Is Preferential Treatment for Women Really that Bad?

Many people say that feminism is bad because it favours women over men. Many feminists react by saying that feminism is about equal opportunity rather than giving women preferential treatment.

However, is preferential treatment for women really that bad? As a man, I may hold paternalistic instincts and may wish to protect women over men, so this may bias my views. However, imagine we had perfect equality and we treated men and women the same. This means that eg there is no gender segregation in prison. Now imagine if a young women goes into a prison with a bunch of men and is raped by these men. Such an outcome is horrific and there are many situations similar to this and so to some degree I would think society should treat women better than men eg have a separate area for women in prisons or eg have quotas for women greater than 50% and so forth.

The Greatest Argument Against Having Children: Human Corruption

I am definitely more liberal than conservative. I generally find conservatives nowadays to be very hateful, e.g. Trump supporters (and other conservatives) seem to mostly be Nazis who view non-whites as inferior, and many of them are sexists as well who subcribe to men's rights activist (MRA) or manospherean beliefs believing that women should be subordinate to men. Many of these MRA manospherean conservatives (e.g. Roosh Valizadeh) actually believe that on private property women should be allowed to be raped. I have heard that in schools nowadays many young boys who are influenced by conversatives values are literally grabbing young schoolgirls by the pussy and sexually harrassing them thinking this is normal traditional masculine behaviour, which is a sad state of affairs. Men in power should set a standard of proper gentlemanly behaviour for other men to emulate. I personally think we should all be treated fairly and with dignity regardless of your skin colour or your gender. I think that the divisiveness that in politics nowadays is not going to help the world in the future, which will be plunged into war, chaos, environmental disaster, and this is the main reason why I don't want to ever have any children. If I go have a child, not only is it expensive to have children (one child costs US$1.1 million over your lifetime) but my child will grow up in a world filled with racism, sexism, religious extremism, division, hatred, and environmental degradation. With the way international politics is going, there will likely be a future nuclear war that destroys all of humanity. If my child doesn't suffer, chances are the generation after that will suffer or be eradicated, so to bring an innocent child into such a corrupt world is tantamount to child abuse, so it is better to never have children, which will save me and my future wife millions of dollars, which will allow us to live life to the fullest, to travel the entire world and see unique cultures and natural beauty while it lasts because the way the world is going now, it is clear that humanity is nearing its end. We must live our lives to the fullest while we can and bow out before humanity self-destructs and implodes due to excessive greed, ego, and aggression.

Meritocracy is Oppression of the Stupid

Most of us agree that oppression is bad. We don't like to see groups of people oppressed, e.g. slavery. However, there is one type of oppression that seems to be acceptable and that is the oppression of the stupid, and it occurs due to the veneration of meritocracy. The theory is that in a meritocratic society, benefit go to the best. For example, the thinking is that if you are smart, you will get good grades, get a high-paying job, and your lifetime earning will be high.

In a meritocratic society, it is the stupid who suffer, and many people have no issues with blaming stupid people for their stupidity. In fact, if you hate someone, it is common to try to hurt them by insulting their intelligence.

The problem is that there are many people in this world who are just born stupid. They are simply just dull people and they cannot help it, and it is painful for me to see them failing at life due to something they have no control over.

Many stupid and naive people who are young and physically attractive are likely to be looked after by others who are more intelligent, e.g. most children or attractive young adults with intelligent partners or spouses. In these situations, stupidity, naivity, or vulnerability can be seen as an attractive personality trait that complements physical attractiveness.

However, physical attractiveness is also something you are likely born with, and for those stupid or naive people who do not have sufficient erotic capital to compensate for their stupidity, it is as if they are left to suffer in a world that shows them extreme prejudice.

Rudd Asylum Policy Balances Compassion with the Demands of Rednecks

http://m.smh.com.au/federal-politics/political-news/its-crunch-time-for-rudd-20130721-2qcqo.html

I am happy Rudd is back. I didn't mind Gillard, but Rudd is the best chance Labor has to defeat Tony Abbot whose right-ring policies will see 20,000 public servants fired.

Rudd's policy of sending asylum seekers to PNG if they come by boat I believe strikes the right balance between appeasing the rednecks while also treating asylum seekers with compassion. There is nothing wrong with settling with PNG, which is a growing and peaceful democracy. The asylum seekers will be treated according to UN standards. All this does not prevent legal refugees and skilled migrants from coming to Australia through more traditional means, as many do.

Carbon Tax Compensation Present Opportunity to Salary Sacrifice into Superannuation

To compensate for the impact of Julia Gillard's carbon tax on the cost of living, income tax cuts will compensate anyone who earns less than $80,000. For further details about the tax cuts, see the following: Individual Income Tax Rates (ATO website)

Basically, the tax free threshold will increase from around $6000 to about $18000 and instead of being taxed 15% after that, you will be taxed 19%. For each dollar you earn above $37,000, instead of being taxed 30%, that marginal tax rate will increase to 32.5% and then eventually to 33%.

What this means is that, for those who earn between $37,000 and $80,000, you can cut your income tax by 33% (rather than just 30%) if you salary sacrifice. One option is to salary sacrifice into your superannuation fund. Money that goes into superannuation is taxed, of course, but it is only at 15%.

Be careful when you salary sacrifice into your superannuation fund as there is a limit. For younger people, there is a concessional contribution limit of $25,000 per year. It is best that you speak to a financial advisor if you are concerned about exceeded this limit.

