Groan - Ronald Reagan was right again

I’ve been wondering if I should apologise to the neighbours for all the groaning emanating from my study. But it’s not entirely my fault. Some recently released ­reports contain so much bilge that you’d groan, too.

Take the report — it’s actually a blog post — titled Fiscal Policies to Curb Climate Change, released by the International Monetary Fund. You may well ask why the IMF undertakes this work given its stated objectives.

Its principal role is to supervise the international monetary system and to grant credit to member countries with temporary balance-of-payments deficits. But once exchange rates were freely floated around the world, there wasn’t much need for the IMF.

But to steal from Ronald Reagan’s thinking, international agencies such as the IMF are clear examples of eternal life. Without anything much to do, they invent activities and establish missions in keeping with the preferences of their well-paid staff who, in the main, don’t pay tax. It’s a classic case of the march through the ­institutions.

The IMF blog post starts off with worthy-sounding guff. “Global warming has become a clear and present threat. Actions and commitments to date have fallen short. The longer we wait, the greater the loss of life and damage to the world economy.” None of these assertions is verified.

According to the four authors, what we need is a global carbon tax. And not just a little carbon tax. For Australia — but bear in mind the report is not about Australia, despite some local reporting — a carbon tax of $US75 a tonne will be required, which at today’s exchange rate is $110. The report notes that the average carbon tax today is $US2.

You can see this being a hit. Retail electricity prices would rise by between 70 per cent and 90 per cent from their already extremely high levels. And the price of petrol would increase by an estimated 10c a litre, although that sounds like a significant underestimate.

According to the IMF, countries such as China, which has no commitment to reduce emissions until after 2030, will need to impose a carbon tax of only $US25 ­because it’s a developing nation. We have heard that one before.

The IMF authors think voters won’t have a problem with a global carbon tax because governments will have all that new revenue to play with. “Options ­include cutting other kinds of taxes, supporting vulnerable households and communities, ­increasing investment in green energy, or simply returning the money to people as a dividend.”

Or what about this for a catchy idea? “Governments could compensate only the poorest 40 per cent of households — an approach that would leave three-quarters of the revenues for additional investment in green energy, innovation or to fund the Sustainable Development Goals” (dreamt up by another example of eternal life, the UN).

Evidently the carbon tax will “help save more than 700,000 people a year in advanced and emerging market economies from local air pollution”. You wonder where they got the figure of 700,000 — not 642,000 or 958,000. There’s also no acknowledgment that carbon dioxide emissions are not the same thing as air pollution.

The problem with these political, substandard reports is that they will be endlessly quoted — not so much for their contents but for their sheer release. Indeed, Labor’s hapless energy spokesman, Mark Butler, who is battling the sensible wing of his party, was immediately on to it.

“The IMF has joined the long list of bodies that have confirmed Australia isn’t on track to meet our obligations under the Paris Agreement,” he said. It didn’t actually say that but what the heck?

I also have been groaning over a study released by Harvard University’s Centre for International Development. Run by a former planning minister of the Venezuelan government, the project has involved ranking the economic complexity of several countries.

According to these armchair economists, complex is good, simple is bad. Australia has a complexity index of -0.6, putting us on a par with Pakistan, Senegal and Uganda. Moreover, our index of complexity has been declining. The winners in this complexity game are Japan, Switzerland, South Korea and Germany.

The economic complexity of a country “is calculated based on the diversity of the exports a country produces and their ubiquity, or the number of countries able to produce them”. I don’t know where these ­authors learned economics but they must have been down the pub when Ricardo’s law of comparative advantage was being taught. This law states that a country will produce more of things in which it has a comparative advantage.

It’s also one thing to say other countries can produce iron ore, thermal and metallurgical coal, liquefied natural gas and agricultural products; the quality of the products, the ­location of the products and ­efficiency of their production are all key elements in establishing our comparative advantage. And let’s not forget the importance of higher education and tourism in generating export earnings for Australia, activities that have nothing to do with mining or agriculture.

But the study has a core weakness: Australia’s per-capita income is among the top 10 in the world (sixth on the best measure) yet we have a low complexity index. The truth is we have been blessed by certain advantages and we have made the most of them.

And as for the “strategic bets” the authors recommend for governments, we call it picking winners and we have seen it fail time and again.