The public’s mixed views on free trade

The latest Lowy Institute poll on Australia and the world shows some now familiar patterns of belief on free trade. As I argued in Policy some years ago, while the Australian public remains protectionist, this does not mean they fail completely to understand the arguments for free trade.

For example, 72% of respondents to Lowy’s poll agreed that freer trade ‘leads to lower prices and more product choices for consumers’. 67% agreed that freer trade ‘helps to increase prosperity, both in Australia and other parts of the world’. 84% agree that it ‘enables Australian business to open new markets for Australian products’. On all these propositions, public and expert opinion is close. There is even majority support for the social and political benefits of free trade, with 64% agreeing that it ‘makes the world more stable by putting people from different countries in contact with each other’.

Yet when it comes to a specific question on a free trade agreement with China, only 38% say that on balance such an agreement would be good. Why? The answers to some of the other questions on free trade give us some clues. 68% of Lowy’s respondents believe that freer trade ‘puts Australia at a disadvantage because of our high labour and environmental standards’. 50% agree that freer trade ‘costs more Australian jobs than it creates’ and that it ‘leads to more economic and social inequality’. 42% think that freer trade ‘leads to lower quality jobs in Australia’.

People are more in favour (47%) of a free trade agreement with Japan than China. I think this parallels initial reasonably strong support for a US-Australia FTA – that Japan, like the US, is not seen a low-cost manufacturing competitor (these days ‘Made in Japan’ is a mark of quality; it used to mean what ‘Made in China’ means today, ie cheap). Support for FTAs, though short of majorities, is always well above questions that assume unilateral tariff cuts – the idea that Australia is getting something in return helps increase public support – which is probably why the largest favourable response in the Lowy survey is on opening markets for Australian business.

Many economists think that even unilateral tariff cuts are better than maintaining protection. But to carry public opinon, reducing protection through international agreements is the way to go.

69 thoughts on “The public’s mixed views on free trade

  1. Obliquely, it’s always amusing to watch the “cheap imports are costing aussie jobs and destroying local industries” stories on shows such as Today Tonight – the most recent story I saw had local swimwear manufacturers complaining about the cheaper chinese-made imports and saying how the local industries should be supported by aussies, and they hoped that part of their salvation would come through increased export opportunities (!). Cognitive dissonance or what?

    More seriously, I’ve found that many people have a poor understanding of trade and international economics (not that I’m claiming I don’t) and that more often than not they complain about the challenges of competitive imports rather than thinking of ways to thrive in an international marketplace.

    In relation to the opinion poll stats on a FTA with China, the “fair trade” vs “free trade” campaign may be colouring people’s responses – certainly this is an idea amongst some unionists and some people in the ALP, and no doubt the general population.

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  2. It would be interesting to ask people what products they think Australia and China actually compete on and how much difference they think that tariffs and other protectionist measures would actually make. It would also be interesting to look at people’s behavior on items where there is potential competition (like clothes).
    I think a lot of people that are against free trade seem only too happy to buy the foregin products when given the oppurtunity (hypocrasy in action). There’s a funny example of this where I work in France — the kiwi lamb is about half the price of the European stuff. However, I have never actually ever seen it in stock — it evidentally sells out very quickly and I presume there are restrictions on the amount that can be imported. Given the general public debate, this is all very amusing, because it shows you that all the people telling you how important agricultural protection is evidentally don’t mind buying the cheaper stuff at all.

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  3. Conrad – I think this is a case in which revealed preference through purchases reveals more than public opinion. I think loss aversion psychology is probably important too – these days while we still see campaigns to ‘save’ existing jobs through higher tariffs, we almost never see any proposal to ‘create’ jobs by imposing tariffs to let an ‘infant industry’ grow. That would cause prices to increase, meaning that the consumer would see a new loss.