Personally, I have taken this as an opportunity to salary sacrifice more into my superannuation fund. All it involved was sending an email to HR requesting it. I now salary sacrifice $600 per fortnight into my superannuation fund.

My reasons for salary sacrificing into my superannuation fund are not just monetary. There are also some personal reasons why I am doing what I am doing. I find that having too much money around doesn't help and actually makes me worried or anxious, so putting money aside (so that it is out of sight and out of mind) actually calms me considerably. Instead of doing something stupid with the money and losing it, it is now safely stored away in my superannuation fund, and I don't have to worry about it until I'm very old.

Some people argue that putting money into superannuation when you're young is a waste of money. They argue that superannuation funds invest money in the stock market, which underperforms residential real estate. They would prefer to be hit with the higher tax and then put the money into residential real estate (by paying off their mortgages). The problem with this argument is that is assumed two things: the first thing it assumes is that superannuation funds invest only in the stock market and not real estate. This is wrong. Superannuation funds typically offer investors with the choice of a range of investments, but typically industry super funds tend to offer shares, bonds, listed property, and cash. These investments, in my opinion, are fine. But if you are absolutely desperate to invest in residential real estate, you can set up a self-managed super fund (SMSF) and invest in residential real estate. The benefit of salary sacrificing into your superannuation fund is that you can save on tax, but it is wrong to assume that superannuation funds only invest in the stock market. The second assumption is that residential real estate outperforms the stock market. This is not true. Residential real estate is very hard to measure but most studies done on this topic find that a broad Australian stock index is roughly the same in growth as residential real estate over the last few decades. Of course, you can always cherry pick some story about some guy who purchased some home for x amount and then sold a few years later for ten times the amount. Likewise, you can pick and choose select stocks like Westfield and Fortescue Metals and launch the same story in favour of the stock market, but what this teaches you is that past returns mean nothing. Just because something has performed well in the past, it doesn't mean it will perform well in the future, and in the world of finance it tends to be the opposite: i.e. those assets that go up in price rapidly in the recent past tend to be overvalued, and a correction in the form of rapidly decreasing prices usually proceeds.

In other words, there is no solid evidence that residential real estate will outperform the stock market in the long run. The best we can do is to diversify across many types of investments, from the stock market, to cash, to bonds, and even listed property and maybe some residential real estate as well. Ecclesiastes 11:2 states the following: "Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth."

Chinese Buying Australian Farms

Read more: Sell the farm to buy a future as China's food bowl

There have been worries expressed at Chinese agricultural interests buying Australian farm land. The main issues with this seem to be the idea that the Chinese investor will use the land for Chinese interests rather than Australian interests. Many say that if a Chinese investor owns Australian land and grows food on it, it will export all its food back to China and leave nothing for Australians or it will export so much to China that food prices will rise.

The only thing I have to say to this argument is that it is already happening. It doesn't matter if the farmer is Chinese, Australian, American, or any other nationality. Investors only care about making more money and will export their products to wherever there is highest demand. Australian farmers and especially miners (e.g. BHP) already export significant amounts of agriculture and resources to the rest of the world, especially Asia. To think that simply changing the nationality of the investor will change anything is absurd. If Australians want to limit how much food is exported overseas, it can implement this by imposing trade restrictions on farmers, but this is highly unlikely as politicians should recognise that there are many benefits to farmers exporting their food overseas.

Patriotism is a tool that rich people use to ensure poor people are loyal and obedient to them. When patriotism is not profitable, rich people are quick to drop it. Farmers would love to tell Australians to support the local industry and buy Australian made food as they benefit from the higher demand. But farmers are very happy to start exporting the bulk of their food to other countries to maximise their profits rather than keep it all in Australia to lower prices for Australian consumers.

The same story unfolded in the Australian retail sector. Australian retailers will tell Australian consumers that they need to be patriotic and support Australian products. Of course they will say this because they are making money off the Australian consumer. But the Australian retailers like Harvey Norman, Myer, and so forth have nothing against importing cheap products from overseas, quadrupling prices, and then selling it to gullible Australian consumers.

Similarities Between Economic Development and Prostitution

Rapid economic growth in Asia e.g. China seems to have occurred after these countries have opened themselves up to foreign trade and capital. This all seems to fit in with supply-side economics. Wikipedia defines supply-side economics as follows:

Supply-side economics is a school of macroeconomic thought that argues that economic growth can be most effectively created by lowering barriers for people to produce (supply) goods and services, such as lowering income tax and capital gains tax rates, and by allowing greater flexibility by reducing regulation. According to supply-side economics, consumers will then benefit from a greater supply of goods and services at lower prices. Typical policy recommendations of supply-side economists are lower marginal tax rates and less regulation.

In other words, in order to foster economic growth, it is important that policies are implemented that meet the demands of businesses because ultimately, all wealth is created by business.

This theory is remarkably similar, in my opinion, to prostitution. In the market for sex, prostitutes work hard in order to make money from customers. In order for prostitutes to improve their standard of living, they have to implement policies that appeal to customers, e.g. they have to maintain their appearance. Similarly, supply-side economics suggests that workers and government, in order to improve their standards of living, must prostitute themselves to global businesses. In other words, the Chinese government and its people must reduce its wages so low and demand that its people work so hard so that a company like Nike will be interested in coming over, exploiting the Chinese workers, and paying them for it.

Hence, in order for countries to develop their economies, they must become better prostitutes. They have to undercut their fellow prostitutes and work harder and harder at providing better services to their customer, i.e. global business. In other words, they must become better prostitutes.

