content of what is dug from the ground is a much better idea.

Since a carbon tax will increase the cost for miners who dig up or sell energy, the costs will likely be passed on until it reaches the consume. The bottom line is that a carbon tax will increase the price of everything since just about everything involves the burning of fossil fuels. The carbon tax will effectively be similar to an increase in GST, and one of the potential problem is the impact this has on poor people who will face price rises when buying essentials like food and petrol. Gillard has claimed that most of the revenue from this carbon tax will be used to ease cost-of-living pressure. I sure hope that it does otherwise there will be massive public backlash, even from Labor voters. In my opinion the proceeds of the carbon tax should be used to increase the tax-free threshold. Currently anyone earning less than $6000 per year do not have to pay income taxes in Australia. With the revenue from the carbon tax, this can be increased, and this will help poor people buy necessities like groceries and petrol.

Some people believe that given that Australia's economy makes up only 2 per cent of world GDP, this carbon tax will have no impact on global warming. This is true, but it ignores the fact that Australia doing this will give other countries an incentive to start their own carbon tax. If the tax is applied to mining or the export of energy then it will have a much greater impact because Australia is a major energy and resource exporter. If the price of Australian resources is higher then this will increase the world prices of resources, which will have a massive impact on global energy consumption. If we are cynical and assume that governments only want to make as much money as possible, then we should expect to see governments around the world use the carbon tax as an opportunity to increase their own tax revenue. If we are very cynical and assume that the governments of the world are controlled by oil and mining companies, then oil and mining companies will be happy that Australia will apply a tax on its energy exports as this will push up the global price of energy and lead to greater profits for them. This will effectively be price fixing for energy. In the name of saving the environment, an OPEC-style multinational cartel of energy-rich countries can be established to artificially inflate the price of energy to both save the environment and to increase profits for oil and mining companies and to increase taxation revenue for government. Governments colluding among themselves and international oil, coal, and gas companies to artifically inflate the price of energy is not going to win public support. However, if it is done for the sake of the environment and if the poor are massively subsidized for the cost of necessities--e.g. by increasing the progressivity of income taxes--then I am sure that this plan will be popular and it will work.

24 February 2011

Survivor Redemption Island Episode 2

This blog post contains spoilers.

In this episode, Russells tribe once again win the immunity challenge early. Most of the action happens after the immunity challenge. In Russell's tribe, a castaway named Ralph who looks like a stereotypical redneck farmer finds the hidden immunity idol without any clues. Russell snatches the clue but because Ralph has already found the idol, it is pointless. To make matters worse for Russell, most of the men in his tribe (who outnumber the women) saw him snatching the clue and are eager to vote him off because he is not trustworthy. I am convinced that Russell will not survive in this game and will go out early. The only thing saving him at the moment is his team's ability to win immunity challenges. His reputation for being untrustworthy is only being confirmed when he continues to behave deviously.

Over at the other tribe, it is expected that Rob would orchestrate the ouster or the crazy man Phillip or Kristina. However, he notices that Matt and Andrea may be forming a strong romantic alliance, that Andrea is strong player, especially when she has control of Matt. To fix this problem he forms a four-player alliance to get rid of Matt, which weakens Andrea and makes her dependent on him. By also sparing Phillip he also controls him through fear. This looks good for Rob but I am worried that with a four versus three position with Phillip, Kristina, and Andrea in the minority in Rob's tribe, all it will take for this tribe to flip on him is if one person from his alliance defects. Keeping Phillip in the game may be a good move as he seems harmless to Rob and also seems very loyal.

20 February 2011

Democracy is Communism

Today I had a discussion with a family member about politics at a Thai restaurant. We were talking about a news article that talks about Hosni Mubarak's massive fortune. The discussion veered off into wealth inequality and communism.

The richest 2% of the world own 85% of the wealth, which is an incredibly unequal distirbution of wealth. Some people believe that this economic inequality is normal and that there is nothing wrong with it. Personally, I do not like the idea of the bulk of the wealth being in the hands of the few. Perhaps it is jealously, or perhaps I don't like the idea of the rich holding all the wealth and using it to work the rest of us like slaves. Either way, regardless of my feelings, I am confident that the majority of the world's population would want wealth to be spread rather evenly among everyone. A survey in America showed that just about everyone (even those earning very high incomes) believe that wealth should be spread more evenly. According to the survey, most Americans believe that the top 20% own only about 60% when in fact the top 20% own 80% of the wealth in America. However, most Americans believe that the top 20% should own 20% only.