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  4. With respect Conrad, it doesn’t necessarily show any such thing… in an economy this size, you’d have to track individual opinions and purchasing behaviour to get any clear idea of whether people are being ‘hypocritical’.
    I imagine many probably are. But observing a) lots of French people support agricultural protection, b) lots of French people buy NZ lamb, does not in any way lead to c) lots of people who think a) are hypocrites. That ain’t a chain of logic, it’s a conclusion looking for evidence.

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  5. Sacha, I’m sure it’s great fun to mock working class concerns about jobs.

    Yet, as an academic mathematician, you lobby for greater government protection of academic mathematics jobs. Personally, I think mathematics and IT need a good examination.

    Note I am commenting here on your hypocrisy, not the wider issues.

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  6. Tony, I am not an academic mathematician. I work for a private company. There are, to my knowledge, no protectionist elements protecting my job. Indeed, one of the current challenges facing the small number of people doing jobs similar to mine is that there is no intrinsic reason it couldn’t be done overseas, other than greater quality control over locally done work. It would be entirely possible that a large part of my job could be outsourced overseas, and if that happened, well, I would have to do something else. This is life.

    I do not mock people’s concerns over their jobs and I do not see why one cannot draw attention to absurd stories on “current affairs” shows.

    In relation to my support for the report you link to, I acknowledge that mathematics departments have had problems in the last 15-odd years marketing themselves to potential students and apparently internally in universities. Many academic mathematicians think that their discipline automatically deserves support for what they see as intrinsic reasons. A principal of Data Analysis Australia, a private firm in Perth, recently wrote in the Gazette of the Australian Mathematical Society about how instead of moaning about the sky falling in, mathematics departments should market themselves properly, which all private companies have to do. I have sympathy with his view.

    I am not going to discuss the “intrinsic” arguments because the arguments are difficult and I am very suspicious of them. I think (and have observed) that the quality of mathematical components of university education in the last 15-odd years has declined, in a large part due to what looks like an incorrect funding formula that doesn’t take into account the capital requirements of mathematics teaching (e.g. for computers) and in which the mathematics skills and knowledge of many students entering university in which mathematics is a (effective) pre-requisite have declined.

    A large part of the argument is that the mathematics standards in some tertiary courses are less than they should be – possibly due to prerequisites being removed and/or other departments taking over the teaching of mathematics in their courses. As I understand it, the concern is with the mathematical knowledge and skills of graduates, which is sought to be addressed by more rigorous work. The concern is not unlike that concerned with high school teachers teaching subjects they are not trained in.

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  7. BTW, the job market for academic mathematical jobs is international and always seen to be such. To my knowledge, there are no “tariff” barriers attempting to prevent overseas people being employed at the expense of Australians. This, of course, makes every position highly competitive and extremely difficult to get, even for very good people.

    Even if governments “created” a number of academic mathematics jobs, this would be an increase in the worldwide total number of such jobs, which would offer marginal benefits to Australian jobseekers.

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  8. Andrew, I think your analysis is exactly right. But I wouldn’t conflate FTA support with free trade support. My informal straw polling suggests that most Australian academic economists support free trade, and oppose discriminatory FTAs (as distinct from the rare non-discriminatory FTAs in which you lower barriers for every country in the world).

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  9. Leopold. I don’t get your logic (excluding those that believe in free trade — who surely are not the only ones buying the products). I could point out many other examples from places in Europe (clothes for example). The fact of the matter is that lots of these people screaming and about the need for protection and how good it is are buying non-protected products whevenever possible. This includes products with no particular intrinsic cultural value which are not start-up industries that do not employ many people (e.g., cheap clothes). Why is this not hypocritical (you should be buying great expensive French products, even though I don’t?). If they loved French jobs and industries so much, they wouldn’t buy these products. Instead, they try and force everyone not to, yet buy them themselves.
    Sacha — most of your comments could apply to almost any subject area. I tend to think the main thing making the difference is really only the high school system, which has made maths/science unattractive to many people (or perhaps society in general), and these students have swapped into other courses. Most courses, for example, have gone down in quality, which is surely one of the reasons for degree inflation. Its also quite possible now to get a degree in many areas and learn almost nothing. You should look at it on the bright side — the less people that get trained well, the more you will be worth.

