Category: Articles

Economic Populism: A Minefield For The Liberals

It’s an odd sight to see the Liberal Party push for more regulation of the finance industry.

Joe Hockey said yesterday the Coalition would push for an inquiry into the finance sector, because the banks are “out of control”.

He has a big, bold plan – full of additional powers to regulators, increased scrutiny of bank profits, cracking down on what seems to be risky behaviour, and enlisting Australia Post as an outlet for small lenders. That’s a taste: it’s got nine points. The details will be earnestly debated.

Nevertheless, it seems strange to announce a policy two months after an election with more detail than most of the policies you took to the election.

And having banged on about the Rudd government’s never-ending series of inquiries, the opposition is now calling for one itself.

But, remember, last week Hockey was saying the government should regulate home loan interest rates. It can’t be a coincidence.

Politically, Hockey’s proposals are less about managing risk in the finance sector, and more about being tough on banks. Being tough on banks is very popular.

And as much as Hockey dresses it up, that popularity has nothing to do with the bank’s government guarantees, or the four pillars policy which makes the sector into a quasi-oligarchy.

According to a Galaxy poll commissioned by the Institute of Public Affairs in July, 59 per cent of voters want a super-profit tax levied on banks.

All treasurers and shadow treasurers love to threaten lending banks every time the Reserve Bank lifts interest rates. Afraid of criticising the Reserve itself – that would be an unsportsmanlike violation of central bank independence – the Big Four are fair rhetorical game for politicians wanting to demonstrate their concern for middle Australia.

Kevin Rudd once famously told Westpac to “have a good hard look at itself” after a rate rise. As hard as they try, moral suasion and confrontational language do not change household mortgage payments.

So banking is not well-loved.

Yet Hockey’s intimation last week that he wants to limit interest rates increases was not met with wide acclaim.

One colleague, mistaking it for a Greens proposal, called it a “lunatic, fringe-type” idea. Malcolm Turnbull took a different, but much more hurtful, tack. He adopted a tone of naive confusion, before belatedly backing the shadow treasurer.

Wayne Swan blusteringly compared Hockey to Hugo Chavez, as if his counterpart was one step away from shutting down critical television stations. And every second press article claimed Hockey’s views were a direct repudiation of the Liberal Party’s “free market principles”.

I put that phrase in quote marks because that’s where it gets tricky.

Hockey’s push against banks clearly illustrates the Liberal Party’s uncomfortable balancing act. In opposition, it flirts with economic populism, but can’t quite bring itself to travel down that dark road.

We saw this play out a fortnight ago as well. Shadow finance spokesman Andrew Robb started to talk about using the levers of government to modify our exchange rate. As colleagues publicly proclaimed their confusion, Robb backed away from that one too.

Now both Robb and Hockey are searching around for legislative mechanisms to achieve policy goals that a) don’t get them branded as economic interventionists and b) don’t sound idiotic.

It’s all about finding the right “levers” – a strange word which seems to imply that governing is like running a factory for the first time. Robb and Hockey seem to be hoping there are levers the previous factory owners didn’t know about.

Of course, there are none. Hence the policy confusion of the last two weeks.

In a way, Labor had the same problem. They went to the 2007 election promising to ease cost of living pressures. But there really wasn’t anything Labor could do about prices at the supermarket and bowser; Kevin Rudd settled on the feeble GroceryChoice and Fuel Watch instead.

The Liberal Party has a harder time at this cheap economic populism, because they’re supposed to be, well, “liberal”. Certainly, on balance, the Liberals tend to favour more market oriented solutions to policy issues. And often the party leans towards smaller government than the Labor Party. They usually oppose more regulation, and propose more tax cuts.

But we can all think of dozens of exceptions to the Liberal Party’s free market inclination.

The purpose of a political party is to get elected. And the free market approach to public policy is an unpopular one. This is true across any number of policy areas. If the great financial reforms of the 1980s had gone to a referendum, they would have been rejected. A party that cuts the size of government usually cuts the size of their approval ratings.

Voters are hypocrites: they hate bureaucratic busybodies, but want government to solve their problems. They think there are too many laws, but think there should be a law to fix everything.

Obviously, it’s an ideological minefield out there.

If the last two weeks have shown us anything, it’s a minefield Joe Hockey and Andrew Robb are struggling to navigate.

An Illusion Of Safety

Here’s a way to make driving safer: make it riskier.

A German safety expert recommends we raise speed limits on our roads, not lower them.

Ulrich Mellinghoff, head of safety at Mercedes-Benz, argues that raising the top speed on long stretches of Australia’s roads to 130 or 140km/h could help combat driver fatigue.

