Articles – Page 41

The assault on freedom of speech

In the first editorial of the earliest independent newspaper The Australian (no relation to the current iteration), barrister turned media proprietor Robert Wardell wrote that:

A free press is the most legitimate, and, at the same time, the most powerful weapon that can be employed to annihilate such [individual] influence, frustrate the designs of tyranny, and restrain the arm of oppression.

Contrast this with what Justice Mordecai Bromberg wrote in his September decision in the case of Pat Eatock v Andrew Bolt and the Herald and Weekly Times: ‘the public deserve to be protected against irresponsible journalism’.

Protected by whom? And who decides what constitutes ‘irresponsible’? The decision in the Bolt case, both the way it was made and the way it was received by those hostile to freedom of expression, is deeply concerning.

The case is doubly concerning because it is just one of many new challenges to freedom of speech. The last six months of Australian politics have underlined that freedom of speech is under threat. Greens Leader Bob Brown has called for licensing of newspapers, or, failing that, for journalists to be licensed individually. Following the Greens’ lead, the Gillard government has initiated a media inquiry with specific remit to increase regulatory oversight over newspaper ‘ethics’ – and largely because it is annoyed by the coverage it receives in News Limited papers. Various commentators now openly talk about the government forcing ‘balance’ on controversial political views like climate change.

For many on the left, it seems finding exceptions to freedom of speech is more important than defending the principle.

Freedom of speech is one of our great bulwarks against excessive state power. It is one of the basic individual liberties. Free expression is an essential human right. Considering how close to the heart freedom of speech is to liberty and liberalism, it is absolutely vital that threats against it are countered.

In September, Justice Mordecai Bromberg found that the columnist Andrew Bolt (who was profiled in the January edition of the IPA Review) had violated Section 18C of the Federal Racial Discrimination Act, which makes it unlawful to, ‘offend, insult, humiliate or intimidate’ on the basis of race, skin colour, or national or ethnic origin. The offending columns in question were published in 2009, and discussed the light-skinned individuals with part Aboriginal backgrounds who, Bolt claimed, had chosen to identify as indigenous out of a range of possible racial identities.

Justice Bromberg recognized that Aboriginality, and race more generally, is a social construct. Australian universities offer entire subjects in Aboriginal identity. Nevertheless, Bromberg found that it was, ‘reasonably likely that the ordinary person within this group would have been offended and insulted by her perception that [Bolt’s columns] were challenging the legitimacy of her identity and that of others like her.’

Certainly, Bolt made some errors, inaccurately tracing the lineage of some of the individuals in question. But they did not sue Bolt for defamation – an ancient common law right and limit to freedom of speech intended to redress reputation damage. They sued under an Act that both had different standards by which to judge the harm and, which uniquely related to offences held by a group.

Justice Bromberg used the existence of Bolt’s errors and a (necessarily subjective) assessment of the ‘inflammatory language’ in some of those columns to bypass Section 18D of the Act – which offers some limited exceptions to 18C, including whether the comment is made in the public interest and in good faith. That legal judgment was his to make. But the Bromberg decision goes much further, explicitly endorsing not only the language and shape of the Act, but its intent:

In seeking to promote tolerance and protect against intolerance in a multicultural society, the [Racial Discrimination Act] must be taken to include in its objective tolerance for and acceptance of racial and ethnic diversity. At the core of multiculturalism is the idea that people may identify with and express their racial or ethnic heritage free of pressure not to do so.

And a few dozen paragraphs later, he argued that, ‘In my view, even outside of political discourse, freedom of expression is not merely a freedom to speak inoffensively … But there are areas of discourse where incivility is less acceptable, including because it is more damaging to social harmony.’

The problems with the Racial Discrimination Act have been known for a long time. As far back as 1992, the IPA Review published Terry Lane’s critique of the racial discrimination restraints on speech, arguing that ‘It is impossible to see how racial harmony would be encouraged, improved or guaranteed by the imposition of penalties on those who express outrageous views.’ But Justice Bromberg’s decision makes it clear that the Act is explicitly designed to restrain specific viewpoints from being expressed, in pursuit of a specific – and, it might as well be said, controversial – goal. There is nothing legally new in the Bolt case. While Justice Bromberg was happy to endorse the social purposes of the Act, he seems to have kept within it. But it is a stark illustration of the still yet unbounded scope of the Racial Discrimination Act.

The Bolt case would be less concerning for freedom of expression if it wasn’t concurrent with an escalating political battle against press freedom. The relationship between News Limited papers (in particular The Australian) and the federal government has been openly hostile since the global financial crisis broke in 2009. The government’s Keynesian stimulus package has been dogged by waste and policy failure – facts which the press has been more than willing to focus on.

In response, the government and its supporters have, over the last two years, spent an increasing amount of time complaining about an overly-critical media and perceived flaws in political and policy coverage.

Politicians complaining about press coverage is one thing. Quite another if they do something about it. The British News of the World phone hacking scandal provided a pretext. When the scandal was reignited in July this year after it emerged that News of the World – owned by Rupert Murdoch – had hacked the phone of a murdered schoolgirl, the resulting media and political frenzy was global.

Despite no suggestion and no evidence to support the claim that such phone hacking had gone on in Australia, Julia Gillard nonetheless claimed that News Limited, the Australian arm, had ‘hard questions to answer’. Exactly what those hard questions were is not clear. The most obvious explanation is likely the real one: there were no hard questions. Instead, the Prime Minister saw the British hacking scandal as an opportunity to sully her critics in the media.

Gillard was, at least initially, circumspect about the policy consequences of her hostility to the press.

But if the relationship between News Limited and the government is fraught, it is nothing compared to the relationship between News Limited and the Greens. Bob Brown has described his press opposition as the ‘hate media’ because he believes they are unfair to his party. Since the News of the World scandal he has first hypothesized about imposing a government license for newspapers – a policy which has been absent in the Anglosphere since it was found to be tyrannical four centuries ago – and then having the government license individual journalists – presumably to weed out ‘irresponsible’ ones.

