Category: Articles

Media Watch: Everyone Loves It Until They Advocate Censorship

On last week’s Media Watch, host Jonathan Holmes called for the government to use a practically defunct regulation to restrict free speech because he disagreed with the content of that speech.

Two days later, GetUp – the useful idiots of Australian politics – responded to this call to action, launching proceedings with the government regulator, the Australian Communications and Media Authority.

That the speech in question was about climate change and the speakers were Alan Jones and Chris Smith is absolutely beside the point.

Media Watch conclusively demonstrated that, on the right to free speech, it’s one of the bad guys – asking for the legal system to intervene in a vigorous public debate.

The program opened with an extended discussion about the number of climate change sceptics hosting AM radio shows, their take on climate science, and the fact that they interview more sceptical scientists than non-sceptical ones.

Completely within Media Watch’s brief, sure, and completely banal. It’s hardly news some radio commentators prefer to interview certain guests more than others. “Opinion maker has biased view” would not stop even the smallest press.

Yet Holmes went one step further. He argued the shock-jocks are in breach of the Code of Practice governing commercial broadcasters which mandates “reasonable efforts are made… to present significant viewpoints when dealing with controversial issues of public importance”.

And the reason the regulator hasn’t enforced the code against Alan Jones and his fellow sceptics? ACMA “won’t or can’t enforce the Code unless someone complains it’s being flouted.”

Nudge nudge, wink wink.

Defending his stance on Twitter, Holmes said on Wednesday that “if you check you’ll see I said stations shouldn’t need to be told by [the] regulator”. The key word there is “need” – Holmes believes that broadcasters do, currently, need to have their speech regulated; their freedom of expression limited.

The host of Media Watch would not respond to further questions.

Don’t just read the transcript – watch the show. Smugness has always been part of the appeal of Media Watch. But when tackling subjects with more weightiness than the NT News or an ABC 24 production error, complacent insinuation and innuendo are increasingly a substitute, rather than a complement, for argument.

Nevertheless, if Holmes believes that GetUp or his audience have misinterpreted his meaning and intent – or simply if he thinks the government regulating public debate is a bad thing – then he could say so on air.

The right to freedom of speech is meaningless without the right to choose that speech. No-one should be forced to say something they do not believe as a condition of saying something they do.

In the United States between 1949 and 1987, the ‘Fairness Doctrine’ obliged broadcasters to do exactly that. The regulation compelled contrasting views to be presented whenever an issue was raised on the air.

And certainly, the doctrine resulted in balanced and civil broadcasting environment. But it did so by exclusion. It was easier to avoid controversial topics than risk a regulatory penalty for being perceived unfair.

Testifying in 1984, the broadcaster Dan Rather argued that “Once a newsperson has to stop and consider what a Government agency will think of something he or she wants to put on the air, an invaluable element of freedom has been lost.”

The Fairness Doctrine quickly became a political weapon. During the Kennedy Administration, the Democratic National Committee produced activist kits teaching party members “how to demand time under the Fairness Doctrine”.

The Nixon administration also used Fairness Doctrine to threaten the licenses of hostile broadcasters. Angered by The Washington Post’s Watergate coverage, Richard Nixon is on record saying that “the Post is going to have damnable, damnable problems… They have a television station… and they’re going to have to get it renewed.”

The Fairness Doctrine is now widely recognised as having had a ‘chilling effect’ on speech.

Compared to the Fairness Doctrine, the Commercial Broadcasters’ Code of Practice is a model of restraint. But, as Media Watch helpfully demonstrated, that is because it is largely defunct – it has been interpreted benignly, and wielded rarely.

Monday’s Media Watch advocated that this free speech status quo be overturned, and the Code of Practice be used as a political weapon.

After all, I doubt Holmes would argue that gay broadcasters should be compelled to air the views of homophobes, or Christian broadcasters to air the view of anti-theists. Instead he called for the Code to be used solely against those discussing Australia’s biggest, most controversial, political issue – the carbon price.

Some claim a Code of Practice is the price broadcasters pay for using public spectrum; that the rest of the media is free to do what it likes but there must be special rules for those using the airwaves. The history of the Fairness Doctrine, and the egregious actions of GetUp and Media Watch, show just how slippery a slope that view is. “Public interest” rationales easily become political interest rationales.

When not actively hostile to free speech, Media Watch is just missing in action.

Take, for instance, the most prominent and disturbing violation of free speech in recent years: the class action lawsuit against Andrew Bolt under the Racial Vilification Act is as clear cut an attempt to silence a critic of public policy as this country has seen in many years.

So, unsurprisingly, the lawsuit has not been mentioned once on what is supposed to be the ABC’s flagship program of media analysis.

Referring to George Bush’s 2003 declaration to the Australian parliament that he loved free speech, Holmes’ predecessor David Marr lamented to the Media Watch audience “If only more Australian commentators shared his view.”

Indeed. And if only Media Watch did as well.

West’s History Not Complete Without Reference To Christianity

Julia Gillard’s declaration over the weekend that she would like the Bible taught in schools seems odd, given she’s Australia’s most prominent atheist.

Mind you, it’s more odd when you consider that in the incoming national curriculum for history Christianity barely gets a guernsey at all. Gillard was the minister who oversaw the curriculum’s development.

As Tony Taylor, one of the architects of the curriculum, helpfully pointed out in Crikey in January, when the curriculum does mention Christianity, it only sticks to the bad things – like the Crusades, and the Spanish conquest of the Americas.

Still, she’s right. Julia Gillard may be an atheist (so am I, for what it’s worth) but understanding the Christian roots of modern liberal democracy is important, even in a secular world.

