5 min read

A festival of bad ideas

Labor's Jobs and Skills Summit is shaping up to be a "festival of bad ideas"; which countries control the world's critical minerals; US inflation flat was in July, so is corporate greed dead?; and the battle for Taiwan.

1—A festival of bad ideas

Australia's new Labor government is holding a Jobs and Skills Summit next month, bringing together "unions, employers, civil society and governments, to address our shared economic challenges". Productivity (or lack thereof) is rightly front and centre, but:

"...the solutions the ACTU proposes would do more harm than good, and are a throwback to the late 1970s and early 1980s. Its proposals would, on the whole, hurt working people most of all, while damaging the national interest to boot. Worse still, they would undermine the prosperity that funds one of the strongest social safety nets and fairest societies in the world."

That's according to UNSW prof Richard Holden, who described the Summit as being more like a "festival of bad ideas" for its mention of price controls, wage growth mandates and a desire to relax the central bank's focus on inflation. Not learning from the mistakes of the past, and all that.

On the inflation targeting issue, Holden notes that if anything the Reserve Bank of Australia (RBA) should focus more on inflation. Having a dual inflation and employment mandate was a major reason it "took its eye off the inflation ball" last year. Achieving full employment is better left to economic than monetary policy.

Holden then went on to highlight some of the good proposals – increased investment in skills and expanding the nation's housing supply – but added that "it's a shame they didn't make more of these". All in all:

"The Hawke-Keating government launched Australia on a bold path to economic renewal that laid the foundation for nearly 30 years without a recession – of rising living standards and prosperity that was broadly distributed. They did it in conjunction with a union movement that didn’t see negotiations as a zero-sum game, that realised the national interest and the interests of working people went hand-in-hand, and that never confused means and ends."

You can read Richard Holden's full AFR article here (~4 minute read).

2—Controlling the world's critical minerals

Infographic comparing supply chains of carbon-based energy and clean energy.
The Peterson Institute for International Economics created this helpful infographic to compare supply chains of carbon-based energy and clean energy.

How dependent is the world on a few countries for various critical energy minerals? Quite, according to a new report by the Peterson Institute for International Economics (PIIE), which noted that:

"The concentration of production in one or a few countries makes the supply chains relying on those minerals vulnerable not only to market power and logistical risks but also to geopolitically induced disruptions, especially through trade restrictions."

Using a game-theoretic approach, the PIIE concluded that China is clearly dominant in supplying clean energy technologies, with the US still the top dog in terms of fossil fuel-based energy.

Australia is only dominant in the mining of one mineral – lithium – although "Chinese state-owned companies control 33.1 percent of the total [lithium] market and about 50 percent of the production of large firms."

Separately, the FT ran an article on lithium noting that while it's abundant, "the ability to execute capital projects is not widely held", which is probably why Australia accounts for 54% of global production with just 26% of known supply (Chile is the opposite – 16% of production with 42% of supply).

That's because getting a lithium mine up and running is no easy feat and not every country is as good at it as Australia:

"Lithium mining projects typically take between six and 19 years from an initial feasibility study to actual production, the longest of any of the technologies involved in electric batteries."

Apparently, "the world needs another 60 lithium mines by 2030 to meet all the decarbonisation and electric vehicle plans of national governments", meaning Australia is well placed to hold its lead barring technological breakthroughs such as direct lithium extraction, which would do away with the need for brine evaporation (Australia's lithium is all hard rock so wouldn't benefit).

Check out the full PIIE study here (~25 minute read), and the FT article here (~3 minute read).


Tweet showing US inflation flattening.
If corporate greed caused the inflation (according to Elizabeth Warren), then presumably corporations have stopped being greedy?

4—The battle for Taiwan

Taiwan is still very much front and centre on the world stage and while no one knows exactly what the Chinese Communist Party (CCP) under Xi Jinping has planned – we're talking in long-run here, so not simply an increase in 'military exercises' or trade restrictions – its Ambassador to Australia, Xiao Qian, expressed his concerns that for whatever reason, the Taiwanese people might not want to re-join China:

"Given the situation that the people of Taiwan are under a regional regime for many decades it is reasonable for us to understand that their perspective about China, their perspective about their motherland, might take somewhat different views."

The solution he offered sounded... depressingly similar to how China has handled the Uyghurs:

"I haven't read such about official policy [but] I think my personal understanding is that once Taiwan is reunited, coming back to the motherland, there might be a process for the people in Taiwan to have a correct understanding of China about the motherland."

Giving them "a correct understanding" through "a process". Sounds a lot like re-education camps. But perhaps it's just a translation issue? 😬

FWIW, the CCP once recognised the Taiwanese as a distinct "nationality", i.e. not Chinese, and Xi Jinping's idol Mao Zedong even supported their independence movement in the 1930s. That was, of course, when the island was occupied by Japan – Mao was a savvy operator, so he probably always intended to take the island. Having the Japanese gone would make that task easier, which explains why he quickly backflipped on Taiwanese independence after taking control of the mainland in 1949, only for his planned invasion to be thwarted by the Korean War.

But the CCP has made up its collective mind. Qian's comments certainly seem to indicate that conflict over Taiwan – at some point – is a very distinct possibility for as long as Xi Jinping is still pulling the strings in China. Western leaders are also increasingly worrying about an invasion, with France's Navy chief telling Parliament that "Against the Chinese navy, we will win if we fight together, in coalition."

There would be no winners from an invasion of Taiwan. A recent war game concluded that the "United States and Taiwan can conduct a successful defence of the island", although it would come at immense cost, and "it's very much a feeling of—well, nobody won, but nobody lost either".

Yep. If China invades Taiwan, everyone will lose.

5—Further reading...

🤖 Worried you're being deepfaked in a video chat? Ask them to turn around.

🎉 Australia will get monthly inflation figures starting from this October. Only 75 years after the US, 62 years after Japan, 47 years after Canada and 25 years after the entire euro area...

💸 Elon Musk sold another $7 billion worth of Tesla shares "to avoid an emergency sale of Tesla stock in the event that the Twitter deal closes".

🏭 China has no inflation problem because the Politburo prefers to splash the cash by increasing supply through handouts to local governments, well-connected firms and state-owned enterprises.