Alan Moran – Regulation And Markets
In this wide ranging discussion I am joined by Dr. Alan Moran from Regulation Economics. Alan has an extensive career at the highest levels of government regulatory organisations and has a unique insight upon how government can impact a free market economy. He also has vast experience in environmental and infrastructure planning regulation.
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Alan Moran – Regulation Economics Transcript
Jonathan: [00:00:00] Hey everybody, Jonathan Doyle with you. Once again, welcome back friends to the supply side podcast. So good to have the pleasure of your company. Welcome aboard. To another fantastic exploration of all things. Supply side macro in this episode, we’re going to do. Some regulatory stuff. We’re going to look at the impact of regulation. We’re going to look at the impact of environmental regulation with an absolutely fantastic guest. I’m really pleased to be welcoming to the show.
[00:00:35] Dr. Alan Moran, who, what he does not know about Regulatory issues probably has not been written. He’s had an extensive career. We know what makes him really interesting is that he has had enormous exposure to working within government. And now spends a lot of his time looking at the impact. Of government on the wider market and the wider society. So I went to a full introduction here because we’re going to do that.
[00:01:02]Live in the show. You’re going to hear about his background and you’re going to hear the great wisdom that he has to share with us. It’s a, it’s an interesting topic. Isn’t it? This the way that a government intervention in markets can have all sorts of unseen effects sitting here on my desk, in the studio is.
[00:01:22] Thomas Sowell’s, famous, basic economics. And he always talks about trade offs. That the, when government gets involved, there are all sorts of trade-offs that take place. And sometimes things that are. They come with good intent. They can end up. Having all sorts of impacts down the line. So that’s enough for me.
[00:01:39] Let’s get into this episode with Dr. Alan Moran, please make sure you’ve subscribed. And if you like what you hear today. We’d love it. If you could share it with other like-minded people. So let’s do this. Welcome aboard again to the supply side podcast welcome to our interview with dr Alan Moran. Dr. Alan, Moran, thank you so much for joining us on the supply side podcast. Really appreciate your time.
[00:02:03] Alan Moran: [00:02:03] Yeah, you’re welcome, gentlemen.
[00:02:05] Jonathan Doyle: [00:02:05] Yeah, I’m looking forward to it. I there’s a couple of key articles that you’ve written recently. I think people are going to be very interested to hear your perspective on, and as I’ve gone through some of your background, I think you’ve got, you’re writing so much you’re writing well, and the sign much that I think you’ve got to share with us.
[00:02:22] I’m just going to spin people quickly through a little walk down memory lane. We’re going to look back at some of your journey in in government policy and the public sector in in areas of regulation environment. So educated in the United Kingdom and a PhD from the university of Liverpool in transport economics, and also degrees from Salford university of salted and the London school of economics.
[00:02:47] And as I often say to my kids, whoever dies with the most degrees wins. So you’ve you’ve done well there. And your professional lives included 18 years as the director of the deregulation unit at the Institute of public affairs, you’ve been a senior official at the productivity commission. And then the director of the Commonwealth office of regulation review.
[00:03:11] And when I found that out, I thought we definitely need some review of regulations. So we’re looking forward to hearing you talk about that you’ve published widely you’re writing continually. Your latest book is called climate change, Trump and policy. It’s sorry. Climate change treaties and policies in the Trump era.
[00:03:30] So here’s my first question. When I was in high school, I wanted to either fly, fit fighter jets, or be a spy. What led you into this journey of of this amazing professional journey? What were you always interested in some of these global economic trends? Tell us about your journey.
[00:03:47]Alan Moran: [00:03:47] It’s not all that spectacular. I worked in the energy area. Yeah, but I shouldn’t have to get my PhD in the UK actually worked for something called the gas council, which is an umbrella organization involved in gas. And I worked in the motor industry in the UK as well. I came out here cause I saw what looked like at the time, quite an attractive job, which is the scenery economist and the department of trade.
[00:04:09] And I progressed through the through the bureaucracy in various ways for about 13 or 14 years before realizing that a bullet was heading to me, his labor was in power and they were gradually isolating me from. Various policy areas. And I joined I think tank one first called the Tasman Institute.
[00:04:29] I worked a little while again, later in the Victorian government, when they were privatization, the energy assets was taking place. And then as you say, worked in think tanks in the Institute of public affairs and now my own organization, regulation, economics.
[00:04:45] And I drifted into the area of a regulator issues and and how governments were stymieing the efficiency of the private sector and and continuing to do
[00:04:55] Jonathan Doyle: [00:04:55] cause it’s an interesting journey because to have spent, you’ve seen both sides here. You’ve had a long journey in the public sector and that’s informed a lot of the work you’re doing now. Do you, would you describe yourself as having a particular being a member of a particular economic school?
[00:05:10]Alan Moran: [00:05:10] I guess the SU the school would be called supply side, if if anything, and essentially it’s a, it’s an emphasis on the ability to produce things for the economy enables us to have high living standards and that’s often forgotten, the dominant paradigm in economics is Ken’s Keynesian or managed risk, whatever.
[00:05:29] And the end, it basically having people as fixers, having people, trying to manipulate the economy into doing better than it is and in doing so, they generally make it far worse than it is. And th there’s a kind of a, an obliviousness to the importance of a reinforcing our ability to produce things.
[00:05:49] Cheaply, which means more capital investment means more R and D and better training of labor force, et cetera. There’s a a seeming inability to understand that this is the cause of growth. And essentially what treasury departments do is a, is stimulating the economy and that’s music to the ears of politicians, of course with additional expenditure and in doing so they undermine the production capabilities.
[00:06:14] Of the economy. And we were seeing that very much to the present time.
