Month: August 2011

Forget Compassion – Our Better Angels Aren’t Listening

With its Malaysia solution the Gillard government is about to implement one of the most illiberal asylum seeker policies since mandatory detention was invented. But the response from refugee advocates has been tired and musty.

In The Age on Monday, Malcolm Fraser said the major parties’ approach was an ”appeal to meanness”. Earlier, John Menadue, a former immigration department secretary, urged politicians to ”make the case for compassion and humanity”.

Releasing a report to ”break the stalemate” over asylum seekers last week, the progressive Centre for Policy Development called for ”constructive bi-partisanship”. If there’s anything the last decade of debate over refugees has shown us, calling for leadership and our ”better angels” has failed. The policies have, if anything, become harder.

And that’s not entirely the fault of political demagogues; it’s because nobody’s willing to admit just how intractable the refugee problem really is.

In June, the SBS reality TV show Go Back to Where You Came From showed this clearly. If you already support asylum seekers, it was one of the television highlights of the year. Yet the producers failed to convince some of the program’s participants.

Certainly, those who had enthusiastically admitted their views on asylum were racist had softened by the end of the three episodes. But the participants who were originally worried soft border policies create an incentive for people to travel on dangerous boats remained unmoved.

If relying on compassion for refugees couldn’t convince people who were shown first-hand the hardness of refugee camps, then what hope does it have for the rest of the country? No doubt there are people who oppose boat people because they just don’t like foreigners. But the majority seem to have serious questions about the unintended consequences of the government’s policy.

Even the Centre for Policy Development’s report quietly granted the premises of the refugee sceptics: that we must focus on how we can deter asylum seekers from travelling on dangerous boats.

Yet no serious study has found domestic policy can have more than a marginal impact on refugee flows. A 2009 paper in The Economic Journal found that, at most, countries could deter perhaps a third of potential refugees.

Evidence suggests asylum seeker flows to Australia are largely out of our hands. But governments don’t like to admit they’re subject to forces beyond their control, and oppositions won’t let them try. It’s hardly a surprise that professional legislators think legislation is both the problem and the solution. This is also why another major argument – that our asylum intake is so small we shouldn’t worry about it – is counterproductive.

It is precisely Australia’s tiny numbers of boat people that create an impression we can do something to change them. Almost every national border in the world is porous. Ours is easily monitored. For Europe or the United States, the sheer volume of refugees getting in makes any belief that domestic policy change could halt the flow seem faintly ludicrous.

Yes, there are a lot of popular myths and misconceptions about refugees. There is no queue for boat people to jump. It is not illegal to seek asylum.

Nevertheless, those myths are beside the point. Asylum seekers are a subset of a bigger issue.

There are millions of people who could have a better, more productive life in the West but are prevented from doing so by immigration policies. This is the real issue, but it suits no one to raise it. By preferring silly rhetoric about the ”essential goodness” of Australians, the refugee lobby is shooting itself in the foot.

We could embrace a renewed policy of mass migration to Australia, yet refugee advocates avoid over-thinking Australia’s immigration philosophy.

The only alternative is to admit there probably is no sustainable policy that would keep asylum numbers limited and manageable. So governments will just keep stumbling through, cyclically hardening and softening their approaches. And, if past form is any guide, our debate about asylum seekers will go nowhere.

Europe’s Doomed Euro

Few people predicted the global financial crisis. Everybody predicted the crisis of the eurozone.

Read almost any critique of the euro from just a few years ago and you’ll be struck by their foresight. The euro will encourage government profligacy – tick. The euro will be extremely vulnerable to a housing bubble – tick. It will rely on the willingness of stronger economies to bail out weak ones – tick. And it will do nothing to buffer Europe from an American downturn – tick.

These objections were raised by everyone from Paul Krugman to Milton Friedman.

So how on Earth did Europe get its doomed euro – an idea which was viewed with deep scepticism if not outright hostility by some of the finest economic minds of the age?