Wielding their power over Julia Gillard’s office, the Greens pressured the government to instigate a media inquiry. The purpose of the independent media inquiry, which was announced in September, is clear: to impose more government oversight of the press. Lobbying for the inquiry on the ABC’s Q&A, Greens Senator Christine Milne said that, ‘it’s time we had a good inquiry and certainly bias is going to be one of the things that certainly will be looked at.’ The independent Rob Oakeshott supported the push for the inquiry because of the ‘absolute rubbish’ that was being written about him.

There is already a series of serious policy reviews being conducted about media reform. No one denies that the challenge of the internet necessitates a rethink of the regulatory settings governing media and telecommunications. The Institute of Public Affairs has long argued that regulations like sport anti-siphoning (which give free to air television first broadcast rights to ‘premium’ sporting events), local content requirements (which impose mandatory minimums on Australian television and broadcast content), ownership restrictions, and much telecommunication regulation make little sense in a digital age where the boundaries between broadcast and media services are being blurred. Nevertheless, the government is already looking into that with a largely unheralded but hugely important Convergence Review, conducted by the Commonwealth Department of Broadband, Communications and the Digital Economy.

But it is clear that the purpose of the independent media inquiry is to regulate the content of newspapers, not conduct a needed policy reform inquiry. The terms of reference for the inquiry appear benign, but they are not. The inquiry was instructed to facilitate two distinct investigations. First, it was to look at the sustainability of media business models in the digital age. Considering the growing calls from many on the left for direct subsidies of ‘serious’ journalism, this is worrying in and of itself. But the second investigation was much more disturbing. The inquiry was tasked to study the ‘effectiveness of the current media codes of practice in Australia’ and ‘ways of substantially strengthening the independence and effectiveness of the Australian Press Council’.

The implication is obvious – the inquiry will look at ways to make the voluntary codes which govern media ethics into mandatory regulations.

It is good that media organisations develop their own ethical codes of practice. But it is very bad that the government believes it should do that for them. Governments are necessarily antagonistic to the press; our current federal government, perhaps more so than usual, but not more than, say, the Whitlam government. We should be very uncomfortable with the prospect of government regulators – perhaps a newly enlarged and empowered Press Council-monitoring, scrutinising, and legally punishing journalists and newspapers for perceived ethical breaches.

In a functioning democracy, the media is one of the primary ways by which governments are scrutinised. So governments should not be putting themselves in the position of defining what constitutes approved and disapproved commentary or journalism. This is a breach of freedom of the press. And it is fundamentally hostile to liberal democracy.

We can see how serious these proposals are by the way interest groups have reacted to the news of the independent inquiry. The chair of the Australian Press Council, Professor Julian Disney – which is, currently, paid for by voluntary contributions from the newspapers, and has no coercive power-welcomed both government financial support and the prospect of regulatory ‘teeth’. He told the marketing website Mumbrella that he wanted the Council to regulate website comments and ‘serious’ bloggers.

Disney told the inquiry itself he was concerned about the ‘cacophony’ of voices on internet comment threads: ‘You can’t have free speech if you can’t hear what’s being said.’ This appears to be more a complaint about vibrant democracy than unethical journalism. Groping around for a purpose that wasn’t simply an attack on the government’s critics, it heard some extraordinarily illiberal and anti-democratic views, by apparently mainstream people.

These are not the only threats to freedom of speech in Australia today. In the June edition of the IPA Review, I outlined the extraordinary call by the host of the ABC’s Media Watch, Jonathan Holmes, to have the government’s regulator enforce ‘balance’ on a number of climate sceptic radio hosts. In a Media Watch segment in March titled ‘Balancing a hot debate’, Holmes pointed out that hosts like 2GB’s Alan Jones, 4BC’s Gary Hardgrave and MTR’s Chris Smith tended to interview climate scientists they agreed with.

Fair enough – but you’d think, in a society which values freedom of expression, that was their prerogative. Nevertheless, Holmes suggested that this contravened the Commercial Radio Australia Code of Practice which insists that broadcasters must ‘present significant viewpoints when dealing with controversial issues of public importance.’ This regulation may be on the books, yet it is practically defunct. The left-wing activists GetUp filed a complaint-necessary for the Australian Communications and Media Authority to act-the next day.

It seems amazing to have to do so, but in 2011 we need to remind ourselves why freedom of speech matters.

The first issues paper of the media inquiry even asks what the purpose of a free press actually is – as if its existence is up for debate. The paper first asked whether the ‘marketplace of ideas’ theory assumes that the market is open and readily accessible?

The marketplace of ideas theory suggests that freedom of speech is desirable because the only way to come to the truth about a topic is to freely debate it – the ‘market’ for speech will ensure that the best and most true ideas float to the top, and wrong ideas fade and die. Then: ‘Are there alternative or preferable justifications for freedom of the media?’ There certainly are. Freedom of speech is a subset of a larger right – that of liberty of conscience. People should be at liberty to express what they privately believe (subject to small limits on defamatory speech and overt threats).

The ‘marketplace of ideas’ theory is high-minded and idealistic – imagining a world where the only public debate is academic, rational, and focused on coming to the ‘truth’ of any given proposition. And it implicitly limits freedom of speech. If speech is necessary to the functioning of a democracy or to truth-seeking, the marketplace of ideas theory provides a defence. If the speech is not necessary, then the theory offers no support. It provides absolutely no guidance about what to do with, for example, the anonymous blog comments which the Press Council and government would like to regulate.

It provides no guide to how policy makers should treat wrong ideas, orideas on which a consensus (dubious or otherwise) has formed. It gives an opening – which Media Watch and GetUp have taken advantage of – to restrain public debate by insisting on ‘balanced’ presentation of political issues. And it provides an opportunity for governments to restrain debate on issues when they feel they have more pressing social goals – as Justice Bromberg suggested in the Bolt decision.

The marketplace of ideas justification for freedom of speech is woefully inadequate. That the media inquiry can think of this as its only justification is deeply concerning. And it emphasises the challenge – not merely to resist illiberal violations of freedom of speech, but to demonstrate that freedom of speech is a value worth defending at all. While the threats may seem disparate – the media inquiry and the Racial Discrimination Act have their own origins and their own political supporters – the reaction to the threats in the last few months has revealed that freedom of speech is not at all safe in Australia in 2011.