[00:06:18] Jonathan Doyle: [00:06:18] Yeah, we had a great conversation last week with Nathan Lewis. Who’s been on the show a couple of times who writes brilliantly on classical gold standards and in his latest analysis, he has he writes he’s quite funny. And he has this line where he says, he’s talking about MMT. And he said that what I meant is the process by which governments spend huge amounts of money, which is enormously popular until it isn’t.
[00:06:39]I liked that line because there’s, there’s definitely a teleology, there’s a trajectory. I think that we’re on and let’s get into that because there’s two articles of yours that I want to talk about. The first one you wrote back in January, 2020, and. When I went back through it today, it’s that weird sense of this was just before COVID really kicked off.
[00:07:02] And I looked at the date and I thought, gosh, if I knew what markets were going to do two months after you wrote this, I’d it’d be a different life. But you wrote a great article called wealth will. We can ask if we ever yield to populism and to give people some background you were writing here about Stanford’s Mont Pelerin society.
[00:07:19] Which was obviously, set up post-World war two as a kind of intellectual sell on Contra, Marxist, dialectic and scientific materialism. But you writing this article, that what you’re observing is a shift in confidence from that broad capitalist model, the ability of capitalism to lift people out of poverty.
[00:07:39] And you’re sensing a loss of confidence in that, which is obviously being played out by so much of what we’re seeing. Can you take us through some of that? Just walk us through what compelled you to write that? What what you’re thinking in that area?
[00:07:54] Alan Moran: [00:07:54] I just think it’s, we’ve seen, we saw the period of. Micro economic reform. We called it in Australia in the late eighties and the nineties, when we saw privatizations in place, we saw competition policy and this basically brought about a much. Deeper productivity gain in the economy as a whole.
[00:08:15]And we’re still basking in, in, in living standards as a result of that. But there was a loss of confidence. I think in as as on the part of the people as a whole, maybe the politicians didn’t explain what was going on very well, but one way or another there was this feeling that we ought to actually.
[00:08:33]Intervene in capitalism more because the rich were getting richer and the poor were getting poorer. The same sort of of dialogue came out of Marxism. Not exactly true, but nonetheless that there was this feeling that there was a lot of unfairness around the wheel to actually intervene.
[00:08:48] To ensure that we get a fairest splitter and this this I percolated of course, into the political class itself, because after all, they just reflect what people are saying to, to a very great degree. And and it’s resulted in as as clogging up the works of capitalism because it’s all very well to say we ought to get a better.
[00:09:09]Better division of the spoils is being achieved. But every time you do that has some disincentive effects on the people who are creating the wealth. Then the more you do it, of course, the more that disincentive effect is in place. Yeah, and this was becoming apparent in indeed in that Stanford conference in the us where there was a feeling that the w there was a great deal, more intervention coming through.
[00:09:33]And I was writing basically to say, this is a great pity, and unless we do something about it, we will see much more sluggish economies. And of course since then we’ve seen far greater interventions in the economy, partly through COVID but COVID has just been an excuse, a massive interventions and indeed we now face quite serious, more serious re repercussions as a result of the ensuing debts and the debilitation of the incentive to invest in productive matters.
[00:10:03] Jonathan Doyle: [00:10:03] What do you think it gives the ultimate intellectual epistemological engine behind this kind of shift? Like people, often will talk about for co this, reducing everything to, the dialectic of power and that, some of the stuff in that first article you’re talking about the aggregate share of income for the rich has grown rapidly.
[00:10:22]Middle-class in heavy decline and a port, the paws had a marginal decline. And you write here that really, what this is going to drive is increasing levels of social division, even violence. Can you, what do you think is ultimately at the heart of it? What do you think is driving the shift from the belief that capitalism was transformative?
[00:10:41] It was going to keep contained. It did lift people out of poverty. What if you had to pick one or two key drivers, what would you pick?
[00:10:50] Alan Moran: [00:10:50] I don’t know that there are key drivers. I think there is something essentially capitalism does reward the greatest producers. By the greatest amount. If it, I liken it a bit to a lot of other things for example, pop music the difference between the rolling stones and some other group who was, who playing is not great.
[00:11:12] However, the rolling stones earn a hundred times as much as there’s this other group. And you can see that in terms of the earners in the it industry as well. There is a kind of that those people who are running the most who are producing the most, tend to earn the most as well. And this actually does create an envy on the part of.
[00:11:31] A lot of people, even though other people, as we’ve seen in our society are basically enjoying massive increases in standard of living themselves. They’re not as high as those are the top. And there is an end with that as a result. And there is a feeling that if only we could get some more of that income from the top to the bottom or the middle we’ll all be better off.
[00:11:51] And there is this th this thinking that essentially that. The wealth will be created anyway, that we don’t understand that the wealth is created because people have actually gone out that seized opportunities, invented things, and then then sold them to the rest of us and in doing so th they are in high incomes, but there is then a trickle down and trickle down has become a sense of an odious
[00:12:20] Jonathan Doyle: [00:12:20] Yeah, it’s almost pejorative. Yeah.
[00:12:22] Alan Moran: [00:12:22] Exactly. And yet that is the way that is the way we enriched ourselves in the first place. And that is the way we continue to enrich ourselves by ensuring that know, that there is sufficient incentive for people to go out there invent new new things and risk their own savings.
[00:12:38]Be parsimonious in terms of their consumption and say more themselves and thereby generate higher incomes for themselves and parole of those around them.
[00:12:49] Jonathan Doyle: [00:12:49] You take on your, take on something. I read a couple of years back, which was that when you look at the gray, the gilded age, and I read a fantastic biography on Rockefeller a couple of years back, when you look at that, at the Rockefellers and John Paul Getty and wise guys that huge growth in wealth, the argument was that it also created a lot of employment.
[00:13:12] So as railroads rolled out, there was a lot more employment. And obviously there was an investment in infrastructure that the railroads created. One argument came across was that the modern tech giants are simply not employing. The numbers of people and also the cash that they’re making is tending to sit in war, chest.