Update 25 July 12

I have been thinking about this issue a little more and have the following to add.

Many people argue that prohibition, whether it is prohibition of alcohol, sex, or gambling, doesn't work. When the US prohibited alcohol, what it found was that drinking alcohol went underground. Organised crime supplied the liquor and made enormous profits. By legalising alcohol, the US government was able to essentially destroy the criminal element in the liquor industry. In the Australian state of Victoria, liquor, gambling, and prostitution are legal but highly regulation. Premises that sell liquor must have a liquor license that it purchases from the state government. The same applies to prostitution. Under the Sex Worker Act in Victoria, there are laws about use of condoms and the frequency by which prostitutes must be tested for STDs. The main argument for tax and regulate versus prohibition is that demand for sex, alcohol, or gambling will never go away. It is better therefore for the government to regulate these industries to allow consenting adults to participate freely but to protect minors and other vulnerable members of the community. Tax and regulate also allows government to earn revenue by selling licences as opposed to all the proceeds of crime being siphoned off by mobsters.


In my opinion, the prostitution theory of economic development works the same way. In the same way that there is a large group of men who, due to their innate sexual desires, will always demand sex, so too there will also be a large group of wealthy people who, due to their innate greed, will always want to grow their wealth. The best way for wealthy people to grow their wealth is to invest.


Instead of prohibiting prostitution, it is better for government to harness the innate sexual desire of men for the benefit of society. By taxing and regulating prostitution, government can collect extra revenue and can allow prostitutes to earn a living and thereby improve levels of employment. In the same way, government, instead of prohibiting the greed of wealth men (i.e. turn to communism) the government can allow wealth men to indulge their greed and invest, start businesses, and employ workers. This allows the government to collect more revenue through various taxes, e.g. company tax, land tax, transaction taxes, etc. It also allows government to harness the greed of these wealthy people (or capitalists) to increase levels of employment. In the same way that men exploit prostitutes, capitalists exploit workers. The benefit of exploitation is that jobs are created. As one economist famously said, the misery of being exploited by a capitalist is nothing compared to the misery of not being exploited by a capitalist. In other words, we are all prostitutes. We sell our talents for money, but that is what puts food on the table and that is what drives global GDP and improves standards of living.


In the same way that government cannot control men's desire for sex, gambling, or liquor, so too government are nothing compared to the power of the international capitalist class. As a result of natural greed, corruption, and so forth, there will always be an elite group of people who control nearly all the wealth. Government do put up a fight, but the existence of tax havens and loopholes make this fight quite futile. The ruling capitalist class will always exist just as men will always desire sex. It is better then for government to accept this and do what it can to sell its people to the capitalists. In other words, if capitalists are like men who are willing to pay for sex, governments are pimps, and workers are prostitutes.

Prostitutes can go it alone and try to get business but there is danger in this. There can be beaten up by customers. If the prostitute has a pimp, the pimp will protect the prostitute but the prostitute must give a certain percentage of her earnings to the pimp. Government is no different. Workers are prostitutes but governments build roads, build utilities, and ports. They build these things to make country to more attractive to capitalists. In the same way, pimps or brothel owners will build buildings, provide condoms, and so forth. These are the essential infrastructure necessary to attract customers and facilitate trade. In the same way that prostitutes pay a proportion of their earnings to the pimp or brothel owner, so too the worker pays a proportion of his or her earning to the government in the form of taxation. In the same way that some pimps treat their prostitutes better than other pimps so too different government treat their citizens in different ways, from the cruel dictatorships to the benevolent dictatorships to the democracies and republics.

What is the take-home message from all this? Communism is prohibition and capitalism is prostitution. If we want higher standards or living economic progress, we must prostitute ourselves and allow ourselves to be exploited.

Using GST to force Victorian tax reform

According to an article in The Age titled State could be big loser in tax plan, the Commonwealth government is thinking of forcing states to get rid of inefficient taxes such as car registration and land transfer duty. It will achieve this by tying GST payments to the states' progress on tax reform. The launch of the GST was supposed to remove inefficient taxes, but what eventually happened was the states simply kept these taxes. By linking GST payments to progress on tax reform, the Commonwealth can effectively force the states to reform their tax systems or suffer the consequences.

Most taxes on transactions are inefficient because they distort economic action. For example, land transfer duty prevents a company from moving its business to better location because of the costs. For an employee who works full time, land transfer duty puts a huge cost on relocation, which means that if he has to travel for two hours everyday to get to work he may choose not to move closer to work due to land transfer duties.

A tax like car registration is completely unfair because you pay approximately $600 regardless of whether you do a lot of driving or do very little driving. The amount you pay should be based on how much damage you do to the road, which is why I think getting rid of car registration and making up for the lost revenue with an increase in fuel tax would be great. The problem is that the states cannot tax fuel, only the Commonwealth can.

Government failure is not an excuse for more privatization

According to the Institute of Public Affairs's article Behavioural Economics: An Excuse to Tax and Regulate, claiming that free markets are inefficient because people are irrational does not give an excuse for government to intervene because bureaucrats are also irrational people. According to IPA, there may be market failure, but there is also government failure. IPA states the following:

Cooper and Kovacic argue that the bureaucrats who regulate those decisions are likely to have biases that undermine the effectiveness of government intervention.

Regulators are like the rest of us. They are over-confident, thinking they can understand complex behaviour. Hindsight bias leads them to believe events are more predictable than they are. And, unsurprisingly, they are driven by action bias - a tendency to favour interventionist solutions when faced with a problem.