The World Will Be No Safer Under Basel III

The Basel Committee on Banking Supervision is about to introduce its Basel III accords, global regulatory standards which govern how much capital banks are required to hold.

But it’s not typically a great idea to introduce huge regulatory increases when the world is on the brink of economic collapse.

And the Institute of International Finance (IIF) suggests Basel III implementation could slice 3.2 per cent of GDP in Europe, North America, Japan and the United Kingdom in the next five years alone, and leave the global economy with 7.5 million fewer jobs.

Sure, the IIF represents more than 400 banks, so they would say that. Governments admit it will slow the economy, but by much less. (They would say that too.)

Basel III was developed in haste after the financial crisis. Like its predecessor, Basel II, its purpose is to ensure banks have an adequate buffer of capital if there is a bank run.

Regulators say capital requirements are necessary because governments insure bank deposits. The idea of deposit insurance is to guarantee depositors won’t lose their money if the bank goes under. But the insurance also means banks and their customers don’t wear the cost of wild speculation and risky banking practices. So regulators believe banks need to be compelled to be prudent.

In other words, a new regulation introduced to patch up the unintended consequences of older regulations.

The existence of Basel II in the lead-up to the financial crisis has always been a gaping hole in the theory that we should blame a lack of regulation.

But it’s worse. The Basel II Accords – designed to keep the banks secure, designed to protect the depositors against excessive risk-taking, designed by some of the world’s most intelligent people – were the primary cause of the crisis in the first place.

That is the conclusion of Engineering the Financial Crisis: Systemic Risk and the Failure of Regulation by the political scientist Jeffrey Friedman and the economist Wladimir Kraus. The book was released in October.

Friedman and Kraus’s argument complicates both left and right crisis narratives. The causes of the housing bubble are well known: policies to boost home ownership, low interest rates, and Freddie Mac and Fannie Mae’s 71 per cent stake of the non-traditional mortgage market.

But explaining the housing bubble is just the half of it. You have to explain how that bubble turned into a banking crisis.

Basel II actively encouraged banks to hoard mortgages. Its capital buffer rules weighted mortgages far higher than business or consumer loans. When the bubble burst, the banks were holding a disproportionate number of dodgy mortgages because they’d been urged to do so.

This is not a completely new story. Friedman and Kraus give it empirical support. They show that American bankers weren’t actually that reckless. They favoured what they imagined to be safer, more expensive assets over cheaper, riskier ones. And the banks were nowhere near as leveraged as they had a legal right to be under Basel II.

Furthermore, it wasn’t “irrationality” that caused the crisis. That widespread theory assumes bankers and regulators had enough information to know what they were doing was bad, but they all went crazy and did it regardless. The irrationality thesis has no explanatory power.

It was just that everybody – regulators, bankers, politicians, investors – thought highly-rated mortgages were a lot safer than they were.

So how did the banking crisis become an economic crisis? Basel II, after all, was supposed to halt a contagion at Wall Street’s edge.

Friedman and Kraus argue that Basel rules are inherently contradictory. The capital buffers which Basel requires aren’t buffers at all. The idea behind capital buffers is, again, that if there is a run on a bank, the bank will be able to dip into reserves to survive. But if it uses those reserves, even in a crisis, it will suddenly be under Basel’s required capital threshold, and will be legally penalised.

As one economist pointed out, there has been little “consideration of the paradox that the buffer function of regulatory capital is limited because this capital is needed to satisfy the regulator”. When the banks hit Basel’s capital minimums in the last months of 2008, credit froze, and the “real” economy started to hurt.

So it is sickly perverse that Basel III’s main purpose is to raise capital minimums even higher. And analysts from the Cato Institute have argued that it “retains many of the weaknesses of its predecessors” – particularly “a highly gameable weighting system” that led to the hoarding of mortgages in the first place.

Basel III shows that governments are trying to fix the finance sector’s problem before they’ve figured out what the problem actually is. The first and most important question has to be why the crisis occurred. Answering that takes reflection.

But legislators work faster than academic economists. Already by 2009 politicians were running down new regulatory paths. In February that year Kevin Rudd had concluded that Basel II was “inadequate” and that it needed a successor. This is meaningless. All regulations were inadequate at stopping the crisis.

Anybody who says they’ve got a handle on the causes of a crisis that big and that complicated in its immediate aftermath is wrong. And they’re being deceitful if they say they know how to fix it.

The United States Congress passed the Dodd-Frank financial reform act six months before its own Financial Crisis Inquiry Commission released its report into the causes of the crisis.

Such is the false confidence of regulators and politicians.

Basel III standards are about to be disseminated around the world. There is no reason to believe that the economic system will be any safer or more stable. And it could be a lot poorer.

Yes We Can… With Exceptions, Qualifications And Requirements

Barack Obama told the Australian Parliament last Thursday that our country and his are “among the most open economies on Earth”.

This is true, as far as it goes. The United States is 10th out of 141 countries on the Economic Freedom of the World Index. Australia is fifth.

But that observation sits uncomfortably with almost everything else Obama said in his speech to the Parliament.

The 44th president mouths his support for free trade but carves out so many exceptions, qualifications and requirements that, if those caveats were put into action, the United States would plummet down the economic freedom rankings faster than you could say “level playing field”.

After all, how to reconcile “History teaches us the greatest force the world has ever known for creating wealth and opportunity is free markets” with “We seek trade that is free and fair”? Perhaps it is asking too much of the White House speechwriting B-team to be internally consistent. Yet it is not clear what the qualifier “and fair” is supposed to do apart from repudiate “trade that is free”.

Free trade is the universally recognised principle that national borders should be open to goods no matter where they come from. Fair trade is the opposite. First literally: the phrase originated as a synonym for protectionism in the 19th century. And second practically: its modern popular use describes a trading system that discriminates between different third world producers according to first world standards. Those who conflate the two are saying they support free trade and oppose free trade at the same time. That’s incoherent even for politics.

Obama then ticked off a series of standard refrains. Countries need to play by the rules (as if the benefits of trade are only possible if that trade is approved by World Trade Organisation lawyers in Geneva). Currencies need to be market driven (a clear swipe at China, which is desperately, if nervously, trying to fix its currency issues). “Workers’ rights” need to be respected (wholly admirable, but this vague demand has been long used by unions to protect themselves from foreign competition).

