Articles – Page 23

The cyberbullying moral panic

With Simon Breheny

Bullying among children is a serious problem. At its tragic worst it can lead to suicide. But it is a serious social problem, not a technological one.

Earlier this year, the Coalition government released a discussion paper ‘Enhancing Online Safety for Children.’ The proposals contained within the discussion paper have been drafted with the intention of tackling cyberbullying — that is, bullying using digital technology. Unfortunately they will do nothing to solve the bullying problem. And, by establishing a ‘Children’s e-Safety Commissioner’ with powers to take down material from social media websites, it will increase government control over the internet and clearly threaten free speech.

The discussion paper outlines three key measures the government aims to implement to address cyberbullying: the establishment of the Children’s e-Safety Commissioner; developing an effective complaints system, backed by legislation, to get harmful material down fast from large social media sites; and examining existing Commonwealth legislation to determine whether to create a new, simplified cyberbullying offence.

The key plank in this policy is the creation of a new power to ‘get harmful material down fast.’ This is an explicit censorship power. Pure and simple. And it’s a particularly disappointing development coming from this government. In a speech to the Samuel Griffith Society in 2012 entitled ‘In Defence of Freedom of Speech’, then Opposition legal affairs spokesman Senator George Brandis said:

The measure of a society’s commitment to political freedom is the extent of its willingness to respect the right of every one of its citizens to express their views, no matter how offensive, unattractive or eccentric they may seem to others.

The proposed establishment of an e-Safety Commissioner is not a policy that lives up to Brandis’ high-minded rhetoric. Indeed the proposal moves Australia in precisely the opposite direction. If the Coalition’s e-safety policy is implemented, this government will be doing more to restrict free speech than it is to defend it.

Several concepts used in the discussion paper are ambiguous. The term ‘harm’ is itself a term that describes a broad range of conduct, from the very serious to the trivial. Whenever the basis of a bureaucratic power is vague it gives discretion to public servants. In the case of the e-safety commissioner, it means that none of us can be sure whether we’ll be censored for something we say online.

The proposed regime carries some very serious risks. The commissioner will not be infallible. There will be mistakes, and content that should never have been taken down will be removed by the government.

We’ve seen this before. In June last year, the Australian Securities and Investments Commission admitted that it had accidentally blocked 250,000 websites in an attempt to tackle online scams.

Those who cannot remember the past are condemned to repeat it. The risk of inadvertent removal of material is serious. But perhaps even more concerning is the idea that the government should grant itself this kind of power at all. It’s not the role of government to judge what is and is not acceptable social discourse. Those important decisions must be reserved for rational, free individuals.

And like any government initiative there is the risk of scope creep. What starts as a small censorship regime grows into a large censorship regime. In a liberal democracy there is only one acceptable level of censorship: none.

On the flip side, it will be impossible for the e-Safety Commissioner to protect children from all cyberbullying. Lines have to be drawn somewhere. And wherever the government creates that threshold there are going to be children who will be the subject of bullying that is not caught by the government’s cyberbullying regime. Additionally, no matter how carefully this policy is implemented there will be cases where the commissioner will fail to remove legitimately harmful material.

Of course, that won’t stop parents from trusting that the government is putting an end to cyberbullying. Governments love to pretend they have everything under control. And many parents will trust that the commissioner has covered the field. But the risk is that the existence of this program provides a false sense of security. Parents will rely on the government to protect their children. This attitude is instinctive — the government is taking more responsibility so I don’t need to take as much.

This attitude has a dramatic impact on consumer behaviour. Parents who rely on the e-safety commissioner no longer direct capital towards free market answers to cyberbullying. This outcome is a direct result of the government intervening in an area where government action is unnecessary. Implementing a government-run online safety program creates perverse incentives that lead to fewer privately developed solutions.

There are a very broad range of tools available to parents, teachers and schools which can assist in effectively targeting cyberbullying.

The most important mechanism that exists to deal with cyberbullying is direct reporting to the social media networks themselves. It’s in the interest of social media sites to have highly developed reporting mechanisms in place. Facebook allows users to report violations of its statement of rights and responsibilities. The statement contains an explicit reference to bullying: ‘You will not bully, intimidate, or harass any user.’ The outline of Community Standards expands on its uncompromising stance: ‘Facebook does not tolerate bullying or harassment. We allow users to speak freely on matters and people of public interest, but take action on all reports of abusive behaviour directed at private individuals. Repeatedly targeting other users with unwanted friend requests or messages is a form of harassment.’

Twitter, LinkedIn, Pinterest, Google+, and other social media sites likely to come under the purview of the government’s commissioner have all developed similar policies.

Distinct from internal reporting tools, there is also a growing range of anti-cyberbullying software available to parents. The number of programs available is impressive. They range in scope, complexity, format and price, and can provide a remarkable amount of parental control.‘CyberSynchs’ is an application that identifies bullying and other inappropriate behaviour, and then sends a report to parents. Trend Micro’s ‘Online Guardian’ allows parents to monitor their children’s social media traffic for pre-programmed key words and phrases.

There are hundreds of these products currently available. And more are being developed all the time. Primary and secondary schools also install filters at the network level. These are the solutions that are available to parents seeking to protect their children from cyberbullying.

There are also a number of existing legal remedies that cover the same or similar conduct as that targeted by the government under the e-safety policy. Violent threats; menacing, harassing or offensive conduct online; stalking; and unauthorised access to accounts are all criminal offences.

The truth is that cyberbullying is bullying. It’s awful. It’s damaging.But cyberbullying is no more or less a problem than run-of-the-mill playground bullying. The same approach should be used for both. Parents are more in tune with the emotional disposition of their own children. They know better than any government-appointed commissioner how their child will react to incidents of bullying, and they know best how to deal with it. Parents are the best anti-bullying advocates their children will ever have.

The proposed Children’s e-Safety Commissioner is a policy born of lliberalism. It patronises parents, and it infringes freedom of speech. The government should not proceed with its e-censorship proposal.

Tony Abbott’s culture challenge

Tim Wilson, formerly of the Institute of Public Affairs, will make an excellent human rights commissioner on the Australian Human Rights Commission.

