The Guardian 20 April, 2005


liars and stupid ministers

It is obvious to all that we not only have a federal government that is ultra-conservative and one made up of liars but also one that has stupid ministers as well.

Last week, Australia's trade minister Mark Vaile while chastising China for its resistance to the attempt of BHP to jack up the price of iron ore by 100 percent said that "We should not step away from the fundamental position that governments don't intervene in these markets in terms of the establishment of price as a result of supply and demand forces".

Vaille threatened to cite China to the World Trade Organisation and remarked, "China aspires to be recognised as a market economy well hello this is how a market economy works".

Mark Vaille's gratuitous statements are not likely to go unnoticed by Chinese government circles. Does Mark Vaille really think that the Chinese need a lecture about the workings of capitalism?

The Australian government "interferes" in the system every day of the week when it doles out subsidies to companies that cry out for financial assistance or need to be "seeded" with taxpayers' money to start up a particular venture. At the very same time as making remarks about China and the non-interference of governments, the Australian government has sent a mission to Iraq because it is feared that Iraq may cancel its contract with Australian wheat suppliers.

It is claimed by BHP that it should receive from China the same price for its iron ore as is paid to Brazil, China's other major supplier. China is much closer to Australia than it is to Brazil and, with its latest ploy, BHP has sought to claw back for itself about half of the reduced freight cost. What sort of "market forces" are they when the price demanded by BHP includes something that neither the exporter nor the importer has to pay?

It may be that this is how the system of "supply and demand" works but it shows up the idiocy of the capitalist system. There has been no significant increase in the cost of production of Australian iron ore to justify the increase of 71.5 percent that was finally agreed upon. The price grab will flow mainly into the pockets of BHP shareholders and will be ultimately reflected in the prices that others have to pay for the goods that China manufactures out of Australian iron ore. But what does BHP management care about that?

Another interesting aspect of this episode is the suggestion that BHP is going to attempt to line up Rio Tinto, another big supplier of iron ore internationally, to join with BHP in jacking up the price of iron ore next year thereby creating a price-fixing cartel. The Sydney Morning Herald, in reporting Vaille's remarks, quoted unnamed "analysts" as saying that "BHP may have support from Rio next year, even though it would have to be informal rather than organised". So will the Australian government step in to demand that iron ore suppliers stick by the rules of "competition" that the government is constantly demanding or will it close its eyes to this violation of international trade rules?

These goings on regarding China trade do not touch on the monstrosity of an economic system that permits and protects by law and where necessary by using the police and armed forces, the private ownership of an immensely rich natural resource that has lain in the ground for millions of years. These private owners claim it as "theirs". They gouge it out of the ground and sell it off making immense profits for a very few company shareholders and, if they have a monopoly, hold the rest of the world to ransom. There is nothing moral about such a situation. There is no mutual benefit for the buyer, only a huge benefit for the seller.

There is no need to speculate should the boot be on the other foot and say, China, drove the price down to below the cost of production. In those circumstances the present Australian government would be running a virulent anti-China campaign, rushing off to the World Trade Organisation and, maybe, even threatening a pre-emptive strike.

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