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  10. Andrew – While economists often regard FTAs as trade distorting, and in practice like the US FTA there are lots of exceptions to ‘free trade’, I’m not sure that much of the general public is aware of this so in reading public opinion I think we probably can compare Lowy’s questions about ‘freer trade’ with their questions about FTAs.

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  11. conrad – “most of your comments could apply to almost any subject area” – quite possibly! I’m not a warrior for any particular thing and will quite happily change my mind if presented with the relevant information.

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  12. Sacha, tarriffs are only for mugs. You guys go straight to the source and ask for more jobs directly paid by the government.

    Also, protectionism isn’t confined to national interests. It’s also a feature of many international groups. The fact that mathematicians travel doesn’t negate the value of more jobs created in Australia. What’s more, the group of job applicants, although larger than the number of openings, is constrained, enhancing the value of additional jobs.

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  13. Tony, go ask the people who wrote the report why they wrote what they wrote. I put my name to it not because I supported every detail in it, but because I thought it might be useful as a way of putting forward the idea that the mathematical content of tertiary courses is less rigorous than it should be.

    As I mentioned, I support the contention of the Director of Data Analysis Australia that the mathematical profession needs to market itself moreso, like every other business in a competitive market rather than just asking for more money from government. I wrote to the Australian Mathematical Society saying this.

    No doubt, elements of “the intrinsic need for people to work on this area” lay behind part of the report, but I have no doubt that there is also a genuine concern with educational outcomes. I support better educational outcomes – the ways to achieve this are up for debate of course.

    Certainly the group of job applicants is constrained, but relative to the number of jobs, is enormous.

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  14. Tony, I haven’t read the report, only the open letter to which you provided a link. But I am not clear what you are saying – are you saying that supporting free trade while seeking additional government spending on something is hypocritical? Even assuming Sacha signed the letter because he is a rent-seeker rather than because he believes more funding would promote efficiency, I would hate to think that supporting free trade while lobbying for some sort of benefit makes one a hypocrite. Is it hypocritical for me to support free trade while lobbying for more spending on cancer drugs (from which I may benefit), or foreign aid (which may bring me utility) or a local road project (on which I may drive)?

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  15. Conrad – if I were in France couldn’t I buy Kiwi lamb and Chinese clothes and not be a hypocrit – if the amount of lamb let in still allowed for a viable local industry (which is what I wanted), and if there were not readily available locally made socks, t-shirts etc. In Australia I might want to buy those kind of cheap clothes from local manufacturers, but there aren’t any.

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  16. Russell, there’s a large and very inefficient industry in lamb in Europe — I believe the average sheep probably has a better lifestyle than the average African in terms of money and medical facilities, and the average cow certainly does.
    Also, you are missing the logic of protectionism for clothes in Europe. If you protect the local industries enough, you won’t be able to buy the cheap clothes at all (since the local industry doesn’t make them, and the cheap imported clothes will become expensive). You will therefore either have to buy expensive clothes made in Europe, cheap clothes priced expensively made in Asia (unless there are outright quotas — which there are on some products), or just pay more, when the clothes you want are not made in Europe despite the protection (like running shoes).

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  17. Conrad – large and inefficient isn’t the point. I wouldn’t be a hypocrit if I wanted as much cheap Kiwi lamb as would still allow a local industry. I might value local more than price if it came to closing down local production.
    Re clothes – people don’t always see the consequences of what they do: buying cheaper socks from China means all socks are now from China. Now we read about chemicals in the fabrics etc and may decide we want to buy local, but there aren’t any available. I think hypocrit is too easy a label to describe how people balance and shift their views on these subjects. I’ve no doubt that one way or another we’ll have Sunday trading in Perth and when it happens people will flock to the shops – will you call them hypocrits because two thirds of them voted against it in a referendum?

