Getting rich is tougher than most people think.
THE ascension of Gina Rinehart to become Australia’s richest person will no doubt have plenty of people gnashing their teeth.
Probably the first person to get the molars grinding will be Mrs Rinehart herself. Despite a recently discovered need to position her investments in areas of influence such as the national media, she is a mainly private person who eschews the limelight.
Those who hate mining will also be giving their dental gear a good work out, even though Mrs Rinehart merely knocks off another resources chief, Andrew Forrest, to top the wealth stakes. For many, mining is a dirty business that is seen as Neolithic in terms of global industry, and to have the rich list led by such people suggests some sort of national inadequacy.
Such thoughts are closely aligned to those of others who think mining’s simplicity is such that anyone can do it, and people who make such money from this sector ought to be taxed to oblivion for being rent seekers on the national wealth.
The fact that Mrs Rinehart is Australia’s richest person will also cause angst among those who believe her wealth is inherited, and therefore unearned. For this reason, I’ll bet many feminists won’t even have a secret toast to seeing the first woman heading the rich list.
The fact is, a big part of the population would buy into all of the above, especially in Australia, the land where tall poppies aren’t popular.
Much of this ignores the truth about Mrs Rinehart’s rise the top.
For those who want her version, the Hancock Prospecting website outlines in some detail the history of the company’s development under her stewardship since her father Lang Hancock passed away.
There, Mrs Rinehart states that the only inheritance she received was an indebted empire that had to be salvaged.
There are those who believe this is rewriting history to suit the author, but there is a much simpler view about those who earn enormous wealth – and ‘earn’ is the operative word.
At any stage in a fortune’s development it would be easier to sell out and enjoy the benefits. That is the path most travelled and, as a business reporter, I see it all the time. There are those who realise that more wealth is meaningless to them, or comes at too high a price. For others it is simply a matter of cashing in what may be the surprising revelation that they need no longer work again. Others drop out from the world of pure business to pursue other loves, from horse breeding to philanthropy.
And, if you think this is prevalent among entrepreneurs, I suspect you’d find it even more common among the next generations who find it hard to match their forebears’ work ethic or have realised that the good fortune of the business’s founders might not be replicable.
For some a few million dollars is enough to promote an exit, for others it is in the hundreds of millions.
That could have been the option taken by Mrs Rinehart. No matter what the state of the business left to her by her father, there was the potential to cash out from various assets in the short to medium term and live a life of luxury. But she did not choose that path.
Mining may look easy and simple in these days of expensive iron ore, but in the 1990s only the true believers outside the giants with economies of scale held any attachment for this business.
There are plenty of others in business who have stuck at things for just as long, or longer, without payoff. But it’s hard to imagine many who would have persevered in mining over decades when they could have cashed out and lived in comfort.
Garnaut out on a limb
ECONOMIST Ross Garnaut does his credibility no favours when he uses natural disasters to support his desire to see a tax on energy use which, after all, is what a carbon tax is.
Professor Garnaut pointed to the extreme weather events in Queensland recently as examples of what climate change models have predicted will happen due to rising temperatures they believe are caused by man-made CO2 emissions.
He can get away with this because he is an economist, just as Greens parliamentarians can because they are politicians.
Even the most concerned scientists are cautious about making similar statements because they know that it can’t be proved. Behind the scenes they’ll be thanking Professor Garnaut for saying what they can’t.
In jumping on the Cyclone Yasi bandwagon Professor Garnaut has seen an opportunity to reinvigorate a tax that any pure economist would find dear to their hearts. That is that energy consumption is the best and most transparent link to prosperity and wealth. Tax energy consumption and you get less distortion than almost any other form of tax because it’s so hard to hide from.
But the chance to introduce a new tax – without any suggestion it would replace all the existing taxes – misses the point that future Yasis and other weather extremes won’t stop because Australia puts a price on energy.
There is a great deal of uncertainty about the likelihood of more frequent extreme weather, but even at present levels it is clear that we are vulnerable. That is because population growth and development have occurred more quickly than our understanding of nature.
A storm like Yasi even just 30 years ago would have been far less damaging because there were simply fewer people and less industry than there is today. The last record storm in that region, in 1913 (note about 100 years ago), is lucky to have been noticed much at all, while anything a century earlier would have occurred at a time when that part of Australia had little in the way of recorded history or settlement.
The challenge for economists like Professor Garnaut (see story, page 13) is to find a way of diverting current tax earnings into better ways to protecting our assets and preserving our way of life, in the knowledge that the next big storm is likely to have a greater impact due to natural development alone. A carbon tax will not do this, except by discouraging economic development so that the next time a storm hits, say in a 100 years, there are fewer people and less industry for it to blow away than there were this time.