Australian government, you’ve forgotten about the basic economic principles

What passes in our federal parliament these days seems more intent on name-calling and general low grade behaviour that what would be tolerated in the schools that I went to. It is sometimes good to reflect on some of the simpler principals that drive the economies that we all live in. The categorisation of various people into wets or drys, rationalists or non-rationalists and so forth does little to meld together a barrage of different viewpoints and provide the leadership that this country requires.

There are very few ways that we can create wealth and we have to be good at creation, otherwise we will sink under our own burdens. We have to decide on what to do whilst we have a window of opportunity, brought on buy our accidental natural resources to which we point proudly when economic discussions come up. They will not always be there and we have to recognise that and prepare for it. Technological advancement can hobble us in a minute as more and more countries reach a higher standard of living. We don’t have forever and we had better start thinking seriously now. The following basic principals, might be a good place to start…

Any economic unit be it a household, shire, state or a federation of states only has three options to generate wealth.

Primary: Grow it, catch it or dig it. No other options, if you want to go down this path. You have to have commodities that somebody is prepared to pay for and you have to be able to harvest them.

Secondly: You can manufacture. You can invent some things that others want and then skill up available manpower to manufacture those products and then if the tyranny of distance and cost of getting them to market doesn’t cripple you, you may have a business.

The third is that you can convince people to pay you for sophisticated services or articles that you may be able to create. You can convince people to come and visit with you and leave some of their wealth with you. The classic example here is tourism.

There are no other ways!

Then of course, once you have generated wealth there must be constraints to ensure that the wealth is not “leaked” to entities outside your own. This is a never ending problem for communities who have been convinced that there is more value in outside service providers who take the monies and effectively run back to their own wealth unit with the funds. The solution is to use local skills and talent for import replacement to a level that balances the individual consumer rights with the overall good of the whole.

Leakage occurs every time a unit has to go outside of itself to satisfy a need. There will of course always be some leakage because we cannot do everything ourselves but if it is recognised that it comes out of our share of our wealth then maybe we can recognise opportunity and do something about it.

So that is the challenge! Maximise every opportunity and minimise the leakage whether it is in your Home, your shire, your state or your federation of states. It has ever been thus.

What economic principals do you live by? What ones has the government forgotten about?