Mellinghoff’s argument is counter-intuitive. It will definitely make driving feel less safe, but it could result in fewer accidents. And it fits in with an increasing body of knowledge that suggests government attempts to protect us are have the opposite effect – making us less safe and, crucially, less able to manage risk.

We’ve had widely owned, personal transport for more than a century now. And we’ve learnt a lot about safety in that time. The University of Chicago economist Sam Peltzman famously studied the results of the American 1966 Motor Safety Act that mandated new car safety standards. Instead of making driving safer, Peltzman found, the new standards prompted drivers to be more reckless on the roads, and endangered the lives of pedestrians. Other risk analysts have found the same occurred when seatbelt laws were introduced around the world.

Economists call that ”moral hazard” – when people feel they are insulated from the consequences of their actions and behave differently as a result.

In 2007, a researcher in Bath, England, attached proximity sensors to his bicycle to see how car drivers responded to his bike helmet use. On average, cars came nearly 10 centimetres closer when he wore a helmet than without. Drivers acted much more dangerously because they assumed the rider was safe. These problems aren’t limited to road safety.

The insurance industry is acutely aware that some customers fail to protect their property when it’s insured. Bushwalkers venture further away from civilisation if they believe search and rescue will be there to help them.

Researchers have even found the introduction of improved ripcords on parachutes did not lower the incidence of skydiving accidents. Instead, they just encouraged skydivers to pull their cords later.

We saw the moral hazard dynamic play out most dramatically in 2008, as the global financial crisis looked set to sweep away the entire world economy. Wall Street made riskier and riskier financial trades and employed ever more complex and precarious financial instruments because of an assumption, cultivated over decades, that if they got in too much trouble the government would bail them out. It would be bad if they lost their financial gambles. But they wouldn’t lose the business over it. They were too big to fail.

Calling a company “too big to fail” is a self-fulfilling prophecy. The marketplace starts to imagine the company is unsinkable and relies on it.

Having bailed out other firms, the market really went into free fall when the US government declined to bail out Lehman Brothers in September 2008, dramatically reversing that assumption.

It wasn’t the government’s failure to bail out Lehman Brothers that caused the panic. It was implying they would do so, and at the last minute whipping the protective blanket away.

The long-term cause of the financial crisis was the suggestion the government would do anything to protect bankers. The short-term cause was that it didn’t.

This isn’t an argument against seatbelts or bike helmets. Seatbelts combined with drink-driving laws, education and cultural change have reduced Australia’s road toll significantly. But it should be a warning: many of the well-meaning attempts to make us safer are counterproductive, making us more likely to take risks, and less likely to think about the consequences.

There are solutions. In a revolution in traffic management across Europe, a number of towns are removing traffic lights, stop signs, and other road markings. Once eliminated, drivers enter intersections more slowly and more attentively. Instead of focusing their attention on signs, they make eye contact with other drivers. They negotiate. Accidents in these towns have dramatically declined.

The Dutch have been experimenting with “shared streets”, where the barriers between pedestrian walkways and roads are eliminated. Again, this sounds abominably dangerous. But when guard railings between the footpath and the road were removed from London’s Kensington High Street, accidents fell by 47 per cent.

A spontaneous order emerges when people feel they are fully responsible for their own driving. And it’s a safer one than in a traffic management system that tries to push drivers along pre-determined paths, barking orders along the way.

It’s like the spontaneous order that emerges in society and markets when people are responsible for their actions. So let’s hope risk and reward can be rejoined in the financial sector too.

We talk a lot about helicopter parents who over-parent and insulate their children from the world. The obvious downside of this kind of parenting is that children learn nothing about managing danger.

Perhaps it’s time to talk about helicopter governments as well: always hovering above their citizens, ready to swoop in the moment they stray off the safest path.

