Chasing the Norm

Australian academic and blogger on politics, international relations, and culture

Tag: Economics

Corrupting one’s own figures

Via the Washington Monthy comes the news that the Heritage Foundation has substantially shifted the position of the USA in its Index of Economic Freedom. The USA is now only “mostly free”.

The Heritage Foundation’s latest world ranking of economic freedoms shows the U.S. falling farther than any other large economy in the world. The foundation says the TARP Program, the auto industry bailout and the stimulus package, among other factors, have caused in the country’s economy to go from “free” to “mostly free.” […]
Factors like business regulation, the labor market, monetary stability, property rights and corruption are used to determine the rankings.

Terry Miller, director of the Center of International Trade And Economics at the Heritage Foundation, says the U.S. ranking may continue to fall.”Certainly looking at the government policies that have been followed over the last year, since our last data cut off, I’m very concerned,” Miller told TPM, adding that health care reform was likely to further hurt our economic freedom.


Heres the top ten on the right for your quick viewing. But it’s an odd list. New Zealand, Canada and Australia all have significantly greater regulations in economic sectors (and weren’t we glad of that in 2008). Likewise all offer true universal healthcare delivery as well as insurance (as opposed to the USA’s just passed universal insurance) and it is hard to argue that property rights and the labor market are in general more regulated in the USA than in Australia.

While Government Spending must be seen as part of the mix, its weighting here seems to utterly distort the figures. You’d therefore have therefore to suspect some ideological politics is at work. The (Conservative) Heritage Foundation gets a 1-2 day headline downgrading the USA as ‘mostly free’ instead of ‘free’, but the long term effect of this is going to damage the credibility of the list. This type of index gets a lot of work in academic circles as a handy reference point, but that’s going to drop off once people start suspecting more than just world view, but domestic politics is interfering with the results. Hardly a worth while pay off.

A new (publicly owned) Bank?

Crikey has the scoop today that the Rudd government is considering allowing/pushing Australia post to expand its financial services into a full blown bank as a way of breaking up the stranglehold of the big four banks.

Crikey can reveal that the Rudd Government commissioned a scoping study into the establishment of a publicly-owned banking capability by Australia Post, with positive results. As Crikey detailed in August last year, Oz Post has been trying to address the long-term decline in postal volumes by encouraging mail marketing and exploiting its branch network to offer a wider range of the sort of services that still require interaction.

This already includes financial services under licence from several banks and up to 70 financial institutions in all, including business banking services from NAB and the Commonwealth. Last year, Australia Post itself began offering insurance services. About 3,300 Australia Post outlets offer external banking services now, just under three times the number of branches of the largest bank network, Westpac/St George.

While the economics have pros & cons, politically this strikes me as a very risky if not downright awful decision if followed through. Rudd already has a reputation as anti-market in the media (being a Labor MP, Stimulus spending, End of Neo-liberalism essay, keeping book tariffs etc). For a party trying to present itself as representing the future over its regressive opponents, going against the 30 year trend to privatization makes little sense. Endorsing the creation of a publicly owned bank would just about drive the economic liberals who dominate the editors/opinion leaders of the press insane and with them a chance to enshrine Labor as the default governing party for the next 20-30 years.

As I’ve argued before, many economic liberals have lost their suction to the Coalition after Howard’s departure. Rudd’s description of himself as an “economic conservative” and talk of efficiency and productivity through his investment in education lured many away. And now with Tony Abbott and Barnaby Joyce ruling the roost, the coalition isn’t the safe haven of support & re-enforcement it once was, indeed it’s looking decidedly shaky and populist.

Yet Rudd seems to have only made a half-hearted effort at recruiting them. He may talk of productivity as part of his Australia day (week) speeches, but his actions speak loudly to this skeptical and (somewhat paranoid) group. Rudds decision to not support a change in parallel imports of books despite the Productivity Commissions report is a perfect example of a policy with a relatively light cost (from a social democrat/arts supporter viewpoint) and much to gain. Indeed you could almost see the press gallery shift away from Rudd at the end of last year soon after this decision was announced (and even worse is that Rudd ‘excused’ himself in a split cabinet because one of his kids is writing a book). As an aside Bob Carr today makes the obvious point that the impending arrival of Apples badly named but oh so cool ipad makes the ALP’s decision laughable.

Establishing an aussie bank under Australia Post may appeal to many in the public superficially, but its positive political impact is likely to be small and slowly occurring, whilst re-enforcing a big government, big spending, big bureaucracy image that Abbott and the editors of the Australian are trying to pin on Rudd. This is not about the forthcoming election which is already in the bag, but a generational re-alignment of those of a liberal ideology both socially and economically who are giving Labor a fresh look they wouldn’t have considered during the 90s and most of the 2000’s. Creating a government owned Australia bank would probably scare them off, and with it a chance for Labor to establish political dominance for the next 20+ years. (Along with hopefully leading Labor to become more liberal in attitude which is why i want to see this occur along with its political benefits).

Abbott boxed in by climate change rhetoric

Pollution_Factory There is a tendency when it comes to political rhetoric to always go nuclear. To deploy the most strident, attacking, and damaging language you can to label an opponents position or policy. And no word has more power today than ‘Tax’.

Case-in-point: In the US 2008 election, the Republicans attacked Obama for ‘palling around with terrorists’ and saw no electoral traction. Yet when they caught him saying he wanted to ‘spread the wealth’ to Joe the Plumber, their spirits soared. It didn’t help their cause that Obama had a tax cut for about 95% of the country, yet McCain still devoted almost the entire second Presidential debate to claiming Obama wanted to raise people’s taxes, causing a few wobbles from Obama’s campaign.

While there was certainly a strong case for Tax Cuts in the 80’s & 90s, today when there isn’t much fat left on the revenue side of the budget, the social stigma applied to the word is impeding our political debate. Of course this criticism has been mounted before by social democrats who want to spend more on infrastructure or key social services, but it’s also damaging the way Liberals and Conservatives develop their policies too.

A few months ago when The Nationals were the only party against the ETS in principle, Barnaby Joyce took the obvious rhetorical step of calling it an ‘Emissions Tax Scheme’ (clever guy huh). As the vote got closer, he increased the volume calling it a ‘massive tax on everything’. A theme picked up by a number of other opponents of the scheme, and instantly adopted by Tony Abbott when he took over as Coalition leader and defeated the Governments’ policy. This was not the only rhetorical attack on offer against the governments CPRS (it could also be called complex, confusing, ineffective, counter-productive, special-interest laden, bureaucratic etc etc) however “Tax” was the leading punch. To Abbott’s reckoning he had given the Government a black eye (a defeated policy), a cruel new nickname (big taxer) and was now the hero who had saved the people from a major tax. Only, and annoying for him, the people still want something to be done. However, nothing that looks or sounds like a tax can possibly be advocated by the Coalition, leaving very few options available.

If Abbott had avoided dropping the Tax bomb on the governments scheme (and he did not need to do so to have it voted down the bill) he could have offered a much simpler and attractive scheme: A Carbon Tax.

By Jeremy Hansen in the NYT (Who Paul Krugman calls “a great climate scientist. …the first to warn about the climate crisis”)

‘Under this approach, a gradually rising carbon fee would be collected at the mine or port of entry for each fossil fuel (coal, oil and gas). The fee would be uniform, a certain number of dollars per ton of carbon dioxide in the fuel. The public would not directly pay any fee, but the price of goods would rise in proportion to how much carbon-emitting fuel is used in their production.

All of the collected fees would then be distributed to the public. Prudent people would use their dividend wisely, adjusting their lifestyle, choice of vehicle and so on. Those who do better than average in choosing less-polluting goods would receive more in the dividend than they pay in added costs.