In fact, regulatory biases could be worse than market ones. Behavioural economics tells us that irrationality is everywhere. But the marketplace provides firms and consumers with instant or near-instant feedback. In a competitive market, psychological bias can lead to failure or loss of market-share. With such feedback, market participants will change their actions. Make a mistake, lose money... do better next time.

This is a fair argument. It is true that bureaucrats are far from perfect. But government failure is not really the product of irrational behaviour. Rather, government failure is usually the product of rational behaviour. In a free market capitalist system, what tends to happen is that a very wealthy class or merchants or capitalists emerge. This is what happened during the Industrial Revolution in Britain when a class of merchants started to challenge the power of the aristocracy or gentry. When a powerful class of capitalists emerge, they tend to influence government. Given that bureaucrats and politicians are rational self-interested people, they are also corrupt and accept benefits from wealthy capitalists. Hence free markets are not really the answer to government failure. Free markets only exacerbate government failure as free markets lead to wealth concentration in the hands of capitalists and this in turn leads to corruption and government failure.

The answer to government failure is democracy. The way to make sure that governments don't always give in to the demands of capitalists is to try to force them to give in to the demands of the people, e.g. by members of the public demanding action from their representatives and voting according to what they want. It may be true that the demands of the people can lead to economic inefficiency, e.g. trade unions, welfare, and so forth are all economically inefficient according to mainstream economic textbooks, but these policies protect the people and if the people do not demand it then the government will simply give in to the demands of capitalists and what capitalists want (i.e. a monopoly for their businesses) is also inefficient. In other words, economic inefficiency will always exist because government officials are rational. They will auction off their position to the highest bidder. The best fairest outcome occurs when what government can give (i.e. the funds from taxation revenue) is distributed more or less equally.

Capitalism is Corruption

Capitalism is a system whereby wealth is in private hands. Communism is a system whereby wealth is in public hands. Capitalism is by definition corruption. Corruption is defined as putting public money into private hands. For example, if a politician receives a bribe by a company for a permit to mine in an area, then instead of the company paying taxes, i.e. paying the people, he is instead paying the individual politician who pockets the money. Hence bribery or graft is the privatisation of public money. It is a move to capitalism from communism.

Capitalism is a brilliant tool for increasing economic growth and increasing prosperity. What is most unfortunate about capitalism is that it flies in the face of what most people consider is fair, i.e. powerful and corrupt people control the economy and the workers are effectively slaves, some slaves more fortunate and more free than others. The optimal system therefore is a mixed economy, a capitalist economy with a communist redistributive taxation system that takes money from the rich to give to the poor. This is a good compromise. Most advanced economies already do this, e.g. America, Australia, Sweden, and Norway. However, poor countries cannot afford communism. They need capitalism to drive the economy. This is why poor countries are corrupt and why they need to be corrupt in order to develop.

Many developing economies nowadays, e.g. China, India, Russia, and Thailand have enjoyed significant economic growth, and most people agree that these countries are highly corrupt. This is because these countries have embraced capitalism and hence they have embraced corruption.

Karl Marx argued that countries undergo a natural evolution from feudalism to capitalism to socialism. Under capitalism, the rich use the workers for profit and pay workers a wage. Over time, workers accumulate wealth through their income and with wealth comes power. This allows workers as a whole to demand sick leave, public holidays, weekends off, and so forth. Over time, capitalism tends to evolve into socialism because exploitation of workers tends to give workers more power as workers accumulate wealth.

Many conservatives argue against socialist ideas, saying that socialist ideas hurt the economy. This is generally true. Take for example public holidays. The government deeming e.g. Christmas Day to be a public holiday is a socialist initiative that benefits the working class. It is a detriment to capitalists whose  factories and other businesses have to be shut down for a day. In large factories that mass produce, one day of stoppage can mean millions of dollars in lost revenue. Socialist ideas hurt the economy. However, once an economy develops, if the government does not give workers their socialist demands, the alternative is worse. In a country that is already developed, the alternative to socialism is fascism. Fascism is defined as rule of the country by the powerful and for the powerful. Fascism will come about if there is an absence of communism. Without communism, the working class is impotent and the capitalist class control the government. If the capitalist class control the government, they will, through rational self-interest, implement policies that are anti-competitive and can lead to monopolistic inefficiencies. If we assume that humans are all greedy and are "rationally self-interested" then fascism is the direct by-product of capitalism. In a capitalist economy, those who have money and power will have an incentive to use government to eradicate competition, which means they will use government to eradicate rival capitalists. Politicians will, through rational self-interest, accept bribes or political donations from lobbyists, and the anti-competitive policies implemented will be detrimental for the economy. The only things standing in the way of fascism is communism, as the people as a whole can demand that government implement policies that benefit them. The force of democracy then leads to a situation in which politicians who want to please both voters and lobbyists, find a compromise. This compromise between the fascism promoted by capitalists and communism promoted by workers is normally called a "mixed economy" or even "socialism."

If the Rich Steal, We Should Too

I spoke to an Occupy Wall Street protester in the city yesterday, who told me the following:

"If we don't steal from the rich, they will use government to steal from us just because they can. Who wouldn't steal a million dollars if he could get away with it?"

When I thought about his comment, it made sense. In America, the bailout of the banking sector shows how the rich steal from the poor due to their influence on government. The problem with capitalism is that once it is implemented, capitalists become socialists and use government to steal from taxpayers. Hence capitalism simply doesn't work in practice as it assumes that the capitalist class have the altruism and self-control to not loot the public purse when it would be so easy for them to do so (because they are by definition rich and powerful).

