Articles – Page 24

Combatting The Cyberbully Myth

Why do we keep telling children that the law cannot protect them against severe cyberbullying? Time and time again politicians and the press claim that there is nothing police or parents can do if a child is being bullied on the internet, and that government needs to step in.

The parliamentary secretary for communications Paul Fletcher claimed this month that for children who were victims of bullying online, if sites like Facebook didn’t help, ”you really have no redress at all”.

This is gobsmackingly negligent. There are Commonwealth laws on the books that were written to do exactly that.

Section 474.17 of the Criminal Code makes it unlawful to use a carriage service – that is, telephone or internet – to menace, harass, or offend. The penalty can be jail.

Then, should the criminal code not be enough, there is defamation law (almost all acute cyberbullying involves defamatory speech), anti-stalking laws, laws against harassment and blackmail, and laws that protect people against threats and fears of violence to the person.

Indeed, some of these laws are excessively powerful.

Still, the fact is they exist.

The Abbott government is holding an inquiry into its election promise to establish a ”children’s e-safety commissioner” who is supposed to protect kids from cyberbullying.

This commissioner would have the legal power to force social media companies to remove abusive content from their sites in response to complaints from the public.

”Remove”, of course, is a synonym for censor. It’s bizarre that a government that promised to run a ”freedom agenda” would want to create a grand new bureaucratic body to censor the internet.

(Ironies abound. Tony Abbott announced this internet censorship proposal just a few days after he announced he would repeal section 18c of the Racial Discrimination Act because the latter was an unconscionable limit on the human right to free expression.)

But anything to help victimised children, right? Well, not if it won’t actually help them.

Bullying is a very serious problem. The harm of bullying should not be played down. At its worst and most tragic, it can lead to suicide. The desire that the government has to do something about bullying is irreproachable. But there are a lot of widely held misconceptions about the nature of cyberbullying.

First of all, there is no such thing as ”cyberbullying”. There is just bullying. The research evidence demonstrates clearly that people who are bullied online are also bullied offline. Of course, this makes intuitive sense. Bullying is a social problem, not a technological one.

In fact, the academic literature consistently suggests cyberbullying is less of a problem than traditional bullying. As a 2012 paper in Complementary Pediatrics put it, ”School bullying is more common than online bullying.” Furthermore, being bullied at school is more distressing.

It’s important not to take the very real bullying problem and turn it into a moral panic about technology.

Bullying is intentional aggressive conduct sustained over time that incorporates some kind of power imbalance – real or perceived – between the bully and bullied. Having a bureaucrat whose job it is to delete individual instances of abusive speech online won’t tackle the basic problem of children being cruel to each other.

Certainly not if a victim is subjected to sustained harassment the moment they return to the playground. Or if the abuse just migrates to less easily monitored websites.

A children’s e-safety commissioner would only offer adults a false sense of security that the bullying has been dealt with.

The major social media sites are doing an increasingly effective job at policing their own networks, and without the iron fist of the state supervising them. Facebook, the site with the youngest cohort, has developed rather extensive systems to report and ban abusive users.

Perhaps surprisingly, a more effective mechanism than reporting users for abuse is the humble unfollow and block. This neutralises the cruelty, therefore reducing the harm, and is necessary to develop coping strategies for young victims.

A lot of cyberbullying is apparently done by text message. Most mobile phones now have a feature that allows users to block calls and messages from certain numbers.

And in the case of severe abuse, there is always recourse to the law. Too often people use the word ”bullying” to describe serious criminal conduct including death threats and physical assault. But the biggest barrier to reducing the harm from bullying is the fact that many children simply don’t tell their parents or teachers what is happening. Too often adults don’t have a chance to help, to provide counsel or support.

So we have to educate parents to identify signs that their children are being bullied, and what can be done.

We have to educate children about the many institutional, legal, and technological resources available to support them.

But most of all, we have to stop this incredibly dangerous political falsehood that there are no remedies available for children who are being bullied, online or off.

FoFA Fearmongering A Blow To Deregulation

Never has so little been met with so much panic.

Alan Kohler has described the Abbott Government’s amendments to Labor’s Future of Financial Advice (known as FoFA) reforms as unseemly, suspicious and like blessing union corruption. Bernard Keane believes the Government’s plans are “a big blow to consumers’ rights”. Ian Verrender, at The Drum, says the changes will be “enormous”.

The Abbott Government intends to cut regulation across the board. But the hysteria about these FoFA amendments demonstrates how hard it is to get even minor deregulation done.

The original FoFA reforms were in response to a corporate collapse: that of Storm Financial and Opes Prime in October 2008, at the beginning of the Global Financial Crisis.

In 2010 the Labor government introduced a huge package of new regulations, new powers for regulators, and new obligations on firms that offer financial advice.

For our purposes, the key ones were a ban on financial advisors earning commissions from recommending investment products, and another one that required financial advisors to act in the “best interest” of their clients. The bulk of FoFA came into effect in 2012.

Now in 2014 it’s being amended.

That’s amended, not repealed. A casual reading of the press would suggest that Arthur Sinodinos, the Assistant Treasurer, plans to rip away every vestige of FoFA.

Instead, the Government intends to distinguish the regulation of personal financial advice – that given by an advisor who works closely with you, understands your specific goals and needs – from the regulation of “general” advice – that given over a bank counter, over the phone, or through promotions, investor newsletters, or advertisements.

For personal advice, everything important in Labor’s FoFA remains. Commission-driven advice is still banned. Advisors still have to act in their clients’ best interests.