In her Sky interview Gillard focused on the Bible’s cultural legacy, saying “it’s impossible to understand Western literature without having that key of understanding the Bible stories and how Western literature builds on them and reflects them and deconstructs them and brings them back together”.

Familiarity with Christianity and the Bible is about more than understanding Shakespearean metaphors.

It is a historical truism that the development of liberal democracy, modern political philosophies, notions of human rights and equality, and our social institutions all owe much to Christian thought.

Almost all thinkers in the formative centuries of Western liberal democracy were convinced (or simply assumed) there was a God, and He was a Christian God. The non-theist exceptions were… exceptional.

Their religious faith couldn’t help but shape their worldview.

Explicitly secular arguments for our modern world only appear with the Enlightenment, and by that stage the philosophical frame in which we understand liberalism and democracy had already been set.

Take, for example, the religious assumptions which underpinned the development of liberal philosophy.

The very modern-seeming idea of human rights comes from the concept of “natural rights” – rights drawn from God.

No-one defined modern liberalism more than the 17th century philosopher John Locke. Locke’s vision of the three basic natural rights – life, liberty and property – set the political agenda for three centuries. As did his arguments that all people are fundamentally equal, kings are just men, and power derives from the consent of the majority.

Locke came to these conclusions from an explicitly Christian mindset.

For Locke, humans are equal – men, women, workers, shopkeepers, peasants, kings, smart people, stupid people, the physically strong and the physically weak – because they are all capable of knowing God.

You don’t need to agree with Locke’s arguments. Neither do you need to believe human rights or equality are inherently religious concepts.

But as the philosopher Jeremy Waldron writes in his 2002 book God, Locke, and Equality: Christian Foundations in Locke’s Political Thought, “Secular theorists often assume that they know what a religious argument is like: they present it as a crude prescription from God, backed up with threat of hellfire, derived from general or particular revelation… With this image in mind, they think it obvious that religious argument should be excluded from public life”.

Thus we get ‘Captain Catholic’, and the idea that teaching children some basic aspects of Christian thought is antithetical to secular democracy.

If the next generation are going to be taught history they should be taught good history. That means fully identifying the religious origins of modern society.

It means discussing how one short passage in the Bible (“give to Caesar what is Caesar’s, and to God what is God’s”) put medieval Europe’s church and state in opposition, and undermined the centralised authority characteristic of other civilisations.

It means recognising not just religious support for the Spanish conquest of the Americas, but the religious beliefs of those who also opposed it, like Francisco de Vitoria, Bartolomé de las Casas, and Antonio de Montesinos – three 16th century theologians who bitterly opposed the enslavement and abuse of Native Americans on Christian grounds.

And yes, it means teaching how devout people did great harm as well.

This secular defence of Christianity should not be taken too far.

While liberal democracy was conceived in a Christian framework, one obviously need not be Christian to be part of liberal democracy.

That’s the whole point. Liberalism as practised in the 21st century is wholly secular and wholly pluralistic – we don’t need to rely on theology to justify universal suffrage or individual freedom.

And, of course, understanding the importance of Christianity in the development of Western thought does not mean we are required to design policy according to conservative Christian values.

Religious arguments for policy should be taken with the same grain of salt as other policy arguments.

The Prime Minister clearly doesn’t want Australian kids to read the Bible out of some evangelical fervour. Teaching children about Christianity is not the same as teaching them to be Christians.

Just as the history of the Middle East can’t be understood without Islam, the history of Western Civilisation can’t be taught without reference to the West’s dominant religion.

Natural Disasters Give Economic Growth A Moral Dimension

Between 1990 and 2002, globally 815,077 people were killed by 4,300 natural disasters.

Since then, an earthquake in Bam, Iran in 2003 took 26,000 lives. The 2008 Sichuan earthquake killed 68,000, and the death toll from Haiti earthquake in 2010 could have reached up to 300,000.

Now Japan, where 10,000 are missing and likely dead.

These numbers are numbingly large.

But tragedy is not aggregate but individual – the personal toll of lost family members, lost livelihoods, lost homes, peaceful lives violated suddenly and destructively.

So what we know about reducing vulnerability to natural disasters is pressing.

And the academic literature is unambiguous: a richer country is a safer country.

Sure, some regions are more susceptible to natural disaster. Asia, for instance, suffers more than Africa. But rich countries are statistically as likely to be hit by nature as poor ones.

It’s just the rich countries cope much, much better.

Between 1985 and 1999, 65 per cent of deaths from natural disasters took place in nations whose per capita incomes were below $US760 – in other words, those nations in the absolute bottom ranks of economic development.

Wealth buys better technology, more money to spend protecting assets against risk, and the wider availability of medical care, supplies, and services.

One economist calculated if a nation with 100 million people as poor as, say, Laos became as less-poor as, say, Turkey, that nation would suffer around 800 fewer deaths from natural disasters a year.

Wealth is not the only factor. Governance matters too. Living in a democracy is safer than the alternatives.

Further, a study published in 2006 by two economists, Hideki Toya and Mark Skidmore, found education level, openness to technological transfer and foreign investment, a more developed and complex financial sector, and even a smaller government (in this case, a smaller public service) were closely correlated with reduced economic damage and reduced loss of life in natural disasters.

That final one – smaller government – is counter-intuitive.

Certainly, larger governments have more resources to deploy in an emergency. But size usually comes at the expense of efficiency. After the 1995 Kobe earthquake, the sluggish response of the prefectural government meant one of the first coordinated humanitarian relief efforts was conducted by the Yakuza.