The 99% Movement

A growing number of people are protesting against corporate greed and the inequality of wealth. They seem to be calling themselves "The 99% Movement" in reference to the growing gap between the rich and the poor. To many of them, the government structures policies that benefit the top 1 per cent of society.

Are you a 99 percenter?

Do you earn less than US$506,553?

If the answer is yes to the question above, you are in the bottom 99 per cent. The New York Times' piece About That 99 Percent... has the following startling facts about the gap between rich and poor in America:

American households right at the 99th percentile (that is, the cut-off for the top 1 percent) will earn about $506,553 in cash income this year, according to a Tax Policy Center analysis. The income curve is very steep at the high end, meaning that people just a few tenths of a percentile point above that make much, much more. A family at the 99.5th percentile, for example, makes $815,868; its neighbor at the 99.9th percentile makes more than double that, at $2,075,574 a year.

Don't these lazy people just want money without having to work?

Many critics of the 99% movement claim that the protesters simply want to make money without working hard for it.

This statement suggests that if you earn less than half a million dollars a year, it is your own fault that you are not rich, and the top 1 per cent who earn more than half a million a year who expect no handout from the government are successful because of they are hardworking. This seems to be a major theme from the 53% movement.

However, a key part of the 99% movement is its focus on Wall Street bankers who on average earn more than half a million a year and are truly in the top 1 per cent. The problem is that the banking sector in America has very close ties with the government, to the point where it seems as if the government is controlled by the banking sector. The left versus right political spectrum is misleading. People on the left of politics blame rich bankers whereas people on the right of politics blame the government. No one seems to notice that rich bankers and the government are one and the same. Here is what the New York Times piece The Guys from "Government Sachs" says on the issue:

Indeed, Goldman’s presence in the department and around the federal response to the financial crisis is so ubiquitous that other bankers and competitors have given the star-studded firm a new nickname: Government Sachs.

The power and influence that Goldman wields at the nexus of politics and finance is no accident. Long regarded as the savviest and most admired firm among the ranks — now decimated — of Wall Street investment banks, it has a history and culture of encouraging its partners to take leadership roles in public service.

It is a widely held view within the bank that no matter how much money you pile up, you are not a true Goldman star until you make your mark in the political sphere.

In the aftermath of the GFC in 2009, the US government bailed out mainly the banking sector. As a result, the U.S. taxpayers now owes as much as $23.7 trillion to fund the bailouts. In other words, the bankers mismanaged their business, the government cleans up the mess, and you pay for it.

If you or I were to start up a business (e.g. a cafe or a restaurant) and we failed because the food was bad or the location was bad or whatever reason, do you think the government will save us? Hardly. The government will tell us that we live in a capitalist society and hence we should not expect any help from the government. But the bankers on the other hand -- if they fail, the government pours trillions of dollars of public money into their pockets.

It's not just the banking sector. After 9/11 (a tragic event) the Republicans led by George W. Bush used the crisis to siphon off public money for the benefit of their friends in not only the banking sector but also the defense sector. Bush then proceeded to cut taxes for the rich. As of 2011, Bush's tax cuts for the top 1 per cent of America have cost U.S. taxpayers more than US$700 billion.

Divide and conquer

If you visit the We Are the 53% site, you will notice that most of these people like to show off that they come from humble backgrounds, they work hard, expect no help from the government, and do not whine.

As I have already explained, the bankers and other members of the top 1 per cent have effectively stolen all the money. To use an analogy, the top 1 per cent have taken the entire cake and have thrown a few crumbs towards the other 99 per cent.

The 99 per cent then proceed to fight among themselves for the crumbs. Those who get the bigger crumbs accuse those who get the smaller crumbs of being lazy and stupid. Sexism, racism, left versus right, differences in religion--all this further divides the 99 per cent, leading to greater conflict and division.

Divide and conquer (or divide and rule) is an old military strategy that has been successful employed since ancient times. Here is what Wikipedia has to say:

In politics and sociology, divide and rule (derived from Latin: divide et impera) (also known as divide and conquer) is a combination of political, military and economic strategy of gaining and maintaining power by breaking up larger concentrations of power into chunks that individually have less power than the one implementing the strategy. The concept refers to a strategy that breaks up existing power structures and prevents smaller power groups from linking up....

In modern times, Traiano Boccalini cites "divide et impera" in La bilancia politica... as a common principle in politics. The use of this technique is meant to empower the sovereign to control subjects, populations, or factions of different interests, who collectively might be able to oppose his rule. Machiavelli identifies a similar application to military strategy, advising in Book VI of The Art of War (Dell'arte della guerra), that a Captain should endeavor with every art to divide the forces of the enemy, either by making him suspicious of his men in whom he trusted, or by giving him cause that he has to separate his forces, and, because of this, become weaker.

How do we lessen the gap between rich and poor?

The answer to this problem is to encourage unity (not conflict) among those who earn less than half a million a year and to use the democratic processes to redistribute wealth from rich to poor.

The rebellion by the Libyan people against their dictator Muammar Gaddafi shows how difficult it is for the people of a country to demand their fair share in a non-democratic country.

But many Americans are lucky to live in a democracy where they can use democratic processes to vote for their fair share of the cake by taxing the rich. The problem is that most Americans, as discussed, are too busy arguing about other issues like race, sexism, abortion, and gay marriage, that they are distracted and do not vote as a united unit for the redistribution of wealth.