The first controversial change is that the best interest rule is being modified to remove an ambiguous and all-encompassing “catch-all” provision.

There are nearly a dozen criteria that are used to determine if an advisor is acting in the best interest of their client. Things like: does the client understand the product? Is the advisor qualified to give the advice? These remain.

The catch-all provision (Section 961B(2(G)) of the Corporations Act if you’re playing along) is basically a “anything we haven’t thought of” step. It’s absurdly broad.

How – without scrutinising everything about a client’s life and finances, scrutiny which would cost thousands of dollars – could you be sure you knew absolutely everything a court might decide constituted the client’s best interests?

Would you want to give financial advice under that sort of legal uncertainty?

Simply put, FoFA’s best interest, know-your-client rule is massively, dangerously overwritten. The Government wants to slightly relax it. Not remove it.

The second change concerns general advice. This covers things like bank tellers making recommendations about travel insurance. Here, commissions, now banned, are to be made lawful once more. Sounds terrible? Hardly.

Commissions are a completely legitimate form of employee remuneration. FoFA describes commissions as “conflicted remuneration”. This is nonsense. A commission, in practice, is not so different from a sales target, or (for higher paid professions) a key performance indicator, or (for higher paid again) an annual bonus. It’s just a different way to slice the salary pie.

If you go into a bank and ask for recommendations about financial products, you ought to expect that they will try to sell you one of their products. Just like if you ask a Telstra store employee what mobile phone plan they recommend they’re probably going to recommend a Telstra plan. Regardless of whether they’re being paid a commission.

Banning commissions in these circumstances achieves no policy goal. Remember, all advisors, including general advisors, are still required to work in their clients’ best interests. Removing the ban on commissions just cleans up a little regulatory ludicrousness.

Perhaps you disagree with the Coalition’s FoFA changes.

But it is true that Labor’s original FoFA remains – in letter and spirit. It is not being gutted. The Coalition’s changes are not radical. They do not deserve the extreme hyperbole they have received.

More fundamentally, it is not the Government’s responsibility to restore the reputation of an industry.

Voluntary industry charters or private ratings agencies are common solutions to the reputation problem. Personal financial advisors had been reducing their reliance on commissions in the years before the FoFA reforms.

Regulation suppresses innovation, raises consumer prices, ties the sector down in compliance costs, and opens up opportunities for rent-seeking.

Indeed, rent-seeking is the real story of the FoFA reforms.

The battle here is between the super funds and the banks. Australia’s superannuation system has created a titanic financial industry based entirely on the compulsory acquisition of a portion of our salary. Super funds – particularly the union-managed industry super funds – lobbied hard for a crackdown on avenues of financial advice outside the superannuation system. With FoFA they got it.

Industry Super Australia is now predicting these minor FoFA adjustments will bring a wave of financial collapses. Sure they will. Storm Financial did not collapse because bank tellers were selling travel insurance on commission.

Where commentators fall on these changes is usually determined by their pre-existing attitudes towards the super funds and the banks.

Most of the debate has been a loose proxy for bigger questions about Australia’s financial system.

But minor tinkering of FoFA isn’t much to hang these questions on.

The backlash against the Government’s plans demonstrates just how hard deregulation really is – held back by a mire of special interests and an unfortunate natural human tendency for doomsaying and fearmongering.

Time To Ditch Antiquated Media Regulations

It is incredible to think the Australian government imposes largely the same regulations on media ownership that it did in the 1930s.

Waves of change in Australia’s economic system have come and gone in that time. Not to mention technologies.

Indeed, television was in its experimental infancy when the first broadcasting ownership limits were imposed.

Statutory Rule 104 of 1935 allowed no more than one metropolitan broadcasting licence per state, two metropolitan licences in the country, three regional stations per state, and so forth.

How different a world was it? When a joint parliamentary committee examined Australia’s broadcasting regulations seven years later, the other big topic was whether to nationalise the commercial broadcasters outright. (The committee was divided on this sensitive issue.)

Communications Minister Malcolm Turnbull is looking at finally eliminating some of the antiquated rules that limit how much traditional media one company can own.

The two major descendants of Statutory Rule 104 are the 75 per cent rule – which prevents a firm or individual from broadcasting to more than three quarters of the Australian population – and the two-out-of-three rule – which limits a firm or individual to owning only two of three out of television, radio, or newspaper in any given market.

There are a couple of others – and of course all mergers in all industries are subject to general competition law – but it is those two rules that are apparently in Turnbull’s sights.

As they should be. It is fundamentally absurd that the same restrictions, based on the very same arguments, are being applied to our media-rich world as were being applied to the media-constrained world of 1935.

The 1942 parliamentary report spoke of “the inherent dangers of allowing the control of commercial broadcasting to become a monopoly or a partial monopoly.”

A 2013 parliamentary report into media law changes made the same argument in different words: media ownership restrictions were all about protecting “diversity” in the media sector.

The shift in language is slight, but it’s also amusingly wrongheaded. Diversity is the one thing we now have in spades. The head of the press council, Julian Disney, even complains of the”cacophony” of voices on the internet.

Just a few years ago supporters of media ownership restrictions would argue that Australia’s narrow media landscape meant that Australians had little choice but to get their news and views from the big corporate media conglomerates.

Of course nobody could seriously make that argument anymore.