It’s An IKEA World

It’s a tiny squeak in the roar of global capitalism, but IKEA has altered its ubiquitous Billy bookcase ever so slightly.
The fasteners which fix the top, middle, and bottom shelves in place are now plastic, not metal.
And the studs on which the adjustable shelves rest are no longer simple cylinders but hollow little cups with a lip which rests against the side of the bookcase. The new studs are vastly more complex pieces of industrial design; thinned at the end, but ridged to “grip” the walls of the holes they are stuck in.
The old studs weighed three grams a piece. The new studs weigh just one gram.
The changes to studs and fasteners are nearly imperceptible. But there are sixteen studs per bookcase. The bookcases are shipped all over the world – flat-packed into cardboard boxes, stuffed into the omnipresent containers of global capitalism, and sent to one of IKEA’s 267 stores.
If you multiply the weight saving over the 3.1 million Billy bookcases produced every year… well, you can bet IKEA’s management knows exactly how tiny changes add up.
The retail price of the Billy has declined over the last 30 years in every country it is sold. A few years ago, the basic Billy sold in Australia for $99. In the 2011 catalogue, it was listed as $79.
No company epitomises global capitalism more than IKEA.
After all, at first glance, it’s an unusual space for an innovative company to occupy. Furniture is hardly cutting edge, retailing furniture made largely of wood even less so. There’s no fashionable Moore’s Law (the theory the processing power of computers doubles every two years) for cheap couches and brightly painted wood side tables. IKEA is far from the realm of biotechnology or the information technology.
Yet few companies play the capitalism game harder.
For example: IKEA pays next-to-no tax. It isn’t even a Swedish company: the umbrella body for most of the stores is registered in the Netherlands, and it’s registered as a charitable foundation. The company fled Sweden in the 1970s because of the Scandinavian country’s inheritance tax (now abolished) and its high income tax (definitely not abolished).
Observing IKEA’s low tax burden is not to criticise it. Any company is within its right to minimise its tax profile while observing the law. Just as individuals hoard receipts for their personal tax deductions, companies are entitled to do the same.
But it is to point out that IKEA’s success at avoiding its tax liability is in our interest – we reap the benefits of an aggressively capitalistic company pushing hard against its competition.
The furniture isn’t always good quality. (Is it ever good quality? I don’t imagine there will be many IKEA heirlooms.) But it’s damn cheap.
And the company offers aesthetics and design affordably to those who can’t afford an Eames lounge chair or a Regency writing desk. In previous generations, the young and the poor scrounged for furniture at op shops and garage sales. In the 21st century the young and the poor buy Grevback, Husa and Rykene. It’s often cheaper, and they get to pick the colour.
That should be reason enough to celebrate capitalism and the dynamics of the marketplace.
But by and large we don’t. We dismiss or ignore the micro-innovations we see around us – the ever so slight increases in our standard of living.
Think of the tiny changes to products at supermarkets which may be little, but are genuine help.
You can buy grated parmesan cheese in single serve packets. Honey now comes in squeezable, plastic containers, which is pretty convenient, but also designed to be upside down, to harness gravity, and with suction lids, to keep the container clean.
These sorts of innovations may seem trivial. They aren’t. Some of them – like the changes to the Billy bookcase – keep prices down and profits high. Others reduce waste. Others just ease petty frustration.
Critics of the market economy claim we’re getting unhappier, fatter, less virtuous, dirtier, and more iniquitous.
I think for the most part the data suggests the critics are wrong. But put aside those debates for a moment. And celebrate the joy of capitalism: the trickle of innovation, invention, efficiency and entrepreneurship which steadily, gradually, but inexorably increases our living standards.
That means celebrating better hairdryers, cheaper linen, sturdier toothbrushes, more cup-holders in cars, flexible silicon bake ware, safer razors, a wider variety of cheaper clothes, and stronger dishwashing gloves with longer sleeves. (Matt Preston might also point out paper towels are more robust these days.)
None of these products are exposed to the argument they’re just indicators of conspicuous consumption: nobody ever impressed with a Billy bookcase or toothbrush.
They’re just the things we quietly enjoy. And they’re result of millions of people competing in a global economy to make our lives just a fraction better.

Individual Liberty In The Eyes Of A Novelist

Novelists often have strongly held political views. Nobel Prize-winning novelists are obviously no exception.
 
But what is surprising about the winner of this year’s Nobel Prize for Literature, the Peruvian Mario Vargas Llosa, is just what those political views entail. Vargas Llosa is a classical liberal. With varying degrees of sympathy, Australians might call his politics free market liberalism, libertarianism, or neo-liberalism.
 
In other words, he’s a supporter of liberty. And not in the vague, collectivist sense offered by those who speak of freedom as taking control of the state for their own purposes. But in the individual sense. Vargas Llosa supports low taxes, limited government, private property, and free markets. He’s even a fan of business, describing it in a 2003 essay as a “beneficent institution of development and progress”.
 
While most commentary has mentioned Vargas Llosa’s strong political beliefs in passing, his politics is more than incidental to his life and work. He won the Nobel “for his cartography of structures of power and his trenchant images of the individual’s resistance, revolt, and defeat”. The thread which ties his novels together is the human desire for freedom, and many of his essays and non-fiction work apply liberal philosophy to Latin American politics.
 
One of the earlier political controversies he engaged as a liberal was opposing the nationalisation of the Peru’s banks by president Alan García in 1987. García, who has had a second term as president since 2006, now celebrates Vargas Llosa’s Nobel win.
 