Corruption Not Harmful?

A Singaporean friend of mine who had just been on a month-long holiday to his home country, chatted with me a few days ago about what he perceives to be a high level of corruption in Singapore whereby the ruling party in that country silences opposition parties by passing through legislation that punishes those who publish opposing views. This came as a surprise to me because the highly regarded corruption perceptions index (CPI) by Transparency International declares Singapore to the least corrupt country in the world.

According to Transparency International, Singapore is not a corrupt country, but according to many Singaporeans I actually talk to, Singapore is a highly corrupt country.

From what I hear, the corruption perceptions index merely gives surveys out to people and asks them about their perceptions on how corrupt a country is. This is hardly a rigourous measure of corruption. Some have suggested that a measure of the amount of bribes you need to pay is a better measure, but the problem with this is that I don't think corruption can be measured by bribe payments alone. We first have to look at the definition of corruption. Most academics define it as follows: "The use of government power for private gain."

It is my opinion that most of the time people's perceptions of corruption is itself corrupted by snobbery. That is, most people believe that rich countries are not corrupt while poor countries are corrupt because rich people have integrity and are honest whereas poor people are dishonest and have no integrity.

Based on this definition of corruption (corruption is "the use of government power for private gain."), let's face it, virtually all politicians and public servants are corrupt, even politicians and public servants in rich countries. Most politicians and bureaucrats use their position as a career, and large companies make non-transparent political donations to parties to effectively bribe them. Even in developed democracies politicians are driven by private gain, trying as hard as possible to stay in power, whether it is by accepting political donations from large interest groups and lobbies but also by pandering to voters' demands. A politician giving to voter demand is, by the definition of corruption we agreed to above, is corrupt.

It is clear that in all countries government responds to the demand of whoever is most powerful. The only difference between a democracy and a dictatorship is that power is not concentrated. In most healthy democracies, the country is still ruled by an elite but a little bit of power is given up to the people as a compromise.

My point is that perhaps we should not worry too much about corruption. There are numerous stories about corruption in China and India, yet these two countries are growing rapidly, more rapidly than the growth of Western economies when they were developing.

A particular public official in a developing country may not approve of some development unless he receives a bribe from a company. This public official may hold out for the highest bribe so he can make the most money possible. Companies offer him cash in briefcases under the table and the public official accept a particular company. This may occur in many developing countries, but it also occurs in developed countries. It is no different to the government allowing projects based on auctions.

If a dispute occurs in a developing country between two parties, the richer party will pay off the public official. This is no different to developed countries whereby disputes between two parties are settled in courts whereby the richer party hires better lawyers and drags the case on for long periods to bankrupt the other party.

Corruption in the form of bribes is merely the replacement of "might makes right" with "wealth makes right." It provides a non-violent means of conflict resolution.

GFC2's Impact on Australia

GFC2 is here. The US and Europe are piling on more and more debt and many investors are skeptical about whether they can pay it off. Here in Australia, many seems to be optimistic. In The Melbourne Age, this piece Forget US Woes, China Keeps Our Economy Strong claims that the Australian economy does not rely on the US economy anymore and that the Chinese demand for our resources will keep our economy strong. According to the article, "40 per cent of China's exports went to the US in 2001. Now that figure is down about 20 per cent and falling..." This means that even if US consumers were to become too poor to afford Chinese imports, China has other countries it can export to.

But one area that bothers me is how much US debt China holds: US$1.2 trillion worth (source: NPR, China Blasts US over Credit Rating Downgrade). If the US is unable to pay off this massive debt and defaults, the US$5 trillion Chinese economy will have a substantial amount of its wealth wiped out. This would have an enormous impact on the demand for Australian resources and hence the Australian economy. Even if the US were to avoid default by printing money, the outcome would be similar. The Americans would print money and hand these dollars to the Chinese. The printing of money will cause massive inflation thereby causing the American dollar to drop in value. Even though the Chinese hold US$1.2 trillion worth of US debt, if the US dollar is worthless then that will drop demand for Australian resources.

Many newspaper economists are going on about how China is now Australia's master and not the US. Be that as it may, these newspaper economists do not seem to give much description of the linkages between the US economy and the Chinese economy.

Just Default Already!

I'm not exactly sure why the US would default if the debt ceiling were not increased. If the debt ceiling were not increased, the US would not legally be able to borrow but could still pay off interest with revenue from existing taxation. I am assuming of course that the US is not just borrowing money to pay off the interest on money they borrowed earlier.

Regardless, it is clear that the Americans need to both increase taxes and cut spending, especially on useless expenditure. That Republicans are not willing to allow increases in taxes is outrageous. In my opinion, the Democrats should just allow a default to occur and let the American people see just how horrible it will be. Th government can cut spending and not built roads, abandon hospitals, stop paying pensioners, and let banks gouge homeowners and businesses with high interest rates. The Democrats can then blame the Republicans for destroying the economy and in the next election should comfortably win.

Carbon Tax Increases Income Tax Rates?

Something doesn't add up with the carbon tax compensation scheme. Take this except from the West Australian article titled Tax cuts to compensate for higher living costs:

To deliver the tax cuts, the tax-free threshold will triple from $6000 to $18,200 when the carbon tax begins on July 1 next year.

A second round of tax cuts will occur in 2015, when the carbon tax switches to an emissions trading scheme, with the threshold lifted to $19,400.

Most taxpayers will enjoy a tax cut of at least $300.

