Single currency for Australia and NZ?

The Prime Ministers of Australia and New Zealand have spoken, there shall be a commission! Specifically the 'Productivity Commission' has been tasked with, conducting a joint scoping study on strengthening trans-Tasman economic relations [to] identify reforms that will boost productivity, increase competitiveness and drive deeper economic integration between the two countries.[1

These are exemplary ends aimed at but as Murray Rothbard indicates:

Governments... seem to be congenitally incapable of keeping their mitts off any part of the economy. Government, aided and abetted by its host of apologists among intellectuals and policy wonks, likes to regard itself as a deus ex machina (a "god out of the machine") that surveys its subjects with Olympian benevolence and omniscience, and then repeatedly descends to earth to fix up the numerous "market failures" that mere people, in their ignorance, persist in committing.

The fact that history is a black record of continual gross failure by this "god," and that economic theory explains why it must be so, makes no impression on official political discourse.[2]

The announcement of a government commissioned report must be taken with great caution. Unfortunately many see no problem and claim the productivity commission is independent of politics. But how independent is it really? Murray Rothbard has the answer:

     "Independent of politics" has a nice, neat ring to it, and has been a staple of proposals for bureaucratic intervention and power ever since the Progressive Era. Sweeping the streets; control of seaports; regulation of industry; providing social security; these and many other functions of government are held to be "too important" to be subject to the vagaries of political whims. But it is one thing to say that private, or market, activities should be free of government control, and "independent of politics" in that sense. But these are government agencies and operations we are talking about, and to say that government should be "independent of politics" conveys very different implications.

For government, unlike private industry on the market, is not accountable either to stockholders or consumers. Government can only be accountable to the public and to its representatives in the legislature; and if government becomes "independent of politics" it can only mean that that sphere of government becomes an absolute self-perpetuating oligarchy, accountable to no one and never subject to the public's ability to change its personnel or to "throw the rascals out." If no person or group, whether stockholders or voters, can displace a ruling elite, then such an elite becomes more suitable for a dictatorship than for an allegedly democratic country.

What then is to be expected from this "independent" government research body?[4] In the section entitled "How far should integration go?" the proposition of a single currency is put foward,

the common currency element of economic union can be a positive or a negative... and in practice will depend on how they are implemented.[5]

Historically as the study notes suggest there are parallels to be drawn from the recent events in Europe,

Currency union is one area where the loss of local decision-making can be problematic. On one hand, there are potential benefits in avoiding the transaction costs associated with having separate currencies. On the other, where business cycles and economic changes (such as the ‘mining boom’) affect the two countries differently, there could be costs in not having independent exchange rates. The recent experience of countries in the Eurozone is instructive in this respect.[6]

Foreseeing the events that later transpired a decade later with the establishment of a European Central Bank (ECB) in 1989 Murray Rothbard discusses the European Union and the ultimate Keyensian dream.

The Nobel Laurete F. A. Hayek also provided some commentary on the prospects for a single European currency, presumably in the 1990 revision of the work: “Denationalisation of Money: The Argument Refined”,

     Though I strongly sympathise with the desire to complete the economic unification of Western Europe by completely freeing the flow of money between them, I have grave doubts about the desirability of doing so by creating a new European currency managed by any sort of supra-national authority. Quite apart from the extreme unlikelihood that the member countries would agree on the policy to be pursued in practice by a common monetary authority (and the practical inevitability of some countries getting a worse currency than they have now), it seems highly unlikely, even in the most favourable circumstances, that it would be administered better than the present national currencies. Moreover, in many respects a single international currency is not better but worse than a national currency if it is not better run. It would leave a country with a financially more sophisticated public not even the chance of escaping from the consequences of the crude prejudices governing the decisions of the others. The advantage of an international authority should be mainly to protect a member state from the harmful measures of others, not to force it to join in their follies.[7]

Moving forward what could be done to boost productivity, increase competitiveness, and drive deeper economic intergration between not only two countries but all countries? Put simply, eliminate trade barriers, and all it would take is 16 words:

Regulated trade between the individuals, companies, and institutions within our respective countries will be illegal henceforth.[8]

In regards to promoting greater monetary 'integration' with a freedom agenda, the domestic response of each country should be toward sound money: eliminate legal tender laws[9], thus opening up competition in currencies[10], and abolish central banking[11]. Otherwise what happened in the Eurozone could potentially happen here[12], especially if the proposed plan expands to include other Asia-Pacific nations.[13],[14]



[1] Trans-Tasman Issues Paper, 2012.

[2] The Cross of Fixed Exchange Rates, Murray N. Rothbard, 1987.

[3] The Case Against the Fed: Money and Politics, Murray N. Rothbard, 1994.

[4] This is the same 'Productivity Commission' that announced several years ago the claim that babies, yes babies, are a drag on productivity. I am half surprised the diaper industry lobby didn't react with outrage "But who will wear the diapers?" or vigoriously propose that their industry "must be subsidized to prevent a new diaper depression." I guess this commissions previous report proves that you can throw the baby out with the bathwater! In all seriousness, this is just another example of economists addressing the 'seen' but failing to consider the 'unseen'. Taking their established 'principle' to its logical conclusion in the form of a reductio ad absurdum indicates as much.

[5] Trans-Tasman Issues Paper, 2012, p.19

[6] Trans-Tasman Issues Paper, 2012, p.20

[7] Denationalisation of Money, Refined: Hayek, 1990.

[8] How Long Does A Free-Trade Agreement Need to Be?, Tim Swanson, July 2008.

[9] The Economics of Legal Tender Laws (video); "The Ethics of Money Production" by Jörg Guido Hülsmann, Chapter 10. Legal-Tender Laws p.125-131.

[10] An excerpt from Murray Rothbard's, The Gold Standard: Perspectives in the Austrian School (Mises Institute, 1992):

... How, then, can the dollar be privatized or denationalized? Obviously not by making counterfeiting legal. There is only one way: to link the dollar once again to a useful market commodity. Only by changing the definition of the dollar from fiat paper tickets issued by the government to a unit of weight of some market commodity, can the function of issuing money be permanently and totally shifted from government to private hands...

Also see: Mises on Monetary Reform: The Private Alternative by Jorg Guido Hulsmann, The Gold Standard by Ludwig von Mises, and The Case for a 100 Percent Gold Dollar by Murray Rothbard.

[11] The Evil Princes of Martin Place: Why We Should Abolish the RBA by Chris Leithner, The Theory of Central Banking by Robert P. Murphy

[12] The Bailout of Greece and the End of the Euro by Phillip Bagus, The EMU as a Self-Destroying System by Phillip Bagus, 20 Quotes from Leaders that Prove the System is over, The Future of the European Union by Yumi Kim, The EU Crackup by Lew Rockwell

[13] Plans of Asia-Pacific integration through Single Currency by Jose Roy, 2009; Asian Leaders ponder common currency by Karen Percy, 2009.

[14] If you would like to make a submission you can do so here, which are due by the 31st of May. A draft report will be released in September 2012. "Submissions may range from a short letter outlining your views on a particular topic to a much more substantial document covering a range of issues. Where possible, you should provide evidence, such as relevant data and documentation, to support your views."