On the back of that campaign, and with a new liberal political party, Vargas Llosa ran for the Peruvian presidency in 1990. He lost.
 
Since then he has been Peru’s most prominent and fearsome advocate for individual liberty and liberal democracy. His influence in Peru is so substantial he triggered a ministerial ousting last month when he resigned from a museum committee to protest a new law excusing human rights abuses under Alberto Fujimori, Peru’s president during the 1990s. Fujimori is now in jail, but has many allies in Peruvian politics.
 
Vargas Llosa has had a long running stoush with Cuba’s Fidel Castro, and Venezuela’s Hugo Chavez, describing the latter as autocratic. He has close relationships with free market think tanks in Latin America, in the United States and around the world.
 
That’s his political credentials. But why are they so surprising? Vargas Llosa has just won one of the highest prizes for literature. There’s been speculation his political views meant he didn’t get the Nobel earlier.
 
We seem to presume that culture is the sole responsibility of the left. Perhaps justifiably: I don’t think it’s overgeneralising to say the majority of artists, actors, writers and musicians profess near uniformly social democratic views.
 
The Argentinian writer Luisa Valenzuela said Vargas Llosa’s liberal politics “stains his literature”.
 
Liberalism is easily caricatured. First as a political philosophy of cruelty that believes all people should be subjected to the harsh storm of the marketplace. Only those who manage not to drown deserve to survive. Or alternatively, as a dictatorship of the accountants, obsessed with efficiency and streamlining above all human concerns.
 
Against these caricatures, liberalism’s critics offer a vision of a society built on compassion and cooperation. And this vision is easy to sentimentalise.
 
Certainly, liberalism resists collective goals. As a philosophy it provides no support for the pursuit of national greatness, which throughout history has been the source of much romantic sentiment. So liberals struggle to tell “national” stories as they are sceptical that artificial collectives like the nation have any real moral agency. Only individuals do.
 
In 1997, Vargas Llosa told the Los Angeles Times that the great battle of the future was the “battle against borders, against this provincial, small, petty vision that defines a human being through the idea of a nation”.
 
Vargas Llosa’s achievement is to show that liberalism has its own romantic elements. Individual liberty is as much a cultural achievement as a political one. When individuals are able to pursue their own goals, free from the structures of the state or the collective, they are able to self-actualise – to realise their own potential and live their preferred life.
 
It was, after all, the development of individualism that provided the spark for modernity. The great Swiss historian Jacob Burckhardt argued the cultural and philosophical achievements of the Italian Renaissance were largely attributable to the idea of the individual as a unit. It’s easy to trace this idea through history to the 21st century political philosophy espoused by liberals like Vargas Llosa.
 
Last week the Mexican historian Enrique Krauze described Vargas Llosa’s win as “an act of justice toward literature and toward liberty. They are two inseparable words”.
 
If nothing else, his deserved Nobel Prize should remind us that culture, art, and creativity are not just franchises of left-wing politics. Individual liberty has the capacity to stir the heart as much as collectivism.

The Expansion Of Presidential Power

In the United States, many thought Barack Obama’s election would be the moment the rule of law reasserted itself in the fight against jihadi terrorism.

After all, that’s what he promised – ending the use of torture and extreme rendition, revising the Patriot Act, closing down Guantanamo Bay detention camp, eliminating warrantless wiretaps, and restoring the right of prisoners to challenge their detention.

So the debate whether the Obama administration has the legal authority to assassinate an American citizen without any due process is pretty unedifying.

The citizen in question is Anwar al-Awlaki, a radical Muslim cleric. He’s probably holed up in Yemen. In April, the administration authorised his assassination.

Now his father is suing the government to prevent the government doing so. In response, the administration asked the court to dismiss the lawsuit because it involves state secrets.

There’s no doubt al-Awlaki is a bad guy. He’s reportedly called for American Muslims to wage violent jihad against the US. His sermons have been attended by an array of accused and convicted terrorists. He’s apparently the inspiration for the Times Square bomber and the Christmas Day bomber. The US government now claims he’s gone from encouraging terrorist attacks to actively participating in them.

American governments have long had the power to assassinate those waging war against the United States.

Yet assassinating a US citizen goes well beyond anything previous administrations have ever been able to do. A senior Bush legal official told the New York Times he couldn’t recall any similar case.

And, Barack Obama – or, at least, Barack Obama’s lawyers – believe the president has an absolute right to do so without limitation and without scrutiny.