(Indeed, private sector disaster relief is more important than commonly acknowledged. Hurricane Katrina also saw firms with resilient logistics and a large distribution network provide supplies and transport quicker than the grossly underperforming Federal Emergency Management Agency. The mayor of Kenner, a badly damaged New Orleans suburb, said Wal-Mart was the “only lifeline” for his town in the first few crucial days.)

Some have been quick to praise Japan’s building codes for the country’s relative resistance to earthquakes and their aftermath.

But the difference between the impact of the Haiti earthquake and the Friday’s disaster in Japan is not the strictness of the two nations’ construction regulations.

Societies can only buy stronger buildings if they can afford them.

A country with tough building codes but no money will either price everyone out of the real-estate market, or, more likely, see those codes ignored. The widespread collapse of Chinese schools during the 2008 Sichuan earthquake revealed schools in the region had been in violation of building codes for decades. Regulators were very likely complicit.

And construction firms don’t make buildings safe solely because it’s mandatory. As The New York Times pointed out on Friday, “apartment and office developments in Japan flaunt their seismic resistance as a marketing technique, a fact that has accelerated the use of the latest technologies.”

Strong building codes have a role. They may have a vital role. But to be at all effective, those codes require the wealth and strong institutions described above. Crediting tough regulation for disaster resistance gets the thread of causation exactly backwards.

As Alan Kohler pointed out in The Drum yesterday, Japan recovered from the Kobe Earthquake quickly.

Less than 15 months after devastation, Kobe’s manufacturing industry was producing at 98 per cent of its pre-earthquake capacity. All debris – all of it – had been cleared within two years. Fifteen years later the only thing which has prevented Kobe fully restoring its earlier economic achievements is the 100,000 residents who just up and left after the disaster.

Compare this to Haiti. More than a year since the earthquake and only 15 per cent of the required housing has been built. Debris is still abundant. The country is struggling through a cholera epidemic caused by inadequate water and health supplies. Much aid money remains unused.

Obviously, the developing world desperately needs to catch up to the developed world.

But the devastations of 2011 – Queensland, Christchurch, and Japan – must remind us rich countries are still extremely vulnerable.

With greater wealth we can increase our resilience to natural disasters – we can save more lives and livelihoods. After all, there’s no reason the buildings of 2111 can’t be much stronger than the buildings of 2011, if we can afford to buy them.

That gives our political focus on economic growth – casually and smugly dismissed by so many – a moral dimension which must not be ignored.

Hands Up If You’re In Favour Of Cheap Milk … Anyone?

One would be forgiven this week for assuming low prices are bad.

Coles’s January decision to sell house-brand milk for $1 a litre was followed by Woolworths deciding to do the same, which was, in turn, followed by cries from the dairy industry about monopoly and unsustainability. Leading, over the past few days, to a Senate committee sitting in judgment over $1 milk.

But the controversy is little more than the cries of producers seeking a political solution to competitive pressure.

In its submission to the committee, Bega Cheese expressed great concern. As did Clover Hill Dairies, Amalgamated Milk Vendors, the South Australian Dairyfarmers Association, and the Southern NSW Collective Bargaining Group.

All up, there were 116 submissions, from businesses, lobby groups, and politicians. Only three supported cheap milk.

Coles’s critics weave a terrifying story: that the supermarkets together want to drive out small dairy farmers from the industry.

Some farmers and industry groups have even seriously suggested that Coles wants to eliminate fresh milk from Australian supermarkets. Australians will then have to be satisfied with UHT, which is cheaper to store. The dairy industry will collapse. Rural towns will disappear. Then, once the milk plan has played out, on to eggs. Then meat.

But when has destroying your own product ever been a good business strategy?

Predicting the collapse of the Australian dairy industry is a long bow considering all that’s happened is a sale on milk.

Coles says it is covering the cost of reduced retail prices itself.

But if the chain were to demand savings from producers in the next round of supply contracts, it would be doing exactly what it should be doing: pressuring suppliers to reduce costs and to find ways to be more efficient.

There are buyers and sellers all down the retail chain – from farmers and processors, to supermarkets and us. Everyone should be trying to get the best deal. And if Coles thinks it can buy milk for less than the cost of production, nobody will sell it to the chain.

People will always want fresh milk, no matter what dastardly strategy is cooked up in a boardroom. Demand, meet supply.

And cheaper milk will lead to more milk sold, not less. The dairy industry is booming – in 2011 dairy cows are selling for 25 per cent more than two years ago.

There’s a lot backwards about the rhetoric over milk prices. For years we’ve been told supermarkets are a cosy duopoly; that Coles and Woolworths were less competitors than a cartel in a conspiracy against working families.

But the point of a cartel is to raise prices, not decrease them. If this is a cartel, it’s the most counterproductive in history.

Not only that, but cartel-mate Woolworths has joined the chorus saying Coles’s strategy is unsustainable. Woolworths is trying to turn public opinion on its rival.

More likely, it’s what it looks like on the surface – Coles being competitive, and Woolworths being forced to follow. Yet that’s enough to get the wheels of Parliament spinning wildly.

So who’s standing up for consumers? Unfortunately not the Australian Consumers Association, known as Choice.

Choice claims ”to ensure the consumer voice is heard loudly and clearly”. But its statement to the Senate says cheap milk ”is not a ‘win’ for consumers”.

Instead, it has taken this price cut to a household staple as a chance to push an ideological barrow – a grand national food policy with which the government can sustainably and benevolently guide agriculture, rather than leave production to the market.

No surprise, perhaps. Choice sees consumer interest as a side issue at best. The self-described association of consumers is more interested in fashionable environmental mantras such as food miles and ”green living”.