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  18. Myths about FTA’S,
    ! They are not about FREE TRADE, they are about preference trade.
    2 Since the introduction Oz/US FTA our debt to US has acutually increased. Check out the ABS website and USA BS website (I don’t know what its called can’t be bothered looking) they have different figures but still an increase. In some years the level of trade has decreased.
    FTA’s are smoke and mirrors some gain some lose, overall OZ has been the loser as Blind Freddy could have foretold and as I did in a letter to Alann Kohler, he didn’t believe me but i have been proved right.
    Never put your faith in bean counters human beans don’t work that way.

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  19. Alan

    Could you impart some of your excellent knowledge a little further.

    Tell us please:

    How do you connect an increase in debt with the US on the FTA. A debt increase could in itself actually mean we are buying more off them. Why is this bad? If Australians demand more US goods isn’t that a good thing. Doesn’t that mean Australian wants are being satisfied?

    It may mean that you have somehow found the pitfalls in free trade in which case you ought to be published.

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  20. Russell

    Don’t be a scaredy cat. I promise you Chinese socks won’t kill you.

    If you exercise, don’t smpke and leave the piss alone, you should be all accounts live a long life… that is even by wearing chinese made socks.

    I see the green muppets have got to you and made you scared. Don’t be.

    Cheap Chinese socks are well made. in fact I git a few pairs of Chinese made Hugo Boss socks and wearing a nice dark pair right now. I’m still alive! Fancy that.

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  21. Russell says:

    “……- will you call them hypocrits because two thirds of them voted against it in a referendum”

    Well they are really aren’t they? Just because it is impossible to call them that doesn’t mean they aren’t.

    ———–

    Correction

    In fact I GOT a few pairs of Chinese made Hugo Boss socks for Father’s day…………….

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  22. Darn right Sacha.

    You’ve have (not got) me thinking the same about that word now . I will never use it again. It doesn sound horrible, you’re right.

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  23. Neither the coarse skin nor the impoverished principles of the penny pinchers will be irritated by Chinese socks, but for those of us whose feet are on the ground but heads are in the clouds Chinese socks are an abomination of style and betrayal of our potential to produce a chemically unadulterated and morally superior sock.

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  24. JC
    US companies manufacrure cheap goods in Mexico import them to US sell them to OZ as made in USA, undercutting locals and creating unemployment in USA and OZ. Just one little rort there are probaly thousands more.

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  25. Put a sock in it Russell. Maybe you’re just a cheap dude who doesn’t want to spend more than a few bucks on a decent pair of socks.

    Dude, I’ve worn these hugo’s all day and heven’t felt faint or like I was bout to callapse dead.

    Maybe you ought to spend a few bucks and get yourself a better pair of Chinese made socks that will make you feel like you’re the green party’s Warren Buffet.

    Stop being a miserble cheapskate and spend it up a little, pal.

    Dude, there’s global waming going on and the world is gunno end on march 16 2213. Why are you worrying about socks?

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  26. With due respect Alan, don’t be so bloody silly.

    The US unemployment rate is lower than ours and ours is at 30 year lows. Our wages grwoth has never been better. while the US wage rate has been a little stymied from the 11 million illegals that have crossed the border and placed pressure on the lower quintile of the US work force. That s separate issue. However US wages has grown in all sectors of the US.

    Free trade between the US and Mexico has been a good thing. In fact it’s been a great thing. American have been able to purchase cheaper goods while the Mexican standard of living has now reached first wrold standards… around $10,000 per cap. Everyone has been a winner with the FTA.

    Before the FTA US tariffs on imported Mexican goods was around 5% while Mexican traiffs were around 30%. Both sides won with AFTA.

    If you’re that preoccupied with cheap labor you may want to explain why people in Mali aren’t fully employed by international firms as their rate is about 5 bucks a week or so.