As the legal commentator Glenn Greenwald wrote, the Obama administration seems to believe that “not only does the president have the right to sentence Americans to death with no due process or charges of any kind, but his decisions as to who will be killed and why he wants them dead are ‘state secrets,’ and thus no court may adjudicate their legality.”

One could make the case al-Awlaki has so abrogated his American citizenship he is effectively a foreigner, and that his threat to the US is so substantial they have no choice but to assassinate him. But that’s a case they should make to a court. Instead, the administration believes the government shouldn’t have to justify targeting the cleric.

This argument proposes the US president be given absolutely unlimited powers.

No matter how hawkish you are on the war on terror, that’s a bad idea.

In her 2008 book, The Dark Side: The Inside Story of How The War on Terror Turned into a War on American Ideals, Jane Mayer laid out how the administration of George W. Bush fumbled its way into its security framework.

Guantanamo Bay, the renditions, the blurring of legal and illegal torture, and the augmenting of the president’s war powers were a result of panic after September 11 attacks and an escalating security machismo within the White House.

The urgency meant it took less than 12 months for these policies to be fixed in place.

That’s not an excuse for the Bush administration blundering – and there was a lot of blundering while the administration tried to reform criminal processes to fight a war against terrorists. And it’s no excuse for their utter disregard of due process, civil liberties, and individual rights. But it is an explanation.

By contrast, it is nearly incomprehensible that, a decade after the September 11 attacks, those powers are still expanding rather than contracting.

Certainly, terrorism remains a national security problem in the US and around the world. Recent warnings about threats in Europe and India remind us of that. But the direct political pressure over terror has been relieved – partially due to the global financial crisis, which displaced public fear of the risk of attack with a much more real fear of unemployment.

And many of the tactics deployed after 2001 have been, in retrospect, dismal failures.

The effort to prosecute accused terrorists through military commissions rather than the civilian legal system has been decidedly uninspiring: those who could have been jailed for life had they faced the full gamut of civilian charges have received peculiarly light sentences.

The recent expansion of presidential power is made worse by the fact that Obama specifically campaigned against legal abuses in the conduct of the war on terror.

This brazenness is unlikely to hurt the president. Many in the American left have been reluctant – even embarrassed – to admit Obama has doubled down on some of the most reviled policies of the Bush administration. Those who do point out a Palin administration would be far worse.

And conservatives are more eager to criticise Obama for being too soft on terrorism than being unprecedentedly bold.

In his new book Obama’s Wars, Bob Woodward quotes the president claiming the US could “absorb” another terrorist attack. This has been described as a gaffe. And, from a political perspective, it is. But it’s also an uncommonly honest reflection of the nature of the terrorist threat.

If only that moderation was translated into policy.

Silenced In Court

Andrew Bolt is getting sued. Don’t applaud yet. There’s been a lot of outrage about the federal government’s proposed internet filter. But lawsuits like the one now faced by the prominent conservative Herald Sun columnist are as much a restriction on freedom of speech as anything Communications Minister Stephen Conroy has come up with.

Nine people are suing Bolt for an article that claimed their Aboriginal self-identification was “fashionable”. He had said they all had part-European, part-indigenous heritage (and fair skin) with an opportunity to describe themselves as a range of nationalities. But, he wrote, they chose to describe themselves as Aboriginal. Doing so gave them “political and career clout”.

At worst, Bolt is deliberately and provocatively disrespectful.

But as their lawyer has pointed out, there are two tests of whether someone is Aboriginal. The first is an objective genealogical test: a fairly clear cut question of whether they have Aboriginal ancestors. The second is subjective: whether a person chooses to self-identify as indigenous, and whether they are “communally” regarded as such.

Bolt’s columns criticised political appointments and government awards that pivot on an individual’s Aboriginality. They’re absolutely within their rights to apply for those grants, prizes and positions. But like it or not, by sponsoring things like indigenous-specific art and literary awards, the government makes what constitutes Aboriginality a political question.

And it’s a question academics have been trying to unpack for decades. Universities teach courses in the “concept of Aboriginality”. Surveying the literature in 2002, the Parliamentary Library could only conclude “an individual’s ethnic identity is always to some degree fluid, multiple, differing in degrees, and constructed”.

Of course, Bolt tackles the issue with trademark belligerence. The merits of his argument will now be tested in court. But put aside the conservative commentator. This isn’t about the collected works and opinions of Andrew Bolt. And put aside the complexities of racial identity, Aboriginality and reconciliation.

This case is troubling because of what it says about our right to freedom of speech. If successful – or just really expensive to defend – this lawsuit could have a stifling effect on political debate.