[00:13:32] It’s tending to sit on balance sheets and not end up. Is, have you got any thoughts on that? Is that a significant difference compared to the kind of explosive growth of the gilded age? Is it, or is it similar?
[00:13:43]Alan Moran: [00:13:43] I’d say it’s more similar than you’d think. And of course the gilded age, you saw. Oil fields and you saw railways and you saw things you could touch and things, which is less so in the mobile it age, but the it area does employ lots and lots of people. I suppose 10% of the employment in one way or another employed lots of people and the practice, that if it creates well, that well will be spent it, if it sits on balance sheets, you can’t really hide wealth under your bed, some balance in a bank somewhere.
[00:14:19] And the bank then has got end. It’s lending the money out to other people. The answer is that, there’s been an enormous increase in GDP as a result of of the people of the apples and the the face of this world and almost increasing well, and that, it. It has made not negative books for the people involved, but it’s trickled down to the rest of us as well.
[00:14:43] Jonathan Doyle: [00:14:43] Yeah. Yeah. I said to Nathan, last week on the show, there’s a brilliant, recent discussion between Jordan Peterson and a guy that runs a, I think it’s human progress.org and they’re tracking. Things like, over the last 50 years, the number of people who’ve moved out of absolute poverty the changes in infant mortality, the, changes for women.
[00:15:06]There’s actually about 10 or 20 major indicators that things are actually surprisingly good. So I get confused every day. When I look at global macro guy, was the world coming to an end? Is it better? Or, sometimes it’s hard to know. A couple of other things from this first article you mentioned either, obviously what we’re seeing is a huge increase in government size and this big increase.
[00:15:26] And you write about this a fair bit in terms of environmental regulation. For American listeners, w we have a column on here and you mentioned this Adani that. Took nine years to be approved. Tell us a little bit about that. The shift from the idea that it was the capitalism was about growth and development, and you are identifying a big shift.
[00:15:44] Now, are you seeing increasing government increase in regulation?
[00:15:48] Alan Moran: [00:15:48] Yeah, there’s been possibly partly understandable anyway, that a shift away from as Reveling in the increase in taming nature, if you like taming nature and making nature productive to us. So actually saying no, we’ve got to do the opposite. We’ve got to turn it back. I mean that you, we, we can see that with the environmental impact statement as being required, the Adani case, which was had a trivial really, truly trivial effects on the environment.
[00:16:15]But which we S. Faced massive amounts of protests and great and a great deal of environmental legislative barriers as well. All of which is costing us a lot of money. It’d be thinking in terms of, I think in terms of say basic. Projects, which were built 30 years ago or something by Western mining, they discovered a nickel deposit.
[00:16:37] They thought, Oh, that’s pretty good. Within two years it was up and running. Now, that the contrast now with Adani and everything else is quite stark. And in fact, we, even though the laziest budget, yeah, we essentially, the national party is saying what a great idea. We, what we’ll do we’ll have the subsidies to farmers essentially just stop farming and a little prouder is the administer that for farmers essentially saying we’ll take w it doesn’t quite say this, but what it means is we’ll take 16% out of the farming.
[00:17:11]Acres that we have in Australia, and we’ll have that as carbon capture and storage with a few incentives, et cetera. This is basically we’re, de-rating our economy and we’ve seen that elsewhere. We’ve seen it in terms of the Murray river the irrigation there, essentially, this is a river, it’s a working river.
[00:17:28] It’s a great, it’s a fine river. It can never be the same as it was as it was 200 years ago, but he’s fine. The river there was working well, but. The w we have groups of activists will come in and say no, they, the river gums need a drink, or this needs to drink or whatever. We’ve got to take money from these irrigations and let it go into the environment.
[00:17:47] So we’ve taken sort of 20% of the water from the irrigator, which basically means we’ve got considerably less productivity in that area. We see very significant area. The Murray-Darling is about 30 or 35 or 40% of our agricultural production is in that area. Most of it. We were, de-rating the economy in response to activist, environmental claims that we’re all going to the dogs.
[00:18:12] Whereas in fact, in terms of the what used to be. The criteria for environment, clean air, clean water, clean, et cetera, where it’s massively improved that than what it was when the only thing that you can point to conceivably where it’s not is the increase in carbon dioxide emissions, which is driving this massive debate on energy and other things globally.
[00:18:36] Jonathan Doyle: [00:18:36] You don’t strike me as someone given to hyperbole. So what do you make of, is it a cultural death wish like, it’s like here we have all this productive land and is. I think I’m correct in saying the most advanced economies tend to have the best environments because we deploy the best technologies for looking after the environment.
[00:18:59] Is it a cultural death wish? What do you thinks behind it?
[00:19:01]Alan Moran: [00:19:01] I don’t think there’s a cultural death wish, but there is a self harm as a result of focusing on particular facets, which you think I’ve not been looked after it enough, if people, would people talk about deforestation? Quite frankly, we’ve got we have as much forest in Australia now as we did in the year 1900, because we could cut a lot of the forest down in the early none directly it’s been grown again.
[00:19:25] And the law is language has been some marginal has grown trees on it. Some, but only a little bit is because of set-asides, but from the national parks. If you look it up just about any different, any environmental. Measure and I think this is what’s behind your question there it’s gotten better and it gets better all the time and capitalism.
[00:19:43]That’s what capitalism does. It makes us richer and allows us then to see select things, to be preserved that otherwise wouldn’t be preserved. And quite frankly, it?
[00:19:53] is moved way beyond what is reasonable in terms of that at the present stage in Australia and in Western ma many other Western countries.
[00:20:03] Jonathan Doyle: [00:20:03] Yeah. Referencing back to that Jordan Peterson interview on the indicators of things, improving in the world, the data they were quoting from the UN, which doesn’t tend to see the light of day, this piece of data. That the planet can reasonably sustain somewhere North of eight to 9 billion.