As Romano Prodi, the European president said in 2002, “The introduction of the euro is not economic at all. It is a completely political step”.

Europe switched its currency for geopolitical purposes and got burned.

In his Euro On Trial (written well before the financial crisis) the economic historian Brendan Brown argues that the European monetary union was a power play between French policymakers and German monetary authorities. Germany is Europe’s largest economy and the Deutschmark was its strongest currency. The influence of the Deutschmark was seen as a threat to both France’s strategic interests and its moral leadership of Europe. French politicians worried that bolstered by monetary strength Germany could act independently of Europe, forging a unique relationship with the United States and even the Soviet Union.

So for the French, a common currency offered glue with which Germany could be stuck in Europe. German foreign policy interests could be overcome by French ones.

Of course, the Germans knew this. French politicians actively raised the spectre of German nationalism when campaigning for the common currency. But these days the only country which fears German power more than France is Germany. For historical reasons, Berlin wanted a deeper European Union. If that meant sacrificing the Deutschmark for French support, so be it.

In adopting the euro, both France and Germany were subordinating economic policy to foreign policy, each trying to bind future German politicians.

The economist Philipp Bagus also argues that prudence of the Bundesbank, the German central bank which dominated Europe, restrained other European countries from excessive spending. This discipline was, needless to say, unwanted. Get rid of the Bundesbank, and the spigots of government largess could open freely.

No wonder that in 2004 the Czech president Vaclav Klaus argued that the euro creates a perfect environment for fiscal irresponsibility.

Certainly, there was an intellectual case presented for monetary union. The theory of optimal currency areas suggests that, at the very least, the size of some currency jurisdictions are better than others.

Then there are the intuitive benefits of currency consolidation. Single currencies reduce the costs of trade, at least a little bit. One currency makes it easy to compare prices across the continent.

But there was no reason to suggest that Europe was such an optimal currency area. (Europe’s economies are, obviously, different.) Even if it was, which countries opted in and opted out of the monetary union was, again, dictated by political considerations, not economic theory.

And the mild convenience of being able to compare prices between Barcelona and Berlin without using a currency converter seems to be a very mild benefit considering the costs of monetary union.

One of the more reasonable polemics in support of the European project was by the British author Mark Leonard – Why Europe Will Run The 21st Century. Social democratic Europe would retake world leadership from liberal democratic United States. And in Leonard’s view, a common currency would be a core foundation in Europe’s revitalisation – luring the centre of global finance back across the Atlantic.

Leonard’s book was published in 2005. How times have changed.

In 2011, we can read in the Guardian that “the monetary union, unlike the EU itself, is an unambiguously right-wing project”.

It’s hard to see why. The European ideal is a long way from its classical liberal origins in a free trade and migration alliance. The 1957 Treaty of Rome set up a simple union of free movement in goods, services, capital, and people.

That early classical liberal vision is very different from the vision of Europe which informed the euro – one in which not only borders are being eliminated but policy differences as well. The monetary union sought to eliminate inter-state competition for the most stable currency. In the Europe of the 21st century, taxes are being harmonised. Regulations are being increased.

The Spanish prime minister said in 1998 that “The single currency is a decision of an essentially political character… We need a united Europe.”

Unfortunately, the only people who have been surprised by the euro’s failure have been the politicians who thought monetary policy should be a weapon for international diplomacy.

Abbott Lines Up With Left-Wing Union On Protectionism

The Coalition’s position on anti-dumping laws is part of a worrying trend.

Rarely does the federal opposition line up with the Australian Workers’ Union on economic policy but that’s where they are on free trade. Unfortunately, the nominally market-orientated Coalition is playing fast and loose with one of its core philosophies.

This matters because as the world faces a second round of financial crises, there’s been a surge in protectionism, and it’s a fair bet Tony Abbott will be the next prime minister.

In his ”forgotten families” speech in May, the Opposition Leader made tougher anti-dumping laws a centrepiece of his economic policy.