The 19th century philosopher John Stuart Mill argued that only by airing contested views publicly and freely could the truth be known. Societies need free speech if only to test and challenge controversial opinions.

And we’re not going to have those necessary debates while legal action stifles one side. No matter how wrong or misguided that side may be.

Silencing Bolt doesn’t just silence him. It potentially silences the speech of others who might be afraid of being similarly dragged through the legal system.

After all, Bolt and his employer can afford to defend themselves. No doubt they have lawyers on call. Newspapers know their way around court.

By contrast, bloggers, amateur journalists, Twitterers and Facebookers commenting on sensitive political issues – for whatever reason, with whatever motives – are much more exposed to punitive legal action than newspaper columnists are.

Should only the rich be able to have controversial views? If anything is going to suffocate the blossoming citizen media, it will be lawyers.

Bolt is being challenged under the federal government’s Racial Discrimination Act. But that’s hardly the only law on the books that has a damaging impact on free speech. Our politicians have a long and shameful history of using Australia’s defamation laws to sue their critics – threatening someone with a defamation suit is a public relations tactic.

In Victoria, our Racial and Religious Tolerance Act, introduced in 2001, has been co-opted as a stick for religious groups to hit each other.

First, the Islamic Council of Victoria took the fundamentalist Christian Catch the Fire Ministries to court. Then a Wiccan prison inmate took the Salvation Army to court. Then the Australia-Israel Jewish Affairs Council threatened to take the Islamic Information and Services Network of Australasia to court.

That’s a shabby record for a law supposed to promote tolerance, not division.

Suppressing offensive views can be counterproductive. The churches and mosques targeted by the Victorian Racial and Religious Tolerance Act were able to say their beliefs were being persecuted – attracting more followers. The victimised dissident is a hero, not a villain.

To his credit, Bolt is a prominent critic of Victoria’s vilification laws. Last year, the Human Rights Consultation Committee faced the task of recommending what should appear in an Australian bill of rights. It struggled to balance our right to free speech with a new “right” demanded by some – the right to not be offended by the speech of others.

But there are an infinite number of ways people could be offended. How could we possibly prevent all outrage?

You can have the right to free speech, or you can have the right to be protected by the government from the offensive speech of others. You can’t have both.

There are other ways to respond to distasteful views.

Refuse to buy the Herald Sun. Tell your friends to do the same. Condemn it in other opinion columns. The solution to bad speech is more speech. If something is offensive, it deserves to be condemned, loudly and often.

This week saw the first Aboriginal member of the federal House of Representatives sit in Parliament. Ken Wyatt is a Liberal. He promised to advocate for Aboriginal and Torres Strait Islander people in Parliament. His mother was one of the stolen generations. In his maiden speech, Wyatt thanked Kevin Rudd for the 2008 apology.

That’s a genuine step towards reconciliation. Wielding the legal system as a weapon to try to silence critics isn’t – no matter how offensive they might be.

Carbon Price Makes No Policy Sense

Gillard will need a big policy win this term. Even better if it’s a win on the policy that sank her predecessor.

So it was hardly surprising that the call by Marius Kloppers of BHP Billiton for a carbon tax was quickly affirmed by the new climate minister Greg Combet.

Julia Gillard announced the makeup of the oddly secretive climate change committee yesterday. She’s getting all her ducks in a row for a price on carbon of some description.

But domestic politics isn’t the main climate game. International politics is. And right now, the prospects for a global agreement on climate change couldn’t be lower.

Diplomats are pouring as much cold water as they can on hopes for securing an agreement in Cancun in December. “The likelihood of a continued deadlock remains significant”, said the director of the UN Framework Convention on Climate Change last week. George Monbiot wrote in The Guardian, “The closer it comes, the worse it looks.”

You don’t have to be a climate change sceptic, denier, pessimist, realist, optimist or scientist to recognise dealing with real or potential consequences of greenhouse gas emissions is the ultimate collective action problem.

As it’s a problem of collective action, it makes little sense for countries to “go it alone” – particularly nations like Australia, who would easily see their carbon emissions move to jurisdictions which aren’t playing along.

The government implicitly agrees. It’s why we have two proposed emissions reduction targets – an unconditional 5 per cent for now, and 15-25 per cent if there is a binding global agreement to do so. The difference between these two targets is an admission that reduction is substantially less meaningful without international action.

Treasury agrees too. Their modelling of the Rudd government’s Carbon Pollution Reduction Scheme in October 2008 assumed all countries around the world would implement the same scheme at the same time.

There’s a precedent for international policy action: the sixty year long quest for multilateral free trade agreements. Like emissions reduction, trade has been the subject of numerous international conferences and diplomacy.