[00:20:21] And then they’re suggesting there’ll be a gradual population decline. So all those Malthusian predictions of, mass starvation haven’t don’t seem to have eventuated at this point.
[00:20:34] Alan Moran: [00:20:34] Indeed. No matter what we do in the economy, we do an awful lot of things. For example, we re were forcing synthetic gasoline through, through essentially through taking out produce from corn, et cetera. And no matter what we do, the crop yields increase, but yeah, we were getting better at it year by year.
[00:20:53] This, the whole idea of famine, which was, We set new humans all over the world. Every so often. It’s a to San Francisco is just absurd. Now there couldn’t be any family. The only farming is created by warfare or whatever. politics. There’s no farming possible anywhere in the world at this juncture, unless we suddenly go backwards and prevent agricultural production.
[00:21:18] Jonathan Doyle: [00:21:18] Yeah, so true. I remember reading a book on the currency crisis in Zimbabwe and you get starvation in places like that when you get. Complete currency collapse and Malad maladministration. It’s interesting you say with the famines, I’m showing my age a little bit, growing up as a kid, you can re I can remember seeing the footage of famines in Ethiopia.
[00:21:38] And again, this what I was listening to last week, there’s just saying you just don’t see them like that anymore. There are a handful of places in the world, North Korea, for example, where it can, it still happens. But so I wanted to ask you. It’s very easy to have a broad brush and say, we need massive deregulation and just open slider.
[00:21:57] But I, my sense with you is that with all your background in the regulatory sphere, there obviously is a place for regulation. Yeah. Where do you see regulation being useful and effective?
[00:22:07]Alan Moran: [00:22:07] I think the, some elements, certainly when when. This is what economists call externalities or side effects of things, clean air for example the measures to prevent pollution of of sulfur and other things and led, et cetera, are all pretty good.
[00:22:23] I These things, people make profit off, but the, but they then have adverse implications on others. The regulations in those kinds of areas I think quite beneficial. There is a suggestion there is a case for regulation, whether there’s monopoly as well. There’s less of a convincing case to me because whenever a monopoly exists the monopolies of course, price gouges, is quite normal.
[00:22:45] And in that, that also then attracts things which break the monopoly. And, you mentioned earlier that the Rockefellers, et cetera Essentially Rockefeller. I don’t think he was price gouging, but he was certainly a lot of money and it did create an awful lot of new comes into the market.
[00:23:01] And by the time that Rockefeller standard oil was broken up, it was far from monopoly probably only had about 30 or 40% of the market.
[00:23:09]So others, it shell, et cetera, shell and BP Amoco, et cetera, come in. But Texas had come in basically to undermine the monopoly. And we’ve found that also in some of the others, the daughter was on railroads.
[00:23:22] Okay. Railroad is as a monopoly. And suddenly you found other railroads being built when the monopoly that the railroad was acting as a price gouger it did attract opposition. And we found that generally. In areas of economy I can’t really see much of a case. There is intervening the areas where we might intervene are in in areas of environment, maybe issues of public safety, and food and things like that.
[00:23:48]There is a case for doing, putting it in there because the argument is that if we didn’t have that of course firms. Made their reputation by not poisonous poisoning is with the food and therefore they take considerable steps, but is arguable that they wouldn’t take as much without.
[00:24:04] There was some sort of of requirements on the part of governments who to investigate things before they’re done.
[00:24:10] Jonathan Doyle: [00:24:10] Yeah, it’s a pretty effective marketing tool to not poison your customers. I think it’s keeps them coming back. It’s fascinating to listen to you. I, you, you said a moment ago that. Outside of these few key areas, you don’t see a huge need for intervention. And listening to that, we’re in this incredibly interventionist moment.
[00:24:29] I’ve often quoted a line from Murray Rothbard’s book. The case against the fed, where he argues that there’s only three. Three places a government should be involved only three. And that was the the guarantee of private contracts. So enforcement of contracts, the national defense and the protection of physical and personal property.
[00:24:51] I was, it was quite striking just because yeah the amount of intervention and and regulations quite extraordinary.
[00:24:58] Alan Moran: [00:24:58] Now those were,
[00:25:00] Jonathan Doyle: [00:25:00] Sorry,
[00:25:00] Alan Moran: [00:25:00] those rough, that was rough by tenants out of the key tenants. Most people wouldn’t regard that as regulation. Although of course it is regulation because it’s state control, but the regulation is that it comes over and above those basic frameworks, which hold society together.
[00:25:16] Jonathan Doyle: [00:25:16] Yeah it’s, I’ve still got three young children and I find myself so constantly saying things like, no, we’re not allowed to do that. Now. We’re not allowed to do that. Now we can’t do that. We’re not allowed to do that. And it’s just fascinating. It’s yeah. Yeah. Yeah, look. The other thing I wanted to talk about is this second article, which you might, which is where I first reached out to you.
[00:25:33] You wrote an article early in the week called enjoy the sugar hit as we flirt with economic ruin. And I’ll just give you an interest. The opening line you wrote, he was very good. You said economic growth requires political stability. And secure property rights. Its drivers include a low taxation and educated, skilled workforce and technological innovation, but the overwhelming influences investment in business activities, roads, and other infrastructure.
[00:26:02] So you make a point that historically in Australia, for example, at our best 20 to 25% of GDP has gone into business investment. We’re now down around 10 surrounding Asian nations are over 20. Take us through your thesis in that article. What are you trying to tell people on this side of, on this issue of investment in business and business investment from government?
[00:26:28] Alan Moran: [00:26:28] Yeah I think the thing to direct me and Problem is right in the Arctic was the budget and looking at it where the government was printing. As I was saying that we basically don’t extremely well in COVID our society, our economy is roaring head with and we clever for doing it.