    It’s not cheap labor that makes a difference, it the ratio of capital to labor that raises living standards. This argument was settled 200 years ago and you want to bring it up now. Pleaaazzze. It’s about as settled as it could be. Free trade works as it improves the living standards of all participants no matter what worry warts like you and Mr Cheap Socks think.

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  27. That’s right – just like the morally superior FairTrade chocolate. I can recommend it Sacha, for lazy people it’s an easy way to exercise good morals. I exercise mine a lot with Coccolo – organic, FairTrade … (didn’t I advertise Coccolo here already?)

    This topic has just afforded me a pleasant moment of Googled nostalgia – I was thinking of my grandfather who wouldn’t buy anything Japanese (hence everything ‘Asian’), because of the prisoners of war in WW 2. He traded in his old Ford for a Simca (I’ve been looking at SIMCA pictures), which came to me after he had a stroke. I felt quite smart in that Simca – definitely the only one in the UWA carpark. I was able to take that car to be serviced at my parents’ mechanic because he, who had been a prisoner of war on the Burma railway, wouldn’t service Japanese cars. None of those kind of barriers to free trade now – what a different world it was.

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  28. JC – that is a low blow. I do have cheap socks (not so cheap actually because they soon go hard and shapeless, and one of each pair disappears in the washing machine, so you have to keep buying the wretched things) but not for want of looking. The only socks I have seen that come from a good home were some French socks – I didn’t care about the price, but they were made from mercerised cotton and I don’t approve of shiny socks (European sophistication, I suppose).

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  29. Take Alan with you on your buying spree. You’re getting the socks and maybe you could find him a Mexican sombrero for the summer. Both of you could in fact.

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  30. You lot obvisously can’t check a website have a lookat the stats our exports to the US have fallen and our debt increased since the intro of the FTA.

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  31. Alan

    for gawds sake…..

    Has our living standards risen since that time?

    Yes.

    Have our exports and imports risen during that time

    Yes

    Have people’s wants been satisfied during that time.

    Yes, as some have made the choice to buy US goods.

    What exactly is your problem?

    As our imports have risen from the US, China has now become our largest trading partner (not because of socks).

    It silly to look at our trading with one nation and panic. There could be numerous reasons why there has been capital inflow from the US.

    I dare one reason could be that the US has a huge advantage when in come to private equity firms which means they are buying up our firms at a premium and making Australian shareholders wealthier.

    Stop worrying enjoy the spring and worry about othr things…

    If we were so badly off you may then what to explain why the exchange rate is now 82 cents while before the FTA it was langusihing at around 50 cents.

    Our very own real estate firms have been buying up lot’s of US commerical real estate too, you know, which may not be a good thing in the not too distant future.

    just stop worrying and look at the aggregates.

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  32. “You lot obvisously can’t check a website have a lookat the stats our exports to the US have fallen and our debt increased since the intro of the FTA.”

    Alan, you’re committing the ‘fallacy of asserting the consequent’.

    Just because two things have happened at the same time (eg, rising imports from the US and the US-Australia FTA) doesn’t mean that the one caused the other. The cause could be a third factor of which you’re not aware.

    For example:

    A more likely explanation for the change in the balance of trade with the US is the rise in the Australian dollar against the US over the last few years. I expect that, even with the FTA, when (if?) the Aussie depreciates the balance of trade will begin to move the other way.

    The same goes for the debt numbers. As I remember it, our debt has been rising for twenty years, whereas the FTA was only introduced around three years ago. This suggests a cause other than the FTA.

    As for our not being able to check a website: maybe, like you (comment #20) we just ‘can’t be bothered’.

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  33. Rajat, I was saying that Sacha is hypocritical in mocking one group of workers for seeking government assistance to keep jobs, while doing the very same thing, dressed up in different social trappings.

    I was not commenting on “supporting free trade,” but on Sacha mocking concerns about the effect on workers. I pointed that out in my initial comment.