These laws purport to prevent foreign imports being ”dumped” so cheaply in domestic markets they threaten the existence of Australian companies. The theory suggests that the foreigners will jack up prices once local companies have gone out of business.

But it’s a theory that everybody from the Productivity Commission to Nobel-winning anti-free market economist Joseph Stiglitz thinks is nonsense. Pursuing that pricing strategy would be expensive and risky. It’s hard to find an example of any company ever having done so successfully.

Anti-dumping laws are pure protectionism. They benefit a few companies at the expense of consumers. No surprise that the AWU has been campaigning to beef up anti-dumping laws for months. But a big surprise that a Liberal leader has been as well.

The government made some changes to the anti-dumping regime in June. The AWU was satisfied. The Coalition was not. Labor, they said, had ”thumbed its nose” at manufacturers. That makes the federal opposition less supportive of free trade in this case than the union movement and the government. It could be dismissed as an anomaly if it wasn’t so clearly part of a trend.

And it isn’t an argument between free-market Liberals and agrarian socialists in the National Party. Last month Liberal industry spokeswoman Sophie Mirabella said departments should buy equipment and clothing from local companies.

Doing so she came up against the Victorian government – a Coalition government. Victorian Police Minister Peter Ryan was sourcing fabric for police uniforms from a company that uses Chinese labour. Protect local jobs, or try to get the best deal for taxpayers on the competitive, international market? The federal opposition went with the former. Ryan – who is a National – went with the latter. It’s the old battle between major benefits for a few or minor benefits for all.

It goes on. The opposition has concerns about foreign investment in Australia. The bogey-man here is Chinese and Middle Eastern companies ”buying up” Australian farms. That practice is also known as ”investing”.

And investment is something you’d think a growing, capital-hungry country like Australia might embrace. Nevertheless, the Coalition has a working group to scrutinise whether it is in Australia’s national interest.

The Coalition is not alone when it wavers on free trade. The past few years of downturn has seen a resurgence in anti-trade sentiment and protectionism around the world. According to the British-based Centre for Economic Policy Research, the 20 countries in the G20 have enacted 155 trade restrictions or tariffs since November 2010.

Austerity has left politicians with a restricted set of tools to please domestic rent seekers and trade unions. When governments cannot spend, they regulate.

Protectionism is easy to sell. Who wouldn’t want the government to protect domestic jobs and industries? By contrast, the benefits of trade – cheaper goods and services for everybody and an expanding economy fuelled by engagement with the rest of the world – are more diffuse.

Yet every one of the new restrictions on trade damages economic growth and punishes consumers. Australia has largely avoided joining the wave of protectionism. That’s what makes the Coalition’s growing antipathy to free trade so concerning.

Tony Abbott has been right to oppose many proposed tax increases. But tax is only one side of the economic coin. You can’t have a strong economy without free trade. If the Coalition cannot confront this principle in opposition, it will definitely have to confront it in government.

Free Speech: Hicks Should Keep His Memoir Profits

David Hicks should be able to keep the profits from his memoir.

The law which confiscates literary proceeds of crime is a bad law.

It’s a bad law because it tends towards arbitrariness. It’s a bad law on free speech grounds.

And it’s a bad law because it is based not on any philosophy of crime and punishment, but merely on a feeling that it would be a bad thing if bad people became rich off their infamy.

Those observations have nothing to do with the rights and wrongs of the David Hicks case.

After all, the law was not originally conceived with convicted terrorists in mind.

Between 1976 and 1977 David Berkowitz killed at least six people in New York, signing off on the murders as “Son of Sam”. By the time Berkowitz was arrested, the case had gathered so much public interest the daily sales of the New York Post doubled.

It’s not unusual for the public to be fascinated by serial killers, but Berkowitz took advantage and got a $US75,000 book deal.

The revulsion about the book deal led to New York’s Son of Sam law, which prevented criminals making a profit off the back of their crime before all victims had been compensated.

Variations of this law were quickly replicated across 40 American states and Australia. Over the decades, they’ve largely dropped their link to victim compensation. Now they just tend to ban profit. Our federal Proceeds of Crime Act doesn’t even require a person be convicted of a crime, only that on the balances of probabilities they have done so.