For example, when the fee reached $115 per ton of carbon dioxide it would add $1 per gallon to the price of gasoline and 5 to 6 cents per kilowatt-hour to the price of electricity. Given the amount of oil, gas and coal used in the United States in 2007, that carbon fee would yield about $600 billion per year. The resulting dividend for each adult American would be as much as $3,000 per year. As the fee rose, tipping points would be reached at which various carbon-free energies and carbon-saving technologies would become cheaper than fossil fuels plus their fees. As time goes on, fossil fuel use would collapse’….

Emissions Trading Schemes were preferred because they let governments set a limit on emissions which can be reduced over time, giving assured levels of pollution reduction. Carbon Taxes are more elusive in this area, but the same logic of a rising price = less use of carbon emitting fuels/products/technology applies. This offers a wiggle room would perfectly suit a coalition party which both wants to look serious on the issue, but doesn’t want to be too tied into international deals and wants to be able to regulate Australia’s actions in line with economic circumstances.

Carbon Taxes have the advantages of being more economically efficient, and ‘just’ in a Liberal sense of being applied equally across the population. While small refunds could be applied to some industries (such as agriculture), it likely wouldn’t be the hodgepodge of deals and allowances & exceptions that the Government has set up with its ETS (which for the Greens make it now useless). And given that a carbon tax would reward individuals who act positively to reduce their own carbon footprints, it would also be in line with the parties preference for individual responsibility and reward. Not only that, but the Coalition could even piggyback some of the potency of the tax argument, by offering to sharply reduce all income taxes in line with the CO2 taxes. Just like the GST, not all taxes are equal, and given the public demand for action, this would be strongly in line with their past actions.

Finally, if they chose to keep back just a small part of that revenue, it could be invested in what is perhaps the real and only solution to climate change: better technology. This was an argument John Howard made consistently during his final years in office, and one the Coalition could pick up and run with. Australia has the minds, the education system, and the incentives to be the ones who create the next big breakthrough that fundamentally changes how we create and use energy. We’re doing it already, but with a big injection of funds imagine what we could create, what industries would come to call Australia home, what economic returns await us.

Of course Carbon Taxes are not a new idea, and I think Paul Krugman is somewhat right that having spent so long building up a Cap&Trade system, to throw it away and start down a different path just means too many delays to accept. But it’s worth noting again, how the rhetoric we use in one area, deamonising all taxation as bad harmful policy, if not outright ‘theft’ has left Conservatives (and many liberals) unable to offer sensible alternative policies in other areas. A Carbon Tax might not be considered as effective environmentally as an ETS, but it’s just as effective (if not more-so) politically for the Coalition. But it’s now off limits.

Instead, because Abbott accepted the rhetorical framework of calling a market based system a tax (thereby ruling out both) he is left with prescious little other than Command-and-Control type regulations. Not only does this also run up against 30 years of liberal and conservative economic thinking in Australia, it may well be at least twice as expensive(p152) if not even more so. But Abbott has no real options left if he wants to propose a policy that at least looks serious.

As Al Gore has said, what is ideally needed is to ensure we “tax what we burn, not what we earn”. Gore is another who has long supported a carbon tax. If the Copenhagen Summit succeeds, then to cap and trades we must committ. But if it fails, if it is all smiling handshakes with no commitment behind them, then a Carbon tax is an alternative we need to have a serious debate about.
If only we could get over the rhetorical stigma of the word ‘Tax’.

(Incidentally, this is why I like the Constructivist approach in International Relations. Everyone wants to be a ‘realist’ about the world and how to respond to it, but when you mentally close off avenues through certain rhetoric, then your options can be utterly distorted, even harming your own interests.)

For a more details explanation of Carbon Tax (and fully sourced), I recommend having a look at this testimony to the US Senate by Ted Gaynor of the Brookings Institute

The financial benefits of a R18+ rating for games

This is our culture and our economy:

CALL of Duty: Modern Warfare 2 has racked up more record sales of $US550 million ($593 million) in its first five days, but the publisher Activision Blizzard is still concerned about weak consumer spending.
The game, a first-person-shooter that lets gamers play as elite soldiers hunting down targets from South America to Afghanistan, beat the record set by last year’s blockbuster Grand Theft Auto IV in its first week.
Last week it said it sold 4.7 million copies for a total of $US310 million ($333.3 million) on its first day in the US and UK alone.
Activision said five-day sales for Modern Warfare 2 topped the $US394 million ($423.6 million) earned at the box office by Harry Potter and the Half-Blood Prince in its first five days.
The video game bested Batman film The Dark Knight, which had held the record for the top opening weekend ever by taking in $US158.4 million ($170.3 million) in July 2008.

There is always a lag between capitalism and culture, though inevitably the dollar wins through. However it takes some time for societies to integrate in and accept certain cultural artifacts, regardless of sales. The rise of evangelical literature/music/films (such as the Left Behind series) is one example, another that suffers is video games. While you will see the occasional article in the papers about them, their coverage pales into comparison compared to films, despite computer games being a bigger industry for films, both in Australia and world wide. Indeed according to the Canberra Times (p6 Monday Nov 23 2009) this morning (no online copy) most Australian’s are gamers:

Computer games are set to be an bigger part of Christmas entertainment than ever this year, with strong growth for an industry now worth $2 billion in Australia….“The average age of the gamer in Australia is 30 and another key figure is that almost half (46%) the gamers in Australia are actually female”… Dr Jeffery Brand, the head of Bond University’s communications and media studies school, said most Australian homes had a game device.
“We have roughly seven out of 10 Australian’s playing computer games at some point in the year” he said. “Most of those, the vast majority of that 70 per cent, are playing daily or every other day”.

All this makes it even stranger then that in Australia, we do not have an R18+ rating for computer games. The Federal Classifications ACT was set in 1995, a lifetime ago in the industries view, with only limited consultation since. The biggest hold up it seems is the gentleman’s agreement that Australia has uniform laws on censorship via COAG. Despite the fact that this isn’t the case in videos (The ACT sells X rated videos, whilst other states have banned them), the convention has given South Australian Attorney General Michael Atkinson an effective veto power over such a large industry. In the last year some of the biggest computer games released including Fallout 3, GTA IV and Left 4 Dead 2 have all been refused classification (ie banned) or major changes forced on the overseas producers. That means lost sales, as people either dont buy, buy overseas, or simply pirate the game. When such contempt for the laws is commonplace, it is the laws that must change.

Yet these loses pale in comparison to the loss and harm the restrictions place on the development of a local Australian computer games industry, one in which Australia has some key niche advantages. The industry requires highly trained professionals which we produce in droves, it is an industry that depends on quality not quantity (meaning it can’t be outsourced to asian factory workers) and it is green and high paying business, returning nice tax benefits to the country. Yet both the Howard and now Rudd governments have ignored the industry, much as they have almost all high-tech industries. Australian governments it seems consider it a core business of theirs to spend billions of tax payer dollars to protect already dead industries (parts of our manafacturing and agricultural fields for instance) whilst not only ignoring but hampering the rise of new industries that seem well suited to our demographics and skills. The loss could already be measured in the billions (I know of 2 ACT games manufacturers that have closed and gone offshore in the last few years) and with video games set to grow, will be worth tens of billions in years to come.

From my reading of the Classification ACT’s it seems it would only require a change in the Federal law, and the compliance of one state or territory for video games to be classified at a R18+ rating by the OFLC and sold only in those states or territories that changed their law to accommodate it. (If there’s something I’m overlooking in my reading of the act, please email me or post a correction below.) For the loss of uniform laws on the issue, each state and territory could choose to encourage or restrict the industry in their territory. South Australian voters could continue to ban the sale of R18+ games, whilst those in the ACT or Victoria allow it. This would be competitive federalism at its best, something the constitution writers were very keen to encourage.