But unlike emissions reduction, free trade is unambiguously in the self-interest of every nation. This is true even if other nations do not open their markets. In a world of high tariffs and subsidies, a country which unilaterally lowers trade barriers – as Australia did – is still better off.

Despite this, the fight for freer trade through global agreements is excruciatingly slow and now seems to be stagnating.

Those failures say nothing of the worthiness of the free trade project. Just that international politics is an ineffective and frustrating mechanism to pursue policy goals.

That’s not a good omen for a global treaty on emissions reduction, where countries can benefit by avoiding their emissions reduction obligations. Unlike free trade, it’s in their self-interest to cheat.

Recognising that is not being a sceptic about climate science, but a realist about politics.

Certainly, many countries are doing little bits of climate change mitigation here and there. We’ve had a national Mandatory Renewable Energy Target for nearly a decade now, and countless subsidies and programs.

We’re hardly alone. Even China is talking about imposing a domestic carbon trading scheme. And on Friday last week, a senior Chinese climate negotiator declared his country would seek a binding climate treaty by the end of next year.

Sounds definitive, but there’s more to that declaration than a headline may suggest. The Chinese blame the Americans for wrecking Copenhagen: “The biggest obstacle comes from the United States”, according to their negotiator. But after China’s calculated theatrics at the Copenhagen summit, it’s hard to take them at their word. Chinese statecraft is increasingly cantankerous and contrarian. Big statements have to be seen through that prism.

Yes, China is cleaning up its coal-fired power stations – as they should – but their average efficiency is still well below those in the developed world.

And the country has generous subsidies for renewable energy. There’s more to those than the headlines suggest too: a report in the South China Morning Post last week pointed out they badly underperform. Wind turbines turn for an average of 75 days a year, compared to 110 days in England. Few wind turbines and solar plants are even connected to the electricity grid.

In Australia, the Green Loans scheme was exploited by opportunists looking to make a subsidised buck, with negligible environmental benefit. In China, those green subsidies are much larger, in a much larger country, and embedded in a much more corrupt and opaque political system.

Yet as business writers keep pointing out, China has an “advantage” in the climate game. It’s a dictatorship. It only has to justify its policies so far.

The rest of the world will be even harder.

The International Energy Agency said last week energy poverty in the developing world is a big reason it doesn’t look like we’re going to achieve the Millennium Development Goals.

1.4 billion people lack access to energy. Most of those are concentrated in Africa and on the Indian subcontinent. The health and wellbeing consequences are substantial. Those nations – 1 billion people in Africa, 1.1 billion in India – will be unlikely to go along with any policy that would restrain development. When you live below the poverty line, a ‘small’ price on carbon is not trivial.

China’s public relations blitz notwithstanding, the chances of a binding and meaningful agreement have diminished since Copenhagen, not increased. The European Union’s climate action commissioner Connie Hedegaard said last month “These negotiations have if anything gone backwards.”

The Stern Review said “no country can take effective action to control the risks that they face alone”.

And it’s now clear we can’t rely on international action.

It makes political sense for Gillard to jump into a comprehensive carbon price this term. But it still it makes little policy sense.

Bankrolling Oprah: The New Tourist Strategy

Fifty per cent of all advertising is wasted, says the marketing cliché. The problem is figuring out which fifty per cent.

Last week we had a rare burst of honesty about the usefulness of the money governments spend on high profile tourism campaigns. The former Tourism Minister John Brown admitted, “We spent hundreds of millions of dollars over 30 years without much effect, I must say that honestly.”

Brown was a minister in the Hawke government when he commissioned and oversaw the famous Paul Hogan “Throw another shrimp on the barbie” ads during the 1980s. That Hogan campaign is constantly held up as the greatest success story of Australian tourism. It’s the yardstick by which all other campaigns are measured.

So his admission it’s all been an enormous waste of cash is unlikely to feature prominently in Tourism Australia’s next annual report.

Brown was helping announce Oprah’s visit to Australia. Her visit is being heavily subsidised by Australian taxpayers: Queensland is chipping in $400,000, New South Wales between $1 and $2 million, and the federal government $1.5 million.

Oprah is personally worth an estimated US$2.5 billion, so clearly she doesn’t need the money.

But Brown doesn’t want us to be “cynical about the cost”. The current tourism minister, Martin Ferguson, is sure it is “money well spent”.

Special Oprah-in-Australia episodes will go to air next January alongside Tourism Australia’s G’Day USA campaign. And, the government hopes, American dollars will flood in.