Each to their own. (Although the government thinks Choice represents all consumers. The non-profit was paid to run Kevin Rudd’s ill-fated GroceryChoice website.) With Choice off on a tangent, nobody is defending consumers against dairy producers who want protection from competitive pressure. It seems the only body truly acting in the interests of consumers is Coles.

In A Truly Globalised World, Immigration Must Be Free

Four Corners last week told the story of Landina, a three-month-old girl lifted from the ruins of a Haitian hospital and evacuated to the United Kingdom for lifesaving medical treatment.
 
The show focused on the search for Landina’s family and the ethical dilemmas faced by the British surgeon who saved her life. Decisions had to be made about whether to return the girl to Haiti or keep her in England for long-term care.
 
But, at its heart, the story of Landina is the story of borders and immigration restrictions.
 
The choice to take the baby to England was a medical one. Yet the sad reality is, if she stays permanently, her life will be on almost every measure better than had she gone home to Haiti.
 
Being separated from her mother will be, of course, hard. But her potential income, to take an obvious indicator of wellbeing, will be at least five to six times higher than it would have been in Haiti. No matter what level of education she obtains.
 
Landina has this opportunity because she was plucked from the rubble of an earthquake by a compassionate doctor.
 
Fifty per cent of Haitians say they would leave Haiti if they could.
 
Our world, we’re continuously told, is a globalised world. In 2011, trade is not completely free, but the barriers to trade are lower than they have been in centuries.
 
Capital, too, is allocated internationally – investors shift their money from country to country, from market to market, looking for the most profitable enterprises.
 
Goods move easily. Money moves easily. That’s all great.
 
But the situation for people is very different. People don’t move around the world easily at all.
 
With its quotas, plodding bureaucracy, and, more obviously, all the smuggling, immigration today looks strikingly like the restricted and protectionist global trade of yesterday.
 
Indeed, over the last century, migration has de-liberalised – the relatively open borders of the 19th century have become the closed and rigid borders of the 21st century.
 
All the same principles which make free trade a win-win apply to free movement of people – large scale immigration allows people to work where they can be most productive, further facilitating the economic specialisation that has boosted global prosperity.
 
The development economist Lant Pritchett describes our world as “everything-but-labour globalisation”.
 
In his 2006 book, Let Their People Come: Breaking the Policy Deadlock on International Labor Mobility, Pritchett cites a study which found the economic benefits of free movement of people would be spectacular.
 
Eliminating the planet’s remaining trade barriers would increase global GDP by around $US100 billion.
 
Eliminating immigration barriers, by comparison, would as much as double world income: that is, increase global GDP by $US60 trillion.
 
This added wealth would be shared, but the overwhelming beneficiaries would be people who now live in poor countries.
 
Sure, right now, poverty in the third world is caused and maintained by institutional failure: bad governance, bad laws, bad justice, bad bureaucracies, bad political systems, and bad economic policy. In recent decades, having seen the failure of too many foreign aid programs, the first world’s development focus has been on fixing those institutions.
 
Slowly improvements have been made.
 
Yet slow improvements are no consolation for those people living in poverty, being told they cannot travel to rich countries where there is abundant work and where their labour could be usefully employed.
 
So the question – repeatedly posed in discussions of economic development – of whether we should focus on foreign trade or foreign aid is badly incomplete. The biggest idea in development no-one has really tried (in the phrase of economist Michael Clemens) is allowing large scale immigration from the third world to the first.
 
The story of a Haitian baby being raised in Britain is just a small window into the possibilities of this shift in development thinking.
 
After all it is not Haiti, or, say, Nigeria, we want to be rich: it is Haitians and Nigerians.
 
None of the standard arguments against immigration hold up to careful scrutiny. Immigrants do not steal jobs. They do not erode living standards. Those who move for work contribute more tax than they take in public services. Migrants – for all the tedious polemic and hyperbole – have never managed to undermine the political and social cultures of host nations.
 
(We can debate the merits of multiculturalism later, but for now it will suffice to say nobody agrees what the word actually means.)
 
In the Four Corners documentary, the difference between Landina’s future life in the first world and her family’s life was strikingly clear. In Haiti, the filmmakers followed the surgeon to a tour of Landina’s family home – a single, unadorned room of concrete floors and walls and fire corner, deep in a Port au Prince slum.
 
When the camera turned to England, Landina was carried into a middle class British home, with long passages and yellow painted walls, full of furniture.
 
It was a graphic display of the difference in living standards between the first and the third world.
 
Development activists who have spent their careers obsessing over the difference between free and “fair” trade have missed the point entirely.
 
Any effective strategy to eliminate world poverty will have to focus on immigration.

Selling Out The Koran

First Tunisia, then Egypt, and now Libya: Muammar Gaddafi looks set to join the cohort of fallen Middle East dictators. And about time too. Under Gaddafi’s tribe-centric Stalinism, Libya has consistently ranked in the bottom 10 countries for economic, social, political, and press freedom.

Libya is not alone. The Arab world fills the lower ranks of all these indexes.

The causes of the region’s discontent are obvious. It has escaped nobody’s notice that the Arab world is almost uniformly undemocratic and illiberal. And poor – the 22 member states of the Arab League have a per capita income less than a third of that in the Western world.

Those truths colour the developed world’s view not just of the region, but of its 360 million people. And, just as importantly, their majority religion.

But how did the Arab world get that way?

A ground-breaking book released last year by the Turkish economist Timur Kuran, The Long Divergence: How Islamic Law Held Back the Middle East, couldn’t be more timely. Kuran is a professor of economics and political science at Duke University in North Carolina.