The potential sales revenue for any state which was the first to move would be immense. They would become the only port of call for the sale of these games, dramatically reducing overseas sales of games, and likely enticing video game production companies to consider moving their business to those cities in order to be able to freely develop their products. That reassurance would be a big boost for an industry that thanks to increasing photo-realistic graphics is having to continually re-account for why its material is classifiable as only MA 15+. What was assured of passing 5 years ago, might not today, without any significantly different levels of gore, just a more natural depiction of it thanks to better technology. Equally potential games producers (which need be only a professional working from a home office developing a game for phones as much as the multi-million dollar blockbusters like Bioshock 2 (produced in Australia) could be enticed to start their own businesses once the laws are expanded and clarified.

Despite massive tax payer funded handouts, Australia has lost much of its manufacturing industry and some of its agricultural as well But in high tech and value adding areas, such as the original idea’s, design and marketing, Australian workers and companies are almost impossible to beat. I don’t know who coined the phrase (I suspect Paul Keating), but the claim Australia needs to become the brain to Asia’s brawn has always struck me as very good economic sense. By not having a R18+ rating we are not only continuing with laws that do not reflect community sentiment, but are actively denying Australia billions in lost revenue in both production and sales in what is is fast becoming the largest entertainment industry in the world. We simply can’t afford not to make the necessary changes and get Australia’s computer games industry into action.

What’s the pay off?

Rudd is a very clever man. Sometimes however he seems to outsmart himself. Take this latest machiavellian ploy to put Costello on the board of the Future Fund:

Govt defends Costello appointment
The Australian government is not about playing politics when it comes to the appointment of former politicians to senior positions, Resources Minister Martin Ferguson says.

Former treasurer Peter Costello is the latest Howard government minister to have been appointed to a senior position by the Rudd government.

The government announced on Sunday that Mr Costello will head the board of the Future Fund from December 18.

But his appointment by the Labor government has sparked criticism from former prime minister Paul Keating, who labelled Mr Costello as “a policy bum of the first order who squandered 11 years of economic opportunity”.

“The prime minister’s goodie two-shoes approach of appointing former opponents of the Labor Party to important public jobs is no substitute for thoughtful and mature reflection as to the public requirement of those positions,” the former prime minister told AAP on Sunday.

The Howard government was rightly criticized for its arrogant politicization of many key postings. Many good institutions were damaged because of the quality and contempt in choice for office holders. To that extent, Rudd’s choice of people such as Robert Hill and Tim Fisher is a welcome return to sense, and decent political advantage. Nelson’s gig in the EU is just a pay off, but there’s enough of those in politics to not make much of a fuss over. But what is Rudd thinking appointing Peter Costello to the Future Fund board ? It’s a bad idea for three reasons:

1. Rudd & Co opposed the FF when it began and still see it as a mistake (or a “solution in search of a problem” as it was infamously dubbed). Given the fleeing of cash from the Govt’s reserves and their desire for big infrastructure developments, they want a FF with as small a media presence as possible. Appointing Costello to the board just gives it a much bigger presence for the media. It becomes a veritable institution, a junior cousin to the Reserve Bank when it comes to financial policy, and all headed by one of their chief economic opponents of the past 15 years. And he’s going to be on it’s board powerfully arguing for an economic vision that not only disagrees with the Govt, but will take pleasure in spiting it.

2. Costello may have signed all sorts of non-disclosure statements, but an ego his size will never prevent him from participating in the debate. As readers of his memoirs will know intimately, politics is personal for Costello. His smirk was never about getting policy up, but putting people down. He may won’t be the chief voice for the FF, but everything he says on economics (such as in his now regular SMH column) will be parsed for commentary on how the FF views Rudd’s government. One word about Telstra shares going down (which hurts the FF slightly) and the story will be ‘Costello slams Rudd for imperiling superannuation/debt/nations future/sunshine and rainbows/’ etc etc. Far from censoring him, it gives Costello a bigger microphone than if he was just another private merchant banker (witness how Bob Carr was regularly and unfairly slammed for his Macquarie Bank links whilst advocating removing tariffs on books)

3. The public isn’t impressed, or even paying attention. It may please the hearts of a few media folk who once had crushes on Costello, but it won’t shift a single vote in the seats Rudd needs to win, and want’s to steal from Turnbull’s enfeebled grasp. Worse, it is just going to put off a lot of labor supporting types, both in the party and out who keep wondering why their side is so weak all the time. There’s nothing wrong with putting your people in key positions. They are your people because they agree with you on the big issues and so can act as substitutes for you. Unless Rudd has figured out a way to clone himself to run every position in Govt, he needs supporters in the key positions to help push his agenda forward. Putting in people like Costello just means you face far far more roadblocks than you should have. And for no political pay off, today’s story isn’t worth anything (esp given the good economic news of this morning).

So its not good politics or economics. Why on earth bother then? I sure hope this wasn’t dangled in front of him to encourage a by-election that the Libs are sure to win in Higgins, which will help Turnbull innumerably. Likewise thank goodness Costello said yes. If he had been offered and said no (and leaked) it would look like the Govt was desperate for his help and had to go begging. Sometimes just playing a straight bat is the most sensible of all politics. Even on those times you pull off the big tricks, the pay off isn’t always worth it.

The real deficit is the one between their ears…

As mentioned below, the Liberals had a press conference this morning on debt reduction, and released a shiny new policy document. Naturally the media ignored the policy for the horse race issue, so your dutiful blogger went through and read the proposal. One problem: It doesn’t actually say anything. Here is the sum total of the Liberals policy for debt reduction 6-12 months before an election:

This morning's conference, from Turnbull's twitter feed

This morning's conference, from Turnbull's twitter feed

1)The Coalition will do more with less by reducing waste and duplication throughout the Australian Government, and between the federal and state governments.
2)The Coalition will immediately upon coming into government establish a Commission for Sustainable Finances to report within three months on waste and duplication in every agency and program of the government.
3) The Coalition will not repeat Labor’s cash splashes. Handing out $23 billion in cash may be popular, but it recklessly adds to debt.
4) The Coalition will pursue a vigorous reform, infrastructure and innovation agenda to lift productivity and increase economic growth.
5) The Coalition will support small businesses, the engine room of the economy, through our Small Business Action Plan.
6) The Coalition commits to a responsible long term objective of returning government’s share of the economy to the level achieved by the previous Coalition Government…. The last five Coalition Budgets had spending of less than 25% of GDP. Only the Coalition can be trusted to return the government’s share of the economy to this level.
7)The Coalition is committed to addressing all of these problems (Complexity, time-cost,reduced incentives etc) in a comprehensive and principled program of tax reform.
8)The Coalition will establish a Parliamentary Budget Office, which will be independent of both the government and the opposition, to ensure the public and Parliament receive honest and timely analysis of the budget, financial results and specific programs.
9) Further, the public will be able to track government debt at a real-time website detailing the size and composition of borrowings, interest paid and projections into the future.

Putting it into a list makes it look far more substantial, but have a look again at that list. Only #8 & 9 deal with specifics (both are good ideas, though the website is more about advertising, as such figures are already on budget.gov.au) Numbers 1,4,7 have been promised by every single opposition since the beginning of time but dont matter at all without specifics. (Here is just one of dozens of press releases labor put out on the issue prior to the 2007 election). Number 5 is just a statement of support, and 3 is utterly redundant (of course they won’t repeat the stimulus given its already in place and the crisis is passed!). Only 6 seems new, though as I’ve mentioned before there is no logical reason why 25% is the ideal figure (indeed in early September Hockey was saying it must be “no more than 24%, but I guess round numbers rule).