It’s obvious from his speech alone that Barack Obama is no friend of free trade. It’s less obvious why so many Australian conservatives and liberals were full of praise for the president when he was here.

Obama’s domestic record on trade openness is not good at all.

Most notoriously, his stimulus package had a crucial “buy American” provision. The provision mandated that steel, iron or manufactured goods purchased with stimulus money had to be produced in the United States.

Actually, it was worse than that. Steel, iron or manufactured goods purchased for a project which received any stimulus money at all had to be domestically sourced. In other words, if a project received just one dollar of federal stimulus, everything bought with non-stimulus money on that project had to be American as well.

The Government Accountability Office found that Buy American red tape badly delayed many stimulus funded projects. And, of course, substantially reduced their value for money.

The administration’s jobs act, which is spluttering its way through Congress at the moment, has the very same Buy American provision. This is naked, unabashed protectionism imposed as a gesture to Obama’s trade union supporters.

Yes, the administration talked a big game on the benefits of free trade agreements between the United States and Korea, Columbia and Panama. These agreements were negotiated in the twilight of the Bush era. But Obama deliberately delayed passing those agreements for four years. His friends in Congress were responsible for part of this delay, sure. But the White House squibbed many opportunities to shepherd the agreements through. Then the administration saddled the agreements with expensive trade adjustment payments which ensured further delays: the US federal deficit would make anyone question whether now is a good time to expand the welfare state.

The Obama administration also had a chance late last year to resuscitate the Doha round of international trade talks, as the trade analysts Philip I Levy and Scott Lincicome pointed out at the time. They completely failed to do so.

As a candidate, Obama played the same game as he did in Australia last week. He would say he was a supporter of free trade, but then rail against “unfairly traded” products which “flood” American markets.

In his State of the Union address this year he said his goal for the country was to “win the future”, a bizarre and hackneyed phrase which implies that prosperity is an international competition with winners and losers. This is the exact opposite of what we know about trade – countries which exchange do so because it is mutually beneficial. Trade is not a contest some countries “lose”.

As a small country plugged into the global economy, Australia depends on free trade for our prosperity more than most. The US president came to our parliament and disingenuously championed protectionism. It should be embarrassing there was no outcry.

The Less Parliament Sits, The Better Off We All Will Be

‘We’re getting on with the job.” This has long been the standard response of Julia Gillard and her leadership team to questions about low poll numbers, the Foreign Minister’s latest tweet, or anything else they don’t want to talk about.

The hung Parliament isn’t gridlocked. Far from it. More than 140 pieces of legislation have passed through both houses. And despite the gauntlet of Bob Katter, Adam Bandt and a motley crew of independents, more than 180 pieces of legislation have gone successfully through the House of Representatives.

A few months ago Treasurer Wayne Swan was bragging this was ”in pretty stark contrast” to the US and Europe, where parliaments have passed fewer laws.

But hold on: why is all this law-making a good thing? (Great! More rules!) The government’s delight at its hectic law-writing schedule must be surprising to those who actually have to deal with the consequences: judges.

Chief Justice of the Federal Court Patrick Keane said earlier this year the ”volume and complexity of federal laws” meant that ”opening the Tax Act [which has blown out to 6000 pages long] is like entering a parallel universe”.

So it’s weird the government thinks placing even more Byzantine restrictions on society and the economy is worth boasting about. Certainly, not every piece of legislation passed has made a new law. Some bills change laws already on the books, others eliminate existing laws. Yet every change has consequences.

Business surveys report a huge increase in the amount of time it takes to monitor regulatory and legislative change. Corporate boards spend more time than ever focusing on legal compliance, instead of on service delivery or innovation.

That’s not just the fault of Gillard’s government. It’s the fault of successive governments, Labor and Coalition, which have steadily increased parliamentary productivity. Now there is an orgy of fresh legislation every year.

And those governments have been egged on by a political culture that favours action – any action – over steady-as-she-goes.

Commentators have recently complained that governments no longer have an appetite for big reform. At least, not like Bob Hawke, Paul Keating and John Howard did. Let’s put aside the questionable evidence for this claim. Isn’t it remarkable how so much of this commentary avoids judging the virtues or otherwise of that ”reform”? The criticism seems to be that legislators aren’t pushing through massive change at a sufficient clip. Anything will do. Huge new taxes, or huge new tax cuts. Doesn’t matter. Just as long as they’re huge.

The Parliament and the press gallery are predisposed to like active governments. A great politician is one who changes the country. A great parliament is one that maximises its opportunity to write and pass new laws. Australian political history is one long game of one-upmanship.

Poor old Kevin Rudd took this bias to its logical conclusion. He spun so many government wheels in motion that his successor is only now starting to control its oversized chassis.

The bias towards legislative frenzy is not helped by oppositions that accuse the party in power of being all talk and no action. This was true while Brendan Nelson held the Liberal leadership. But it’s an odd criticism coming from a conservative party. Conservatives believe change for change’s sake is fundamentally bad. The last thing a conservative would want is frenzied reform. ”Do nothing” should be a compliment. Let society evolve by itself.

Just as bizarre are the opposition’s complaints the government hasn’t planned for enough parliamentary sitting days. The government will sit ”only” one in four working days in 2012. But that’s excellent. ”No man’s life, liberty or property are safe while the legislature is in session,” wrote a 19th century lawyer. The fewer sitting days the better. The father of liberalism, John Locke, argued that while parliament was better than monarchy, parliamentarians need to be restrained. One way was to limit how often they sat.

Conservatives who understood these issues hoped the 2010 election result might restrain Parliament’s obsessive law-making. Obviously not. If only the hung Parliament was as deadlocked as its critics claim.

Commonwealth Games Bad News For The Gold Coast

Poor Gold Coast. Acting Queensland Premier Andrew Fraser told reporters after the city won the right to hold the 2018 Commonwealth Games over the weekend that the economic benefits would be “priceless”.

That’s right: the Queensland Treasurer suggested that the financial gain for the Gold Coast was completely unquantifiable.

Politicians are living in a fantasy land when it comes to the economics of major events.

Evidence that international sporting festivals provide any economic benefit to their host is almost non-existent. The games will discourage as much economic activity in the Gold Coast as they will boost. Probably more.