The title of his book is very specific: Islamic law limited economic growth in the Arab world. Not Islam per se, but the legal framework which built up over centuries in Islamic societies.

After all, the Koran is pretty good on economic growth: it encourages entrepreneurship; it promotes commerce; it praises the acquisition of wealth, instructing Muslims to “seek the bounty of Allah”; it endorses private property.

Muslims were once some of the world’s greatest entrepreneurs. When bandits captured the Chinese city of Guangzhou in 878, they found more than 100,000 Middle Eastern traders there.

So if 1000 years ago you were to wager what religion would dominate the next millennium, Islam would have seemed fairly safe money. Christian Europe was far behind. A European touring the Middle East would have met people who had much higher incomes. So what happened?

Kuran argues Islamic law primarily failed to develop the concept of a corporation: an economic and legal construct, separated from family and tribal loyalty, designed to encourage investment and profit sharing.

Islam’s early strength – shared faith to unite warring tribes – became a weakness, as it manifested itself in hostility towards smaller, corporate, capitalist forms of organisation.

As corporations multiplied in Europe from the 17th century, the Arab world’s relative success disappeared. It needn’t have been so. There’s nothing particularly un-Islamic about the corporation – the organisation was embraced by Muslims in the 20th century. Kuran shows Islamic law is flexible enough to change, but a failure to encourage economic growth meant Arab nations slipped behind the West.

Today, the other economic positions taken by the Koran – the importance of commerce, the defence of private property, and the freedom to seek wealth uncompromised by state action – are notably absent in the Arab world.

A rich country tends to be a liberal country. Wealth and freedom progress together. So too does social development. Women and minorities in the First World have respect and rights that are the envy of those in the Third World.

Conversely, poverty feeds social backwardness, which reinforces that poverty.

The relative economic decline of the Arab world in the 20th century caused its political decline. The political vanguard in the Middle East has careened from assertive nationalism, to Soviet client socialism, to Islamism.

Islam’s critics focus on the obviously archaic and often brutal views held by Islamists. They blame them for the problems of the Arab world. Fundamentalist Islam seeks not only to restore premodern social relations, but premodern economic structures as well. The future caliphate will shield itself from the dynamism of contemporary capitalism.

But it was defective legal institutions that originally put the Arab world behind, not culture or religion. Hence reasons for optimism.

Institutional failures have institutional solutions. An Arab nation that adopts the very best political, economic and legal structures of the developed world could be just as rich, successful, and liberal.

And the pro-market Koran won’t need to be discarded to do so. Timur Kuran’s findings suggest Islamic faith is perfectly compatible with modernity.

Research published in February in the journal Public Choice, “Economic freedom, culture and growth”, backs this up.

Using the World Values Survey, the most comprehensive database we have on global beliefs, two economists empirically answer the question of whether culture is a barrier to development. It is – up to a point.

If a country’s economy is not free – if it labours under the burden of an overbearing government, high taxes, and high regulation – then culture matters a lot.

But the importance of culture disappears as a country becomes economically free. Once a nation has the “peace, easy taxes, and a tolerable administration of justice” Adam Smith described, it will grow rich. Regardless of religious or cultural baggage.

That’s a lesson the revolutionaries trying to liberate the Middle East will need to quickly understand.

Right now, in Egypt, Tunisia, Libya and Bahrain, the revolt has a liberal character. A lot of time has passed since the Iranian revolution in 1979. Today, even radical Islamists in those countries are agitating for democracy above all else – not theocracy.

Whether the revolutions remain liberal is far from certain.

But if the citizens in the Middle East wish not to just discard tyranny, but grow rich and prosperous too, they’ll need to enact not just political but institutional change. A free, capitalist economy is the foundation of a free society.

Adapt To Survive

The Labor party once made great fun of John Howard’s distinction between core and non-core promises. Julia Gillard has now added to that taxonomy: a promise so intolerably core it has to be explicitly denied during an election campaign.

It’s damned hard to reconcile August 2010’s ‘There will be no carbon tax under the government I lead’ with February 2011’s ‘The two-stage plan for a carbon price mechanism will start with a fixed price period for three to five years.’

Labor’s goal during the 2010 campaign was to get over the line and govern another term. Just like any political party. But where Labor broke new ground was by being happy to say anything or promote any idea to get there, no matter how divorced from its own philosophy or the wishes of its supporters.

Disavowing a carbon tax is what US political consultants told Gillard to do. So that’s what Gillard did, no matter what she or her party thought.

Of course, the Prime Minister’s reversal of what seemed a pretty explicit promise not to price carbon says nothing about the rightness or wrongness of that policy. But it says a heap about her approach to politics. She’s very, er, political.

Careful policymaking would be a distraction from the important business of political manoeuvring.

The Greens might bear this in mind as they negotiate with Gillard and her ministers. Any deal is one grumpy focus group or James Carville phone call away from being discarded.

Nevertheless, if all the government’s legislative cards fall in place, after July 2012 Australia will have a price on carbon. That’s almost exactly when poor old Brendan Nelson suggested the Coalition under his leadership would implement one.

Nelson’s policy had an important condition: international action on climate change. It was a more innocent, optimistic time. Kevin Rudd and Malcolm Turnbull also spent 2008 and 2009 rabbiting on about Copenhagen and international agreements.

Yet in 2011 the closest Gillard comes to mentioning the molasses-like movement to international agreement is a vague ‘the global economy is shifting’. Just vaguely shifting, in general.

This modified rhetoric places the government’s climate policy at one remove from its purpose: to combat global climate change.