Given the bad position the Liberals are in today, only a comprehensive, detailed policy will get them any attention. If Rule #1 of Federal oppositions is don’t repeat the Fightback mistake of 93 (with Turnbull eerily imitating Hewson), Rule #2 is don’t do invisibly small target’s (ala Beazley 98) either. There is a happy balance in the middle. Howard and Rudd both won by proposing a number of key, detailed area’s of policy in ground they wanted to fight on, and then obscuring the differences on everything else. Turnbull can’t win, but he can at least fight a respectable campaign for principles he believes in by being bold. Far better to be remembered for going out fighting for your ideas (that may one day become accepted wisdom as Hewson’s GST now is), than as a front man without the courage of his convictions. (Jason Soon on Crikey makes a similar point about Turnbull’s failure to live up to his hoped-for-liberal creed)

If the brain’s trust in Liberal HQ want some ideas, how about reducing the churn of taxes/welfare as John Humphreys advocates:

The Australian welfare system—including health, education and handouts—costs more than $250 billion per year. Some of this is redistribution from the relatively rich to the relatively poor. However, about half of the welfare is pointless ‘churn,’ where the same person both pays taxes and receives welfare benefits.
Some of this churn is ‘cash churn’ where people both pay tax and receive cash from the government. But the bigger problem is ‘services churn’ where middle- and high-income earners pay tax and receive government-subsidised health and schooling services.

By removing middle-class welfare in exchange for income tax cuts, the government could reduce tax and welfare by about $80 billion without leaving anybody worse off.

Such reform would be bold, enticing (everyone, esp the press would focus on the massive tax cuts this would mean), rally the base (cutting welfare/bureaucracy) and give a radical plan to pay down the debt in their first term, not to mention long term benefits to pay for healthcare (as Humphreys’ advocates). Hell I’d vote for it…

The idea’s are out there, the Government has massive targets that can and should be hit, but so long as the Liberal Party is serving up this shallow pap, the equivalent of a warm towel to fix a gunshot, they will be rightly ignored.

An Uneasy Marriage

Politics involves three things. Power, Relationships and Compromise. And while Power (who’s up, who’s out) and compromise (who has sold out/who’s principled) are topics of endless conversation, relationships are almost never talked about. They are assumed eternal links, the union movement and labor, doctors and the conservatives. But like glaciers, their slow speed should not be mistaken for weakness and when they do bring change (Howard’s battlers) they fundamentally re-arrange politics far more than any policy or polling issue could hope for.

One of the more interesting relationships to watch over the last decade has been the de facto marriage between Economic Liberals and the small business/corporate World. On the face of it, these two groups should get along famously. The former favour a de-regulation of industries, reduced taxes, and the privatisation of government services. For the business world, this means they have to worry less, pay less, and can do more than previously. But the two groups interests don’t always run in parallel.

The clearest example of this can be found in the US at the moment, in the debate about Health Care Insurance. For the Libertarians/ardent Economic Liberals, Government shouldn’t be involved in the industry (like regulating about pre-existing conditions) and certainly shouldn’t be subsidizing or offering a public run insurance service (like Medicare). Given that health insurance is so critical, in the US businesses have slowly had to adopt a health insurance package as part of their salary offers. The problem with this is that it is very costly (and ties workers to jobs). So US firms that may compete with Canadian or European or Australian firms, have significantly higher overheads. Of course businesses in the Insurance industry love this set up, but for the vast majority of businesses in America, this is just a hassle and a cost. For them, it is far better for Government to provide Health Insurance. In this case the interests of the Economic Liberals and the Business community diverge, which Obama has been exploiting to aid his legislation, and confound the Republicans

In almost all cases, the relationship is dominated the corporate world. Business has resources to pressure politicians, and emotional arguments (you don’t want us to toss the workers onto the street) that dominate the usually more pragmatic than principled support for economic liberalism espoused by western politicians these days. In short the corporate world wears the pants over the economic liberals, and so have avoided most harmful changes save the short term pain of moving to low tariff economies for western countries in the 1980’s & 90’s. That however was offset consistently with increased corporate welfare. This payoff earned the ire of some economic liberals (though somewhat appeased as they had colleagues in government). It means taxes were higher, but whenever changes came through, like reduced tariffs, FTA’s, deregulation of industries, natural challenges (drought) or man made (airlines pre & post 9/11) the government was willing to step in to help the corporate and business world through. It contradicted all good economic policy, but it made pragmatic sense, kept business happy, workers employed and could generally be afforded.

I was thinking of all this whilst reading some recent reviews on the topic of the stimulus package in Australia. On the face of it, the Stimulus package has been a roaring success with Australia, almost alone among countries, staying out of recession. Indeed news today is that unemployment has fallen for September. On the other hand, it’s much much harder to link that spending to the economic performance of the country. We haven’t gone backwards, but nor have we gone forwards. So While the economic liberals point to this as evidence such spending routines are a complete waste of money (Malcolm Turnbull is currently making the exact same point at a press conference this morning), it’s important to note the business community isn’t completely on side with such claims.

For business, the stimulus meant a psychological and fiscal guarantee. It meant the bottom of the economy was never going to fall out, that taxpayers would in effect subsidize their continued operation, and therefore that they could continue to operate as normal. Economists models may try and sideline the role of psychology, but for the business community, such re-assurance is vital. The lure of extra corporate welfare, government spending (school construction for instance) and subsidies (pink bats) at least ensured that the economy would continue as normal, which is the pattern that we have seen. While business owners are also individuals with tax rates and an ideological worry about the debt, it has been noticeable how little energy or emotion came from the corporate world over the stimulus package. They don’t like government, but they knew they needed it. As such, economic liberal politicians who lack this connection to business (Turnbull, The US republicans) have been forced to throw themselves into the fray, without their usual cavalry, -in the form of the business lobbies-, to attack the government. They have become lonely soldiers on the battlefield, as business either holds back, or throws its self-interested lot in with the Keynsean big spenders in the hope of getting some of the loose dollars.

The relationship between economic liberals/libertarians and the small business/corporate world will continue to endure. They’ll patch things up over healthcare, and having seen off the economic crisis, will revert to attacking wasteful government spending and reject any cost cutting/tax rises to pay for the debt. But a smart politician who comes up against this collective force should recognise the fault lines in the relationship. There is a reason Howard (whose dad ran a suburban petrol station) was never keen on competition as an economic principle. There is a reason business is being very quiet about the ‘SOCIALISM!’ that Obama is supposedly introducing with his health care insurance policies, and likewise Rudd and his deficit spending. For this reason, Turnbull and Hockey this morning* are probably wasting their time trying to convince Australians they are the better economic managers by being so concerned about the debt. The public is only superficially concerned about it, and the silence of their favorite barometer, the business world, will tell them all they need to know about why they should stick with Rudd. The same thing happened in 07, when business failed to go into bat for workchoices. Noticing the quiet, the people decided that the policy was an over-reach that wouldn’t help the economy that much, and so could safely be rolled back under Rudd.

* The purpose of Turnbull & Hockey’s press conference this morning was a debt reduction strategy of 25%, which I found out about on Twitter. But when I looked for a news link, not a single one even mentioned the issue of debt. Not the SMH, not The Australian , not the ABC, or news.com.au. I love a good leadership story as much as the next political junkie, but surely just ONE reporter could actually mention the purpose of the press conference or attempt to talk about something different. I’ve seen schools of fish with more independent mindedness.

Update – Finally on the 14th, 6 days after the press conference we get our first serious engagement with the Coalitions 25% cut plans by a major media outlet. I hate that MSM v blogs argument, both are useful and necessary for different reasons, but this is a pretty stark comparison in how the media has become obsessed on personalities to the exclusion of everything else. The Australian people deserve and need better.