According to one New York State senator at the time, a “sense of justice and decency” compelled the introduction of the original Son of Sam law.

But it’s hard to pin down the rationale for confiscating literary proceeds any more concretely than that.

There’s absolutely no question if a court convicts a bank robber they shouldn’t be able to keep the loot as a nest egg for when they get out of jail. In that case, the stolen money is a direct result of the crime.

By contrast, literary proceeds of crime aren’t really “proceeds of crime” at all. Trading off the notoriety you gain from robbing a bank is not the same as living large on the bank’s money once you get out of jail.

In fact it’s quite the opposite: writing a book is an entirely legal endeavour. In fact, it’s an admirable one. Any profits gained are gained honestly – writing a book is a lot of work. And if the book sells, it implies consumers have gained something from it. A profitable book is a net benefit to society, regardless of the history of the author.

No surprise: people like reading about the crooked lives of others.

When the Attorney General’s Department looked at the proceeds of crime law in the late 1990s, it sensibly pointed out confiscating literary profits provides no deterrent against committing crime in the first place. It would be a very farsighted criminal who broke the law in order to write a successful book about it decades later.

Instead the department argued a more convincing basis for the measure was unjust enrichment.

Yes, it seems somewhat unfair a criminal might get a heftier book deal than the victim of their crime perhaps would.

But that sense of unfairness is not a stable enough foundation on which to limit free speech.

It’s been claimed that in David Hicks’s case confiscating his commercial gains has nothing to do with free speech – while there is a human right to free speech there is no similar right to speak profitably.

That this argument has come from many conservatives is disappointing. Because the literary proceeds of crime laws are a neat example of the inextricably intertwined relationship between human rights and economic rights.

Speech requires finance. To pretend the former is unharmed if you ban the latter is nonsensical.

If a government was to ban a newspaper from making a profit but otherwise leave its material uncensored we would not hesitate to condemn it as a violation of freedom of expression.

There is no right to profit from speech – not all books or newspapers find markets and audiences – but without a right to try to profit, the liberty to speak is severely crippled. Writing, publishing and distributing is an entrepreneurial enterprise. We cannot detach the economic motive from speech.

No matter how you slice it, confiscation of the proceeds of someone’s memoirs is a restraint on free expression.

On The Drum in February, one of David Hicks’s legal advisors Ben Saul argued literary proceeds of crime restrictions should be extended to crimes against international law – that way the profits from John Howard’s memoirs would be similarly up for confiscation.

Saul’s trite idea obviously will never happen. But such reasoning encapsulates one big problem with laws such as these. Rather than contesting the usefulness or justice of the law, partisans wield them like a weapon against their opponents. Indeed, the Howard government amended the Proceeds of Crime Act in 2004 specifically to stop Hicks and Mamdouh Habib profiting from their stories.

Because in Australia this law has been rarely used and is largely untested – and many, many Australian criminals have written books – it is hard to avoid the impression the pursuit of Hicks’s profits is more about the man than the just application of the law.

That’s pretty much the definition of arbitrariness.

Ultimately, the David Hicks case suggests that the pursuit of the literary profits of convicted criminals comes down more to taste than justice.

‘Carbon Cops’ Destined To Join Mega-Regulators Club

The powers which the Gillard Government intends to give the Clean Energy Regulator are unquestionably illiberal.

The climate body will be able to enter and search workplaces and compel people to provide self-incriminating evidence – a clear breach of the basic right to silence.

Those powers are counter to the Western liberal legal tradition, which should provide protection against self-incrimination, and defend the sanctity of private property against state intrusion.

But, that said, the Clean Energy Regulator’s powers are not at all surprising. They’re not even unusual.

It’s a feature of Australia’s regulatory state that government regulators are granted extraordinary powers – often more substantial powers than the police hold.

The Australian Securities and Investments Commission can compel people to give evidence in private hearings, under oath, entirely separate from the court system.