[00:26:42]The thing that. Th that struck me is what is basically the reason why we’re recovering from COVID is because the government has taken the brakes off. COVID wasn’t like a wall where we’ve actually destroyed capital investment. We’ve destroyed an awful lot of things, and we’re all going to be poor as a result, essentially.
[00:26:59] It just forced many of us to take a year off. The basic structure of the economy was the same. So as soon as the breaks would taken off by the government, then we recovered and w who could have, and today, anything other than that, we bounce a recover. Of course, that means it didn’t mean a lot of people may made financial losses, and that was terrible for them.
[00:27:18] But essentially the structure of the economy remained the same. But what didn’t remain the same and is the government’s intervention. The government’s massive increase in spending this combined with other policies that they’ve put in place in terms of energy. And in terms of, we talked about London before elsewhere as actually may have been a great December, this stimulus to investments.
[00:27:41] And we’ve seen investment now probably pretty much at the lowest level it’s been certainly for 50 years. As a share of GDP and one of the things that failed to be recognized by treasury departments who have the economic models and the basically say, Oh, can, if you increase government spending or investment spending or consumer spending, it all increases GDP, which of course doesn’t, you’ve actually get to get, got to get back to.
[00:28:07] And that this can go back to my philosophy. In economics, the supply side you can always stimulate the economy and that will mean more income. But it may not meet, but it’s unlikely. I More, more real income. I Just inflation. And if we’ve stimulated the economy now with 7% deficits with quite a very big increase in the money supply over recent years through the gut through government borrowing and just through government injection of money into the banking system.
[00:28:35]But this is not supporting. Oh, has not been supported by increased investments. And this means in the end, we must have placed lower standard of living. Certainly low standard of living than we would have had. If we, once we were investing that much money we Australia had. As a result, of taxation policies and various other thing, quite a low savings rates compared to other cancers.
[00:29:00] And we’ve always imported capital investments on quite a considerable scale, about 10% of savings, which probably means about 20% of business savings or business investment comes from overseas, which is. Is quite unhealthy for an economy, which is quite rich. We’re importing savings from India, from China, cutting economies.
[00:29:20] We set a much face a lot of poverty still, but, and certainly not as rich as we are. So basically we have been importing a lot of capitals to supplement our savings. And now what we’re not even investing, we’re not investing in it, like as much as we should. And really it comes back to the gov, the government seizing a lot of income, but it’s own spending and therefore not investing when government?
[00:29:47] doesn’t invest it.
[00:29:48] They tend, it tends to invest in, in low returning. It tends to be involved in political type investments rather than than maximizing profit, which is a key tool to efficiency investment.
[00:30:01] Jonathan Doyle: [00:30:01] I’ll listen to you. And I keep thinking of George Gilder’s, his book, knowledge and power, this sort of information theory of capitalism. That, what capitalism does it at its best is coordinate these vast amounts of interactions and human motivations. And it’s, the invisible hand perhaps, but it’s when you read it and you think about it, it’s an extraordinary, it’s an extraordinary thing.
[00:30:23]And this idea that government can. Figure all that out more effectively than people, left to work that out. I often say on the show that the the us federal reserve system. Has over just short of 1500 PhDs on staff across the different reserves. And you look at the boom bust, boom, bust the deficit, and you’re going, they’re not getting a lot of value out of some of the PhDs at the moment.
[00:30:50] So it’s interesting to see what happens when this in this moment we’re in historically, you also say in the article, it really struck me that 15 years ago, Australia was debt-free. And now I think we’re running just North of 40% which comparatively, I think the U S is pushing 130% of debt to GDP.
[00:31:06] Now the other thing you mentioned is that the government’s getting in the business of picking winners in terms of some of those rebates for, I think you mentioned biotech medical. Is that a similar thing that, that, that government is just, I think you say that they’re not as sophisticated as merchant bankers are picking winners.
[00:31:21]Alan Moran: [00:31:21] Yeah.
[00:31:22]And that’s a. It may well be backside is a great area for growth and probably is a good area for growth. But, I find it somewhat offensive when governments are saying, okay, we’re going to give these people a stimulus because we think that they are the areas which are going to be gung ho and going to lead leaders out of poverty in the years to come.
[00:31:41]We’ve seen governments in Australia do this for. Almost forever. I knew he was going to be textiles and motivationals, and then we had this great idea that we were building all these wind farms. So we’d we’d invest in wood blade factories, windmill blade factories. You probably went bust as soon as the money was laid out.
[00:31:58]I, he’s much better. I think if the government doesn’t do any of this thing, it doesn’t try to be selective in terms of forming investment. It doesn’t know. Things that over and above What the entrepreneurs know the public servants themselves as you quoted that then they’re not Macquarie bank bankers that basically just guys like me, maybe you who know a little bit but haven’t got their own money on the line.
[00:32:21] And so they tend to pick the winners, but th the winners more often than not tend to be losers.
[00:32:28] Jonathan Doyle: [00:32:28] What do you think MMTs going? MMT, which Jim Rogers says is he says it stands for more money today. I’ve been the last week going deeper into M and T and just trying to understand the intellectual underpinnings of it, but I still can’t get past. The conversations I have with my own children that you can’t magically create base money without product, without a productive, without it coming from production.
[00:32:57] So where do you think it’s taking us?
[00:32:59]Alan Moran: [00:32:59] It’s taken us?
[00:33:01] a long way at the moment, in terms of the way government policies moving, even though most governments, most officials. And certainly most politicians would tend to say that it can’t work. They are trying to make it work. I mean there are of leveraging their own political futures off of it.
[00:33:18]And the people who are failing MFC say what’s your problem basically w we’re doing pretty well. We’ve increased this. We were spending money and we don’t have that inflation, which you forecast. Yeah. And the, and that, that appears to be the case.