Let’s hope he is the last human rights commissioner.

As the Attorney General George Brandis pointed out when he announced Tim Wilson’s appointment in December 2013, the commission has ‘become increasingly narrow and selective in its view of human rights.’

This is quite an understatement. As the Institute of Public Affairs has documented over many years, the commission isn’t just narrowly left-focused on human rights. It is actively hostile to basic liberties like freedom of speech, freedom of religion and freedom of association.

So Wilson’s appointment is excellent. But the government is kidding itself if it thinks it has fixed the commission by doing so. Under John Howard the Coalition appointed conservative and liberal supporters to significant government roles — like, for instance, the board of the ABC. Despite this, you’d be hard pressed to identify any long term institutional change these appointments brought about.

The new Abbott government has been characterised by two things. First is its surprising and extremely welcome antipathy to corporate welfare. It refused to bail out SPC Ardmona. It refused demands from the car industry for further subsidies. And it refused to guarantee Qantas’ debt. But second and much more significant is its enthusiasm to hop unashamedly into the culture wars.

It began early. The target was the ABC and its reporting of the Edward Snowden leaks and claims of asylum seeker mistreatment. More important was the particular way in which the argument was framed. Abbott told 2GB’s Ray Hadley that ‘A lot of people feel at the moment that the ABC instinctively takes everyone’s side but Australia’s.’

Wilson was appointed to the AHRC in December, with predictable outrage.

In January, the education minister Christopher Pyne announced a review into the National Curriculum because ‘the benefits of Western Civilisation should be taught in our curriculum.’ Predictable outrage again.

But Wilson is just one commissioner among seven — hardly a fatal blow to this $30 million organisation. And the idea that Pyne’s suggestion could be at all controversial — that it would be controversial to squeeze Western Civilisation into a curriculum whose themes already include sustainability, Asia, and indigenous cultures — just shows how deeply the left have captured not just the National Curriculum, but the broader public debate over our history as well.

It certainly wasn’t the ‘right’ that started the culture wars. If Tony Abbott wants to effect the long term cultural change in Australia — as all the evidence suggests he does — then he needs to come to terms with how the left harnessed the power of the state to push its cultural vision.

A word of caution. Few terms more are frivolously used in Australian politics than ‘culture war’. Literally one week after the Coalition won government in September 2013, the academic Conversation was heralding the start of ‘Culture Wars II’ because it dared to criticise the content of the previous government’s national curriculum.

An article published in the left-wing online publication New Matilda claimed, a fortnight later, that Tony Abbott had ‘reignited the culture wars’ by abolishing the Climate Commission — a body which was specifically formed by Julia Gillard in order to sell her government’s climate change policy.

In November, Renew Economy, a specialist climate change website, claimed Tony Abbott saw climate change policy as a ‘culture war’. Never-mind that the Coalition had committed itself to the same emissions reduction targets as Labor, and its own elaborate, expensive mechanism to suit.

Describing an opponent’s policy preference as a ‘culture war’ is to give it an air of unreality — as if their policy preferences are motivated solely by partisanship and fantasy. Only ideologues fight culture wars. Everybody else just tries to ‘do what works’.

The term ‘culture war’ originated with Otto von Bismark. His kulturkampf (‘cultural struggle’) pitted German Protestants against the Roman Catholic church in Prussia. It took the form of aggressive state controls on Catholic institutions: state inspection of religious schools, a ban on political commentary at the pulpit, and a wide range of heavy regulation on Catholic participation. Thousands of the clergy were fined or jailed for resisting the kulturkampf dictates.

The Protestant majority believed the Catholic Church was a force holding back Bismark’s modernising force, and, with the Church’s relationship to the Papacy, a threat to German unity.

That drive for national unification is the key to understanding what a culture war is about. The left has long seen the state as a vehicle through which society can express itself. In this idea, institutions such as the law and bureaucratic organisations are not solely mechanistic tools to achieve public policy goals but are also demonstrate the values held by the social collective. Take, for instance, the emphasis on what a repeal of section 18C of the Racial Discrimination Act would ‘symbolise’, or the proposal to recognise indigenous Australians in the preamble of the Constitution.

The culture wars describe not just an ideological back and forth — politics is, as it should be, a battle of ideas — but a contest for control of state institutions. So the culture wars aren’t about culture per se. They’re about the way the state seeks to control the culture.Its tools are the network of grants, subsidies, programs and initiatives doled out almost exclusively to one side of politics to promote their vision of what Australia ought to be.

The complaints that the Abbott government wants to restart the culture wars are rather complaints that the left’s privileged position in the institutions of state are being challenged.

But the Abbott government must not imagine that a victory in the culture war will be found by placing conservatives and liberals in government roles custom-built for their ideological opponents.

Neither will institutions be repaired by reorientating them towards conservative ends. As the IPA’s James Paterson argued in Quadrant in 2011:

the Right should be highly wary of using the power of the state to advance their side of the cultural wars. Often, it was unsuccessful. Worse, it sometimes backfired and made the job of their ideological opponents much easier.

It may be possible to repair the National Curriculum’s hostility towards Western Civilisation. The cross-curriculum priorities — Indigenous and Asian perspectives and sustainability — could be replaced to reflect our heritage: the legacy of British institutions, the Western tradition, and economic development.

But doing so would be no guarantee a future government would not reverse those changes, subjecting the education system to a constant political and ideological back and forth.

The National Curriculum is explicitly a culture war high ground. It is a project to impose some degree of cultural unity on the Australian nation. It is, in the words of one analyst, a ‘major means by which the citizenry, collectively and individually, can develop the capabilities to play a part in the democratic project of nation (re)-building.’

It is obviously tempting for the Abbott government to reclaim the ground; to take the institutions created by the left and use them for conservative ends. But why should we have a national curriculum at all? A liberal, pluralistic society that offers the maximum space for individuals to pursue their own goals and live the lives they choice would reject these grand schemes for national cultural unity.

This is why the IPA has called for the Abbott government to abolish the National Curriculum, rather than tinker with it. Only by devolving the curriculum down to the school level and granting parents choice about what their children are taught can we stop the curriculum being a political plaything.