The Liberal Party’s Economic Confusion

In my last post I remarked on the Oppositions claim to support big budget cuts, but unwillingness to back a relatively easy example of it. It goes to a much larger problem for the Liberal Party: They don’t know where to stand on economics nor how to describe their position.

The essentials arn’t in doubt, they are for the free market, with a reasonable support for government welfare services chucked in to moderate the harsher aspects of capitalism. But over the last 3 years they have seen massive shifts within this range, and varying and contradictory explanations for these positions.

When the Howard Government left office in 2007, it was championed as a great Pro-Free Market government. It had restored economic liberalism after the savage blow of losing the 1993 Fightback election, and implemented a GST, deregulated many industries, privatised and outsourced significant elements (the famous yellow pages test), and spent 11 years advocating strongly and consistently for free markets. This was seen as one of the great strengths and records of the government. Where articulate critics pointed out they had substituted a lot of populism into this mix (such as Andrew Norton’s essay The Rise of Big Government Conservatism) it was generally ignored. If they hadn’t gone as far down the path as they had liked, this weakness was only a minor issue, one that had helped keep them in power and probably Labors fault in blocking reform in the senate or scaring the people. This wasn’t an extreme or libertarian government in any sense. But it was rhetorically and philosophically clear about the direction it wanted to go, and every step further down that path was seen as a good thing.

Then in the Spring of 2008 the Financial Crisis hit and suddenly economic liberalism was seen to take a body blow. This wasn’t entirely fair, as a particular form of US capitalism, bad oversight and regulations and some distorted government policy caused the crisis which then hit around the world. Now, the former members and defenders of the Howard Government couldn’t get away from the term Neo-Liberalism fast enough. Where they had mocked Rudds 2007 accusations of their free marketer ideals, wondering if he proposed poverty and socialism instead, they now sought to claim he was completely over-exaggerating their support for the ideals. They hadn’t been a free market government, just a pragmatic, cautious one that had only been continuing what Labor had started. What was a small weakness in the Governments economic policy in 2007 was now being held up as its greatest strength in 2009. But loyalty to the old ideas isn’t going away (which is a good thing), but it does mean some serious re-writing of history and rhetorical confusion is going on right now as they attempt to find a new place from which to detail their economic position.

I wrote a while back that the big flaw of Tony Abbott’s book Battlelines (which seems to have sunk without trace) was that this confusion was visible on every page and yet never directly addressed. But theres just as clear an example in Paul Kelly’s new book ‘The March of Patriots’ (2009). Kelly is a conservative if sympathetic writer for both sides, but also one clearly in support of economic liberalisation (As I am too). But this leaves his narrative into contrary directions because of the Liberals recent re-writing (which began to occur whilst interviewing for the book)

‘The 1993 election extinguished more than John Hewson’s dreams – it terminated the neo-liberal political experiment…Hewson’s Fightback! program was the only package resembling neo-liberalism ever presented to the Australian people. Its defeat was a turning point. No Future leader – not Keating, not Howard, not Treasurer Costello – would contemplate the model or its specifics as a package. This was the conclusions from the 1993 election despite occasional polemical claims that Howard as a Prime Minister was actually a neo-liberal – Page 75

Yet just 11 pages later as he details the fall of Hewson he recognises that whilst the man was gone, very little had changed in the party:

It was a view shared across much of the coalition frontbench and it took more shape as the 1993-1996 term evolved. It was the position of Howard, Costello and Dower. Their sentiment was to avoid any over reaction filled with recrimination, to recognise the policy integrity and energy within Fightback, to review policies applying a sharper test of what the people would accept, to return to the political centre but stand by the pro-market economic reform agenda and to avoid any early detailed policy release’ – Page 86-87

Where the Coalition seethed during office that they couldn’t implement all their reforms, out of office they have come to claim this was a deliberate design. Apparently they wanted some of their bills to fail, wanted to lose on workchoices, wanted to be rebuffed by the public on selling Aus Post and others, wanted to have the democrats force them to take food out of a GST, etc etc. In office they would nod and acknowledge yes it was bad economic policy to hand tens of billions over to families on comfortable wages, but that was the price to keep Labor out of office. Now they seem willing to make welfare for the wealthy a core principle of the party.

Labor has responded to the Economic crisis by indulging their desires for government spending. In many ways it seems this has worked very well (we have stayed out of recession, unemployments stayed in reasonable shape), but a reckoning will come and only some seem (Lindsay Tanner) seem interested in talking about it, and then more as an electoral weapon than a shift in policy.

The Liberals on the other hand have got themselves completely tied up in knots. Their baser instinct and education is to return to the proud support for free markets that they enjoyed under the Howard years. To promise to cut spending and demagogue debt. But like a dog beaten too often, when anyone gets close they flinch. When media questions get too hot they jump back. No specifics, no details, and NO NO NO to means tests for government handouts. The only time the Liberal Party has looked at all comfortable in opposition was a few weeks in July 2009 when they had the issue of debt to rally them, and remind them of the good old days. (In fact it reminded them too much of them, repeating old ideas such as a debt truck) , but soon Godwin Grench reared up, Rudd & Swan managed to hold us up out of recession and the Liberals lost their nerve again.

As for Kelly, his book is thus far enjoyable (I’ll do a review when finished early next week) but it feels rather over-written, and with a deliberate eye for the future. He’s trying to make this the essential history of the period (as his End of Certainty became for Hawkies govt). But if he’s willing to uncritically accept this clear re-writing of Liberal views, then it is unlikely to gain as much traction. Nor does it have a cleaver summing up in the way the previous book had with its formulation of an ‘Australian Settlement’

Update: Michelle Grattan is clearly a reader of this blog :p

Trust Me – Tomorrow I’ll start the diet

A nice juxtoposition in this mornings paper:

What they Say:

Hockey Vows to slash $14b in spending

MALCOLM Turnbull will base his push for the prime ministership in next year’s federal election on a promise to axe government spending by billions of dollars a year.

And the Opposition Leader will blame Kevin Rudd’s economic mismanagement for the need to take a razor to spending, proposing cuts that on current levels would be worth at least $14billion a year – the equivalent of 70 per cent of the nation’s annual defence budget.

Mr Hockey refused to nominate which services would face the axe, but said there was a strong argument that government spending as a proportion of GDP should be no more than 24 per cent.

This financial year, spending is worth 28.6 per cent of GDP, with the government’s budget forecasts reducing the level to 28 per cent in 2010-11, 27.1 per cent in 2011-12 and 26.4 per cent in 2012-13.

What they do:

Coalition Votes down Health Means Testing

THE Senate has dealt a $1.9billion blow to Kevin Rudd’s health budget by rejecting plans to means-test taxpayer rebates for private health cover and increase levies on the non-insured.

The Coalition, the Greens, independent Senator Nick Xenophon and Family First senator Steve Fielding combined to defeat the three budget bills, which would have raised health fund premiums for more than two million middle- to higher-income Australians.

Manager of Government Business in the Senate Joe Ludwig appealed to balance-of-power crossbenchers ahead of the vote to pass the savings measure, which the Coalition had long vowed to oppose.

“This is a hard decision and one that was not taken lightly, but it is the right decision for Australia’s long-term economic future,” Senator Ludwig said. But the government offered no compromises, which sealed the package’s fate.

It’s easy to say you will cut immense amounts, but significantly harder to actually do so. In this case the Coalition had a case of spending that could be reduced with the cover of the Labor Government championing the bill, and in line with their major principles of individual responsibility (Private health insurance is a benefit above and beyond the norm, so those who want it should pay for it) and reducing government dependence and spending.