If Americans (or every human in general) so overwhelmingly support wealth being in the hands of the people rather than the few, why don't they support communism? The theory of communism states that wealth in the form of income-producing assets (e.g. land, factories, businesses, etc) be owned by the people rather than the few.

What is clear from looking at the definition of communism is that it is almost exactly the same as the definition of democracy. The word democracy is made up of the word "demo" that means "people" and the word "cracy" that means "rule." Hence democracy literally translated means "rule by the people." In other words, the people are in control. Given that most people support equal distribution of wealth then it follows that democracy if properly implemented will inevitably lead to communism. If you speak to the average person on the street, he will likely support democracy and even support the distribution of wealth, but he will also likely oppose communism. I believe that popular opposition to communism is the product of most people not understanding what communism actually is. Most people seem to confuse communism with dictatorship, probably because many dictators use communism as an excuse to gain popular support before they sieze power for themselves. A dictator may be communist initially but as he gains power the temptation to sieze all power and wealth for himself is so great that he effectively renounces communism by his decision to sieze power and wealth for himself. Dictatorship is not communism as the dictator owns everything, not the people.

When you talk about communism, inevitably people will talk about how communism does not work in practice. I actually agree that pure communism is difficult, if not impossible to implement. The problem is that humans need leaders otherwise there is confusion about what to do. As leaders are formed, temptation is there for leaders to sieze power and wealth. Even if a system were set up that takes money from the rich and gives it to the poor, this would remove the incentive to work. When you go to work, you work hard for your boss because you hope that one day you may replace your boss and earn more money. But if the boss is paid the same amount as ordinary workers, why would an ordinary worker bother trying to work hard? Because there is no incentive to lead, nobody leads, nobody works, and nothing gets done. In practice this leads to empty shelves at supermarkets, as we saw on television as the Soviety Union collapsed.

I therefore do not think that pure communism is wise and some degree of income inequality is necessary to give people a reward for working. If nobody works, there will be no food grown and no shelter built, and we will all die.

The answer is to implement a system that tolerates wealth inequality but limits it to a degree with communist-style policies that take money from the rich and give it to the poor, e.g. progressive income taxes. In fact, most countries, e.g. America and Australia, already have progressive income taxes. Furthermore, Australia also has a generous universal public health insurance scheme called Medicare.

The main point of this blog is to illustrate that communism should not be a dirty word. Communism is merely the spreading of wealth into the hands of the people and the implentation of communist policy and law is normally the by-product of democracy and elections as most people want wealth to be spread evenly. Given that a country like China has no election and hence the people do not have any way of expressing themselves and given that the income inequality in China is so high (China's Gini coefficient is around 47, higher than Australia's 30) it would seem as if the wealth in China is in the hands of the few, which is hardly compatible with communist theory. I would argue that based on Australia's democratic system and high redistribution of wealth from the rich to the poor, that Australia is much more of a communist country than China is.

19 February 2011

Survivor Redemption Island Episode 1

This blog post contains spoilers.

Season 22 of Survivor will still be on Nicaragua, as was season 21, but this season will features two twists: Firstly, those who are voted out do not leave but rather go to Redemption Island (RI) where they will have to survive by themselves. When the next person is voted out, he or she also goes to RI where the two castaways will engage in a duel. The winner of the duel will continue to stay on RI while the loser is completely out of the competition. At some stage in the future the castaway on RI will re-enter the game. Survivor Pearl Island had a somewhat similar idea in that two people who were previously voted out went back into the game. When this happened, there was a lot of pressure on the returning castaways because those in the game make the argument that these people did not deserve to still be in the game. The second twist this season involves the return of former Survivor players Boston Rob and Russell Hantz. Boston Rob has played three times, went to the end once, but has never won. Russell, a self-proclaimed multi-millionaire who owns an oil company, has played in two seasons, has been to the end twice, but has also never won. Given these these two players have developed reputations as villainous and devious players, it is likely that other players will see them as a threat, which may see them voted off early. If this happens, the existence of RI should give Rob and Russell fans an incentive to continue to watch the season.