The Australian Human Rights Commission should be abolished, rather than reformed.

Governments come and go. The Abbott government should not try to win the culture war. It should try to end it.

We Should Fear Slow Growth, Not Inequality

Is inequality the defining issue of our generation? According to the French economist Thomas Piketty’s incredibly popular new book Capital in the Twenty-First Century it is.

But Piketty’s book actually demonstrates something else. Inequality isn’t the essential economic danger of the 21st century. The danger is slow economic growth.

It’s remarkable how many hidden assumptions and unexamined ideological preferences surround the entire inequality debate.

Piketty’s argument has been widely recounted. He has carefully investigated high-wealth tax returns in Europe and the United States and, deploying some intuitive reasoning, claims to have detected a central contradiction in capitalism.

Income inequality, rather than converging over time to make us more equal, actually diverges to make us less equal, and society therefore less meritocratic.

More formally, Piketty argues that the rate of return on capital (r) exceeds the rate of economic growth (g). That is, r > g.

As a consequence, rich investors accumulate wealth at a faster rate than ordinary income earners. That wealth is then passed on to their children. Over the long term, this creates an established permanent class of the super-rich, whose privilege cannot be justified by any meritocratic or utilitarian considerations.

It’s a powerful story. The specifics of his model are debatable – see Paul Krugman’s supportive review and Tyler Cowen’s critical one – what’s more interesting is what the book suggests is why we should worry about inequality.

The last line of Piketty’s Capital is “Refusing to deal with numbers rarely serves the interests of the least well-off.” This widely quoted aphorism is supposed to reflect his interest in empiricism. Yet it’s quite misleading. The least well-off don’t make much of an appearance in the book at all.

Capital offers a theory of the rich, not the poor. Specifically the very rich – the top 1 per cent of the population. They’re the ones in his model about inherited wealth. However, the 9 per cent of people below that 1 per cent (that is, the rest of the richest 10 per cent) earned their wealth from income like the rest of us, not from capital investments and inheritance.

There are lots of potential reasons to care about inequality. The most obvious one is if high incomes lowered the incomes of those at the bottom of the scale. But outside some Marxist intellectual holdouts, there is no suggestion that the mere existence of the super-rich creates poverty.

No doubt some extreme incomes have come at the expense of the rest of society. In Russia the oligarchs have expropriated public wealth to become private wealth. In our liberal society, rent seeking or legal constructs like intellectual property can generate wealth at the expense of the rest of us.

But the issue in these cases is not the existence of the wealth but how it was taken. And the solution would be to close down the illegitimate means of acquiring that wealth.

So what of the poor? Piketty compares 19th century capitalism to 21st century capitalism and finds that they share roughly the same pattern of capital accumulation and inherited wealth. But even a casual observer of the historical record would understand that the big shifts in the interim century haven’t been focused on the rich but on the poor.

There are lots ways to measure inequality. If we look at inequality of consumption we see convergence rather than divergence. Where, in the past, only the rich could afford home heating, food refrigeration, personal transport, and to outsource chores like clothes washing, now those luxuries are shared by rich and poor alike. The living standards of the 19th century and those of today are virtually incomparable. (I made this argument on The Drum last Christmas.)

Good news for the poor, and all thanks to economic growth. Let’s return to Piketty’s formula: r > g. As he says this is not true at all times, but it is now, just as it was in the 19th century. Sometimes growth catches up to the rate of return on capital. Piketty believes we’re in for a prolonged period of low growth. So does the Commonwealth Treasury. But doesn’t that define the challenge?

The logic of his book suggests we ought to be single-mindedly trying to increase economic growth. Piketty dismisses a growth focus with a simple hand-wave. Yet it is surely no more an unrealistic goal than his alternative: a globally-imposed tax on capital to suppress extreme wealth.

And (here’s a bonus!) a focus on growth above all else would directly help the poor.

Piketty is viscerally opposed to inequality. He says his story is “potentially terrifying”. OK. But he doesn’t get much more specific than that. A number of times in his book he fears wealth inequality will lead to political turmoil, even revolution. This dynamic isn’t elaborated.

(A subsidiary concern he has is that high net wealth individuals dominate western culture. Maybe. But surely this applies better to the top 10 per cent rather than the inherited 1 per cent he focuses on.)

Arnold Kling makes a really important economic point – Piketty’s nightmare of mass capital accumulation would actually boost the wages of the rest of us. That doesn’t sound terrifying, unless you are less able to enjoy your own earnings if others earn more.

The philosopher John Rawls more concretely outlined what he saw was the ability of financial power to become social and political power. Yet if it is political power we are concerned with, then why not tackle political power directly? In New South Wales the ICAC has shown that wealth is neither a necessary nor sufficient condition to wield corrupt influence. It wasn’t inherited riches that gave us Eddie Obeid.

The purpose of Piketty’s proposed global capital tax isn’t really to collect money for spending elsewhere. As he says there are so few high income individuals that even a very large tax would collect a small amount of money. Instead, its goal is simply to reduce the size of those honey pots.

There are lots of progressive reasons one might want to tax a population – for instance, social services or transfer payments. But simply because the government doesn’t like people having lots of money seems like a very bad one.

Yet in context it makes sense. Piketty’s book – and so much of the inequality debate more generally – seems to suggest that the core problem with inequality isn’t that lots of people are poor, but that a few people are rich.

Election Promises Are There For The Breaking

What are election promises for? Who on earth do they convince?

Tony Abbott walked into a trap during the 2013 campaign when he excluded a bunch of policy areas from budget reductions.

Those include the pension (“no change to pensions”), the public broadcasters (“no cuts to the ABC or SBS”), Commonwealth health spending (“no cuts to health”), and Commonwealth education spending (“no cuts to education”). Watch the video, Abbott was unequivocal.

Now, to bring the budget back to surplus, the Government is looking at changing the pension and cutting ABC and SBS.

No one can forget the enthusiasm with which the Coalition pursued Julia Gillard for her “no carbon tax” pledge.