But they have chickened out for short term and almost pointless political benefit. No MP will keep his seat next year because of this vote, but Labor will be able to cut holes in their claims to financial competence by putting up similar bills and watching the Coalition act to keep high spending levels in place.

There’s also an intriguing claim by Hockey that Government spending as a GDP ration should be at 24% (which seems both his comfortable norm and his “emergency maximum level”). Theres no real reason why 24% should be the magic figure. There is the obvious argument that lower is better, but why 24%. It was the most common figure during the last 32 years, but hardly tracks to economic well being. (1)

Personally I think big cuts do need to be made to our welfare levels, but that should be a question of total spending vs need, rather than based around trying to hit supposed magic numbers. As the chart shows, some very successful economy’s have significantly greater Govt spending as a % of GDP, and some have quite a bit less. What’s more important is where and how that is spent, and the capacity of the country to pay for that spending.

When the coalition starts supporting the simple introduction of means-testing welfare and benefits for the middle class we will know they are beginning to be serious about cutting spending (I’m not sure the ALP is either, so we shouldn’t yet take their support for the bill as evidence of it). Until then Hockey is just using bluster and bullshit. But lets leave the final word to his predecessor as Treasurer in the Liberal Party: Peter Costello

don’t think that reducing expenditure to GDP ratios is easy. Every pressure in a democratic system is to increase spending. Resisting calls for increased spending on worthy causes (and all causes are worthy in the eyes of those who want it) is a daily struggle – week in week out, month in month out, year in year out.

(1) Whilst trying to find a good graph illustrating the difference I ran across this 2006 speech by Peter Costello claiming that “In the OECD Australia has the second lowest level of government spending as a share of GDP at 35.7%, lower even than the United States.”. Whilst the 2009-10 budget records a level of Government Payments as % of GDP at 24.2 for that year (Which also matches the figures Hockey cites for current spending at 28%.)

Update: The wise and civil Sinclair Davidson from Catallaxyfiles suggests this may include state spending, or counting the GST as Federal rather than State spending.

Why is Libertarianism so unpopular ?

If you take a regular gander at libertarian voices in this country, you often find they arn’t a very happy bunch. Despite thirty years of economic reform running almost entirely in their direction, they always have a nervous skittishness about any sign of backtracking, with frequent prophetic warnings about imminent economic doom. A large part of this is based on the widespread recognition that libertarian and indeed free market ideas arn’t actually that popular in most countries in the world. What better demonstration could there be than the 2007 dumping of the Howard Government for its support for WorkChoices, or the public embrace of Rudd and his heavy spending on health and education (the two area’s which always lead public opinion polls in terms of focus area’s over tax, security or immigration). The Liberal Democratic Party, the closest to a Libertarian party in this country, receives well under 1% of the vote

Yet Libertarian views have four significant advantages:

1) They advocate more freedom: Whatever minor philosophical differences there are, Libertarians can generally be identified as favouring social and economic freedom. Of course in individual circumstances there are debates about the consequences and the like (ie drugs, abortion, fireworks), but in general being identified as being in favour of such a key western value is of tremendous value. Conservatives have spent 30 years grasping for that mantle, and only sometimes succeed in getting anywhere near it.

2) They play to people’s self interest. Despite the obvious flaw in this reasoning, most people think they are above average, and would like a little more of their own tax dollars. Now while this can certainly be over-sold, (and the strongest vote against workchoices came from those not affected by it) this is a pretty good platform from which to appeal to people. Instead of having to make a moral or ethical case about caring for the ‘other’ as social democrats do (witness Obama’s struggle for health care in the US), Libertarians can appeal to your personal sense of competence, capability and resilience. You should choose who your doctor is, where your kids go to school, how to spend your money, etc etc. Most people seem to recognise that the common wealth benefits us all, but still see themselves as seperate from and more capable than most they run into. Libertarians get to play to this, with a clear set of policy proposals that have a logic of their own (you make it, you keep it) rather than the re-distributionism of the big government advocates (we’ll give you more in handouts).

3) It seems to work: After thirty years of general movement towards free market policies we have western societies that sit on the right side of ‘History’, have seen significant growth in GDP, disposable income, attainable products and services, quality of life, brought over a billion people out of poverty, and had few of the claimed major consequences of opponents rhetoric. Sure, the welfare state and very slow changes have been there to buffet the winds of change, and markets clearly don’t work in some areas (defence, health, education) in the way they work in others (ie need some public input to achieve outcomes), but we have reduced taxes, sold off assets, and deregulated our markets for great public benefit. Yet the favoritism for free trade and libertarianism doesn’t seem to have significantly budged despite these successes.

4) And most importantly: They are the natural party of wealth in our society. Money has always had and always will have a significant influence in democratic societies. Indeed most of the big fights that lead to democracy in the west have been centered around the wealthy trying to exert their influence (the original kings councils that ushered in the parliamentary system in Britain) and to protect that wealth from undue government control (the US ‘no taxation without representation revolution). Elections are very expensive businesses and while money usually follows power (meaning the major parties abilities to enact current changes will drive corporate interest), most businesses, entrepreneurs or wealthy agents in society would also be very sympathetic to those proposing less regulation, less taxation and an outsourced, reduced government.
The Australian Labor party is one of the most successful left wing parties in the west precisely because their union beginning and links gave them a financial base to compete with the big money interests who supported the conservatives. But given the Conservatives in Australia have only a half-hearted endorsement of free market and libertarian ideals (at the same time as introducing WorkChoices, Howard was presiding over the highest level of Government welfare spending in this country’s history), it is a wonder that business elements, especially those trying to challenge the status quo of a particular market, or those so sure of their capability in a particular arena dont try and pull the Conservatives towards the Libertarian side of the dial with strategic donations.

Despite these three great advantages, appealing to individual desire for freedom, individual self-interest and the natural alliance with the moneyed interests in a country, it is a wonder why Libertarian voices havn’t done that well. Perhaps the main reason I can see is that Libertarians have usually been unable to even agree to enter the political debate, and as such have little to no public face. Without a professional effort at public advocacy, what arguments are made for Libertarian views are usually either pitched as high economics or simplistic scare stories. Indeed whilst I am often very sympathetic with their overall ideals, and spend a fair bit of time reading libertarian literature and chatting with them, I so often feel somewhat talked down to. The answer is usually so obvious to them that your greed or ignorance seems the only reason you don’t fall to your knees and accept their wisdom.
Likewise, when presented to much of the general public, Libertarian views are seen to be representative of greed and avarice, while they see the economics and logic of their positions both more just and more likely to benefit the disadvantaged. (On that there is some scope for debate, but it’s defendable, and certainly shouldn’t be as dismissed as it currently is). Finally, both for reasons of ideology, and because of the reception that the ideology has recieved, there is a quite clear distrust if not contempt for democracy amongst a clear minority of Libertarians that then slows or even damages efforts to promote their ideas to the public.

So why then is Libertarianism such a disregarded and discredited ideology in Australia, indeed in the world?

Tab Dump

* While the US grapples to accept it was a torturing nation under the Bush Administration, Michael Johnson says (then retracts) what too many in this country think:

Queensland Liberal MP Michael Johnson said there was a place for torture. “I think that there is a very limited place for torture and, certainly where that torture takes place, it must be done in an appropriate way, and in an appropriate context,” the former barrister told Sky News last night. He added that it all depended on how torture was defined.
That prompted an immediate response from fellow panelist Labor MP Mark Dreyfus, another former lawyer.
“I think we need to resolutely say that there is no place for torture,” he said. Mr Johnson later issued a “clarifying statement” condemning torture. “Torture is unacceptable in any place at any time,” the statement said.