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  34. Tony, as I mentioned, in my job, which is not as an academic mathematician, I am completely subject to being outsourced overseas. I am not seeking any protection.

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  35. And Tony, I think it’s perfectly reasonable to point out the apparently contradiction in people wanting to obtain export markets but complaining about imports. What do you think about this?

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  36. I think Alan’s comment highlights the underlying reason for the public’s stance on trade – mercantilism: exports are good, imports are bad. I remember hearing former(?) Age State Economics writer, David Walker, speak at Melb Uni over 10 years ago. He said that economists had been successful in persuading the public of the existence of scarcity – and hence the need to make choices and trade-offs – but had not been able to convince the public of the case for free trade. It’s just too counter-intuitive for the average carbon unit (my conclusion, not his). Perhaps one useful analogy could be that seeking higher exports and lower imports is like working without getting paid. Surely most people would prefer to get paid without working!

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  37. Let’s not forget the economists who actually are like the deniers in AGW. These are the people who suggest that some tariff protection and industry policy is a good thing. These people are nothing more than enablers who pass on bad ideas to the public.

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  38. Hi just snooping in from America. You might not be following our economy as closely as I am and so unaware that we heading towards a globalism implosion. Its all well and good to discuss free trade’s theoretical benefits. Don’t let the fact that every country that has tried it has crashed and burned discourage you. Japan is just now recovering from a 20 year recession. On my visit to China we went weeks without seeing the sky because of “Asian brown cloud” (see Wikipedia). While working in India I read about farmers commiting suicide in droves. South America so crashed and burned with this nonsense that they are now forming some sort of socialist union. The oil trade has left dictators in power all over Russia, the Middle East, Africa. And now finally even the US is teetering under the burden of debt caused by its trade deficit (indeed if Australia had anywhere near our level of percent GDP debt you’d all be sent to debtors prison).

    Yes free trade in moderation is good which explains why some segments of some societies have seen some benefits. The mixed views are the result of the public not buying into globalisms crazy absolutist purist ivory tower nouveau riche religion.

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  39. David

    Japan- loose monetary policy caused the boom and then too tight monetary polcy compounded by some pretty big fiscal errors made it worse. Gloablisation probably saved them from depression.

    China- lack of properly defined property rights and no vote is the cause of the plume in the same way that the environment was so degraded in Russia and Eastern Europe before the wall came down.

    India- Dunno know about the suicide issue but I hardly think it’s because Indians can purhase more Sony TV’s.

    South Am- Has always been a socialist dung hole.

    Dictators is oil rich countries- not really our problem. The people there should do something about it.

    US debt- Yes Ask Allan Greenspan why he left the o/n rate at 1% for 18 months. Again looose monetarry problems.

    Australia has a bigger personal debt problem than the US.

    Free trade is good. Globalization has nothing to do with the problems you presented.

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  40. JC wrote:

    Dictators is oil rich countries- not really our problem. The people there should do something about it.

    Yes – they should tell us to stop mucking about in their politics, killing their elected leaders and hoisting our own sham, puppet governments so that our propped-up, cheap energy capitalism can continue it’s sputtering progress. I know we’re all supposed to believe in the economic miracle of free trade, but the whole lot is underpinned on oil, which in reality isn’t cheap at all if you include the horror inflicted on the countries who are infected with it. Every time we don’t pay full price for oil, one of those poor bastards pays for it in a missing limb or a dead relative. I’m ready for nuclear now – at least the horrors will be visited on us rather than them.

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  41. David

    Sorry to say but that’s about the most emotive nonsense filled missive I have read for a while.

    Perhaps you too need to tell us why free trade doesn’t work and if so why haven’t you been published yet.

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  42. Then let’s keep trying David.

    If you’re in Sydney the LDP is running a pro-free trade rally on Saturday. I’m sure you will attend, right?

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  43. Going by David’s contribution (not David Rubie’s), it looks as though the “fallacy of asserting the consequent’ is in season.

    I wonder where Alan has gone.

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