[00:33:32]That was certainly Indications that the inflation may take off over recent weeks, the U S inflation rate went up 4.2% last month. And there are various people who are are now saying, there, there isn’t a place and the others are saying the in placement is there really be, can’t say because it’s in bricks and mortar and houses and various things like that.
[00:33:52] You’ve got to, you’d have to say in the end even though the relationship of money supply and real wealth and inflation it’s very difficult to detect very difficult to scientifically determine the cause and effect. It’s got to be that if you actually dump a lot more money on the economy without producing the goods, that’s gotta be in place.
[00:34:15] And in the end, when it’s being prevented or being stopped at the moment, because people are holding a lot of money in bank balance in more money than they used to. So hold You can’t see that’s going to happen forever. But when it does take off, it may take off slowly and yeah.
[00:34:29] And gradually governments, I’ll penny, penny back and prevent it happening. But it may take off very rapidly. It has it, as it has in various countries in the past.
[00:34:38] Jonathan Doyle: [00:34:38] You finished that article where you’re saying that the outcome of all of what we’re talking about, at least for this country and probably for a few developed economies is you say that see the slow Latin American decline or an abrupt crash. What you’ve got feeling on where things are heading as you look into the next decade.
[00:34:59]Alan Moran: [00:34:59] I would say the former the low there is likely to be a low decline. I If there’s a crash that has some benefits, he certainly wipes. A lot of people are very painful, but a crash does suddenly have this. Major understanding that, we can’t continue like that.
[00:35:17] We’ve got to go into austerity, we’ve got to do this and wine back payment systems and things and and stop stop impeding People’s decisions making in terms of efficiency, but th that crash that often leads to to poor policies as it did in the United States, for example, in the 1930s.
[00:35:35] And it takes a long time to get over. But the worst thing is the slow decline that the boiling frog sort of thing, and the Argentinian conundrum, we started over a hundred years ago when Argentina had about. Some like per capita income to Australia in the United States. And there’s now calls itself as has done for many years now, a third world country.
[00:35:56]So you know, that, that is the tragedy that, that may well unfold, that we’d continue along the lines we’ve been continuing and. Because Australia is, has got some phenomenal natural wealth is unlikely to go with sort of Bangladesh or Ethiopian roots. But nonetheless, it’s going to be a lot poorer than than it would be.
[00:36:17] Jonathan Doyle: [00:36:17] Yeah, listening to you. It just sounds a lack of of stewardship in a way. I quoted last week, Krista Muth from the Hudson. Institute in the U S I read a paper of his, and he said that for the 191 years in the U S 191 years, right up until the closing of the gold window in 71. The U S essentially ran balanced budgets, 181 years.
[00:36:41] And his theory was that basically there was a kind of moral imperative. There was a sense of, George Washington said that it was anathema for any generation to create debt, that it couldn’t pay off in its own lifetime. And she has to see where we’re at now with, Like the U S Def deficit in, the Ford obligations.
[00:37:00]It’s like a big historical shift, right?
[00:37:03] Alan Moran: [00:37:03] It is. And the the people would take a contribute and say look, people are going to be much richer in the future than we are. Watching the night pay, pay more If you could, if you can get away with it and then not that’s that makes a bit of sense. But as you say no economists really thought in terms of deficit financing until Keynes.
[00:37:21]Governments were doing a bit of it now and again, before Keynes in 1936, the general to his general theory now. Any economists who you just don’t agree with. It couldn’t get a job in treasury there isn’t, we ha we have the treasury we don’t know that we got 1500 PhDs and the Australians are treasured that we’ve got a lot that are on the reserve bank.
[00:37:41] And they all think that. It’s great. W we can do this and maybe we just going a little bit too far. Now the treasury secretary said yesterday, perhaps we’ve got to wind back at some stage in the future, but, he’s been encouraging the government to spend ever since he was appointed.
[00:37:57] Jonathan Doyle: [00:37:57] It sounds like a little bit of pregnancy, maybe we’ve gone too far. It’s I think once the hand has been put to the plow, it’s funny now, living here in Canberra, I I’m a very committed cyclist and I’d ride a huge amount. Every Thursday morning. One of my rides finishes literally out the front of the treasury building.
[00:38:14] And I always stop there and I put my headphones on and put some stuff on for the ride home. And yeah, it’s funny sitting there and I was saying this to one of my kids. There’s essentially a room in there where with a computer screen where somebody is typing in zero, zero, zero, zero, and hitting enter.
[00:38:30] And it’s like magical unicorn money. He just came into the world and I’m like, when you explain it to a five-year-old and they go. But you can’t do that. I’m going. Yeah, I know. So I wanted to ask you a couple of final things. I know you’ve got a TV interview to get to, and want to ask you a couple of favorite questions of mine.
[00:38:45] Can you ever see the reestablishment of a gold standard and what do you think it would be a good thing?
[00:38:50]Alan Moran: [00:38:50] Yeah, I think it would be a good thing. I think it certainly would be a good thing. Can be reestablished. Maybe Bitcoin will be the gold standard in the future. Maybe that’s. This is going to have teething troubles. If it’s going to go up and down I think there will be. It’s essentially, although governments will always steal your money and they can’t do it So much.
[00:39:11] And there’s a gold standard that people will look for ways in which they can avoid having the government take their money and maybe gold will be in there. Another other assets like that. So to do so w we’ll get something like that for perhaps forced on government. Because people will leave the national currencies, which we should depreciating vis-a-vis gold or Bitcoin or whatever else is in invented.
[00:39:38] Jonathan Doyle: [00:39:38] So I know that your focus isn’t necessarily on cryptos, but I just finished a bunch of study at Oxford in their crypto economics program. And my. My conviction is that there is no way in and there is no way in hell that central banks and sovereign governments again, to let private cryptocurrencies win.