For this government, a carbon price is no longer about stopping, reducing or slowing global warming – a task which would require concerted, co-ordinated global action. Now it’s just the season’s most fashionable economic reform.

Gillard has implicitly admitted the chances of international agreement on emissions action in the foreseeable future are near zero. The chances that the unco-ordinated and compromised carbon initiatives now being introduced in some countries will have a significant impact on the global climate are even lower.

Don’t underestimate the magnitude of a transition to carbon-free energy production. Or the economic and social change that transition would cause.

The Australian government’s carbon price will start small. But if it is to make any dent in our carbon emissions it will have to be steadily raised, year after year.

Even during the ‘fixed-price’ period which Julia Gillard announced would precede the full emissions trading scheme, the carbon tax will still increase ‘annually at a pre-determined rate’.

Any government facing complaints about the cost of living – justified or unjustified – will find that very challenging.

A Galaxy poll commissioned by the Institute of Public Affairs last week showed that 66 per cent of Australians were unsure about the relationship between human-induced carbon emissions and global warming. This figure has remained steady for at least 12 months.

Combine this finding with survey data revealing that even people who fully accept the dangers of anthropogenic climate change are unwilling to pay the extra money a modest carbon price would demand, and you have quite a political pickle.

Gillard may initially win some political points for a courageous and aggressive stand on climate action. But those points will disappear when higher energy bills are mailed out. Especially since the Prime Minister has effectively taken personal, political responsibility for everybody’s electricity costs.

Hers is a pickle shared by every government which wants to act on climate.

The situation is even more serious in the developing world. Energy poverty is a serious development problem. Traditional home methods of producing energy (burning wood, agricultural residue and animal dung) are a major health hazard for the world’s poor. Economic growth is held back by unreliable or inaccessible electricity.

So no responsible developing world government would penalise large-scale energy production significantly enough to have an impact on the global climate.

The only policy position sensitive to these political realities is a focus on adaptation. Adapting to climate change – whether natural or anthropogenic – is the only approach which accommodates questions of political economy.

Sure, it’s easy to imagine an ideal world where a mechanism can be developed which prices the externalities of pollution efficiently, consistently and effectively – where the best legislators can team up with the best scientists and the best economists to write the best laws which take into account the best research, unimpeded by politics and democracy and the mendacities of self-interest.

But that’s not our world.

If you fully accept the Intergovernmental Panel on Climate Change’s dire scenarios, there’s still reason for optimism. The economist Indur Goklany, poring over the UK’s Stern Review, found that human and environmental wellbeing in the foreseeable future will be, on balance, higher in a ‘richest-but-warmest’ scenario. His argument should carry weight: Goklany has been a long-time delegate to the IPCC. He argues that tackling the consequences of climate change is far more efficient than trying to prevent it.

That is, a rich world is better able to cope with the adverse effects of any climate change than a poor one. When it comes to climate change, it is far more efficient, and far more practical, to treat the symptoms.

And it’s the only approach which takes into account the raw, unforgiving logic of political action.

Artificial Markets: Miles Behind The Real Deal

The Federal Government and its faithful Opposition are falling over each other to say their own climate policy is market friendly.

On Lateline last week, Penny Wong and Greg Hunt each argued theirs was the most faithful “market mechanism” which could be devised.

Perhaps this should be taken as a positive – recognition by both sides of politics that voluntary trade in a free market is the most efficient way to allocate resources. A few decades ago this would have been a very different debate.

But a crucial distinction has to be made. A market mechanism does not make a free market.

Indeed, while market mechanisms like an emissions trading scheme are superficially appealing – it has all the buying and selling that we see in the most dynamic sides of capitalism – they can only ever be a crude approximation of the real thing.

Sure, it looks like a duck. It quacks like a duck. But it swims like a robot which has been engineered to swim like a duck.

Ducks and robo-ducks are different. So are genuine and artificial markets.

Genuine markets emerge, spontaneously and dynamically, to meet demands or to create them. The market order which develops seems harmonious – balanced, as if, by an “invisible hand”.

But of course there is no invisible hand guiding the marketplace. Ideally, the market is only limited by general rules: private property, protection against fraud, and enforcement of contracts.

There are just billions of people working to produce things for other people to buy, and buying things which other people have produced for them.

It works. The efficiency, wealth, and increase in living standards that results from this capitalist dynamic have been recognised, implicitly, by every side of politics.

An artificial market like the proposed emissions trading scheme is a completely different beast. It has a very visible hand indeed.

Every side of the market is created by legislation. The Government nominates the product. The Government nominates the customers. It nominates the producers. The Government controls the supply and restrains the demand. Then it regulates the whole thing over the top.

Someone has to design the rules of the game, the limits, and write the laws which govern them.

The contrived structure of an emissions market leeches away much of the dynamic efficiency it is supposed to encourage.

Markets out in the wild have booms and busts all the time. Artificial markets are even more flimsy and prone to failure. No planner could predict ahead of time the negative consequences of every single line of legislation which will construct this artificial economy.

On The Drum on Friday, the ABC’s Chris Uhlmann speculated how soon the first great crash of this huge artificial marketplace would occur. He could have added these crashes have precedent. Two of the most dramatic corporate collapses in the United States in the last decade have been deeply involved in artificial markets and were pioneering carbon trading.

Enron was an energy company, sure, but its main business was broking – it wasn’t producing much energy, but trading a lot.

And when it traded energy, it was gaming the regulatory environment created by the inconsistencies of Californian electricity “deregulation” in 1998. The opacity of Enron’s business operations mirrored the opacity of the law which created the energy commodity market. And as the firm got increasingly comfortable trading commodities which were for all intents and purposes fictitious, it started trading emissions credits.