As a consequence, one theme of Abbott’s stint as opposition leader was his attempts to bind his future acts in government. But the Abbott obsession with promises predates Gillard’s carbon tax backflip. In 2010 he even physically signed a “contract” that the Fair Work Act would not be amended.

I’ve put the word contract in quote marks because a contract that cannot be enforced is not a contract at all.

That contract would mean nothing if the Coalition announced tomorrow that the Fair Work Act was going to be abolished.

This is the promises dilemma. Elections are commitment games. We vote for the candidates and parties whose values and policies are most appealing. But how can we be sure they’ll follow through? All we have is their word – their assurance they will act in a certain way under certain circumstances.

Of course, commitment problems are common across all spheres of human endeavour. In the marketplace we often pay up front for services to be rendered later. But we have courts to enforce commercial contracts that have not been fulfilled. In politics there is no institutional mechanism by which voters can enforce the pledges that their elected representatives have made.

H.L. Mencken famously defined an election as “an advance auction sale of stolen goods”. He was not cynical enough. Voters bid without any guarantee that the auction will proceed to settlement.

So the mystery isn’t why promises are broken, but why they are kept at all.

The most likely explanation is that politicians want to be re-elected, and a reputation for promise breaking is likely to damage their re-election chances.

But elections are weak discipline. They’re only held every three years. And three years is a long time to wait to enforce a contract. Elections are an imperfect control. Sure, voters weigh up the honesty of candidates, but honesty is not the only factor that determines an election. Sometimes it’s better to re-elect a liar than risk a potential incompetent.

There are other constraints on breaking election promises. A dissatisfied electorate, even in non-election years, can make it hard to pursue your agenda. Politicians may even be constrained by personal ethics … who knows?

This 2009 survey of election promise studies across Europe and the United States found that political parties kept on average 67 per cent of their campaign commitments.

The inherent difficulties of measuring political promises aside, 67 per cent is surprisingly high. But how would voters react if they were plainly told that one out of three promises would be broken? How would consumers feel if one out of three products were lemons?

If politicians really wanted to demonstrate a credible commitment to the electorate, as the economist Robin Hanson writes, they would post personal bonds – say to their homes – that would be forfeited if a promise was broken. Then we’d know they had skin in the game. Of course no politicians do this.

One objection might be that in a representative democracy we do not vote for representatives as agents to do specific enumerated tasks, but instead install independent delegates who we trust to follow their own conscience.

And it’s exactly what the Abbott Government is claiming now – that its general mandate to fix the Australian budget trumps any nit-picking over what was said or wasn’t said in opposition.

But then why the elaborate, interminably detailed promises? The Abbott Government, like the Rudd government, released dozens of policy documents in the lead up to 2013 – full of specific itemised policies they planned to implement in government.

Here’s one answer. Parties don’t see election promises as promises in the plain English meaning of the word. Instead, promises are signals designed to express a deeper character of the political party. When Abbott promised not to change the pension and not to cut public broadcasters he was trying to signal that his would not be a radical government; that he was firmly targeting the median voter.

After all, why give the SBS promise? Did it win any marginal votes? Surely not. But it did suggest to the electorate he had no secret plan to burn through Australia’s institutions. Promises like that increase the political cost of radical action.

This practice is of course deeply deceptive – election promises as signals rather than genuine commitments – but it’s a deception we’re used to.

Voters are rational. We know campaign nonsense when we see it. As this interesting 2004 paper points out, voters infer the true policy position of candidates for office despite the thicket of untruths.

Obviously Coalition failures deserve to be treated as harshly as Labor failures were. Perhaps more. The Coalition swore to be guided by higher ethical standards than its predecessors.

But let’s not pretend to be surprised. Australia is one of the world’s oldest democracies. We’ve been voting for broken promises for a very long time.

Bilateral Trade Deals Simply A Political Plaything

Bilateral free trade agreements are political confidence tricks.

Far from encouraging trade liberalisation, the trade negotiation process holds it back.

Bilateral agreements make international trade seem like a game that countries win or lose. They encourage countries to hold back on domestic reform, seeing tariffs as bargaining chips for future negotiations. And worst of all, they bury the interests of consumers in the morass of international diplomacy.

The Abbott Government is currently signing bilateral trade agreements across Asia. They’ve finalised one with Japan, another one with South Korea, and they’re trying to get one with the really big fish – China.

These are described as free trade deals but they’re really more like mutual long-term tariff reduction pacts. When the Japanese agreement is in full force in 2029, Japanese consumers will still be paying a 19.5 per cent tariff on imported Australian frozen beef, and 23.5 per cent on fresh beef.

Twenty-three per cent is nobody’s definition of “free”. Beef tariffs are bad for Japan and Australia alike.

In 1817 David Ricardo demonstrated conclusively that free trade is mutually beneficial to all involved. Two centuries later Ricardo’s law of comparative advantage is still what both left and right-leaning economics professors teach their students.

The textbook Principles of Economics, written by the Harvard professor and former Bush advisor, Greg Mankiw, tells students that “the best policy, from the standpoint of economic efficiency, would be to allow trade without a tariff”.

Economics, by the Nobel-winning Paul Krugman, agrees: “The vast majority of economists would say that international trade is a good thing from the point of view of the nation as a whole.”

But here’s the thing. The biggest benefit we get from free trade deals isn’t that other countries lower their tariff barriers. It’s that we lower our own.

Lower tariffs in Australia means cheaper consumer goods and a higher standard of living. Protectionism only favours a few well-connected industries, and does so at the expense of everyone else.

In other words, the chief benefit of trade deals is that they provide an excuse to liberalise domestic trade barriers at home, while placating Australian producers with promises of new markets abroad.

This makes the incredibly complex bilateral trade agreements a much less appealing proposition.

Why not lower tariff barriers unilaterally? In a 2010 report into trade agreements, the Productivity Commission recommended that we do exactly that.

Indeed, the greatest trade liberalisation in Australian history was unilateral – the surprise 1973 decision by the Whitlam government to cut tariffs by 25 per cent across the board.

But the diplomatic focus on trade agreements makes it unlikely we would do this sort of autonomous liberalisation again.

Modern trade agreements are still, to a very large extent, shaped by memory of the Great Depression.