We have enough serious, scholarly, dispassionate studies of major events to be strident here. Winning the Commonwealth Games is nothing to celebrate. It is bad news for the Gold Coast.

Of course that is not how the Games bid has been pitched to voters.

Anna Bligh has argued the bid is “vitally important for the future of the Gold Coast”. Fraser may believe the benefits are priceless, but the Government and the bid team have been spruiking an economic benefit to the city of between $1.4 billion and $2 billion (naturally, the Government prefers the higher number).

According to comments by the bid chair Mark Stockwell late last year, the Games will also create 24,000 jobs. In Queensland Government press releases, that projection has become a nice round 30,000 jobs. One press release is higher again, and weirdly specific: 33,540 jobs between 2015 and 2020.

These figures are apparently based on a “feasibility study”, which the Government commissioned. The study is not available for public scrutiny.

It doesn’t have to be. We already know it’s wrong.

In their 2008 paper “Do Economists Reach a Conclusion on Subsidies for Sports Franchises, Stadiums, and Mega-Events?”, the economists Dennis Coates and Brad R. Humphreys survey the “large and growing” peer-reviewed literature on major sporting events.

There is an overwhelming consensus among academic economists that no tangible economic benefits from subsidising events, stadiums, or sports franchises exist. None at all. In fact, some papers have found substantial losses from hosting these big national or international sport festivals.

After all, major events are not all economic boom. They are disruptive. Roads are closed. Residents stay away; when locals might have gone out for other entertainment, they stay home fearing crowds. Businesses which cannot take advantage of the visitors see their sales slump.

Major events are not even unambiguously positive for the hospitality industry. One study failed to find any statistically significant relationship between the US Super Bowl – which moves from city to city each year within the same country and provides a convenient natural experiment for major sporting events – and hotel occupancies or retail sales.

Infrastructure gets built, sure, but not necessarily the most useful infrastructure. Events distort spending priorities. Stadiums have only limited uses once the event is over. Transport designed to ferry thousands to an event only held once might not be the most useful transport once fans go home (and why governments don’t do their job and build needed infrastructure until a major event forces them to do so is beyond me).

Add these problems to the large amount of taxpayers’ money used to directly finance major events, and the economic case slips away very quickly.

One academic analysis of the 1994 World Cup in the United States estimated the host cities lost up to $9.3 billion.

But beforehand the boosters were predicting it would increase economic activity by $4 billion.

Every single Commonwealth Games, World Cup or Olympics is matched by a consultancy report forecasting the huge numbers of jobs that will be “created”, the flood of tourism which will be unleashed, and the massive infrastructure investment that will be sparked.

Anna Bligh launched Queensland’s bid for the Commonwealth Games in August 2008. The feasibility study came well after. She told parliament in June 2009 she had “recently” agreed to commission the study, but the Premier was already talking up all the glorious new jobs it would bring. You might say that was jumping the gun. It wasn’t. It was a study commissioned by a Government for a major event. Of course it was going to find a squillion jobs would be created.

Last year the Gold Coast Business News decided the benefits of the Games so concrete, the reverse must be true as well. They titled an article on the bid “Unsuccessful Games bid could cost Gold Coast $2B”. Sounds serious.

What happens from now is all very predictable. Tourism lobbyists will spend the next seven years talking up the event. A few years after the Games have ended, and once it is blindingly obvious the influx of long-term tourism dollars has not arrived, they will blame the Government for “failing to capitalise” on the global goodwill.

Then everybody will move onto bidding for the next event, armed with fresh new consultancy reports and suffering amnesia.

Such is the fantasy world of major events.

Media Inquiry Motives: Accountability Or Revenge?

Bob Brown’s submission to the Independent Media Inquiry has an appendix of criticisms he’s received in the press since calling for a media inquiry: ‘totalitarian’, ‘self-serving’, ‘prejudicial and dishonourable’, ‘witch-hunt’, ‘pillory’, ‘fascism’ and so on.

It’s a strange appendix to include, considering that the substance of those critiques is how the Greens leader’s support for a media inquiry is motivated by personal animus. And, further, such a motivation means the inquiry is not a benign investigation of the current media regulation, but something more sinister – politicians trying to use their powers of legislation to punish critical newspapers.

So a bit of an own-goal there.

The Government has repeatedly rejected claims that the inquiry will be focused on News Ltd. That’s clearly not the way many of the inquiry’s supporters see it. Brown can barely go a media appearance without talking about The Murdoch Press. Critics of the Greens say the minor party is actually the government. If so, then Brown sees Rupert Murdoch as his loyal opposition.

Labor’s backbenchers are also loose-lipped on the inquiry. A furious Senator Doug Cameron said last week, “The Murdoch press are an absolute disgrace, they are a threat to democracy in this country and we should absolutely be having a look at them”.

Cameron was angry about reports of leadership instability in the Daily Telegraph. Maybe the Telegraph reports were a beat up. Maybe they were not. ‘Government backbencher says leadership speculation is baseless’ is not a decisive rebuttal.

But regulation of the press imposed as revenge for anti-government reporting is much more a threat to democracy than any tabloid headline could be. That neither Bob Brown nor government backbenchers like Doug Cameron appear to recognise this blindingly obvious problem is worrying enough.

Governments and the press have never gotten along. The two are, and will continue to be, absolutely opposed to each other. One accumulates power. The other undermines it. Australia’s first media proprietor, Robert Wardell, described the free press as a weapon to “frustrate the designs of tyranny, and restrain the arm of oppression”. One 19th century Chicago Times editor said “It is a newspaper’s duty to print the news, and raise hell”.

This is certainly not to defend media ethics. Bad journalism deserves harsh criticism. Raising hell can bring up devils. But the choice presented is not between our current media and a noble, ethically-unimpeachable media. It is whether the Government should to try to ennoble it for us.

What constitutes ethical practices is not for governments or bureaucrats to decide, and certainly not for them to enforce. Governments are subordinate to civil society. They must not be the supervisors of their critics. This is a much more fundamental principle of democracy than the often-repeated idea that free elections require an informed citizenry. Restraining the actions of government once a parliament has been formed is surely just as important making sure people can decide who to vote for every couple of years.