Unsurprisingly, Enron was one of the biggest advocates of the Kyoto Protocol.

Enron specialised in markets which were created and managed by governments and regulators. (They also traded in broadband, another highly regulated, imitation market.) Those markets were artificial, the corporate collapse in 2001 was not.

So too that other iconic implosion of recent time: Lehman Brothers. Collateralised debt obligations weren’t the only complex financial instruments Lehman Brothers was buying and selling at a far remove from their underlying value. The financial services firm was looking to be “the prime brokerage for emissions permits”. Like Enron, Lehman too wanted a price on carbon, because then there’d be money to be made selling carbon derivatives.

Much goes on in the dark regulatory complexities of market mechanisms.

Nevertheless market-based schemes are still, on a theoretical level, an interesting way to resolve a public policy challenge.

If you ignore the emissions trading scheme’s crippling complexity, the inevitable exemptions, the free and subsidised permits, the compensation to lower- and middle-income households, the politics, the rentseeking, and the possibility of bureaucratic or regulatory error distorting the framework even further, then perhaps a market is better than no market at all.

Well, it would be, if anybody thought it could work.

The idea behind carbon trading is to neatly arrange a regulatory framework, then let the profit motive and competitive pressures choose the most efficient suite of energy policies. Set and forget.

But there’s been no suggestion that the substantial subsidies and regulatory requirements for renewable energy will be lifted once an emissions trading scheme is implemented. The Renewable Energy Target, for one, will stay. The Government plans one of the biggest economic changes in Australia’s history, but not even they have any faith in it.

A future emissions trading scheme will feature lots of buying and selling, sure. But while it will have all of the risks of a marketplace, it will confer few of the benefits.

Anti-Dumping Laws: In Whose Interest?

It’s hard to top deposing a Prime Minister. But having the management of Rio Tinto replaced by monkeys (as Australian Worker’s Union boss Paul Howes suggested last week) would be pretty impressive too.

The AWU celebrated its 125th anniversary with bluster and assertiveness. It’s been swinging wildly at mining companies, foreign imports, and ministers in the Government it installed.

None of it shows the AWU in a particularly good light. Take for instance the union’s campaign to strengthen the Government’s anti-dumping laws.

“Dumping” occurs when a foreign firm exports into Australia products and sells them for a price lower than in their home market. The idea, in theory, is to put Australian firms out of business, and then jack up prices. Our anti-dumping laws impose selective tariffs on goods to compensate. Lots of countries have similar laws.

So it may seem the union’s “Don’t Dump on Australia” is of minor importance. But the campaign against dumping exposes a simple truth: the union movement is a special interest, acting on behalf of a few favoured sectors of the economy.

Because from the very beginning, anti-dumping laws had almost nothing to do with the theory of dumping.

The first anti-dumping law was enacted in Canada in 1904. New Zealand imposed one in 1905, and Australia in 1906. The US joined the anti-dumping club 1916; South Africa and Great Britain five years after that.

But it was only in 1923 the economic theory of dangers of dumping was formulated, by the economist Jacob Viner in his book Dumping: A Problem in International Trade.

So what inspired the earlier anti-dumping laws? Politics, not economics. The Canadian government first imposed anti-dumping laws to curry favour with domestic steelmakers feeling threatened by cheap US imports.

The rest of the world followed suit. For Australia, anti-dumping legislation was a simple component of “protection all round”.

In other words, anti-dumping is not a measure to defend the integrity of free trade (as Howes claimed last week, saying foreign competitors were “cheating”) but a measure to undermine it.

Anti-dumping laws are protectionism, pure and simple.

As the failures of state socialism have become clearly manifest in the last few decades, Viner’s theory of dumping has been abandoned, along with the arguments for infant industry protection, import quotas, general tariffs, and trade subsidies.

After all, the dumping thesis relies on the possibility of a foreign producer, having eliminated all its competitors, raising prices. But it’s hard to find in the literature an example of a firm ever doing so. It’s not a very good strategy: it’s expensive, and its reward is uncertain. Even if a firm managed to eliminate all its competitors, the moment it raised prices new competitors would flood back into the market.

And if imported goods are only cheap because they’re subsidised by foreign governments, that’s a straight transfer of wealth from overseas taxpayers to Australian consumers.

A Productivity Commission inquiry last year found while anti-dumping measures benefited a few companies, those benefits came at the expense of everybody else’s economic well-being.

It did, admittedly, find the overall cost to the economy was likely to be very small. So the commission recommended keeping the laws for a very specific reason – to placate the fears of some firms (and the union movement) about tariff reform.

That is, for politics, not for good policy.

You could dismiss the Productivity Commission as unforgivably neo-liberal.

But even the Nobel Prize winner Joseph Stiglitz – hardly a doctrinaire free-marketeer – describes much anti-dumping laws nothing more than “creative new measures to block imports” which make “little economic sense”. The first world, Stiglitz argues, uses anti-dumping legislation to shield itself from third world competition.

The AWU is welcome to stand up for what it perceives to be in the interests of its members. That’s its job – to seek special privileges for those who pay the annual fee.

But the union cannot claim the policies it pursues are in the general interest of the Australian economy. (And, as Stiglitz might add, in the interest of third world workers.) The union’s ferocious advocacy of anti-dumping laws is a small but indicative reminder of this.

If the AWU was concerned with all Australians they would campaign to eliminate anti-dumping laws. Lower prices and a more competitive economy benefit unionists and non-unionists alike.

Unfortunately the Federal Coalition has joined the AWU on its anti-dumping crusade: Tony Abbott has also called for an examination of the anti-dumping regime to protect jobs.