[00:39:59] I just think central bank, digital currencies, if they don’t. If they don’t win, then the entire order of nation States and, Senora regional, all that stuffs collapses. So do you have any thoughts on that? I know that, crypto is not a big necessarily focus for you, but I can’t see how governments don’t use central bank digital currencies, just to wipe out private cryptocurrencies.
[00:40:28] Alan Moran: [00:40:28] People would have to have confidence in the central bank, digital currency. I any companies that, we all have superannuation. I know the government’s going to steal the superannuation eventually and we’d already has It so it’s going to it’s going to steal that no matter what sort of assurances it gave in the first instance.
[00:40:46] And I guess if they, if the central banks bring in their own cryptocurrencies, then they will be successful. If people think they are bonafide and they will keep to them otherwise. People will see to buy gold or buy a Bitcoin or private sector things. And it’s typical to see how the government stops that happening.
[00:41:07]Governments globally would have to come to some sort of agreements and policing mechanism in ways that are difficult to envisage.
[00:41:16] Jonathan Doyle: [00:41:16] It makes me think of that line. Trust us. We’re from the government. We’re here to help. You can trust us with that new cryptocurrency. This time will behave. Last couple of things. We don’t give investment advice on the podcast, but can you suggest. In terms of hedging or just the global macro outlook over the next decade.
[00:41:32] What sorts of things would you suggest people should be thinking about in terms of protecting wealth?
[00:41:37]Alan Moran: [00:41:37] I guess the traditional answer is bricks and mortar and houses and all that sort of stuff. There, there is a problem in Australia in that respect because houses are inflated in values of results of regulation. After I’d done a lot of work in the course of my career on housing policies, and essentially we were very efficient producers of housing in Australia.
[00:41:59] We have a very dispersed system non-union and all that sort of stuff. But what we do is ration, Lund arrest and land uses. If somebody on the outskirts on the new South Wales border beyond Canberra has got a farm it might be worth $2,000 a hectare. If suddenly that farm is rezoned for housing, it’s worth $200,000, but per hectare or more, more maybe.
[00:42:21]So essentially we’ve Got very high housing prices in Australia, simply because of regulation through government preventing land subdivisions, and therefore that by. Creating a shortage so that’s an area where you could say that would be great. And it may still be great, but it’s not as good as it might have been given the government’s decisions over the years.
[00:42:41] But so I guess those sorts of areas you’d think in terms of the better areas to go maybe areas in terms of it. Obviously there’s going to be improvements somewhere, like in the 1920s and 1930s were clearly automobiles were the thing to do.
[00:42:56] And if you got it right, you were dead. But lot of automobile companies went bankrupt. So it was we’ll see that in it as well.
[00:43:02] Jonathan Doyle: [00:43:02] Yeah, it’s interesting. You say that. Cause I’m building out a blockchain consultancy, not cryptocurrency, but actually the blockchain stuff behind it in terms of helping businesses with youth use cases. And we’re still very early in that. That tech phase of blockchain and decentralized ledgers.
[00:43:18] Cause it’s you try to explain it to people as this glazed look over their eyes nah, not getting it yet. So I think we’re a few years away from the mass adoption. All right. Last thing is when COVID hit and basically seeing this vast, monetary and fiscal stimulus globally, I think there’s now North of 30 trillion and excess global liquidity.
[00:43:38] If you had a magic wand, what would you have done differently if you were the prime minister or, had said to you, Hey Alan, am I going to give you the case? We’re going to just give us a policy response. What would you have done differently? Even if it was painful?
[00:43:54]Alan Moran: [00:43:54] I think there’s the COVID response in Australia was a mixture of less protect people who suddenly become. Vulnerable as a result of the policies we’ve put in place to protect others. That is, so we’ve got to Have a sense of adult being given to people. But then in addition to that, there was always the idea that we ought to stimulate the economy as well.
[00:44:18] And I wouldn’t have done any of that. Certainly there, there was a case for putting in some temporary respites funding for people, but the government went a lot further than that. And it, and he talks about, we need to stimulate, we need to do things over and again, over and above that. And indeed in the U S the Democrats now talking about we’ve got to replace it, but replace it with something better.
[00:44:38]So it’s using the COVID as an excuse to totally dismantle the note, what they consider the noxious parts of of the economy and replace them by others, which basically is, a socialistic. Response. So I think that there was always a case that you have to do something about COVID if you are going to, unless you’re going to let it run rampant, which probably would have never been possible.
[00:45:01]Yeah, you have to do something to protect those who you’ve created as casualties but that’s all he needs to do and you don’t need to start so stimulating the economy because as we’ve seen the economy will come racing back. Because you haven’t destroyed anything. All you’ve done is put it on ice.
[00:45:20] Jonathan Doyle: [00:45:20] At the root of all of that, is it simply a question of political economy? It’s that politician? a, It’s a, there’s an interplay here. Isn’t there because if you look at Jude, Wanniski is the way the world works. And you mentioned this at the start that politicians are responding to what they are sensing people want.
[00:45:39] And that’s a quite a wineskin idea. Do you think as a populace, there’s just this increasing expectation for government large. Yes. So there’s an independent tradition here that the people expect government to provide more and more, and the government is happy to keep doing it because they’re relatively, for most politicians it’s four to eight years and then you’re doing something else.
[00:46:01]Is that the dynamic.
[00:46:03] Alan Moran: [00:46:03] I think it is. It’s the same dynamic.
[00:46:05] it’s always been there. I mentioned it on a couple of articles, the American revolutionaries, I mean that they understood this and they understood how democracy could kill the Republic because basically, people will vote themselves more money.
[00:46:18] And that’s why the whole idea, the American constitution, which is the same as the Australian constitution essentially. Was it in place? To prevent governments actually doing that sort of thing to to give them much, much less leeway than they would want to actually seize money from other people and give it to those who are gonna vote for them.