During the first episode, Rob and Russell were randomly assigned to separate tribes. Russell is in the more physical side whereas Rob is in the less physical side made up of younger and physically weaker people. Because Rob is the only strong player on his tribe, he is important. However, Russell is a strong player among many other seemingly strong players, so his position in the tribe is, in my opinion, not good, especially given his villainous reputation.

Rob's tribe lost the immunity challenge and went to tribal council. He teamed up with three young girls and two young guys to form a six-strong alliance versus a minority of three people: Francesca, Phil, and Kristina. Because Rob suspected that Kristina had an immunity idol, he instructed his alliance to split the vote between Kristina and Francesca. This plan resulted in Francesca being voted off.

One of the castaways, Phil, is probably one of the strangest contestants ever. He was a former Federal agent and likes to brag about this. When he talks, he uses secret agent jargon. He reminds me of a friend of mine who studied law in university and although he is not a lawyer but an accountant he loves to brag about how he had a sharp legal mind and that he knows how to think in a legal manner. While being a Federal agent or being a law may or may not be an impressive thing, the bottom line is that if you have to brag about it, surely you must be insecure.

13 February 2011

Exploiting Cheap Labor

"As for the rich in the present age.... They are to do good, to be rich in good works, to be generous and ready to share." ~ 1 Timothy 6:17, 18
I am still a twenty-something, but I am almost thirty, and many of my friends are younger than I am, which makes me feel old. When a man feels old, he goes through a mid-life crisis and starts to ask himself questions such as what will his legacy be once he dies. If you're going to die, you might as well do something worthwhile while you're on this earth. But what is worthwhile?

This is a question for each individual to find out for himself, but if a man wants to have a positive impact on the world, a good place for him to start is to help others, especially the poor. If you are reading this now, chances are you can afford internet connection, and chances are you are among the wealthiest people in the world.

Of all the people in the world who care about the poor, I approximate that most of them believe that although helping the poor is a virtuous goal, it is a futile effort. Most people I speak to say that they would like to live in a world without poverty, a world in which the rich shared money with the poor, but they believe that they don't have enough money and that there is too much greed among humans, which leads to theft, and theft in turn creates poverty.

But I respectfully disagree. I believe that in the last century we have witnessed in India and China the greatest escape from poverty in human history. China and India are the most populous countries and the world. Together these two countries make up 40 per cent of the world's population. Yet the rise in the living standards in these two countries is not primarily the result of sharing wealth. In my humble opinion, the explosion of wealth in these two countries over the last few decades is primarily the result of mass exploitation of cheap labor.

Charity is an unreliable source of income. If you beg someone for money, he may hand you a dollar today, but rarely is a person willing to give too much, and the desire for charity is as fickle and unpredictable as the desire for sex. If you made a living from begging for money in the streets, chances are you will not have enough and you will not be satisified. How then do you and I make money?

We make money by working.

A job gives a worker not only money but it also allows the worker to develop skills and to help customers receive some good or service that they need. A job therefore is not like charity in that it does not rely on the fickleness of altruism but rather it exists to fulfill consumer needs.
"If a man will not work, he shall not eat." ~ 2 Thessalonians 3:10
Millions of Indians and Chinese grew rich because jobs were created. It is true that many of those who benefited from the sales of goods made through the exploitation of cheap labor were already rich (e.g. the shareholders of Nike) but if it weren't for Nike existing in the first place, these jobs would not have existed. If jobs eradicate poverty then those who create jobs should be rewarded greatly. Nike executives have found a way to give millions of jobs to poor citizens in poor countries and create demand for this labor through ingenous marketing to induce consumer demand.

So what are we to do? What is all this writing about? By writing all this I am trying to tell everyone that we do indeed have a lot of power in our hands. As consumers, whenever we buy a t-shirt that is made in China we are supporting jobs in China that allows someone in China to live by earning something rather than nothing.

The main point of this essay I write is to encourage readers to exploit cheap labor. If we see cheap products made in poor countries, we should not feel guilty buying it. Furthermore, products that exploit cheap labor tend to be cheaper, which benefits the consumers who buy them. Hence exploiting cheap labor is a win-win situation. When we go on holiday or when we retire, we should travel to poor countries and try to buy products that exploit cheap labor. How do we know what goods and services exploit cheap labor? That is where your common sense comes in. If you go to a poor country and stay at an expensive Western-style hotel that pay high wages to rich workers, chances are you are not helping the poor as much as if you go to a cheap three-star hotel that hires and pays low wages to poor workers.