October 14th 2006

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Articles from this issue:

COVER STORY: COMMONWEALTH-STATE RELATIONS: Will Howard override WA on natural gas?

EDITORIAL: Bushfires: an ounce of prevention

CANBERRA OBSERVED: Behind the move to lift cloning ban

INTERNATIONAL TRADE: Farmers protests over free trade in Cairns

TRADE POLICY: Why WTO trade talks failed

STRAWS IN THE WIND: The decline of Labor, the fate of Smith Street, Blair's departure and the Regensburg Address

NATIONAL AFFAIRS: T3 sell-off will not end Telstra's woes

HOUSING: Urban planning is destroying the great Australian dream

FOREIGN AFFAIRS: North Korea's nuclear ambitions: is China really powerless?

ANTI-LIFE CAMPAIGN: The selective indignation of Senator Stott Despoja

OPINION: The case for optional preferential voting

BIOTECHNOLOGY: The ascent of Mount Improbable

The debt trap (letter)

The Pope and Islam (letter)

The Ice epidemic (letter)

BOOKS: LONDONISTAN: How Britain is Creating a Terror State Within, by Melanie Phillips

BOOKS: SCOURGE AND FIRE: Savonarola and Renaissance Italy, by Lauro Martines

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The debt trap (letter)

by W.K. Allen

News Weekly, October 14, 2006

The first sentence in Gerald Stone's recent book 1932 said, "The Great Depression was born of a great delusion - the myth of a bubble of boundless prosperity that could never burst. By 1932, the Federation owed more to the financial houses of Europe than all Europe, Africa, the Far East, the Middle East and South America combined. It ranked as the most addicted, debt-ridden country on earth."

It went on to report tragedies in Australia dependent as it had been on primary industry exports.

Are we now facing the prospect of tougher times ahead, a massive and burgeoning net foreign debt nearing $500 billion, a government debt perhaps artificially contained by selling the people's assets (selling the farm to pay the rates), almost total dependence on mineral and agricultural exports to meet our voracity for imports.

If these industries face reduced demand, as they did in 1929, when Stone said, "Wool and wheat receipts nose dived - due to cut throat foreign competition but also because of the rise of rampant protectionism - the punitive tariffs and other import restrictions - we could have trouble".

Perhaps we should now be thinking of falling exports and reduction in an over-stimulated building industry that could presage a flicker in a fickle stock market. Is there to be little debate on our economic situation?

All political parties appear to have their heads in the sand as they regard profit as a mark of human progress and seem reluctant to look beyond the next budget. We don't manufacture much any more, and it is well to remind ourselves of Alexander Hamilton's comment, "Not only the wealth but the independence and security of a country appear to be materially connected with the prosperity of manufacture."

The EU, the Americans, Japanese and other Asian nations have not given up protection. And our free trade maniacs could be reminded of Keynes' comment in the General Theory, where he refers to the "puerile error" and "presumptuous error" in dealing with the free trade issue which, he says, has "for centuries been the prime object of practical statecraft."

Let us have a little more of the practical statecraft of Curtin, Chifley and Menzies, or our net foreign debt will consume us. This notable trio would tell us that the capacity to produce and not only capacity to consume is proof of a nation's wealth.

They would be concerned about our current low rate of saving. They might also tell us that free trade does to a nation what alcohol does to a man - saps him first of his vitality and then his independence. Or do we await the Standard & Poors revision of our international credit rating and its consequences?

W.K. Allen
Sorrento, Vic.

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