[00:46:36] And that’s why the American constitution served us so well for so long. There are signs that. They’re more than the science. We’ve been discussing that essentially is no longer serving that purpose, that once the government decides that it no longer is going to balance a budget that, again, who’s suddenly with that, we’re suddenly departed from those principles that, that, that were that to allow democracy to work in a way, which didn’t destroy the very which has given them the prosperity.
[00:47:05] Jonathan Doyle: [00:47:05] I can’t remember if it was Alexander Hamilton or Benjamin Franklin that said that if the people don’t understand basically the value of their freedom, he said, then the fault is ours. And it’s our job as politicians to remind them of the importance of their freedom and not to take it away. So it’s it was interesting idea.
[00:47:22]In all of this, my, my second master’s I did was in philosophical anthropology and. This idea of ontology, that there are certain inalienable, if you will, aspects of personhood that people need to work. There’s an inherent dignity in work and production. That’s what attracted me to supply side of, I was like, We need to produce stuff we need to work.
[00:47:45] And if you create a context, either through universal basic income or transfer payments where people are disincentivized, it’s not just an economic question. It’s a question around human dignity and human, just how culture develops. So for me, I’m starting to see we’re in a very pivotal moment about what we think it means to be a culture.
[00:48:04]Last question. Are you optimistic? I, in the dismal science, are you a, what are you, what are your, as you look ahead, what are you thinking?
[00:48:14] Alan Moran: [00:48:14] I think that I’m optimistic in terms of, we’ll see, continue to see technology showing us improvements in living standards, et cetera, but I’m quite pessimistic in terms of the ability of governments to corral these. Animal spirits that we have as individuals and to actually ensure that we don’t steal the money from those who are producing the well that we’re all enjoying.
[00:48:39] And we don’t suppress those incentives that they have. I’m quite pessimistic that there will, we will see a turnaround back to the level of, more rampant capitalism, if you like than we’ve. We’ve been seeing in recent years.
[00:48:52] Jonathan Doyle: [00:48:52] Yeah, I think when you look at the 2008 bile out, I said to my kids the other day that it wasn’t, it’s not really capitalism when the central bank prevents the actual, the natural functioning of a, of an ecosystem and refuses to allow failure to happen, then you know, it, we’re seeing something emerging.
[00:49:13] That’s quite different. So we’re going to let you go. Cause I know you’ve got to, you’ve got to get. It’s a cross town, but I’ve absolutely enjoyed this. We’re going to send people across to your work at regulation, economics.com. We’re going to put those links in the show notes, but want to thank you for sharing your wisdom with us.
[00:49:29] And I just want to encourage you to keep writing cause I’ll be looking out for those articles in the months ahead.
[00:49:34] Alan Moran: [00:49:34] Thanks Jonathan, and keep televising as well, because it’s very important that the message gets out and abouts and a great piece of work doing that.
[00:49:43] Jonathan Doyle: [00:49:43] Thanks so much. Thank you. Appreciate you joining us.
[00:49:46] Alan Moran: [00:49:46] Welcome
[00:49:46]Jonathan: [00:49:46] Hey everybody, Jonathan, back with you once again, just to wrap up, I really hope you got a great deal out of that interview. With Dr. Alan Moran, he had to finish up quickly and get across town to do a great interview. Which we watched on television last night. Really appreciate the work he’s doing.
[00:50:02]So much common sense, trying to help people understand the impact of excess regulation on retarding and distorting. What takes place in markets that we would all probably hope were a little bit more unregulated and free. So that’s it for this episode, please make sure you go and check out.
[00:50:22]Dr. Alan Moran at regulation, economics.com. And you can reach out to them. There it’s a, it’s an amazing site. There’s a huge amount of riding on that site. So if you want to go deeper. Into his work. Please do that last bit of housekeeping for me, please make sure you’ve subscribed. To the podcast. That’s a big help wherever you’re listening.
[00:50:41] And is we’re only really getting started your help in sharing this with other people. If you’re on social media, posting this on your Twitter feed. Is a big help letting people know that a supply side. Is not, has not gone missing that. There is so many amazing men and women around the world who. Still have a strong sense that when good men and women produce good goods and services.
[00:51:05] It’s a bit of a tautology there then. Our economies have the best chance at thriving. Don’t you feel? We’re in a very interesting moment of global history. It really does feel like the script that we were all reading off is being rewritten almost on a daily basis. So stay tuned, friends. We’ll keep trying to bring your guests to unravel what’s happening.
[00:51:25]On a personal level I’m taking my recent study at Oxford in blockchain and crypto economics. Into a service offering. So if you were interested in finding more about how we can help you with blockchain business cases and, simply understanding blockchain, I think there’s a big sense of people, they hear about cryptos. They know a little bit about cryptos.
[00:51:44] But really what’s you. Incredibly powerful as the technology behind it, the blockchain technology, which I’ve been beavering away at for the last couple of years. Stay tuned. We’ll keep you posted on where I’m heading with that, but that’s it for this week. We have James McIntosh from the wall street journal on coming on Tuesday.
[00:52:02] And then hopefully we’ve got a very famous global investor guest coming on the next couple of weeks, so really hoping we can make that happen. So stay tuned. Make sure you’ve subscribed my name’s jonathan doyle this has been the supply side podcast and we’ll have another episode for you very soon.
Modern Monetary Theory With Nathan Lewis
Modern Monetary Theory or MMT is the soup of the day in the global monetary shadow world. In this episode Nathan Lewis and I discuss The Deficit Myth by Stephanie Kelton, the current bible of the MMT and functional finance crowd
Inflation Working Longer And Harder For Less
In today’s episode I share a great quote from a recent article from John Rubino’s Dollar Collapse website. It would be funny if it was not so tragic and such a reflection upon the criminal mutations that define our financial system.