The first an second points are easy to understand. But the third point about most taxpayers will get a tax cut of at least $300 doesn't make sense. The way the income tax system works currently is that you pay nothing for any income you earn up to $6000. Then from $6000 to $37000 you pay 15 per cent. If the tax-free threshold were to increase from $6000 to $18200 then this means that if you earn at least $18200 per year you will save (18200-6000)*0.15 = $1830, and everyone earning over $18200 per year will get this.

But news article talk about most people getting tax cuts of only $300 and that people earning below $80,000 will not benefit!

This makes no sense. Perhaps the government is trying to obfuscate what looks like a tax rise for people in higher tax brackets. My guess is that although the tax-free threshold will increase, to compensate for this the government will increase income taxes in other areas. For example, for every dollar you earn between $18200 to $37000 you may be required to pay 30 per cent rather than 15 per cent.

I wish the government were clearer on this. It does not look good when the government tries to hide detail. If anything it makes me suspicious.

Update 16 July 2011: I have finally worked it out! It's disappointing that the increase in income tax rates was not clearly highlighted in the mainstream media, but the changes are as follows:

• Tax-free threshold will increase from $6000 to $18200
• The 15% income tax rate will be lifted to 19%
• The 30% income tax rate will be lifted to 32.5% in 2012 and then 33% at 2015.

The low income tax threshold will decrease, which, now that I think about it, makes sense because a change in the income tax rates is much more transparent. All in all, I think these tax rate changes comfort with the general principle of carbon tax compensation, which is to target poor people and not rich people. The increases in the income tax rates at the higher end will help make sure that the benefits of the carbon tax compensation only go to those who need it.

I have complained about the carbon tax because there are many problems with it. It doesn't address the problem of jobs moving overseas and it exempts petrol. Furthermore, carbon tax compensation doesn't all go to poor people. Much of it goes to industries. Nevertheless, I completely understand that the job of politician entails compromise. It is no point letting best get in the way of better, as the Greens would have found out when they opposed the CPRS. With a Parliament made up of independents and the Labor party being heavily influenced by trade unions and voters who struggle with rising petrol costs, it makes sense that Gillard make these compromises to ensure that at least something gets through Parliament. All in all, this is a step in the right direction. Taxing big business for their carbon emissions is a much better idea than paying big business to reduce emissions, which is what Tony Abbott plans to do. If Abbott had his way, the money necessary to pay off big business to reduce emissions would need to come from somewhere, and chances are he would introduce some form of carbon tax e.g. by increasing income taxes. Simply increasing income taxes would not punish people who use more electricity, it only punishes people who earn more. By increasing carbon tax you are punishing those people who commit the sin of emitting more carbon and with the proceeds of the carbon tax you can reduce income tax, which encourages single mothers and students to work.

Carbon Tax Released

Finally the full details of Julia Gillard's carbon tax has been released, but as soon as I checked the Commonwealth Treasury website and was diverted to an Australian government website about the new policy, I became annoyed because it was just not clear how much I was going to get. Like the Budget that Labor introduced that cut little bits of spending on a thousand different things, thereby spreading out the pain, it seems as if the carbon tax follows the same philosophy whereby the compensation is spread out over a large number of people, not just low-income people but also pensioners, people with children, people with certain welfare cards, and so forth. It was really confusing.

One of the main features of the compensation is that the tax-free threshold would increase from $6000 to $18000. For someone earning over $18000 per year this is an extra $1800 per year in your pocket ((18000-6000)*0.15=$1800). In my opinion, this is not ideal because this $1800 would go to everyone earning over $18000 a year, including those who earn millions of dollars per year. I have stated in another blog post that I would have preferred to see an increase in the low income tax offset so that millionaires are not compensated.

In addition to this increase in the tax free threshold, there will also be, according to this Herald Sun article on the carbon tax, additional compensation that presumably will come from tax cuts that will be paid to singles earning below $50000: "Individuals will get all extra costs compensated up to an income of $50,000. The compensation means an individual now on $50,000 a year will get $303 in assistance, to cover a $304 rise in their cost of living."

This carbon tax compensation system is far too complicated. I have no idea how much I will get and when I will get it, and I suspect many other Australians will not bother to figure out what they will get because it seems to be dribs and drabs from all sorts of places. The government seems to have divided the benefits into a million different categories.

Furthermore, as I feared, the tax will be levied on only 500 emitters and will only apply if the material is burned. This I fear will mean that companies can dodge the tax by exporting it to countries that have lax environmental laws. What would have been better is a mining tax based on the energy content of what is dug out of the ground. Given that Labor caved in to the big miners and the mining tax discussion is now dead, we must live with what we have, which is the carbon tax and the future transition into an ETS. The system will also be linked in to the international carbon price, and this will hopefully coordinate carbon emission reduction objectives all around the world and hopefully cut off the loophole whereby companies export resources to other countries to dodge the carbon tax.

Why Australia Needs Class Warfare

With the release of the Federal Budget 2011-12 by Prime Minister Gillard, the opposition Liberal party led by Tony Abbott has accused Gillard of class warfare.

It is my opinion that class warfare in a country is a good and healthy thing, but first let me define what I mean by class warfare. Within any country there is a distribution of wealth and as a result there can be classified different classes of people based on wealth. Within most countries there are poor people, middle-class people, and rich or upper-class people.