One of the first and most damaging responses of policymakers to that economic calamity was to immediately raise trade barriers. But protectionism only made the slump worse.

As a consequence, when policymakers were rebuilding the international economic system after World War II, they wanted to set up formal institutions that would bring about long-term tariff reductions around the world, and try to guarantee such mistakes were never made again.

One of the big issues at the 1944 Bretton Woods conference (which set up the International Monetary Fund and the World Bank) and the 1947 Geneva conference (which set up the General Agreement of Tariff and Trade, the precursor of the World Trade Organisation) was the preferential trade deals the United Kingdom had set up with the rest of the Commonwealth in the middle of the depression – a policy called imperial preference.

The solution was multilateral trade agreements through the GATT. These rounds ended imperial preference and ate away at the barriers that had built up around the world.

But in the 21st century multilateral trade deals have become bogged down. The Doha round, which is trying to get a trade deal between 159 countries at once, has been going since 2001 and looks unlikely to conclude anytime soon (despite modest progress in Bali last December).

As multilateralism has become dysfunctional, individual countries have filled in the gap by forging individual agreements with each other. Regional trade deals are also being developed.

But the irony here is that those individual and regional agreements are the same sort of preferential trade deals that multilateral trade liberalisation was designed to wipe away.

And they’re being instituted for largely the same reason.

Imperial preference was less an economic policy than a political one. It was seen by politicians in London as symbolising the strength of the British empire in adversity.

Likewise, today’s trade agreements are more about forging diplomatic relationships than benefiting consumers.

This may be why politicians and the press gallery get excited by trade deals but economists and consumers less so.

Perversely, the rise of bilateral trade agreements creates an incentive to keep trade barriers high. The Abbott Government has provided a classic illustration of this dynamic.

The Coalition went into the 2013 federal election promising to tighten controls on foreign investment, for instance lowering the threshold for Foreign Investment Review Board scrutiny of agricultural land deals to deals worth $15 million.

Now that promise is apparently being used as a bargaining chip in the negotiations over the Australia-China trade agreement deal, to be dealt away in return for liberalisations in China.

In part this is because Australia is a relatively open economy already. There are not that many tariffs to bargain with.

But mostly it’s because free trade agreements have little to do with the virtues of free trade. They’re about politics and diplomacy, not economics.

Micro-Parties Tap Into Dissatisfaction

The 2013 federal election was a remarkable election, and Saturday’s Western Australia Senate re-run has confirmed just how remarkable.

In September, nearly a quarter of Australians (23.5 per cent) voted against all the major parties – that is, against Liberals, Nationals, Labor and Greens – in the Senate as their first preference.

This is an enormous figure. In 2010 only 13 per cent voted against the major parties. In 2007 it was 11 per cent. In 2004, 12 per cent.

In other words, the non-major vote has suddenly doubled.

(I’m counting the Greens as a major party. They’ve been around for two decades and deserve to be treated as part of the mainstream.)

Nor was the anti-major vote a fluke, or a mistake voters are eager to rectify.

In September, 19 per cent of Western Australian voters voted against the non-major parties in the Senate. On Saturday that figure increased to 25 per cent.

Yet you wouldn’t know it. The response of our political class has been to try to paper over this profound, revealed dissatisfaction – to focus on side issues and avoid tackling the deeper malaise.

Virtually at dawn on September 8 last year there were claims the electoral system needed urgent reform because micro-parties had gamed preference flows.

Nobody is suggesting our voting system is perfect. Every system has trade-offs and there’s no reason to believe our system is the most optimal. But gaming preferences is something the major parties have been playing at for a very long time.

All such reform would do is hide the basic issue of 2013: given a choice between Tony Abbott, Kevin Rudd and Christine Milne, a quarter of Australians chose “other”.

(One thing electoral reform would do is help the major parties protect their second and third Senate spots. If you assume that political parties work in their own self-interest – a big assumption, I know – there’s good reason to be wary of any proposed changes.)

Be sceptical of anyone who tells you they know how Australian voters really wanted to vote.

To what extent do unusual voting patterns reflect voter confusion, and to what extent are they reflections of democratic choice?

Distinguishing between ignorance and intention is particularly hard in Australia because our compulsory voting system requires those who are disengaged and uninterested to vote.

A case study is the Liberal Democratic Party’s (LDP) success in New South Wales in September’s Senate vote. There are anecdotal stories of people being confused between the Liberal Party and the LDP. It is also clear the LDP benefited from being first on the ballot in that state.

But confusion is hardly the only possible explanation for their large showing. Disaffected Liberal Party supporters looking for a liberal-y alternative would have found a substitute at the start of the ballot paper in the LDP.

The advantage with these sorts of explanations is that they don’t immediately assume voters are too stupid to recognise the name of the party they want to vote for.

But more importantly, they fit the bigger nationwide trend. The rejection of major parties manifested itself in different ways in different states. It wasn’t confusion that led to Nick Xenophon’s support nearly doubling in South Australia. Nor was it confusion that gave Clive Palmer more of the vote than the Greens in Queensland.

And that trend makes the criticism of micro-party success completely misguided.

Virtually by definition, micro-parties are too small to take a Senate spot by themselves.

Think of a vote for a micro-party as a vote against the mainstream, rather than intellectual support of the full platform of, say, the HEMP Party or the Secular Party of Australia.

(Not everybody rigorously compares party policies. Again, voting is compulsory.)

All those micro-party votes pool together through the preference system and throw up a micro-party representative.

In past elections micro-party votes would just dissipate, because the micro-parties weren’t working together and there weren’t as many Australians voting against the big players.

Yes, Ricky Muir of the Australian Motoring Enthusiast Party got a tiny number of direct votes. But it’s not about him. A Senate seat isn’t a personal reward. Muir represents all those in Victoria who voted “other”.

If we rewrote our electoral system to prevent micro-parties from preference aggregation we would, in a very real way, be disenfranchising those who rejected the majors.

The Clive Palmer phenomenon is slightly different. He has the money to elevate his party’s profile above the noise. That allows him to take advantage of the dissatisfaction without having to play the preference game.