Sometimes attacks on government or politicians are misinformed, simplistic, or propagandistic. Sometimes those attacks mix up facts and opinion. Wrongheaded views – even wilfully ignorant ones – are not unique to the press. They are a feature of democracy.

In his submission, Brown suggests the fact a journalist described him as “self-serving” helps strengthen his case. God knows we wouldn’t want the public to think politicians can be that.

Nevertheless, Brown’s submission is interesting. The Greens leader has said journalists don’t tell both sides of a story accurately or reasonably. The submission builds his case at length, free of media gatekeepers.

Brown conflates two separate grievances into one. First: The journalist’s Code of Ethics, administered by the media union, “has become a hollow vessel”. Second: Rupert Murdoch has oligarchical control over the print media.

Are these two linked? Brown thinks they are. A core problem for the Greens leader is “Almost all the news media in Australia is owned by private corporations, outside of the ABC and SBS”. In July, as the News of the World scandal hit its stride in the UK, Brown asked whether the News Ltd board meetings should be opened to public broadcast. This would impose a degree of public scrutiny on a single company that isn’t even applied to federal cabinet, or, indeed, his own party conferences. Perhaps he thinks all private companies should open their boardrooms. But that’s not what he said. Just News Ltd – a firm which employs his most strident critics.

The profit motive is one of the most powerful forces in our society precisely because it delivers consumers what they want. Organisations which offer people goods or services which are attractive and desirable and not prohibitively expensive succeed. Those which do not, fail. All government should do is provide a legal framework, under which laws are universally applied. For instance, to choose a law completely at random, don’t hack phones.

The profit motive seems like a pretty good way to deliver journalism which people want to read, watch and listen to. But, otherwise, the Government spends a billion dollars a year on the ABC – specifically to address an assumed failure by the market to provide quality media in the absence of a public broadcaster.

Bob Brown would no doubt like the ABC budget increased. But that’s not the argument he is mounting. Tellingly, the ABC barely rates a mention. His focus is on the private News Ltd, not the ability of existing institutions to achieve any democratic objective.

Brown’s enthusiasm for the media inquiry seems more about fighting his party’s critics than any principled position about the relationship between democracy and media.

Greens pressure led to the formation of the inquiry in the first place. So it is hard to take the Government’s reassurances that the Independent Media Inquiry has nothing to do with the hostility of the press.

Memo To Unions: White Australia Was A Bad Idea

Rarely was the relationship between economic nationalism and xenophobia made so clear. The Transport Workers Union’s Tony Sheldon, after complaining about Qantas’s industrial relations tactics, said that his union would ”stand by the workforce, the Australian brand of Qantas and not have it Asianised”.

Asianised? This was not a slip of the tongue. A variant Sheldon has also used is ”Asianisation”. So is Asianisation worse than normal outsourcing?

That’s no dog whistle; there is no subtext. Google ”Asianisation” and the first page of results offers up ”Australian nativists”, manic claims about the Yellow Peril, and warnings about our ”national suicide”. Sure, those hysterics are on the margins of Australian society. But the TWU boss is the chief opponent of the Qantas restructure and of Alan Joyce who, as many people have pointed out, has a thick accent, betraying his foreignness. Sheldon’s easy use of these terms is damning.

Damning, but not damned. Contrast this missing outrage to the handwringing that followed Tony Abbott’s clearly rhetorical ”blood pledge” to repeal the carbon tax. There would have been fury if a conservative leader said anything remotely like what Sheldon did. The ABC’s Q&A would have spent a show debating whether Australia is a racist country. Serious talkback hosts would have spent the week talking about Enoch Powell. None of those things happened.

Opposition to trade, outsourcing and labour migration has always been tightly bound up with xenophobia. In Australian history, racism has usually had an economic context. After all, why should it be a matter of urgent public policy that some jobs be kept within Australian borders? On what moral basis is limiting immigration to protect workers from competition a good thing, as was proposed by unions at the start of the financial crisis.

Protectionism is bad for many reasons. It raises prices and lowers living standards – worrying enough. But its moral core is dark. Surely Australians are no more deserving of jobs than people from China, Japan or Singapore. Economic nationalism implies natives are worth more than foreigners. The far right is explicit about this. The Australian Protectionist Party makes its regressive views (nationalisation, high tariffs, less immigration) part and parcel of its hostility to multiculturalism. One Nation was also sceptical about globalisation.

So given the union movement’s historical culpability for the White Australia policy, you would think someone like Sheldon might be sensitive to the nuances of xenophobia.

Labor-sympathetic historians in recent decades have tried to sheet the White Australia policy home to prejudice. Immigration restriction was, many post-1960s historians have claimed, simply the result of a racist zeitgeist.

But the White Australia policy was led by a union movement trying to eliminate competition in the labour market. This is an awkward truth.

The government’s own fact sheet on the policy mentions how ”hard-working” immigrants were, yet neglects to mention the role played by unions and the Labor Party in kicking them out.

Immigration restrictions were just a part of it. It was the official policy of Labor prime minister Andrew Fisher to grant ”absolute preference” to white unionists in workplaces – and to encourage employers to fire ”coloured” workers. The Australian Socialist League called for the ”exclusion of races whose presence under present competitive conditions might lower the standard of living of Australian workers”.

The only serious opposition to White Australia came from pro-market thinkers – particularly the great free-trade MP Bruce Smith, who described the policy as ”racial prejudice”.

Steven Landsburg, an American professor of economics, asked recently: ”If it’s OK to enrich ourselves by denying foreigners the right to earn a living, why shouldn’t we enrich ourselves by invading peaceful countries and seizing their assets?” Obviously the latter is wrong. The former is just as wrong.

There’s no reason to believe workers made redundant by Qantas will end up on the scrap heap. That sort of theory was barely plausible when the Australian economy was being opened up in the 1980s and 1990s. It is ludicrous now. We’ve had 30 years of globalisation and the unemployment rates are at record lows. International trade is not war. There is no fixed pie of jobs over which protectionist governments must fight for a share. Nor is there any reason to believe basing some Qantas services in Asia will be bad for consumers. Few companies would deliberately make their service less desirable.

All this leaves us with is a union boss attempting to stoke xenophobia in service of his own economic interests. That’s something with which Australian history is sadly familiar.