So now the argument is that while there might be lots of diversity online, most Australians still consume content produced by the big newspapers and broadcasters. As a consequence, the mainstream media still leads the discussion. The reasoning seems to be something like this: you can lead a horse to water, but you can’t make them drink.

The patronising paternalism of this argument should be obvious – as should be the implicit suggestion that the real media diversity problem is that Australians don’t want media diversity.

But it is not novel to point out that the internet has made all the old arguments for media ownership restrictions into laughable anachronisms. At Crikey, Bernard Keane and Glenn Dyer are right: It’s hard for the Government to claim it’s purely motivated by digital libertarianism in media ownership considering it also has plans for a social media censorship scheme and a “three strikes” policy for file sharing.

Broadcasting is one of the most highly protected sectors of the economy. The business is built almost entirely on rent-seeking. You can bet there’s a stream of media lobbyists filing in and out of parliament house every day. The media firms know exactly what they hope to get out of the next round of regulatory change. The deals have probably already been made.

None of that has changed since media ownership laws were last seriously revisited under the Howard government in 2006. (Labor tried to change the 75 per cent rule as part of its media regulation package early last year but that was fumbled along with the rest it.)

Then, as now, broadcasters were self-interested. The arrival of new online media firms was slightly more hypothetical eight years ago, but it was pretty obvious which way the wind was blowing.

What has changed since 2006 has been the incredible implosion of the legacy media firms. The slow erosion of newspaper profitability has become rapid disintegration. In 2012, Fairfax announced it was shedding an incredible 1900 staff. News Limited has been a bit more circumspect but the job losses are huge there as well.

Industry consolidation may be the only way to save some of our legacy media outlets.

The loss of classified advertising revenue makes the idea of a free-standing, traditionally-structured, independently-profitable newspaper a thing of the past. There has never been a more important time to ensure that the industry is institutionally flexible – capable of experimenting with ownership structures and capable of forming new alliances if necessary.

As Michelle Grattan puts it, there are big prizes about. And this is a sector that has found few prizes in recent years.

The irony is the 1930s rush by newspapers to buy radio broadcasting licences – the rush that inspired media ownership regulation in the first place – was out of fear that advertising revenue would migrate from print to the airwaves.

In the 1930s and ’40s the fear that newspapers would lose their rivers of gold was misplaced.

Now that fear has been completely, irreversibly realised.

Why keep ownership regulations that were so manifestly designed for another age?

Qantas Ball Now In Labor’s Court

So now the Qantas ball is in Bill Shorten’s court.

Last night the Abbott Government announced it was not going to provide Qantas a government debt guarantee – that is, let the airline, which has a junk credit rating, piggy-back on the Government’s triple-A credit rating.

Instead, the Coalition wants to repeal part of the Qantas Sale Act, which places a limit of foreign ownership on Qantas that its competitor Virgin is not subject to, and (of course) get rid of the carbon tax.

(Happily, partial nationalisation is off the table.)

Thank goodness. A debt guarantee would have made a mockery of the Government’s professed free market sympathies. The last few months have seen an agonising debate within the Coalition as to whether they could do such a thing. It genuinely could have gone either way.

But a debt guarantee was only on the table because Labor refuses to countenance any repeal of the Qantas Sale Act.

Allowing in more foreign investment, in the words of Anthony Albanese, would turn the flying kangaroo into the “flying camel” or the “flying panda”.

Put aside the slightly xenophobic vibe there. Even if the Qantas Sale Act were repealed, the existing limitations on foreign shareholding in the Air Navigation Act would remain the same. On top of that, any investment would be subject to approval by the Foreign Investment Review Board and the Treasurer, who are supposed to take in all those nebulous ideas of national interest.

We’ve been loading up anti-foreign investment laws on our statute books for half a century now.

All this national carrier stuff about Qantas – the “still call Australia home” blather – is a political ploy. It’s the rhetoric of nationalism in the service of rent-seeking.

A debt guarantee is a corporate bailout, pure and simple.

And as with any bailout, the biggest winners of a bailout of Qantas wouldn’t be its unionised workforce but Qantas’ management.

Albanese and Shorten say they’re mostly worried to ensure that aviation jobs stay in Australia. But Qantas is shedding jobs while it remains in limbo for the Qantas Sale Act to be repealed.

Labor’s refusal to budge on the act – which would open up the airline to new sources of funding that aren’t Australian taxpayers – just adds to the instability of the airline and therefore the uncertainty of the jobs that Albanese and Shorten say they want to protect.

But ultimately, industry failure and job losses get blamed on the government in charge at the time, not its parliamentary rivals.

And, of course, Shorten’s Labor is not the first party in the world to discover the easy relationship between opposition and opportunism. Tony Abbott’s Coalition made antagonism into an art form. I wrote at the time that there was nothing wrong with an opposition opposing the government.

Yet Shorten’s approach on Qantas sits uneasily with Labor’s self-image as the party of change battling the conservative parties of reaction.

The ALP likes to see itself as the driving force behind Australian history. Labor’s role is to lead social movements and spur reform. The conservative parties are there to resist – there to restrain Labor’s overreach and sometimes reverse its excesses.

It was Labor that sold Qantas in the first place, as part of its broader liberalisation and privatisation agenda under Bob Hawke and Paul Keating.

Yet how should we square that sort of progressive approach to economics (and opening the Australian economy was definitely progressive, in any literal sense of the word) with Shorten and Albanese’s proposed bailout of Qantas’ management under the cover of nationalism? Or its refusal to connect a global airline to global capital markets?