But the key thing is this: Palmer’s money didn’t create the demand for non-majors. It simply helped funnel that demand towards him. When a disengaged but frustrated voter goes into the booth they remember the gregarious billionaire who hates Canberra and has all the yellow ads.

Of course Palmer is in politics for himself. A dissatisfied voter might ask: what’s new?

The real question is why so many voters are unhappy with the usual political choices.

One argument is there’s a longer-running decline in trust in the Federal Parliament. Yet this Essential Vision report suggests a more complex dynamic in the medium term. After a precipitous fall in 2012, trust in Federal Parliament has begun to recover.

An alternative is that many voters simply hated the choices on offer this time around.

The latter would only be comforting if you believed major parties choose their leaders and policies essentially randomly – that is, they do not reflect the internal structure and values of the party itself.

Either way the major parties have no interest in publicly discussing why so many voters dislike them.

They’d rather talk about kooky micro-parties, as if those parties aren’t a symptom of the deeper failures of the majors.

But micro-parties weren’t the issue in 2013. Nor was Clive Palmer. Dissatisfaction was.

You Can’t Just Tax Your Way To A Surplus

In 1979, the free market economist Milton Friedman reviewed Margaret Thatcher’s first budget in his Newsweek column. Like Australia today, Britain faced a serious long-term budget problem. Like Tony Abbott, Thatcher had been voted in to fix it.

Friedman thought her budget was excellent – a rare example of financial prudence in a highly imprudent decade. It was chock-full of privatisations and tax reforms. The sort of stuff Thatcher became legendary for.

But, alongside the tax reductions and spending cuts, the Thatcher budget also increased Britain’s sales tax to compensate for some lost revenue.

This was a problem. As Friedman wrote, “From the long-run point of view, it seems to me preferable to resort to a temporarily higher level of borrowing rather than a possibly permanently higher level of indirect taxes.”

In other words, if the unpalatable choice is between a deficit and a tax hike, then a slightly prolonged deficit is the lesser of two evils.

Thirty-five years later, the Abbott Government’s proposed deficit levy is supposed to be a temporary measure – perhaps limited to four years.

Abbott should listen to Friedman. “Temporary” taxes are rarely temporary. Once introduced, they have a habit of staying high and sticking around.

After all, Australia’s income tax itself was only meant to be short-term thing. The Commonwealth Government introduced the income tax during the First World War in order to pay for the high cost of military participation.

Of course, as the Commission of Audit demonstrated dramatically last week, the choice the government faces is not between a prolonged deficit and higher taxes. The Government could cut spending and abandon its Direct Action and paid parental leave schemes.

There is something faintly ludicrous about a Government fighting its budget battle on two fronts.

For the free market right, the deficit levy is not just a broken promise – we’ve come to expect broken promises in Australian politics – but a betrayal by a leadership team that, for the last six years, has been claiming to favour low taxes above everything else.

For the left, the Commission of Audit represents a fundamental attack on the Australian social democratic settlement.

The audit commission report is remarkable. It is incredibly rare to see major government reports so explicitly driven by philosophical beliefs about the proper scope of government.

This is something Australian politics could do with more of, not less. Bold premises, radical conclusions. It’s similar in a way to what came out of Kevin Rudd’s 2020 Summit, but the audit commission is more coherent and doesn’t bother pretending to be the result of Ruddian consensus politics.

Yet to what end? The Abbott Government won’t do much with the report. What is radical in the audit commission is unlikely to be adopted. The policies which will be adopted have been floating around forever.

There is no way that this Government will be returning income taxes to the states. Sure, Tony Abbott has gone through an evolution of his views on federalism since he wrote his 2009 book Battlelines. He is apparently no longer a myopic centraliser. But there is no one in Government with appetite for such epoch-making reforms.

The things that will be adopted – like selling Medibank Private – have been obvious low-hanging fruit for many years.

So in many ways the audit commission reveals the Abbott Government’s lack of reforming ambition rather than its radicalism.

The deficit levy underscores that timidity. Don’t be fooled by the recent polls. Compared to cutting spending, raising taxes is the easy option.

The basic political economy problems with deficits and taxes are similar.

The reason it’s important to return the budget to surplus is to ensure that there is constant pressure on politicians to spend only what the tax system brings them. This is because every political incentive goes the other way. The best way to ensure a voting bloc supports you is to offer them financial support. Unchecked, governments want to spend more than they tax.

The only real constraint on this runaway spending dynamic is the fiscal norm that says budgets need to be returned to surplus. Short-term governments rarely worry about long-term consequences.

So it is important that we reduce the deficit as soon as possible. But not by any means possible.

Because, as Milton Friedman cautioned Margaret Thatcher, while the long-term dynamic of forgiving budget deficits would be bad, the medium-term dynamic of introducing higher taxes would be far worse.

Yesterday morning Tony Abbott said “in the long run the voters will thank us for doing what is absolutely necessary”.

Maybe. But in the long run voters should have no confidence that this Government – or a future Labor government – will happily forego the new stream of revenue the deficit tax will provide.

It’s Power Grabs We Should Fear, Not Cybercrime

“Cybercrime is a systemic risk and I think it is the next black swan event,” the head of the Australian Securities and Investments Commission, Greg Medcraft, told a forum at the end of last month.

That’s just 15 words in which Medcraft squeezed one moral panic and two fashionable but misleading economic concepts.

Catchy, though. Medcraft’s comments were widely reported.

But they demonstrate, once again, how Australian regulators and law enforcement agencies are using the digitisation of the economy as an opportunity for a huge power-grab. More on that in a moment.

Medcraft’s argument is drawn from an unofficial working paper, “Cyber-crime, securities markets and systemic risk”, published mid-last year by the International Organization of Securities Commissions, an association of which ASIC is a member. You can read the paper here.

So, could cybercrime be the next ‘black swan’ event? A black swan (the phrase was coined by the statistician Nassem N. Taleb) is characterised by two things. It is incredibly devastating, and it is incredibly rare. This makes black swan events hard to predict precisely because their probability of occurring is so low.

Crime, whether ‘cyber’ or traditional, does not fit the black swan criteria.