The review of 2010 federal election by Steve Bracks, John Faulkner and Bob Carr has reaffirmed the relationship between an antagonistic union movement and a deferential Labor Party.

Given the union movement’s willingness to forego the national interest while protecting its client industries, this should not be welcomed.

Striving For Political And Economic Freedom

It was no surprise that the Economic Freedom of the Arab World Report was launched in Cairo last year.

Egypt has been at the centre of economic liberalisation in the Middle East.

Hosni Mubarak stubbornly resisted political and democratic change, but had much ambition in the economic sphere. The end of the dictator’s grip on the Egyptian presidency comes after a substantial economic reform program.

So the world observes in Egypt not only a people trying to free themselves from dictatorial rule and a police state, but another illustration of the close relationship between economic and political liberty.

Introduce one, and people will demand the other to match.

Reform needs consent. Mubarak isn’t the first dictator to fall because he ignored this requirement, and he won’t be the last.

The Economic Freedom of the Arab World Report rates the 22 members of the Arab League on measures of economic liberty: tax rates, size of government, security of property rights, monetary soundness, regulation, labour market flexibility, and trade barriers.

When the report was launched eight years ago, Egypt was near the bottom of the rankings. For its effort, the country is now dead in the centre. Not as economically free as Kuwait or Bahrain, which occupy the top positions, but doing much better than Algeria and Syria.

Egypt’s government launched an economic reform program in 2004. The tariff burden was reduced from nearly 15 per cent to 5 per cent. Egypt re-engaged forums of trade liberalisation, and facilitating import and export. The company tax rate was reduced from 40 per cent to a 20 per cent flat rate, and their progressive income tax system is now levied at a maximum rate of 20 per cent. The rolling series of privatisations, which had petered out in the late 1990s, were rejuvenated.

As a consequence of these changes, Egypt increased its GDP growth from 3 per cent per year at the turn of the millennium to around 7 per cent. That figure only modestly declined during the financial crisis, to 5 per cent.

And unemployment – commonly cited as a source of Egyptian unrest in the wake of the Mubarak regime’s privatisations – declined during the reform period. At 12 per cent in 2003, unemployment is just over now 9 per cent. Economic reform has been disruptive. It always is. But it has not hollowed out the Egyptian labour market.

Poverty, of course, remains a major problem, as it does across the developing world. Yet while Egypt is very poor, it is not as cripplingly so as those under it on the economic freedom rankings.

Alexis de Tocqueville said the most dangerous moment for a bad government is when it begins to reform itself.

While deregulations, privatisations and other economic liberalisations are rarely popular on their own behalf, the wealth and economic growth they spur usually is. The challenge for would-be reformers is to demonstrate the connection between growing prosperity and those disruptive reforms. And to ensure those benefits can seep through the entire society as quickly as possible.

Any attempt to demonstrate that connection is going to be tough while a country is ruled by a dictatorship.

No amount of positive economic reform will excuse the absence of individual liberties, widespread government harassment, arbitrary arrest, political repression, a justice system divorced from the rule of law, rampant corruption, and restrictions on freedom of expression. And nor should it. An increase in GDP is no comfort for someone who has been tortured in custody just to fill an arrest quota, or someone who is unable to report a sexual assault for fear of being seen as “fair game” by police.

In the same period when Egypt was rapidly up the economic freedom rankings, its ranking by Freedom House, which measures civil and political freedoms, remained stagnant. That stagnation hides hundreds of thousands of individual human traumas at the brutal hands of the state.

Dictators can’t always have it both ways. They can’t reap the benefits of economic growth – with their higher tax revenues and more luxuries to hand to political supporters – and maintain complete political control at the same time. No country can be both a police state and a market paradise.

Sure, the Chinese model seems to suggest otherwise. But China is less economically free, more decentralised, and its constituent parts more unstable than the first country appears. And the Chinese story, like the Egyptian story, isn’t over yet.

Not all economic reform is the same. In developing economies like Egypt, the benefits of privatisations can easily be corrupted by bribery and secrecy.

After all, the idea behind privatisation is not merely to get enterprises off government books as quickly as possible. It is to reintroduce market competition, improve services, and make those enterprises more efficient. Consumers should be the beneficiaries, not politically connected oligarchs.

Unsurprisingly, Egypt’s privatisation program has been dogged by corruption allegations. Whether justified or not (there’s every reason to suspect in many cases they are) those allegations reflect a lack of democratic openness. Egypt ranks poorly on Transparency International’s Corruption Perceptions Index – consistently well below most other Middle Eastern countries.

Corrupt practices, whether on a large or small scale, are the manifestation of a broken, undemocratic, and illiberal political system. A corporate tax rate of 20 per cent sounds wonderful, but is illusory if daily business requires greasing the palms of bureaucrats and police.

Despite a decade of reform, Egypt may no longer have one of the most unfree economies in the Middle East. Yet compared to the rest of the world, it is still terribly over-regulated, corrupt, and dominated by state subsidies and restrictive labour practices. Craig Emerson correctly wrote in The Australian last week that “Political freedom without economic freedom would dash the hopes and aspirations of the region’s youth for a better life.”

The military takeover has underlined how much work there is to be done if Egyptians wish to be both prosperous and free. There are some worrying signs. At this stage the new leaders seem more interested in cracking down on strikes than democratisation. “Stability” is the catchcry of tyrannies everywhere.

The military has, however, promised to continue economic liberalisation.

And if last few weeks have demonstrated anything, it’s that a country cannot reform its economic system and leave a corrupt and oppressive political, judiciary, and administrative system in place.