The Qantas Sale Act is a legacy of old prejudices against foreign investment, old philosophies of corporate nationalism, and old economic beliefs about industry policy.

Consumers are showing no loyalty to Qantas, so why should parliament give it special treatment?

The idea that the same consumers who grab cheap Singapore or AirAsia fares to Bali or a Virgin ticket to the Gold Coast would seriously punish a government for allowing foreigners to buy some – not all – of Qantas beggars belief. Certainly not if the policy was explained properly.

Every opposition lives with the ghost of its previous government. Particularly during the early years of the Howard government, the Labor Party struggled against policy that it had considered in the decade before: the introduction of the GST, for instance, and the privatisation of Telstra. There’s every reason to believe that had Keating won in 1996, he would have continued the economic reform he begun back in 1983.

With Qantas, Labor is fighting the legacy not just of Keating but also the Gillard government,which was just about to approve some sort of debt guarantee when Julia Gillard was rolled by Kevin Rudd in June 2013. Albanese had been personally negotiating a deal between Qantas and the Commonwealth. No wonder this seems like a settled question.

Perhaps Bill Shorten can rest easy. Historians tend to remember parties by what they did in government, not what they said in opposition.

But by refusing legislative reform, Labor is punishing the national icon it claims to love, and risking the jobs it wants to defend.

Another G20 Deal For Everyone To Ignore

The G20 finance ministers and central bankers have emerged from their weekend meeting in Sydney with a promise to grow the world’s economies by an extra 2 per cent.

Okey-dokey.

It’s a cliché after these international conferences to point out they’re long on motherhood statements and short on blueprints.

But the Sydney G20 communique is a classic of its genre. It is, in a way, symbolic of the entire G20 to date: bold, plain-spoken and fundamentally worthless.

After all, who wouldn’t want 2 per cent extra growth? That’d be great.

Yet the only concrete policy in the whole document is hitchhiking on the OECD’s Base Erosion and Profit Shifting action plan, which is designed to prevent multinational corporations from taking advantage of low tax countries.

And focusing on how to extract more money from the private sector doesn’t exactly scream “growth-inducing”.

The most sympathetic interpretation is as follows: The extra money governments take from multinationals might be spent on the most economically vital infrastructure and in a few years (infrastructure takes time to build) will manifest in future growth.

But the far more likely scenario is the money will be spent ineffectively and slowly on programs that please voting blocs or interest groups, and will come at the cost of suppressing international tax competition.

A tax crackdown is easiest to agree on at the G20 because it is in the G20’s interests. As some of the world’s biggest governments, they don’t like having to compete against small, lower-taxing jurisdictions.

As for other ways to boost growth? Well, we have to wait for them. The idea is that all the finance ministers now go home, brainstorm ways to reach 2 per cent growth, and come back to Australia in November along with their leaders. Then a “Brisbane Action Plan” will be devised, and everybody goes home and gets rich.

The G20 is relatively young. It was formed in 1999 to facilitate cooperation about the global financial system.

It was only when the financial system collapsed that the G20 became, as a 2009 statement put it, “the premier forum for … international economic cooperation”.

Many people argue the G20 helped prevent the world falling into a second Great Depression. This is a complete fantasy.

An emergency G20 summit held in Washington in November 2008 was all about creating a “Bretton Woods II” – completely redesigning the international monetary system – but that didn’t happen.

It also pledged to avoid the protectionism that was so damaging during the depression of the 1930s. In his book Who’s in Charge Here?, the Financial Times journalist Alan Beattie points out this pledge lasted just 36 hours before G20 member Russia announced new car tariffs.

Certainly the G20 was no constraint. Beattie writes: “I have never heard a G20 pledge cited as the reason why a serious amendment to policy was made.”

The next summit, in London, focused on fiscal stimulus plans and monetary easing. But that meeting was held in April 2009 – that is, after many countries had gone ahead and done those things anyway.

Both Australia’s and the United State’s big stimulus packages were announced in February 2009. China’s major stimulus pre-empted the November 2008 summit by a week. It’s not obvious how “coordinated” the G20’s approach to the Global Financial Crisis really was.

In subsequent years the G20 became bogged down in debates about austerity. The United States wanted everybody to continue expansionary fiscal policy. But European countries were being compelled by their dire budgets and the European Central Bank to slow government spending.

Between 2010 and 2013 the G20 argued about austerity because there was actually something to argue about. It’s not just that each country had starkly different needs. It’s that there is no consensus on how to survive and recover from a major economic crisis.

Indeed, the ease with which the G20 has managed to sign up to a growth agenda now that the crisis has abated is a sign of its irrelevancy rather than vibrancy.

Ultimately countries are going to pursue their own domestic agendas in their own way. Organisations like the G20 either endorse pre-existing national policy preferences or are ignored.

The G20 agreements are non-binding. In theory this is supposed to enhance the institution’s flexibility but just means that it is unable to achieve the goals it sets. As one paper in 2012 put it, the “G20 has proved about as far from effective as Greece is from solvency.”

Perhaps we are asking too much from what is really just a chance for finance ministers, central bankers, and government leaders to catch up.

But then perhaps it would be better to refrain from the ridiculous claims that the Sydney meeting was a “win” for Treasurer Joe Hockey, because he managed to convince the G20 to nominate a specific, entirely hollow, growth target.

Or the claims that the G20 is now “back on track” because it agreed to go for growth in the first place.

Or the most ridiculous claim of them all: That what a G20 communique says means anything of significance to the world economy.