It is not incredibly rare. Financial crime is an already existing, easy-to-quantify, and constant risk.

Nor has it been incredibly devastating. Cybercrime is usually low level. Hackers take down websites, not stock exchanges.

Perhaps they might do worse in the future. But that does not make them a black swan. The very nature of a black swan is that they are unpredictable. You can only recognise them in retrospect.

Nor is cybercrime a ‘systemic risk’. This term refers to the danger that a shock to one institution will have flow-on effects to other institutions in the system. In the Global Financial Crisis, the initial shock was declining house prices, which led to a run on some banks, which spilled over into runs on other banks, and eventually a credit crunch.

It’s plausible to argue that an initial shock could be cybercrime-related. Yet the systemic risk is created by the interconnectedness, not the shock. The worst scenario the International Organization of Securities Commissions can come up with is a cyber-attack on a systemically important institution, or a coordinated attack on a large number of institutions at once. But these are merely more initial shocks.

This might seem a minor objection to Medcraft’s claim. Pedantic, even. It isn’t.

Now that the GFC has passed, financial regulators are quietly changing their approach to regulation. How they see the relationship between micro failures and macro consequences is central to this.

Should regulators try to predict and prevent the crises themselves, as Medcraft seems to argue, or should they instead focus on how the system responds to unforeseeable crises?

Nassem Taleb invented a second famous term: anti-fragility. Anti-fragility describes systems which become stronger when they are stressed. Taleb contrasts this with systems that are simply resilient, designed merely to survive shocks. A resilient system is one which tries to defend itself against known dangers – say, cybercrime. An anti-fragile system is one which accepts uncertainty and is designed to evolve in response.

No surprise then that Greg Medcraft talks about the need for ‘cyber-resilience’. And that makes technology the problem, and ASIC the solution.

Cybercrime is not the bogeyman it is made out to be.

Sure, there is an extraordinary variety of claims about the damage cybercrime does to the economy. Almost all of them are overstated. At Crikey, Bernard Keane has an excellent overview of just how ludicrous these estimates are.

This paper from 2012 finds that traditional crime costs the typical citizen at least a hundred-fold more than computer crime. The paper concludes that the best way to deal with cybercrime is simple law enforcement. Hunt down criminals individually. Throw them in jail. Cybercrime is hardly the sort of policy dilemma that screams black swans and systemic risks.

But not according to the International Organization of Securities Commissions. In its working paper, the black swan event it foresees is a horrifying cyber-catastrophe originally dreamed up by Richard Clarke in his 2010 book Cyber War.

Clarke, a former US counter-terrorism official, warned of a full-blown digital international conflict where cyberwarriors cripple national infrastructure, release chlorine from chemical plants, remotely crash trains, etc, etc, etc.

As Wired magazine put it, Clarke’s prognostications are like “the Book of Revelation re-written for the internet age, with the end-times heralded by the Four Trojan Horses of the Apocalypse”.

Our corporate regulator can’t seriously believe this hyperbolic nonsense. So let’s assume they don’t. Yet that doesn’t give them much credit.

ASIC has a track record of seeking extra powers in response to technological change.

It is the most enthusiastic user of section 313 of the Telecommunications Act, a law that allows it to block (that is, censor) websites from Australian internet users.

And it is one of the big advocates of mandatory data retention, a policy which would force internet service providers to keep records of everything we do online, just in case law enforcement agencies – and regulators – want to look at it in the future.

Medcraft’s dark warnings about cybercrime and black swans need to be seen through this prism: the ongoing battle between government power and digital liberties.

ASIC knows, as all good bureaucracies do, that the best way to get new powers is to massively overstate the problems those powers are supposed to fix. Unfortunately it seems that policymakers are particularly susceptible to technological gobbledygook. Remember the internet filter?

Cybercrime is, undoubtedly, a challenge. But we should be worried when our key regulators, deliberately and explicitly stoke up mindless panic about the impact of new technology.

How George Brandis’ Race-Hate Laws Are Good For Democracy

What would the repeal of section 18C of the Racial Discrimination Act symbolise? It is a sign the debate has progressed that columnist Waleed Aly and Race Discrimination Commissioner Tim Soutphommasane, both writing in Fairfax Media last week, now focus their objections to Attorney-General George Brandis’ proposed reform on the symbolism of such a move, instead of its practical effects.

Section 18C makes it unlawful to offend, insult, humiliate and intimidate someone on the basis of their racial or ethnic origin. Introducing the provision in 1994, the then attorney-general Michael Lavarch said it would be a “safety net for racial harmony”.

But two decades later, no serious person argues the aggregate level of bigotry in Australia has been affected one bit by section 18C. As Aly admitted: “We’re not exactly playing for cutthroat stakes.”

The proposed reforms are not about the “right to be a bigot”; they are about whether Australians should be able to sue each other for racism. And that is a much narrower question. Few people have the resources or inclination to litigate speech. No wonder the most articulate defenders of section 18C now focus on its symbolism.

But the symbolism is a two-way street. The proposed reforms are not just designed to protect freedom of speech. They appear to be written in a way to suggest that free speech is a basic democratic virtue.

How so? The core of Brandis’ proposal is a new defence to the accusation of racial vilification if it occurs in a discussion of “any political, social, cultural, religious, artistic, academic or scientific matter”. This distinguishes it from the existing defence, which requires the political discussion to be “reasonable” and made in “good faith”.

The intuition here is that your right to participate in public debate does not hinge on whether a Federal Court judge believes you are participating reasonably, or what your motives are. It is a fundamentally democratic change. The High Court has rightly found that the very foundation of our liberal democracy is a right to speak freely on matters of political importance. Brandis’ proposals extend that observation to all areas of public interest: cultural, social, religious and so forth. And doing so is symbolism, which everybody – including those who section 18C was originally designed to protect – should have an abiding interest in.

Human rights exist to protect the minority against the whims of the majority. To defend free speech is to recognise that no ideas are sacrosanct, that all ideas can be challenged. Historically, free expression has been one of the strongest weapons for pluralism. Speech rights are most necessary for the weak, not the powerful.