ASIC uses its suite of coercive information-gathering powers around 26 times every single working day, a Senate committee hearing revealed last year. The standard rules of evidence and privilege against self-incrimination do not apply at ASIC hearings.

ASIC’s powers are still being bolstered. In 2010 they had their wire-tapping and phone records access powers increased.

Then there’s the Australian Building and Construction Commission (ABCC), which can bring anyone in for questioning, in secret, and force them to hand over documents, or report on private conversations.

In the Sydney Morning Herald last year, George Williams reported one person was pulled in front of the ABCC because they simply walked by a dispute between a union representative and a building manager.

Last week the ABCC admitted it had issued 203 summonses defectively: the same failure which last year led to the acquittal of Ark Tribe, a building worker who refused to give evidence to the commission.

The Australian Taxation Office has the capacity to ban people from leaving the country if they are in a dispute over tax owed. Paul Hogan learned this first hand. And the ATO can enter and search premises for documents without having requested those documents first.

The Australian Prudential Regulatory Authority and the Australian Competition and Consumer Commission also have substantial coercive powers. They round out Australia’s mega-regulators, a club the Gillard Government’s climate body is destined to join.

Unfortunately the illiberalism of all these powers is obscured by politics.

Conservatives suggest the ABCC’s powers are a necessary evil because they restrain union thugs. Progressives suggest the extraordinary coercive powers of bodies like ASIC are necessary because cartels and corporate fraud and insider trading are endemic.

That’s how the basic principles of the liberal rule of law gets chipped away: through an endless list of exceptions.

Partisans on each side can point to their opponent’s hypocrisies. Hopefully the union movement, which has been rightly vocal defending the rule of law against the ABCC, will be able to recognise the problems inherent in vesting yet another regulator with coercive powers.

After all, does anybody believe the Clean Energy Regulator won’t have its powers extended over time? Every regulator pesters Parliament to have its jurisdiction expanded, its funds increased, and its scope widened. This is the inexorable logic of the regulatory state.

Yes, the creeping thicket of regulation demands growing regulatory powers. If you’re going to impose a regulation you’ll want mechanisms to make sure the regulated comply.

But those powers are being steadily augmented to give independent regulatory agencies an increasing degree of unchecked power.

Typically the powers held by regulatory agencies lack oversight. Richard Gilbert, of the Rule of Law Institute of Australia, has pointed out these regulators are reluctant to disclose data on the use of their coercive powers. And without reliable data, Parliament and the public are unable to assess whether those powers are being used judiciously.

That’s a particular problem because the entire purpose of making a regulatory agency “independent” is to deliberately separate them from the traditional ministerial and parliamentary lines of responsibility. By definition, they lack accountability.

This causes a very real governance problem. Each of these agencies are little fiefdoms, with reputations they feel they need to defend, particular interests, ideological preferences, and obsessions.

This is no more evident than ASIC’s behaviour in recent years.

In one of the most celebrated recent cases, ASIC pursued the mining company Fortescue with such fervour the judges started questioning the regulator’s motives – because there’d been no suggestion anyone lost money out of Fortescue’s actions.

And ASIC’s attempt to have the activity of “rumourtage” (spreading false rumours for profit) penalised failed, after the only rumours ASIC could identify which had altered market outcomes turned out to have been, in retrospect, true.

ASIC seeks more power and influence. It’s an independent body, so it acts independently.

While it eagerly sought its new wiretapping abilities, in June ASIC admitted it had not even used them since they were granted late last year.

We can infer the need for those extra coercive powers may not have been as pressing as originally made out. But it must feel nice to have them on the shelf.

ABCC, ASIC, APRA, ATO, ACCC, and now the CER: it’s rarefied company which the Clean Energy Regulator joins.

No doubt the partisan fluffery will die down and the political roadshow will move on from this week’s debate about ‘carbon cops’.

But we will be left with just another mega-regulator, desperate to expand its domain, and gathering more and more powers.