The Battle Between Political And Economic Freedom

It’s the ultimate political chicken and egg question: which comes first, economic freedom and the market economy, or political freedom and human rights?

Of course, some claim the chicken has no relation to the egg at all. Or worse, chickens are constitutionally incapable of providing eggs – many argue that free markets actively encourage political and civil repression.

The interaction between market freedom and social freedom is one of the most important questions in development. It’s crucial to the future of China and the Arab world, and it animates much of the revived anti-capitalist movement.

So a recent paper by two European economists, Indra de Soysa and Krishna Chaitanya Vadlamannati, is extremely important. Published in the journal Public Choice in July this year, the paper sets out to determine, as empirically as possible, whether human rights violations truly are the unhappy companion of pro-market economic reforms.

Soysa and Vadlamannati compare two sets of data. The first is the CIRI Human Rights Dataset, which assesses human rights practices in 195 countries – in particular the rights not to be tortured, summarily executed, imprisoned for political beliefs, or to be “disappeared”. Using US state department and Amnesty International sources, the coordinators of this dataset give each country a single human rights score.

The second is the Fraser Institute’s Economic Freedom of the World Index, which assesses 42 indicators of economic freedom – from property rights to tax rates to the regulatory burden – also spitting out a single score.

These are the two most comprehensive and authoritative indexes we have at the moment. Soysa and Vadlamannati also control for other factors which might affect the results: a country’s size, for instance, can make governing hard and therefore make repression more likely. Same with entrenched ethnic differences. By contrast, economic growth calms both population and government, so they control for that too. The famous “resource curse” has unpredictable effects, so they also factor in how dependent each economy is on oil exports.

And, critically, the authors control for democracy. Just because a country is democratic provides no guarantee human rights will be protected. The tyranny of the majority makes democracy an unstable foundation for civil liberties – unless there are significant countervailing pressures like a liberal culture or a free economy.

Even after taking all those factors into account, Soysa and Vadlamannati find that market-orientated economic reform is unambiguously beneficial for human rights. Between 1981 and 2006, freer economies have been freer societies.

This shouldn’t be a surprise.

Market reform takes economic power away from political interest groups. Indeed: it eliminates much of the financial reward from politics. In a market economy there are none of the vast sums of money to be made controlling nationalised industries. Economic freedom undermines power rather than strengthens it.

Property rights are revolutionary – reorientating sovereignty from the state to the individual. And private competitive industries mean people do not have to rely on the government and patronage for employment.

The liberating effects of economic freedom are particularly strong in the developing world. In the 20th century, many poor countries merged their traditional autocracies with socialist economics. The result was corrupt bureaucracies and networks of political power controlling entire economic systems.

Of course, market reform in these countries has to be done well. Crony capitalism can easily perpetuate corruption – an issue faced by countries like China. But when reform is done well, it breaks down those entrenched power structures.

So then why have we heard for the last two decades that market reform and globalisation are threats to human rights?

Many academics specialising in “globalisation studies” have long argued that humanity is being trampled by a single-minded race for corporate profits. And Naomi Klein’s bestselling Shock Doctrine: The Rise Of Disaster Capitalism claimed the greatest human rights violations of the last 35 years have been by governments terrorising their own population to prepare for privatisation and market liberalisation. For Klein, political repression is a necessary precursor to free market reform.

Soysa and Vadlammanati’s paper demonstrates just how wrong this claim is. And how desperate. The first-comes-privatisation-second-comes-murder story is apparently too seductive to check. Perhaps that’s because it gives otherwise dry debate over political economy a moral dimension. But more likely because it implicitly claims corporate power is more dangerous than state power – exactly the story you’d want if your goal was to increase state intervention in the economy and society.

The Public Choice paper finds that even edging towards economic reform is positively correlated with human rights protections. For the chicken and the egg question, this suggests economic freedom comes first.

Market reform is good for human rights. The corollary is true as well: reversing that reform, or simply delaying it, can be bad. We should be worried how the global financial crisis has taken much of the energy out of pro-market reform in the third world. Combine lack of reform with an increased likelihood of political unrest when economies stagnate, and the risks to human rights over the last few years have grown substantially.

The anti-globalisation crowd – by fighting economic reform in poor countries – could be unintentionally encouraging the human rights problems they claim to oppose. Economic freedom and political freedom are part of the same package.

Why Doubt Free Trade With China?

On Wednesday Tony Abbott told The Age that he would make a free trade agreement with China less of a priority than one with Japan – because China, he pointed out, is not a market economy.

Of course, there’s nothing sacred about bilateral free trade agreements. They’re a poor cousin to multilateral agreements. They can be written well or poorly. A lot rides on their negotiation, and interest groups and rent seekers will want their say.

But the pros and cons of bilateral agreements plainly have little to do with the Opposition Leader’s scepticism about a trade deal with China.

Last week’s comments are not isolated. Abbott also wants tougher laws against anti-dumping, to penalise goods subsidised by foreign governments. With these policies, the Opposition Leader is close to endorsing retaliatory protectionism.

Abbott says he wants to ensure a “genuinely level playing field with a fair go for Australian companies”. In recent interviews, he has begun to talk not about “free trade” but “free and fair trade”.

Abbott is not alone. Barnaby Joyce also talks about his full-bodied support for free trade but only if it is “genuine” free trade. The AWU’s Paul Howes says, “If trade is going to be on, it’s got to be on a level playing field.”

Of course, the entire point of free trade is that the playing field isn’t level. The world isn’t flat. The world is very bumpy. Different products are made more efficiently at different places. Environmental, geographic and social conditions vary wildly. If anything, the process of globalisation has emphasised just how different parts of the world are.

Free trade is beneficial precisely because the world is heterogeneous, not homogenous.

This applies even when those differences are created by deliberate public policy choices, not “naturally”.

Yes, China is not a market economy. As John Lee pointed out in Crikey last week, it would be flattering to even call it a mixed economy. It is led and dominated by the state, rigged so state-owned enterprises are the main beneficiaries, and corrupted by industry plans and subsidies.

These are all bad things. But to retaliate – or, to use less-loaded language, compensate – by bumping up our trade barriers would be compounding one error upon another.