Under authoritarian regimes, rich people tend to own slaves and oppress the poor, using them to run their businesses. The democratic system gives poor people a voice through the government, allowing the poor to push back at the rich so that they are not fully enslaved. This is class warfare. When the poor push back, they get benefits like public holidays, sick leave, maternity leave, recreation leave, and a host of other benefits that workers in authoritarian countries don't have.

To ensure that poor people get these benefits, they need to be constantly aware of class divisions and to vote for their own class interests in elections.

Unfortunately, in many democracies, while the majority of poor people are class conscious, a significant number of poor people actually vote for parties that implement policies that disadvantage them economically. In American following the 9/11 terrorist attacks, 80 per cent of Americans voted kept George Bush in power, allowing him to implement tax cuts to the rich. Under his presidency, public debt soared and the gap between rich and poor accelerated dramatically. In Australia, refugees tried to hop on a boat and come into Australia. The Prime Minister John Howard turned the boat back. His tough stance saw just about everyone, including the poor, vote for him. When he came in, he implemented policies that diverted public money to the rich e.g. by giving tax breaks through superannuation funds, family tax benefits that even high-income households were eligible for, and of course WorkChoices. In countries like Thailand and Cambodia, the leaders there clash in small-scale wars along the border, both leaders afraid of starting an all-out war but both still very willing to talk tough in an effort to appear nationalistic. This tough stance wins votes and distracts the voting population from the immense wealth held by the elite in both countries. The King of Thailand is the wealthiest royal in the world with a net worth of $30 billion, over sixty times higher than the net worth of the Queen of England (around $450 million).

For many centuries, history shows that the rich often use nationalism to win broad support in democratic systems. Once in power, they implement policies that benefit themselves at the expense of the poor. A poor working-class American will continue to be loyal to the rich as long as he views everyone in the world as being either American or non-American. He feels united to his employer, the one who is exploiting him.

Class warfare allows poor people to suddenly realise that there are indeed divisions within countries. Class warfare allows the poor to demand policies that work in their own interests.

Further reading: Rich and poor divide underestimated

The Federal Budget 2011-12

The Federal Budget 2011-12 was released this week. Everyone else is giving opinions on it, so I may as well. All in all, I think it is a positive budget that would hopefully get Australian back into surplus by 2012-13. The growth in revenue seems optimistic and the spending cuts are probably in my opinion not deep enough, as much deeper cuts are needed in middle-class welfare. But all in all, it is a step in the right direction, that is, keeping taxes high and cutting spending. It follows the fundamental rule of personal finance, which is to spend less than you earn.

In the world of FBT, the budget gets rid of the loophole that allows tax benefits to be accrued if you drive your work car more than 25,000 kilometres per year. This horrendous loophool meant that many small businesses actually deliberately drove their company cars more than they needed to in order to get tax concessions.

A number of people complained that there were no increases in family tax benefits for those earning over $150,000, which I thought was incredibly surprising as those on $150,000 are definitely rich given that the average household earns around $70,000. For Australia to get back into surplus, spending cuts need to be made or taxes need to be raised, and cutting spending or increasing taxes on the poor is not only highly immoral but could actually kill them. Therefore, the rich need to be sacrificed. I am surprised that there was so much opposition to this idea, even among religious people and poor people.

The budget contianed no details about the coming carbon tax, which is disappointing. I am happy with the carbon tax as I think it is one of the best ways of cutting carbon emissions in Australia. It gives me great pleasure when I look at those people driving large SUVs and live in large McMansions and know that they will soon be punished for their behaviour. The carbon tax is understandable unpopular with many people believe most people don't like the idea of cost of living increase. This is why I believe that Prime Minister Gillard needs to give very generous compensation to low-income people. It is already disappointing to hear that only half of the revenue raised will actually go to compensating low-income people (it should ideally be 100 per cent). If I were Prime Minister Gillard or if I were her adviser, I would suggest that the way she go about compensating people is to made amendments to the low income tax offset (LITO). Specifically, she should increase the LITO payout and increase the threshold when you are no longer eligible for it. This will put money back into the hands of the poor and give a moderate amount to the middle-class. If the compensation is large enough, I am sure just about every single Labor supporter will be happy and a substantial number of Liberal voters will switch sides and vote Labor to secure for themselves the compensation, and Prime Minister Gillard will win the next election.

We'll see what she does.

Baillieu Cutting Stamp Duty by 50%

The average house in Melbourne is around A$500,000, which is among the most expensive in the world. In a bid to help first home buyers, the Baillieu government plans cut stamp duty by 50 per cent (according to First Time Buyers Struggling to Keep Up). This is clearly a bad move as it will only increase the demand for houses which will in turn increase prices even more. Those buying houses at a time like this may think they are better off with a stamp duty discount, but with house prices and mortgage interest rates at record highs, it will likely put a lot of stress on home owners. Expect banks to make more money out of this.

My advice to first home buyers is to live with your parents for longer and to pay them rent. Usually parents are willing to charge lower rent to their children because they have been living with you for decades and know that you are trustworthy tenants. With the money you save from living with parents you could take advantage of the high Australian dollar and invest in overseas companies or you could buy shares in Australian banks.

If Australians continue to want to buy houses, this will only result in more bank profits as perpetual demand for housing will result in perpetually rising house prices, which will mean home buyers will need to go into more debt to fund their purchases. Greater demand for debt will mean that banks are able to charge higher prices for mortgages. They can increase interest rates or charge higher fees. This should lead to greater profits, all else equal, will lead to greater shareholder return.

If you want to invest in an Australian bank, I recommend one of the big four: Commonwealth Bank, Westpac, ANZ, or NAB.