The Great Corporate Welfare Con-Versation

It’s a worry that we’re having pretty much the same economic debates in the 21st century as Adam Smith was in the 18th century.

After all, the intervening centuries of experimentation have surely demonstrated one principle beyond doubt: do not give welfare to private corporations.

Corporate welfare is economically ineffective, politically corrupting, and morally dubious.

It lowers our living standards, entrenches privileged corporate interests, and enriches some at the expense of all.

And yet here we are. The Abbott government has spent the last few months debating whether it should stump up cash for Qantas, SPC Ardmona, Toyota, Cadbury, and now the entire farm sector.

Qantas is likely to get a government debt guarantee. SPC Ardmona’s request for money was declined by the Commonwealth, and accepted by the Victorian government. Toyota left before the Abbott government could formally decline further subsidies. Cadbury got a dozen or so million as part of an election promise. Australian farmers are about to get a big wad of cash packaged up as drought relief.

All in all, that’s not a bad success rate for the rent-seekers. If you were a struggling business, why wouldn’t you chance your arm? Why not ask for a bailout?

Firms fail all the time. It’s hard to measure, but we could guess from page 40 of this paperthat, say, one in 20 businesses fail every year.

The unknown question is how the political system will respond. If the dollar or interest rates are unpredictable, then the Australian parliament is doubly so.

It is tempting to use taxpayers’ money to “save” jobs. The benefits of doing so are highly visible, and the costs are diffused across the population. There’s always a clamour to intervene. Many people view government as a deus ex machina – an opaque and limitlessly powerful entity that can fix problems with the strong of a pen … if only it had the “will” to do so.

So the fact these claims on the taxpayers’ dollar seem to have all come at once has made an interesting test of the Abbott government. Especially after its shaky first few months.

But governments are temporary things. More important is the longer-term dynamic: That of the parliament unsure how to relate to the private sector in an era when their biggest interventionist tools have been decommissioned.

For most of the 20th century, Australian industry was protected by large and complex tariffs. The theory was that protecting manufacturers against cheap imports would grow the economy and encourage exports. Exports being better than imports. Building cars better than riding the sheep’s back.

(Tariffs and subsidies are two sides of the same coin. Tariffs transfer wealth from consumers to producers. Subsidies transfer wealth from taxpayers to producers. The Productivity Commission collapses both into the phrase “effective assistance”. The PC is too … PC … to call it all “corporate welfare”.)

Old-school protectionism has no serious supporters today. For all the hand-wringing about neoliberalism, the intellectual case for protectionism fell when the tariffs did.

Yet the political calculus that supported Australia’s corporatist industry policy remains.

Voters liked protectionism because the gains (keeping out foreign competition) were obvious, and the costs (lower standards of living, more expensive consumer goods, a slower economy) were harder to see.

Furthermore, corporatism was a vehicle through which politicians could share their vision of the future. Our political class has always declared it wants to shift the economy from primary industry to manufacturing. Both Kevin Rudd and Tony Abbott said they want Australia to “make things”.

In other words, they’re in denial of the fact that a government overseeing an open economy is not able to decide what that economy looks like.

And that denial leads to haphazard, confused and unpredictable policy.

Take the distinctions the Abbott government is trying to draw between the corporate welfare it is willing to pay and that which it is not. It insists that Cadbury (welfare application successful) is different from SPC (welfare application denied).

In an important way, Tony Abbott is right. Cadbury is different from SPC. Cadbury is being paid to build “tourism infrastructure”. Tourism is a bottomless pit of government spending: A unique policy area where no spending can be too much and where no evidence needs to be produced that the spending is effective.

In this way Australian governments have camouflaged traditional industry assistance to fit the economic philosophy of the times.

After all, it wasn’t an accident Kevin Rudd recast car subsidies as “green” car subsidies. He wanted to pretend Labor’s customary support of automotive unions was instead part of its climate change plan.

Likewise, the government’s drought assistance package is old industry policy in a new guise. 20th century Australian governments aggressively regulated and protected the agricultural sector. They controlled production volumes, stabilised prices, and imposed marketing boards.

Most of those direct interventions have been eliminated. Now agricultural subsidies come at arms-length, disguised in the form of periodic drought packages, and wrapped in rhetoric about national disasters.

Yes, we have learned a lot since Adam Smith’s day. But economic knowledge and political incentives are very different. The government simply cannot resist the political demand for corporate welfare.

Divining The Meaning Of Elections Is A Mug’s Game

What does the Griffith by-election mean? What is its deeper, broader significance for the trajectory of the Abbott Government, and, through it, Australian politics?

In Fairfax papers, Peter Hartcher said Labor’s win suggests “the people are reserving their judgment on Tony Abbott’s government”. The victor, Terri Butler, thinks, “We’ve said to Tony Abbott: hands off Medicare.” Tony Abbott believes it’s “a poor result for Bill Shorten”. A Labor pollster reckons, “The by-election showed Labor too has some way to go to build trust with many in the electorate.”

Of course none of them have any idea what the Griffith result means. Politics is all about converting ignorance into popularity.

There are two theories about what drives a by-election result. The first, and most appealing, is the referendum theory. This says that a by-election reflects the electorate’s satisfaction or dissatisfaction with a government. Polls are necessarily hypothetical – they can only ask people how they might vote. By-elections are definitive.

The second theory is that a by-election is all about local candidates. In the off-election season (and assuming the by-election won’t topple the government), voters are free to think more about the personality of individual politicians. Without the national significance, voters are more interested in local issues.