Johnson holds one of the liberals best seats since 2001, yet went no where under Howard, Nelson and likely now Turnbull. If smart the party will use this chance to dump him and demonstrate their morality in rejecting outright torture as a practice by modern societies. Conservatives worry regularly about the moral decay of our civillisation, but teenage promiscuity or drug use doesn’t remotely compare to the use and abuse of torture as the pre-eminent moral question of our time.

* From the Funny, Sad, Pathetic column: Yale is printing a book on the 2005 Danish cartoons that set of the riots, but refusing to publish the actual cartoons. Around 200 people died from this inability to accept free speech (almost exclusively Muslims). Hitchen’s skewers them as only he could.

* In news to warm the hearts of all Canberrans, the ACT is more important to the Australian Economy than China is. But it’s changing. H/T @Pollytics.

* With the US economy beginning to rebound can we say the bailout worked? Or more interestingly is the Administrations plan, with all its inherent debt a better outcome than the sharp market deflation that mass bank failure would have set off? Are we better off, (in terms of liberty and wealth) than had we let the markets run where they want ? Whilst others counter that we have over-reacted.

* The Daily Telegraph should stay away from photoshop, or hire someone competent. Ugh.

* And finally, since in my last post I critercised The Australian for ignoring Nelsons retirement, and then did so myself, its worth noting that whilst Nelson is a good bloke, it is not befitting the honour and importance of Parliament to leave mid term for a rumored defence sector job. Nor to do so at a cost of half a million to the tax payers. He has perhaps only a year to go until the election if that, so ought to stick around. Much could still be done locally, and with nothing to lose or fear from his party leader could use his platform as former Education and Defence Minister to tell the country some hard truths that had been squibbed during the Howard years and are doing so today (like the ham-fisted way we run international student education, our need to develop high tech sectors as the manafacturing sector closes, or rethinking how we go about assisting the pacific region, including long term planning, rather than over-relying on the Military and police to race in and save the situation ala the Solomon Islands, or sit idly by as democracy buckles in Fiji. The great danger of our modern political environment is that it scorns old wisdom, always seeking the new. Political leaders are seen as either on their way up, or on their way out. We should encourage those who have served the leadership to try and stick around. But as it stands only 1 out of 10 past major party leaders since 1990 in the form of Simon Crean has stuck around after losing the leadership, now capably serving as the Trade Minister.

The Free Trade Left

I’ve already raised the issue of ending the ban on parallel imports of books. The Productivity Commission has now released it’s final report and its findings are clear:

the Commission has
• concluded that the PIRs place upward pressure on book prices and that, at times,
the price effect is likely to be substantial. The magnitude of the effect will vary over
time and across book genres.
• Most of the benefits of PIR protection accrue to publishers and authors, with demand
for local printing also increased.
• Most of the costs are met by consumers, who fund these benefits in a nontransparent
manner through higher book prices.
• PIRs are a poor means of promoting culturally significant Australian works.
– They do not differentiate between books of high and low cultural value.
– The bulk of the assistance leaks offshore, and some flows to the printing industry.

Alan Fells, former head of ACCC and now at the Australian New Zealand School of Government has suggested that means a cost of up to $200m for consumers.

But what is most interesting (though if you know your history not surprising) is that most of the push for this end to protectionism has come from the left. It was Chris Bowen, in the Rudd government who initiated the Productivity Commission’s survey. It has been most publicly championed by Bob Carr, former ALP premier of NSW. And has received support from a variety of quite left wing types such as the ACT’s own rising star Andrew Barr (as I noticed this morning via his facebook – who says blogs don’t break news:P). Whilst the libertarians at Catallaxy have of course been forthright in wanting a change, I could only find this lukewarm press release from the Liberals Competition policy shadow minister Luke Hartsuyker, with not a single mention by Malcolm Turnbull.

This may seem counter-intuitive if you think the right is pro-free trade and the left against it. Yet whilst the two party structure of Labor and anti-labor sometimes creates that mould, the history is quite different. The single largest reduction in tariff’s in this country occurred in 1973 under the Whitlam Government. After some drift under the conservative Fraser, Hawke and Keating picked up the mantle and effectively ended the way Australians had run their economy by reducing almost all tariff’s. This was encouraged by Howard (having supped from the classical liberal economics of Reagan and Thatcher), but his own government whilst rhetorically adamant, ended up doing very little on the free trade front. It liberalised small areas such as CD’s (in the way now proposed for books) and seeing the flaws of multilateral deals pushed into bilateral deals with mild success. The two big areas still under the umbrella in agriculture and cars remained protected, or got effective protection through constant handouts. In fact if you examine Australian political history, it has been the moderates and liberals within both the ALP and Liberal Party who have lead the move towards free trade in this country (Howard being the obvious exception). The more conservative forces, much like the union-left have largely been against such moves. Take for instance this piece by Tony Abbott writing in 1995:

‘His [Keating’s] Asian crusade is simply the second phase of a long battle – hitherto fought around Australia’s economic structures – to extripate the legacy of Menzies. The first phase meant changing Australia’s economic structures and breaking down the old business establishment. The second centres on smashing the Crown which he thinks is the ultimate icon of conservative Australia. Asia played little part in his drive to ‘reform’ economic institutions – after all, most Asian governments pursue pragmatic interventionist economic policies similar to those of pre-Keating Australia’ (p220)
Abbott, Tony in Sheridan, Greg (1995) Living with Dragons: Australia confronts its Asian destiny Sydney: Allen & Unwin

Abbott went along with, even championed Howard’s economic ideals, but never was at the forefront of the debate, and with his mentor out of the game, it will be interesting to see which way he turns in his forthcoming book. Whilst the forces of free trade have largely won out (both due to argument and circumstance), don’t be surprised if there is a slight shifting back amongst the right should the conservative forces lead by Abbott take charge. As i’ve predicted many times before, I see the two party system shifting to a more liberals vs conservative basis instead of the weird cross-overs we saw under the Reagan/Howard coalitions, but either party could take either role, depending on their internal struggles. Long story short the “common sense” idea in the media and the general public that the right is pro-free trade and the left against it is not sustainable in current policy nor historically accurate. As the new left begins to develop it’s form, I have little doubt that a strong stand for free trade will be at the heart and soul of its economic system. Only such a system can encourage universal rather than national sentiments, international organisation, healthy free competition and the free flow of ideas and people.

Free the books!

I missed it initially, but over at Catallaxy, Sinclair Davidson has put up a well researched post on the move to allow parallel imports:

From The Australian: When the Howard government removed import restrictions on compact discs in 1998, it was accused of gutting the music industry and jeopardising the income of musicians. But industry data shows royalties increased from $81.8million in 2003 to $108m in 2007, and the number of performers receiving royalties also increased. Meanwhile, the average price of a CD album has fallen by 32per cent.

The Australian voices telling Australian stories argument is simply rent-seeking and doesn’t stand up to empirical analysis. We’ve heard these arguments before

As a keen book buyer (I sometimes fear I like buying books more than I do reading them), seeing an end to the ban on parallel imports would be a great step forward for this country. There is no reason why I need to wait longer and pay more for an Australian version of the book I desire. When your stock reading is the latest non-fiction quasi-journalism, the delay on new books as they wait to see if an Australian publisher will pick it are infuriating and tend to actually reduce my willingness to buy these books. Those who suffer from it most are poor students (especially post-grad!), forced to pay heavily to import foreign books, or simply denied access to the tools of their trade. In education, and encouraging a reading public, the book ban has been an ongoing disaster. And as we enter the era of digital books, a direct link can be drawn between our book ban and the lack of digital readers emerging in Australia. If the ban on parallel imports was removed, Amazon.com could add a .au and begin selling Kindles at a viable cost. In fact as we begin to see the outlines of a digital era in books both distribution and display, the idea of country based barriers becomes simply laughable.

