This graphic from GlobeandMail shows the amount of  ‘stimulus’ spending in selected G20 countries in dollars and as a proportion of GDP. I have linked to GlobeandMail, but article content is subscription or pay per view.

Stimulus Spending as a Proportion of GDP

Australia’s spending is proportionally higher than the US (though not by much), which means the amount of debt incurred for each citizen is higher. Which you would expect to mean a longer recovery.

But in spite of this absurd level of ‘stimulus’ spending, and directionless economic policy by the current Federal government, Australasian Investment Review believes that Australia is better equipped to cope with the global recession than most other advanced nations.

Surely the previous government’s careful economic management and years of surplus budgets wouldn’t have anything to do with that?

Know-it-all Sir Bob Geldof is the former front man of the Boomtown Rats, a one hit wonder band from the seventies, and therefore qualifies (in his eyes) as an expert on foreign policy and development. Well, Leonardo De Crapio thinks he’s an expert on the science of global warming, so why not?

Two years ago Sir Bob called Australia ‘one of the meanest countries on the planet’ saying our level of foreign aid was amongst the lowest in the world, as a proportion of GDP.

That would be a moral issue worthy of consideration if there was any evidence that foreign aid, other than emergency aid, did the slightest bit of genuine good. If it could be shown, say, that countries which received development aid actually developed more than those that didn’t.

But as Fredrik Erixon, chief economist with Timbro, a Swedish think tank and book publisher, has shown, development aid to developing nations does not work. The more aid a country receives, the more likely it is to be locked into a cycle of increasing poverty. The graph below (taken from the BBC article linked above) shows that when aid received is high, economic growth is at its lowest. 

Aid to Africa and Growth Inversely Proportional

Kenyan economist James Shikawati explains why this is so in an interview with Der Spiegel. In essence, providing free food and clothes undermines any local industry, and encourages corruption and a passive expectation of rescue, which then leads to increasing resentment.

SPEIGEL: The industrialized nations of the West want to eliminate hunger and poverty.

Shikwati: Such intentions have been damaging our continent for the past 40 years. If the industrial nations really want to help the Africans, they should finally terminate this awful aid. The countries that have collected the most development aid are also the ones that are in the worst shape. Despite the billions that have poured in to Africa, the continent remains poor.

SPIEGEL: Do you have an explanation for this paradox?

Shikwati: Huge bureaucracies are financed (with the aid money), corruption and complacency are promoted, Africans are taught to be beggars and not to be independent. In addition, development aid weakens the local markets everywhere and dampens the spirit of entrepreneurship that we so desperately need. As absurd as it may sound: Development aid is one of the reasons for Africa’s problems. If the West were to cancel these payments, normal Africans wouldn’t even notice. Only the functionaries would be hard hit. Which is why they maintain that the world would stop turning without this development aid.

What works to bring nations out of poverty, as South Korea and Taiwan have demonstrated, is open trade, democratic government, and reward for effort and invention.

For related insights see Hal G.P. Colebatch’s article ‘Giving It Away’ in this month’s Quadrant magazine.

By Prime Minister Kevin Rudd.

My wife was stimulated at the same time.

Then we got a letter from the Tax Office telling us we had been stimulated, just in case we hadn’t noticed.

Most Australians will get a one-off stimulus ‘tax bonus’ of $900 from the Federal government.

I just don’t get it. How is it stimulating the economy to take money away from people who are earning it, working for it, producing something to get it, and handing it out willy-nilly to everyone?

It’s not free money, Mr Rudd.

I have been offering a stimulus special – a decent computer package for $900, with a tie-in to the education tax refund.

It has been going pretty well. But not as well, I suspect, as the ‘Let Us Stimulate You’ deal offered by the After Dark brothel in Sydney.

If experience is anything to go by, it will be liquor stores, brothels and gambling houses that benefit most.

But even if it wasn’t, you cannot spend your way out of debt. You don’t create jobs and increase production by taking extra money from productive people to give to people who are not. And you certainly don’t create any incentive to work, or to be responsible.

Over a month ago I wrote about Defence Minister Fitzgibbons’s relationship with Chinese/Australian business woman Helen Liu:

Fitzgibbon may genuinely have forgotten how well he knows Ms Liu, his visits to China with her, the functions he attended with her, and the gifts he has received from her. In that case he is an idiot and cannot be trusted with the Australia’s defences.

Or he lied about them. In that case, he thought he had something to hide. If he thought he had something to hide, he probably did.

Andrew Bolt referred today to a story in the Sydney Morning Herald about a covert enquiry by Defence Department officials into that relationship.

When Ms Liu re-appeared in Sydney in the early 1990s, she suddenly had access to large sums of money, began amassing a multimillion-dollar property portfolio and started courting Australian political figures.

In 1993 she paid for Mr Fitzgibbon and his father, the federal Labor MP Eric Fitzgibbon, to travel first class to China to attend the opening of a hotel development. Mr Fitzgibbon was not an MP at the time but was expected to succeed his father as the federal member for Hunter in NSW.

Ms Liu has strong ties with senior Chinese Communist Party figures and has enjoyed considerable support from the Chinese Government-controlled Bank of China. Between 1995 and 2007, her companies donated $40,000 to Mr Fitzgibbon’s election campaign funds and another $50,000 to the NSW ALP.

All of that is of interest. Mr Fitzgibbon has either lied about or has genuinely forgotten about the nature of his relationship with Ms Liu. Regardless of the findings of the enquiry, in other words, regardless of whether Ms Liu really is a spy or not, Joel Fitzgibbon is not a  suitable person to be responsible for Australia’s defences.

“There were limits to what we could do and we didn’t get all of the story, but what has come out later about Fitzgibbon’s failure to declare trips to China only strengthened the concerns,” the official said. “There are big questions about just why the minister has been so obligated to Helen Liu and what the full extent of their relationship has been.”

Indeed.

But what is really of interest in the SMH story is that the enquiry, which is obviously necessary, is not in any sense official. Even though concerns were raised about Fitzgibbon’s relationship with Liu, departmental hierachy did nothing. The enquiry is being conducted ‘underneath the radar’ by concerned Defence Department staff.

But now those staff are being ferretted out and subjected to an inquiry:

The Defence Department has confirmed that the inquiry by the Defence Security Authority into the covert probe into Mr Fitzgibbon is “still under way” and that a report will be finalised soon for submission to Mr Fitzgibbon. A month ago, the Defence Secretary, Nick Warner, confirmed that more than 200 defence officials had been interviewed and that 850 had signed statutory declarations denying any involvement in investigations into Mr Fitzgibbon’s personal affairs.

Senior Defence Department staff did nothing when faced with serious allegations about the relationship between the Defence Minister and Ms Liu, and the strong possibility this could be a national security issue of grave concern. And now they are conducting a witch hunt into the people who were responsible enough to take that matter seriously.

The media should be all over this. It’s the kind of story that might make people think about buying a newspaper.

And doesn’t the Government have some sort of policy about protecting whistle-blowers?