But in an important way, it doesn’t matter which theory is most true. What matters is which theory the political class believes.

Pundits like the referendum theory because it makes by-elections more significant; more worthy of their scrutiny. Losers like the local candidate theory because it’s all about creating exceptions to national trends – “that by-election was unique because the candidate had a strong local profile, well-known in their community…” etc, etc, etc.

Of course, much of the nonsense of Australian politics is self-interested nonsense. But the desire to impose narrative on disparate and complex events isn’t just driven by the political necessity to spin in their favour.

We have an innate human desire to create order where there is disorder – to create meaning from the muddle of history.

The question at the front of this column – what does the Griffith result mean? – is an example of exactly that. Commentators who try to answer it aren’t just filling word counts and news pages, but are trying to make the world intelligible.

Too bad that meaning-seeking is utterly futile. At best it lulls us into a false sense of security that we understand more than we do. At worst it’s a confidence trick.

Philip Tetlock influentially argued in his 2005 book Expert Political Judgment that political experts – pundits, pollsters, analysts, consultants – are no better at making predictions than the general public.

Tetlock found that while a little knowledge about a subject can help us improve our predictions about political events, having a great deal of knowledge is actually counterproductive.

When the book was published, most people focused on why it was so hard to get experts to make bets – that is, put money on the line – to back their predictions up.

But what was more important, and more interesting, was why experts are incredibly bad at predictions. It’s that our social system is far too complex to even read, let alone understand well enough to forecast its future. The most learned expert can grasp only a few small elements of a political order.

When it comes to understanding infinitely complex systems, learning doesn’t create authority, it creates overconfidence.

Far from being harmless, our demand for narrative and meaning in politics creates heroes where there are none.

The political class builds up elaborate mythologies about great election campaigns and great election strategists to explain the twists and turns of political fortune. There are giants of Australian politics who can read the “mood” of the electorate, who have a unique vision into what the battlers or working families want.

But these giants are more like soothsayers than scientists. Statistical chance is just as plausible an explanation for short term political change.

There’s a parallel here with financial markets. Eugene Fama won the economics Nobel last year for his bubble-bursting empirical work on the efficient market hypothesis, which suggests most success in the share market is determined by random chance.

Every fund manager claims to consistently beat the market. Yet statistically speaking, somebody has to be Warren Buffett, and somebody has to be Gil Gunderson. It’s the same in politics.

Hopefully Terri Butler doesn’t actually believe Griffith was a referendum on Medicare. Hopefully Peter Hartcher doesn’t believe the by-election can reveal anything deep about the aggregated opinions of the Australian electorate with any degree of certainty.

Hopefully they realise the game that they are playing: trying to impart meaning on events no person can possibly understand.

PM’s ABC Critique Masks Deeper Security Debate

Sometimes the backdrop is more interesting than the performance.

It was significant that, when Prime Minister Tony Abbott launched his critique of the ABC last Wednesday, he singled out the ABC’s apparent promotion of the National Security Agency leaker Edward Snowden, who he described as “a traitor … who has betrayed his country”.

Because it’s easier to argue about the ethics of whistleblowing or the role of public broadcasting than come to terms with the radical changes in the politics and governance of national security over the past decade.

As my Institute of Public Affairs colleague James Paterson wrote in Fairfax papers last week, the case for ABC privatisation isn’t altered one bit by whether the network is pro-Australia or not.

(The hysterical fears about Malcolm Turnbull’s efficiency review are also a bit much. The ABC is a $1.2 billion piece of public policy. Public policy ought to be constantly reviewed – especially public policy that big.)

No, what we are seeing is the antipodean wing of a bigger debate about the place of national security in an open society.

The Indonesian spying revelations and the National Security Agency surveillance scandal are elements of this larger issue.

And with the military secrecy focus of Operation Sovereign Borders, the Abbott government has managed to drag asylum seeker policy into the national security net.

National security has always been an insiders’ game – a privilege of political power. Politicians who win government are suddenly taken into the tent. They’re granted the right to hear secrets kept from the people who elected them.

This is both an honour and a terrible responsibility: Those politicians inevitably get the blame if anything goes wrong.

Their responsibility makes them risk-averse and more sensitive to the desires of intelligence bureaucracies than other bureaucracies. It’s easier to say no to the deputy secretary of the Education Department than the director general of ASIO. It’s easier to bring innovative ideas from outside government to education than to the black box of national security and intelligence.

This has always been the case. What’s changed is the size of that black box.

It’s hard to overestimate the significance of the September 11 terrorist attacks for the development of the modern national security state.

With a decade’s hindsight, it has been as big a deal as the introduction of standing armies in the 19th century – a permanent, impossibly ambitious mass intelligence operation on a constant war footing.

Hence the United States’ historically unprecedented surveillance program, where a secretive bureaucracy hoovers up the world’s internet and phone records under the theory that almost anyone, anywhere is potentially a terror suspect.

The program is either unconstitutional or questionably constitutional. Either way, it certainly exceeds its legislative mandate.

At the end of last month a bipartisan government commission found the National Security Agency was misusing powers in its collection of phone records.

It’s pretty damning. Congress only permitted the collection of material related to ongoing investigations, and, even then, the agency given this power was the FBI, not the NSA. Nor could the commission identify any terrorist attack that had been directly thwarted by the use of this program.

This is all before we get to the grave civil liberties consequences of the mass data collection.

