My initial response was just basically to investment but you have brought up a plethora of other information that i agree and disagree with to varying extents. I think overall you are not specifically targeting the chinese directly here but i get the feeling that you are targeting capitalism as a whole and the notion of true free trade between countries. My reasoning with the above sentence is due to the fact that the chinese have only recently begun to invest their money here in Australia and their are numerous other countries that hold a greater stake in our economy than the chinese do ( I dont know you loki01 and you seem a well educated person but for the sake of removing any racist undertones I will replace the word chinese with other countries. Please do not take offence at this but as i said above I do believe you are using china as a general reference to your thoughts on the current workings of "free trade and capitalism" because they are currently in the spotlight.) Capitalism itself is certainly not a bad thing but it's the way those in power manipulate it thru implementation of self serving regulations that has created such a disparity between the have and have nots. ( Possibly a little off topic here in regards to insurance payouts... Can anyone here tell me why insurance companies are exempt from the unfair contract laws? )
You stated "Free and wealthy I suppose."
I certainly agree we would be free but without "other countries" who we export goods to in a substantial way Im not so sure about the wealthy part. We create so much raw materials that there is no way we could internally sell it here in Australia so again, we HAVE to export it to someone and that someone just happens to be other countries.
you stated "And forced to confront our economic issues rather than have paper shuffling ponzi housing booms which simply force up the price of an essential item to young Australians." This point i agree with 100%. However, this comment really has nothing to do with other countries as it is our own govt that has caused this. If you look back at one of my previous postings my partner and i have sold 3 of our investment properties over the last 18 months as the govt initiatives and the banks themselves ( bank guarantees, first home buyers grant etc etc ) have created a time bomb in the property market.
you stated "We might again learn to produce things, and actually participate in the 21st century by being innovative. Actually, I wonder whether you can have an advanced economy without a successful manufacturing base, which has been the basis of economic progress in the western world."
This point I also agree with to a degree but for us to be able to produce things we have to be competitive. There is no way we can compete, labour wise, with certain other countries as their incomes are still well below ours. Countries economic competitiveness almost always slowly erodes as that country wealth increases due to wage increases that go hand in hand with a nations wealth. Over the next 100 years I can guarantee you will see the rise and fall of many economies including those that are the most powerful at the moment. As for innovation well I think our govt has a lot to answer for in regards to this. I truly believe more incentives should be given to companies who do their own research and development. Numerous other countries have massive tax and similar incentives but sadly Australia lacks the forethought to see the true benefits of this and hence we see a number of truly revolutionary ideas and products heading offshore.
You stated "As long as we can sell ourselves into slavery our politicians will ensure that they will take the cheap and easy road"
This point I tend to disagree with. Foreign ownership is not selling oneself into slavery. It is our companies obtaining money from foreign companies for investments that that could not be obtained locally. As for the govt taking the easy road well i would have to certainly agree with this... votes are the only thing that counts and unless you have blinkers on this is quite obvious on the lead up to elections with the infamous election promises.
You stated "In any case any benefits from the investment is being used to fund all those added costs from the excessive population growth (eg roads, electricity plants, schools etc) and the social services that go with that."
This point Im a little confused with. Our population is not directly tied to foreign investment? So your saying that the monetary benefits received from Australia exporting to other countries goes to building roads, electricity plants and schools. Im failing to see the downside to this unless you are alluding to the fact that this money would be channeled to other areas if we didnt sell our goods to other countries which in itself doesnt make sense as its our govt that decides on where the money is spent? I would also see building schools as a stepping stone to increasing our competitiveness thru education or have i missed something? And again, where our govt inputs money from overseas investment; what controls our govt imposes on population control; and how much money goes to social services has very little to do with other countries investing in our economy but with the day to day governance of our country by our politicians.
"The social costs of the foreign investment is paid mainly by Australians while the benefits go overseas."
I cant really comment on this point as i cannot find any statistical information that proves or disproves your statement.
You stated "Always remember what Buffett says - the real value of an asset is not its current price but what it can generate over time. PE ratios typically are 12-15 while asset lives may be 20 years plus (in the case of the sale of ASX the asset life has no end date). Hence the value at which assets are sold is well below the long term income stream. It is this residual value not captured by the PE ratio where Buffett has made his money. In a sense by selling our assets we are funding the takeover of the country, because foreign companies such as Xstrata ( for example) is expanding in Australia from profits it has generated from the cheap takeover of MIM. "
Using PE ratios to validate your claim that foreign investment is undermining our economy really doesnt sit well with me. Using that logic every country around the world who invests in another country is guilty of a potential "takeover of the country". Based on those principals Australia would be found guilty of this tactic just as much as any other foreign country. Maybe we should replace the word "this tactic" here with capitalism?
You stated "And do not forget the issue of tax evasion (eg via transfer pricing etc), and the constant pressure by foreign owned companies to bring in their own workers rather than train locals and to thereby depress wage rates."
I can tell you now tax evasion is certainly not limited to foreign countries... I highlighted previously how competitiveness has a correlation to a particular countries state of wealth. It's the nature of capitalism that business's here will do their utmost to obtain the cheapest possible labour they can find. As for whether they are foreign owned or local Australian business's well i would like to see some statistics to show that it definitely is foreign owned and not local business's requesting this.
You stated "Think about it, before you simply accept the mythology that foreign investment is good. If it were so good then China and India would have allowed BHP, Rio, Vale etc to take over their mining industries - but in fact they want to take over ours!!!"
Im a little confused with this statement.Are you saying foreign investment is bad because that's the way it appears from my perspective? So should Australia stop all it's investments in foreign countries as well? In fact, try to picture a scenario whereby no country invests in another country and try to see the economic impact that would have on the majority of nations... Im wondering if there is any country on the planet that does not have investments in another country? I wonder how many of our mining companies would still be in existence if it wasnt for foreign countries? Lets rephrase that... i wonder how many companies full stop would still be in existence in Australia if it wasnt for foreign investment. Other countries, just like Australia, have their equivalent of a Foreign Investment Review Board which manages any potential take over of its own companies. Australia on numerous occasions have rejected take over bids by other countries companies on the grounds it could adversely effect Australia. Again you cant blame a foreign country for investing in Australian companies if you believe the foreign ownership laws here in Australia are fundamentally flawed can you? If you believe there are issues with foreign ownership you should be targeting the Australian foreign investment review board and not those foreign companies legitimately investing in our companies.
loki01 please don't see this as an argument but an open debate on each others thoughts on foreign investment / capitalism. Although i dont agree with a number of your points does not mean i dont want to read about your viewpoints. In fact quite the opposite... a contrarian point of view can sometimes ( and has in the past to me ) enlighten you to facts or particulars you were not aware of which may completely alter your perspective.
Good luck to you loki01 and Im hoping to read more of your posts in the future.