We should feel sorry for Chinese taxpayers when they are asked to stump up for ever more industry subsidies, not resentful of them. China is a developing country. Yet it is taxing its citizens in order to prop up businesses. Which then go sell their products below the market cost to rich countries. These subsidies are a direct wealth transfer from third-world taxpayers to first-world consumers.

As Professor of Economics Donald J Boudreaux describes this perverse strategy: “To make its country’s exports artificially more abundant and artificially less costly for foreigners to buy, a government taxes its citizens, effectively forcing people within that country to bestow benefits on people outside its boundaries.”

It’s tragic. But Australians are the beneficiaries of such misguided policies, not the losers.

There is no reason to believe the efforts of foreign governments to build industries using subsidies and industry plans will be any more effective for them than it has been for us – that is, it will be entirely fruitless and extremely expensive.

So foreign subsidies do nothing to undermine the case for free trade. Self-sufficiency is no virtue. Just as it is nonsensical for an individual to make everything they need themselves, it is nonsensical for countries as well. Free trade would be beneficial even if Australia was the only country in the world that believed in it.

The union movement offers one further objection to trade with China – the Chinese government artificially undervalues the yuan, deviously making their exports more competitive than if their currency had been floated.

Perhaps. Currency demagogues in the United States (where the strength of the yuan is a major political issue) have long pointed to the Economist’s Big Mac Index, which compares the price of the iconic hamburger around the world. It’s a rudimentary but evocative test of currency health. It measures a standardised product, allowing us some indicative comparisons. The Economist found the yuan could be undervalued as much as 44 per cent.

At least it did until the index was drastically revised this year. Big Macs should be cheaper in countries with low labour and land costs. The index was adjusted to take account of that obvious complication. Its revised data suggests the yuan is much less undervalued than everybody originally thought.

The Big Mac Index is certainly crude. But we know an artificially low yuan is bad for China itself. An undervalued currency is an effective subsidy to exporters at the expense of domestic consumers, raising the price of imports and increasing costs across the economy.

In the last 12 months domestic pressures have been getting more intense. The Chinese growth model is a ticking time bomb. What we’re seeing is not cunning manipulation of a currency to undermine international competitors. We’re seeing an economy teetering on the edge of the abyss – and Chinese policymakers know it.

It seems bizarre to claim economic self-harm in China justifies economic self-harm in Australia.

But that is exactly what Tony Abbott, Barnaby Joyce, Paul Howes and other free trade sceptics now recommend.

Idealism Turns Us On, But Reality Bites

There’s a particularly idiotic moment in the 2003 movie Love Actually when British Prime Minister Hugh Grant loses it. Grumpy at President Billy Bob Thornton for hitting on No. 10 staff, he breaks off script at a press conference, describes his American ally as a ”bully”, and abandons the ”special relationship”.

Unbelievable? Absolutely. But what really throws this scene into the realm of high surrealism is the grinning faces of the PM’s political and policy team. Their leader has threatened the leader of the richest and most powerful economy on the planet. And Grant’s staff – who would have to deal with the consequences – are over the moon about it. Hooray!

Pop culture doesn’t do politics very well. The depictions of government (and the people we elect) in movies and television are either wilfully naive, or naively conspiratorial. Take The American President, where a Michael Douglas administration is inspired by the love of a good woman to decarbonise the US economy. Right now, in 2011, radical climate change action by America is pretty unlikely. But it was ludicrous to imagine when the film was made in 1995. In more pessimistic and dramatic films, politicians and governments head up elaborate conspiracies – they manufacture fictional wars (Wag the Dog), run military actions in secret (Clear and Present Danger) and cover up murders (State of Play, Absolute Power, and Enemy of the State).

But here’s the funny thing. All of these conspiracies pretty much work. They’re successful – at least until the movie’s hero intervenes. Doing the wrong thing might be wrong, but the movies assume it will be simple.

In the movies, covering up a conspiracy is no big deal. When needed, the wheels of government move effortlessly. It’s the same in the films with a more optimistic view of political leadership. Prime Minister Grant or President Douglas only have to put their foot down to get stuff done. Governments in the movies are competent. They’re nothing like the real world. In the real world, government projects are characterised by disappointment and compromise. Political operatives, not experts, make the final decisions over policy. Petty leaks and cheap betrayals are commonplace. Political favours are used like currency.

Even the worst fictional depictions of politics typically exclude the sad reality of policy botches, bureaucratic waste, and politicians with an exaggerated sense of self-importance.

More than anything else, the television show The West Wing has demonstrated pop culture’s bizarre faith in the competence of government and the goodness of politics. The show has a cult following among political boffins. No wonder: The West Wing flatters the political class by its suggestion that every person involved in politics is well informed.

And extremely well-intentioned. The West Wing‘s President Bartlett (pictured) is incorruptible. Power has done nothing to him. If anything, holding the most powerful office on earth has made him more honourable. And his staff are all dedicated to public service, extolling self-sacrifice and duty.

Something’s wrong here. In The West Wing‘s depiction of politics, there appears to be no politics. As Gene Healy, the author of the book Cult of the Presidency, has written: ”Fans of the show never saw the sort of infighting, backstabbing and jockeying for position that appear in real-world accounts of White House life.”

No wonder virtually every character in The West Wing has an unwavering faith in government action as the solution to every problem. They never come up against incompetence or dysfunction. And barely any opposition.

This matters because these portrayals of politics shape in a big way how we understand real-world politics. Rather than pointing at the inevitability of much government failure – caused by its plodding bureaucracy, its base politics, and the inevitability that power will be used to pursue private interests – movies and TV trivialise it.

If only the good people were in charge. If only Mr Smith really had gone to Washington. If only political leaders didn’t use their powers for evil. If only politicians weren’t weak.

Politicians have tried to exploit these sorts of sentiments, but the dull, sad reality of government always sinks in. Reforms go off the rails. Supporters lose faith.

There are rare exceptions, like Yes, Minister, and the more recent, even more cynical The Thick of It. But these are great because they are depressingly authentic compared with what we usually see on our screens.

Even in the darkest political thriller, pop culture’s overwhelming vision of government is optimistic, almost utopian. Shame the real thing can’t live up to the fiction.