Saul Eslake responds to Peter Strong: “Assertions, but no evidence”

Retail-saul-eslake

Peter Strong would seem to have a surprisingly thin skin (especially for such a seasoned and effective lobbyist) if he truly believes my questioning of the justification for, and the effectiveness of, the preferential treatment he’s been able to extract for his members from governments over many years is “offensive”.

And he has an odd way of constructing an argument when he begins by asserting that my paper “fails to disclose the assumptions used in the analysis”, despite the fact that (as anyone who follows the hyperlink to the article originally published by the ANU can verify), the very first paragraph of my article states, quite clearly, that the definition of “small businesses” which I use is the long-standing ABS definition, namely, those having fewer than 20 employees.

Contrary to Strong’s unfounded assertion, I did not adopt that definition “to advance a prejudiced position”. I adopted it because it is the definition used by the agency that publishes almost all of the data which I used in the article. If the ABS definition of a small business had been any entity employing less than 50, or 100, employees, I would have “adopted” it. Maybe Strong likes to make up his own definitions in order to suit whatever case he is pleading, but I don’t.

Likewise, when I cited data produced by the Australian Taxation Office, I used the definition of a “small business” used by the ATO (which is in turned based on legislation passed by Parliament), not in order to advance a pre-determined argument, but because it is the definition used by the agency which publishes the data.

Similarly, contrary to Strong’s unfounded assertion that I’m a stereotypical, ivory-tower-bound, ‘laissez-faire’ economist, I have actually run a small business myself for the past six-and-a-half years. I have an ABN; I collect, and pay, GST; I arrange my own insurances; I do many of the things that other small business proprietors do (albeit, I confess, I don’t sponsor a nearby netball team). However, unlike Strong, I don’t believe that makes me morally superior to people who work for larger businesses, or government agencies: nor do I think it entitles me to pay less tax on a given amount of income than people who work for larger businesses, or government agencies.

Strong makes absolutely no attempt to challenge the data I present in my paper (other than the aforementioned utterly spurious quibbling about definitions). He presents assertions, but no evidence, about the “public good” of small business.

I don’t doubt for a moment that small business proprietors do many “good things” in their communities — whether it’s sponsoring local sports teams or other good works. But when they do provide financial support in that way, it’s a tax deduction for them just as it is for larger businesses.

It is of course typical of lobbyists seeking to extract preferential treatment for those who pay their salaries (preferential treatment, which is ultimately paid for by those who end up paying higher taxes, or having less public money spent on them, in order to offset the cost of that preferential treatment) to say that the “good” which those whom they are representing do isn’t captured by data — and that anyone who can’t see that is blind, heartless, prejudiced, stupid, or some combination of those and other shortcomings — in the hope that making those assertions will relieve them of the burden of actually having to prove their case.

And often, it works. As it has done for those who have sought preferential treatment for small businesses.

But the real clincher is in Strong’s final sentence — which acknowledges that the main reason for the preferential tax and other treatment which he’s been able to extract from governments over the years is that he’s drawn to politicians’ attention the fact there are many more people running small businesses than there are running large ones; and that they tend to live in marginal electorates (as opposed to people who run large ones, who tend disproportionately to live in safe Liberal electorates).

That’s much the same reason as to why, for all the crocodile tears that politicians of all political persuasions shed about the difficulties faced by would-be home buyers trying to get on to the first rung of the property market ladder, they never actually do anything to help those would-be home buyer: because they also know that, in any given year, there are only a few hundred thousand of them, as opposed to the 11 million voters who own at least one property (and the 2 million who own two or more), and the last thing those 11 million voters want any government to do is anything that might make housing more affordable (as John Howard more than once candidly acknowledged).

Good politicians know how to count votes. So do good lobbyists.

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Peter Strong
Peter Strong
3 months ago

It appears that Mr Eslake and I will agree to disagree.

I note that he spins my comments into something they weren’t – which is unbecoming for an economist tbh.

To dismiss support of sports teams (and charities as well) by small business as just tax deductions shows no understanding that time spent a (lot of time) on boards and doing other support activities is actually not tax deductible.

The data in the academic paper in question appears to be designed to confirm a (mistaken) personal belief held by Mr Eslake rather than discover relevant impartial facts. Which is why the data can be ignored.

The clincher for me is the use of the word ‘fetishism’ in the heading of the academic paper. That word is offensive and shows an emotive need to attack small business and it’s supporters rather than look at economic and community good created by small business folk.

Whatever.

Next!

Saul Eslake
Saul Eslake
3 months ago
Reply to  Peter Strong

Perhaps something we can agree on is that you don’t preach as to how economists should do their job, and I won’t pretend to tell lobbyists how they should do theirs. Although, actually, I’ve acknowledged throughout that you’ve been highly effective and successful at yours.

Peter Strong
Peter Strong
3 months ago
Reply to  Peter Strong

Also one of the people I worked with did do research on small business and sport and isn’t happy that it was ignored by Mr Eslake. https://www.cosboa.org.au/post/small-business-is-the-backbone-of-community-sport-here-s-the-proof

A small business owner
A small business owner
3 months ago

As an economist turned small business owner (consultancy) I believe Mr Eslake is being selective and emotive.

For example, he fails to mention some of the concessions that only big business can access due to their scale and legal and financial resources (R&D tax concession, transfer pricing, thin capitalisation, transferring revenue sources offshore etc).

He doesn’t acknowledge that many small businesses become medium/large businesses over time.

His productivity/innovation stats are distorted due to the different sectors small and big business operate in.

He doesn’t acknowledge that in many instances small/medium businesses are the key suppliers of products/skills to big business.

He fails to consider that it is often smaller businesses who are the key ‘providers’ of a broad range of goods and services in smaller regional and remote communities (try to find a Bunnings or Woolworths in a town of less than 5,000 people)

This list could go on.

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