Nobody denies the harm of hate speech. But nor should anybody deny the necessity of protecting free expression for the maintenance of a democratic system and as a basic individual right.

Indeed, it is surprising the same human rights bodies lining up to oppose Brandis are also the strongest advocates of an Australian bill of rights. Any bill of rights would have a right to free speech. What if this right made section 18C invalid? Certainly, that has been the result of the United States’ First Amendment, which has made anti-hate speech laws unconstitutional.

Brandis’ reforms are carefully written. They appear to be designed to straddle two famous controversies. The first is the Andrew Bolt articles on light-skinned Aboriginal people, which were found to have been unlawful under section 18C in 2011.

The amendments have been tailored to cover all the major issues raised by the judge in that case. Brandis wants to clarify that the word intimidation means physical intimidation, reset the “reasonable person” test to mean a reasonable member of the Australian community, and make sure the free speech exemption does not rely on a judge’s feelings about what constitutes good faith. The Bolt columns would be perfectly lawful under the Brandis reforms.

The other controversy was when a 13-year-old girl yelled “You’re an ape” at Adam Goodes at an AFL match in May last year. The proposed new anti-vilification provision is designed to keep speech such as this unlawful. The girl was not commenting on a matter of public interest.

Goodes did not sue. He made his case against bigotry in the public arena. But many section 18C cases are like the Goodes incident: verbal altercations and family feuds that involve some sort of racial slur. Under the Brandis proposals, they are still supposed to be unlawful. The theory is that such abuse has no democratic merit.

Yes, the Abbott government should reform laws that constrain freedom of speech across the board. And certainly, it should not be proposing to censor social media as part of its anti-cyber bullying proposals. But that this government’s defence of free speech is less than comprehensive is no argument against reforming section 18C.

Soutphommasane and Aly are right. The symbolism of getting the courts out of the business of regulating public debate would be profound, and profoundly democratic.

Politics Stands In The Way Of A Full 18C Repeal

George Brandis’ exposure draft of amendments to the Racial Discrimination Act is a magnificent example of how to repeal legislation without admitting you’re repealing legislation.

It is, without doubt, a reform that advances the cause of freedom of speech in Australia.

The reforms neuter the provision (Section 18C) which Andrew Bolt was found to have breached in 2011 with his newspaper columns discussing white-skinned Aboriginal people.

As supporters of the existing law point out, the next section of the Racial Discrimination Act(Section 18D) is supposed to provide exemptions to 18C, for instance, any reasonable and good faith statements on topics in the public interest.

But Justice Bromberg decided that Bolt was not eligible to meet the exemptions in Section 18D that cover political comment because the columns were not written in good faith. The judge said there were too many factual errors and Bolt had adopted an excessively sarcastic tone.

Well, 18D is to be repealed, and replaced with an extraordinarily, incredibly powerful exemption that reads (and it is worth reading in full):

This section does not apply to words, sounds, images or writing spoken, broadcast, published or otherwise communicated in the course of participating in the public discussion of any political, social, cultural, religious, artistic, academic or scientific matter.

There’s no “reasonable” or “in good faith” there. No ambiguous terms of art a judge could use to decide some speech on political, social, or cultural topics didn’t actually qualify for the exemption.

And this rewritten exemption would undeniably have covered the Andrew Bolt columns, which spoke of what he saw as a social, cultural and political phenomenon of lighter-skinned people choosing to identify as Indigenous.

The full amendment presented by Brandis today makes a lot of other changes.

The old Section 18C prohibited any speech that would offend, insult, humiliate and intimidate a group on the basis of their, race, colour, national, or ethnic origin.

The words offend, insult, and humiliate are gone. Intimidate is more tightly defined as intimidation that involves physical harm, duplicating much existing law. The amendment adds “vilify”, which it defines as inciting hatred against a person or group.

But none of that matters if the grand exemption applies.

The exemption is important not just for what it does to the new Section 18C, but for what it symbolises.

Back in the early 1990s, the High Court decided that freedom of speech is a fundamental lynchpin of democracy, and that therefore the constitution implied some sort of freedom of political communication.

Putting aside whether implied rights make much sense, the court’s basic reasoning was a good one: it is absurd to talk of a democracy that doesn’t freely and openly debate political matters. Or social, cultural, religious, artistic, academic or scientific matters. Democracy is more than just voting.

The defence lawyers in the Bolt case didn’t base their argument on the right to political communication. It’s a shame that they didn’t. The strict confines that the High Court has placed around this right are starting to fall apart, as we saw in the Unions NSW case late last year. It would have been fascinating to see what they might have done with Section 18C if it was taken that far.

The new exemption makes clear the fundamental importance of free discussion on any matter of public interest, no matter how extreme that discussion is.

Yet Brandis is right that protections against racial vilification remain, even in the new amended section.

To understand why you have to be familiar with the sort of cases section 18C is used in. Most section 18C cases don’t cover high profile things like Andrew Bolt columns. I’ve mentioned one such case in the Drum before: where a lawyer called a security guard a “Singaporean prick”.Here’s another one, from 2012 – a family dispute that involved throwing racial slurs around.

Nor does anybody suggest that these sort of cases are major wins in the battle against prejudice.

Depending on how judges choose to interpret the word “vilify” and the phrase “racial hatred” – both added to Section 18C in the exposure draft – it is highly plausible that they would still be considered unlawful acts of racial discrimination. (And of course, there’s all those state racial and religious vilification laws.)

But who knows? Legislation can travel in funny directions once Parliament puts it in the hands of the courts.

That, ultimately, is the problem with leaving Section 18C in there; with not going the whole hog and committing to a full repeal.

The phrase “racial hatred” comes from state law, but we can’t know how future judges will choose to interpret it. There is always some risk that Section 18C could be reactivated in some sense.

Now given the strength of the broad exemption, it’s fair to say that risk might be small. But why not just do the full repeal?

Politics, obviously. The complex amendments allow George Brandis and Tony Abbott to say that they haven’t repealed any protections, just cleaned them up.

And that argument is pitched entirely at the Liberal party room, who will be the ones that decide whether this draft exposure bill becomes Liberal Party policy.