Meanwhile, as much as current authors may fear losing even their meager returns from the status quo, those with talent have nothing to fear from the contest. Their fear of losing local voices telling local stories seems based on the absurd assumption that book buyers who pick up Australian content, do so only because there is nothing else on offer. That their allegiance is so weak that when stories of life on the Mississippi or Thames flood in, everyone will abandon the Peter Carey’s, Bryce Courntey’s and Matthew Reilly. If this is not the case, and book buyers are choosing based on an actual interest in the material, then they have nothing to fear from the competition and perhaps a chance for wider exposure, distribution and breaking away from the horribly monopolistic and talent squandering process that is the publishing industry.

The sooner the Rudd government moves on this the better.

Fukuyama was right

Normally I post a link to someone being serious/foolish and then spend several pages saying why they’re wrong and there’s better ways of looking at the world. This time however, someone being funny, in order to buffer a larger and under-represented point I’ve been wanting the make:
dilbert_10_may1
http://dilbert.com/fast/2009-05-10/

Capitalism is often seen by the public purely as it’s visible (or at least countable) outcomes. Money, Interest, Stocks are what come to mind when you ask people. Yet, much much more than that, Capitalism is a system of trade, lending, and interaction based upon the assessed value of capital assets possessed by the parties. Where barter trade systems consider just the equivalence of one good for another, capitalism adds in considerations of the assets already (or in future owned) and allows those to become part of the exchange (ie a bank lending to you based on the value of your house, or companies selling stocks which offer part of their future profits to those who purchase now).

That is, it is a system that is highly dependent on TRUST between the various participants within the market. It is a significant historical fact that Francis Fukuyama, fresh from his controversial classic ‘the End of History’ charting the ideological victory of democratic capitalism as a way of organizing human societies, would write his second book on the question of ‘Trust’. Fukuyama would argue and through numerous case study seek to demonstrate that ‘in all successful economic societies these communities are united by trust’ (1995:9).

While we are far from the end of the economic recession, we have the US president saying he is beginning to see ‘green shoots’ and much closer to home, even positive retail growth and reductions in unemployment. Whilst these numbers are sure to dip again, and some of the shoots to be bitten by the winter chill, it is likely that at the very least the Western world can now be said to have avoided a 1930’s style depression. This recession will be severe, and take a long time to get out of (not to mention the debt to pay back), but the system has held. And despite Adams pessimism that is because fundamentally people have retained their trust in the system. In the banks to hold their money, in the stock market to chart the worth of companies, and in our political leaders to respond to the challenges and do what they can to marshal resources towards solving the crisis.
fukuyama_trust
Whilst Obama’s economic moves have taken hits from the Left (most notably Paul Krugman and those supporting bank nationalisation) and from the Right (sensible conservative concerns about debt through to the nutty tea baggers), he has largely been seen to chart a pragmatic and responsive policy approach to the current economic challenges. Whilst the media have again tried to use the left-right frame to accuse Obama of becoming a socialist or alternately being captured by the big end of town, the public have responded positively to his efforts. American conceptions of if the country is on the Right Track/Wrong Track have gone up a remarkable 31% since October 2008 when Obama’s victory began to look apparent. In the last 2 months it has gone up 8% and finally moved to positive territory with a 48/44 split. Even better and clearer in its indication is news that 64% of Americans approve of Obama’s handling of the Presidency. Obama and his team may have stumbled at times, and people are still nervous about how the bank stress tests will play out, but for now there is confidence returning.

Closer to home in Australia, and the Prime Minister also enjoys significant public support. While there was a statistically significant drop since April, Labor is in comfortable election winning territory, and the PM is like his American counterpart enjoying 64% satisfaction support. Indeed this comes even as voters express significant disagreement* with the way in which the government has stimulated the economy. Rudd’s job was a little easier given his inheritance of the strong economic management of the Howard government, yet such is the trust that the government is doing what it thinks is right, the public can disagree and still show almost record support for the prime minister.

It goes back to an argument that social democrats have been making since the Industrial Revolution. Whilst their measures distort the market, affect prices and cost individuals, the resulting benefits whether delivered in welfare, working conditions or universal access to services help guarantee public support for the continuation of the capitalist system as the engine of prosperity in the community. As Franklin Delano Roosevelt would repeatedly claim, his New Deal made him the best friend capitalism ever had. He saved it from itself, a mantle Kevin Rudd would claim for himself in his 2009 essay on the Global Financial Crisis. This has often been unfairly compared to a ‘destroying the village in order to save it’ mentality, but whilst there is no guarantee that moving significantly further in the opposite direction is even better at social cohesion and stability (or is worth the cost and distortion of the market), social-democratic policies can be claimed as a useful ballast, maintaining the stability of society.

This indeed is one of the interesting contradictions of politics, in that the reinvigorated capitalist revolution of the 1980’s and 90’s, was largely championed by social conservatives who saw their policies unleash significant social change and damage to the ‘social fabric’ of Burke’s immortal metaphor.

Thankfully Adams social commentary is just a little bit too pessimistic this time. Even though great problems remain, Capitalism retains the trust of the public, and for that our national leaders deserve our support. Now to tell our kids they have to begin helping pay for those same measures …

* I put this down more to voter ignorance, both of economics and the governments approach. Of the $42 billion 2nd stimulus package only 4 billion was cash handouts, with the rest on infrastructure. Yet the media framing has largely been such that the payments are the focus.

Sometimes you dont need a sick day

This doesn’t sound a wise idea.

TREASURY is preparing the ground for a massive new burst of fiscal stimulus in next month’s budget, declaring that the measures to date have averted a plunge in consumer spending.

Retail sales figures released yesterday show that although there was a 2 per cent fall in sales in February, turnover still remains 4.5per cent ahead of its level last June.

Speaking in London overnight, the Treasurer Wayne Swan and Kevin Rudd said the figures vindicated their decision to spend $52 billion to kick-start economic activity since last November.

But they would not comment on The Australian’s report that Treasury is preparing a third economic stimulus package.

Surely we should be doing all we can to keep the economy flowing along ? And our ability to pay it back will depend on the strength we maintain throughout right ? Not always. Let me use a homely metaphor of the type Rudd is so fond.

Flu season is well upon us, along with a variety of sniffles, colds and coughs in this grey damp season. So all of us, esp the Casual and part time workers amongst you dear readers will be familiar with the times when you face that hard choice of going back to work, even though every impulse in your aching body calls out for more rest. So you make your way to the PC & check your online banking, no work means no money on monday. But if you are fully rested by then you could surely do more hours right ? Earn a bit of overtime and make up for the shortfall right ?
But usually such choices are a mirage. However long you spend in bed, you’ll still feel slightly sluggish the following day, and by 3:40 be pinning to race out the door. You’re certainly a little healthier than you were had you not stayed home, but also sure to enjoy poverty for another week, unable to bring yourself to torment yourself with that many more hours of overtime. Increasingly one thing becomes clear: you should have gone to work, and just been done with it the previous day. And so you feel worse.

Even at a reduced rate you’ll end up better off, than the indulged but broken promise to double down pathway. It will suck, but sometimes it’s better to just go back to work. Sicknesses do pass, you just have to accept being at the whim of nature and forces beyond yourself and get on with life. It may still blindside us that we, unrivalled amongst the species of the planet if not the universe can still be struck low by such a small thing, but that is sometimes a useful lesson to learn. Rudd should be very careful about wanting to make the economy downturn even softer, at the cost of long term debt & financing headaches in the future. Plans that will eliminate any chance for him to engage in critical health or education reform.

And now, I’m off to eat an Orange. Prevention is always better tastier than the cure.