Of course, much of what we know about it comes from the Edward Snowden leaks. It doesn’t matter whether you think Snowden is a traitor or hero or something in-between. It is undeniably true that had those leaks not occurred, we would be none the wiser about the Obama administration’s probably illegal, unquestionably disturbing, and obviously dangerous security program.

It’s an interesting hypothetical as to whether, even had September 11 never occurred, governments would have sought and acquired such powers anyway.

But that’s the key: The NSA surveillance is only possible thanks to technological developments that enable such huge amounts of information to be collected, stored and processed.

And, conversely, it is those technological developments that have made it possible for the new era of whistleblowers and leakers to have the impact they have had.

Daniel Ellsberg had to photocopy the Pentagon Papers by hand on a very new and unfamiliar Xerox machine. It took him and a colleague all night. By contrast, Bradley Manning easily transferred a quarter of a million documents onto a blank CD while pretending to lip-sync a Lady Gaga song. Uploading them to WikiLeaks would have been even quicker.

As explosive as they were, the Pentagon Papers were only an internal history of the Vietnam War up to 1967 – not the raw material of diplomacy and intelligence we’re seeing today.

There’s another important development that has been somewhat obscured by the political contest surrounding our new era of leaks.

What we’re seeing is not the surreptitious transfer of secrets from one country’s intelligence agency to another country’s intelligence agency – as has been the historical norm – but the very open transfer of secrets from intelligence agencies to the public sphere.

All the political sound and fury has been over the release of information to voters. In other words, the opening of the national security black box to democratic scrutiny and debate.

The Indonesian spying scandal was a particularly stark demonstration of that dynamic. Indonesia knows we spy on them, as we know they have spied on us. The political problem is that the Indonesian public now know too.

These leaks will keep happening. Maybe not from Snowden or Manning, but the next person. Embarrassing disclosures about the secret inner workings of the national security state is the new normal. It’s not necessarily a good or a bad thing – it just is.

And democratic governments are just going to have to learn to deal with it.

The Olympics: A Tool For Autocrats Since 1936

Another Olympics, another repressive state using the Olympics to boost its international reputation and gain legitimacy at home.

This time it’s Russia and the Sochi Winter Olympic Games.

When will it sink in that repression is not a regrettable anomaly in some host nations, but a central feature of the Olympic package? That the Olympic movement feeds, legitimises, and even encourages political authoritarianism?

Here’s the rap sheet for Sochi. The 2012 presidential election, which put Vladimir Putin back in the Russian presidency, was surrounded by allegations of fraud. His government met the resulting mass protest movements with a suite of legislation designed to suppress dissent, free speech, and free assembly.

The prosecution of members of the band Pussy Riot was just the most highly publicised attack on political and religious dissent in the last few years.

Amnesty International estimates that 4,000 people across Russia were detained for protesting in 2012 alone. International non-government organisations engaging, however vaguely, in “political activity” are required to register as “foreign agents” and are subject to routine harassment. Foreign journalists are intimidated and sometimes banned.

Then, of course, there’s Russia’s “gay propaganda” law, which makes it illegal to suggest that gay relationships and heterosexual relationships are in any way equal.

All this is on top of the usual forced evictions, construction and development corruption, and extra-legal environmental damage that is par for the course for any Olympics held outside the very richest countries. Putin promised a “zero waste” Olympics as part of its bid back in 2007; apparently the Olympics committee is unable to detect outrageous nonsense when they hear it.

Indeed, it was clear during 2007 that Putin’s Russia was an illiberal Russia. This chronology by FreedomHouse shows how political repression has increased since Putin’s first election to the presidency in 2000.

But by now there is a well-established Olympic media cycle. Negative stories are aired before the games commence. The opening ceremony is 10 days away. The next week and a half will, no doubt, be full of exposures of Putin’s political perfidy, about the environmental and economic cost of the Sochi Olympics, warnings that Sochi’s infrastructure isn’t up to speed, fears about terrorism, and revelations of waste and mismanagement.

But those tales subside the moment the opening ceremony wraps up. Unless there is a major political, logistical, or security crisis, the international coverage of the Sochi games will immediately focus on the sport.

Athletic performances will wash away the political stench. Putin and his government will be the beneficiaries. They will be photographed with sports stars and visiting celebrities. They will feed off the praise of organisers and fans and athletes, for whom there is no world outside the Olympic villages and stadiums.

All the pre-Games bad press will be chalked up to anti-Russian sentiment.

That’s the Olympic calculus – repressive regimes have to tolerate a few months of quiet and steady negativity, which is more than adequately compensated by a fortnight of blisteringly positive press.

Western complaints about Russia’s anti-gay law will not take the shine off Putin’s Olympics.

Defenders of the Olympics make much of the one historical instance where the games bought genuine, welcome political change: Seoul, in 1988. South Korea’s democratisation dates roughly from that time.

But this is not much of a defence. The country was at the time of its bid in 1980 controlled by a repressive military dictatorship, who wanted the Olympics to legitimise its rule.

As this 2004 paper makes clear, at best, the Olympics can be seen as a catalyst, rather than a cause, of South Korea’s democratisation. There were many factors pressuring the country towards change.

And anyway, the International Olympic Committee had no problem being used for authoritarian propaganda. From the Olympic movement’s perspective, it was just a happy accident that South Korean democracy emerged from South Korean dictatorship.

There’s simply no reason to believe the Olympic movement cares about political freedom, and many reasons to believe it is happy to be a tool of the world’s worst regimes.

