The Prime Minister, Julia Gillard, has called our resources boom ‘the equivalent of the gold rushes’. So – is it? And is her comparison a good argument for putting profits of the current boom into national infrastructure, just like in the 1850s?
Cards on the table: personally, I’m all in favour of the super profits tax – especially when both BHP-Billiton and Rio Tinto announced last week just how super their profits are at the moment. (And despite the fact that my superannuation probably gains from those profits, too)
But I want to look at Julia Gillard’s comparison between the 1850s and now. How valid is it? What differences are there between the 2 periods? And does this have any bearing whatsoever on what political decisions are made today?
There is one obvious difference. Today we have a federal system, and tax rates decided in Canberra apply across Australia (though state mining royalties are another matter). In the 1850s, the states were independent colonies, dealing directly with Britain rather than each other, and the different governments raised money in different ways.
Gold was first discovered in Bathurst, NSW, in 1851, by Edward Hargraves, who had just returned from the Californian goldfields. Or that’s the official story. In fact, there were a number of earlier discoveries. In 1844, an amateur geologist, the Rev. William Clarke, showed a gold sample to Governor Gipps, who is said to have replied: ‘Put it away, Mr. Clarke, or we shall all have our throats cut.’
Gold and convicts were not a good mix, and even after transportation ended, gold was not seen as an unalloyed good. (no pun intended) So to begin with, the authorities expected a resources boom to lead to disorder or worse.
But Hargraves deliberately publicised his find. On 2 May the Sydney Morning Herald gave his announcement second billing, after a story about the Van Diemen’s Land Electoral Bill, but by the following Monday, it was big news. Soon much larger gold fields were discovered in Victoria, and the authorities had to find some way of handling it – and making some money from it.
Louis XIV’s finance minister, Jean-Baptiste Colbert, put it best:
‘The art of taxation consists in so plucking the goose as to get the most feathers with the least hissing.’
That’s not easy, and no easier 160 years ago. Most people worked for cash. They had no idea of their annual income, and were not literate enough to fill in an income tax form. (I’m still not) So income tax was out. Most firms were private partnerships, so company tax was out. That left import duties, charges on government procedures such as stamp duties on land or share trading, excise tax on a few drugs (tobacco, alcohol, opium), and the occasional populist levy, such as a £10 head tax on Chinese diggers. Virtually all these taxes were regressive, disproportionately hitting the poor.
It was the imposition of one more such capricious levy – a miner’s licence, set at 30 shillings a month – that triggered rebellion on the Ballarat gold fields, the Eureka Stockade.
(There were other causes, including claims of corruption in the Victorian police force – some things never change.) Eventually, after nearly 30 deaths of rebels and police, the government compromised, and replaced the unpopular licence on individual miners with a lower tax, named by the spin doctors a ‘miner’s right’ because it gave them the right to vote, and by a tax on gold exports – essentially a super profits tax on gold production.
It is not surprising that Julia Gillard, who lives in Melbourne, should draw a link with the gold rushes, because the impact of gold was greatest there. Anyone walking around Melbourne or Ballarat can see that impact, in the high Victorian architecture, the railway network, and public philanthropic projects such as the University of Melbourne and the State Library.
It was a very good resources boom for Victoria, and to a lesser extent for New South Wales. But like our current one, it was uneven: Western Australia, South Australia and particularly Tasmania, lost population – and therefore income – to Victoria. Then, as now, resources created a 2-speed economy, but with separate colonies, there was no thought of wealth redistribution. Instead there was a mad competitive scramble between the colonies for ‘men, money, markets’.
Julia Gillard is right: the gold rush was a resources boom. In its wake, it brought stock market speculation, inflated house prices, class conflict, racial tension over immigration, and Australia’s most successful tax revolt – as well as a lot of McMansions, and a useful, if flawed, National Railway Network.
So far, this time around, nobody has been killed.
Geoffrey Blainey, The Rush that Never Ended (1964 and later editions) – desperately out of date but a classic and readable text