The 2007 assessment of the Sochi bid (here, page 9) is a masterpiece of amoral detachment. In its assessment of Russian politics, the only factor it feels worth relating is the overwhelming political support for holding the games, as if democratic debate about the virtues of the Olympics would be would be a negative.

It’s true that the repression in Russia is now less than the last time Russia hosted the games in Moscow in 1980. Or than that of Berlin in 1936, or even Beijing in 2008.

But it’s no coincidence that the three most brutal totalitarian dictatorships of the twentieth century have each been granted an opportunity to host the Olympics.

Or that many other undemocratic nations have used the games to build legitimacy at home and aboard.

The Olympics movement simply doesn’t care that it – and all the athletes who compete in their events – is being used as pawns in an authoritarian political game.

Why protecting the pension is a political con job

‘The Abbott government is proposing to reduce the rate of increase of the age pension’ said Bill Shorten.

You’ll only make it in politics if you are willing to be completely shameless.

On Tuesday Social Services Minister Kevin Andrews flagged a major review into Australia’s welfare system. One in five Australians now receives income support payments – 5 million people. That’s a lot, and the Coalition believes it is too many. The budget has to be balanced. We don’t want to become like Europe.

So far, so good. Yet 2.3 million of those people – nearly half, and the largest cohort – are on the age pension. And Kevin Andrews has specifically quarantined the age pension from his review. So, it isn’t quite the major budget-repairing review it sounds like.

Bill Shorten confidently insists that ”the Abbott government is proposing to reduce the rate of increase of the age pension”. (Never say Shorten isn’t trying his little heart out.)

This comically absurd little spat over the pension reveals a lot about Australia’s welfare system and the political system in which it operates.

The list of beneficiaries and the conditions placed on those benefits are not organised by any noble principle of need or fairness or morality, but calculations – often highly crude ones – about voting blocs. Of course it is all dressed up in the language of social justice.

Despite being the largest beneficiaries of the welfare system, pensioners are a protected species. Remember there’s no guarantee a review would recommend a cut to any particular welfare entitlement, nor any guarantee the government would follow through if it did. No, the pension is too sacred to even be studied.

Australians like to say they’re concerned about middle-class welfare. Defenders of the status quo argue our rate of middle-class welfare is relatively low by international standards.

But this week’s little pension quarrel reveals something more fundamental – the modern welfare state is, itself, a project designed to benefit the middle class above all others.

Middle-class welfare isn’t a bug or aberration. It’s the defining characteristic of any democratic welfare state.

This observation is known as Directors’ Law – named after economist Aaron Director, who argued that redistribution policies in a democracy will benefit the largest voting blocs. Invariably this is the middle class. The primary function of a welfare state isn’t to keep people out of poverty. It’s to transfer money to the powerful middle class.

Sometimes the system taxes the middle class to provide benefits to that very same middle class. Such ”churn” is a political confidence trick that relies on citizens’ ignorance of their true tax burden.

You’d be hard pressed to find a philosopher, economist, sociologist or political theorist who could support such a distorting, wasteful, politically motivated transfer system on principle. But that’s what we have. All the big political flashpoints of Australia’s welfare policy – baby bonuses, family tax payments, parental leave – are disproportionately generous to the middle class.

Nor is the age pension solely to protect the poor. Eighty per cent of people above pension age receive a part or full pension. By excluding the family home from its income test, the pension protects elderly home owners from having to use the savings they’ve accumulated in their house to fund their retirement. And, a bonus: it protects the inheritance of their children. No wonder it’s popular.

Welfare is a political compact. Sociologist Gosta Esping-Andersen famously distinguished three models of welfare state capitalism: liberal, corporatist-statist, and social democratic.

Liberal welfare regimes view income support as a safety net. Think the United States, where welfare is an emergency, often short-term measure. The corporatist-statist regimes (found in Germany, France and Italy) uphold traditional class divisions. Scandinavian countries have a social democratic regime where welfare is less about poverty and more about citizenship. All classes get something.

Usually Australia is grouped in the liberal camp. This reflects our English political origins, with a focus on individual rights rather than collective belonging. And welfare for the rich seems to offend the antipodean sense of the fair go.

That’s the theory anyway.

The Abbott government seems intent on destroying the last vestiges of what makes our system liberal.

There’s something deeply alien – well, Scandinavian – about the Coalition’s paid parental leave scheme. The government will pay as much as $75,000 to new mothers for 26 weeks, according to their previous income, not their need.

The Coalition insists the parental leave scheme isn’t welfare, it’s a workplace entitlement. Nonsense. But the philosophy behind this talking point is deeply illiberal. It suggests the state is as responsible for providing your income as your employer is.

Even more symbolic: just two days after Kevin Andrews announced the welfare review, he also announced the government would give young couples $200 for marriage counselling. The average Australian wedding costs upwards of $35,000. Yet the party of free markets and individual responsibility feels the need to chip in another few hundred dollars.

Of course, a review into Newstart and the Disability Support Pension is a good thing. The latter has grown rapidly in recent decades. The chief executive of Mission Australia has said hundreds of thousands of disability support recipients should be helped into work. The social and psychological benefits of employment are unarguable. This is more than enough justification for an inquiry.

Nevertheless, any serious review of Australia’s welfare system must be a review of the entire system. Even the popular bits.

Joe Hockey has been unable to commit to returning the budget back to surplus until 2023. But if the government can’t slay – or at least scrutinise – some sacred cows, this deadline looks far too optimistic.