Maybe millions for Oprah will succeed after millions for “Where the bloody hell are you?”, the Baz Lurhmann Australia tie-in campaign, and 2004’s “Australia: A Different Light” with Delta Goodrem and Richie Benaud, failed.

The Oprah effect can turn a book into a bestseller just by being featured on her program. Our tourism bureaucrats are hoping that scales to continents.

But I don’t want to dwell too much on the specifics of the Oprah visit.

The federal government’s thinking about tourism has always been woolly. Tourism promotion has been a swamp in to which the government has poured cash and consultants for decades.

In Crikey in June, Noel Turnbull pointed out the government is running two simultaneous marketing campaigns, with contradictory messages. The first is a branding campaign which suggests there’s more to Australia than people think. The second is a tourism campaign which suggests there isn’t; that we’re all about glossy surfaces and pretty landscapes.

One wonders how many marketing and public relations consultants are going to feed on the Oprah campaign.

But why are governments doing tourist promotion at all?

The overwhelming beneficiaries of tourism dollars are private industry: hotels, restaurants, transport, souvenir shops, pubs, cafes, barbecue manufacturers and shrimp farms. Tourism promotion does their marketing for them – the government spends millions of dollars trying find customers.

Certainly, the government gains a small amount of money from the GST levied on things tourists might buy. But the same holds true for all Australian industries selling products to Australian nationals – the government gains a little from every sale. So such logic would suggest the entire advertising industry should be subsidised by government.

If the benefits of promotion are so enormous, the tourism industry should be paying for it themselves. There’s no reason they can’t band together in another of their many peak bodies to sponsor international marketing campaigns. Let industry discover which half of advertising works and which half doesn’t.

Government policies designed to promote tourism almost always end in disappointment, as John Brown recognised.

But we don’t only push out ads. We also spend vast sums on events to try to lure in overseas crowds.

The major events strategies of Commonwealth and state governments are predicated on a belief that big sporting contests translate into big touristy payoffs.

This month is the 10th anniversary of the Sydney Olympics. We ran a good event. But we got a bad Olympic hangover. Visitor numbers to New South Wales actually declined relative to other Australian states. It’s not our fault: Beijing and Athens had the Olympic hangover too.

The Sydney Olympics was a bigger deal than Oprah’s tour ever could be. We earned a great deal of international goodwill and publicity in those few weeks in 2000. But tourism went backwards.

In Victoria, the Grand Prix – the pride and joy of the Victorian tourism lobby – isn’t even paying for itself anymore. It posted a $49.2 million loss this year, and was promptly bailed out by the state government.

Here’s hoping Australia doesn’t win the privilege of hosting the World Cup.

There’s good reason to be sceptical that Oprah is the tourism spend to buck the trend. The former tourism minister may be optimistic about Oprah’s visit but history tells us we shouldn’t be.

Savaging a popular policy a tricky task for Turnbull

Malcolm Turnbull’s elevation to the shadow communications portfolio may be just what the debate over the national broadband network needs. It could be just what the Liberal Party needs, too. But Turnbull has a hell of a job: to persuade the electorate that a gigantic, government-subsidised gift of a super-fast internet is a bad idea. An Essential Report poll late last year found 65 per cent of Australians thought it was important the NBN was built. Sixty per cent of Coalition supporters did, too. As a general rule, Australians like free stuff even if eventually they have to pay for it through tax.

Both the government and the opposition have lined up their new portfolios in time for the next sitting of Parliament.

The election is over and Lab or wants change, not continuity. Julia Gillard has tried to eliminate all traces of the embarrassing Kevin Rudd era.

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On the other side, the Coalition did astonishingly well at the election. So, Tony Abbott’s thinking goes, why fix what’s working? Turnbull’s move to communications is the only significant change.

The Coalition’s broadband message was an unmitigated disaster during the election – the biggest problem with an otherwise robust campaign.

It’s possible that Abbott is laying a cunning trap for his rival. From now on, the debate over the broadband is going to be intimately linked with Liberal Party leadership questions. And who would want to be saddled with the job of opposing one of Labor’s most popular policies?

But Abbott needs Turnbull to do well. Ever since he took over in November 2009, Abbott’s leadership has burnt fast and hot. His strategy was to barge into The Lodge. Now it seems likely the Coalition faces a full term in opposition. Abbott has to turn off his fast burn and apply slow, indirect heat to the Gillard government. He will need his shadow ministers to break down government policies bit by bit, not try to blow them up as quickly as possible. In other words, Abbott is relying on Turnbull to make the broadband network look like insulation, not the mining tax. Turnbull may be able to do so.

Since 2007, the government’s Communications Minister, Stephen Conroy, has successfully portrayed any Coalition critic of his broadband plan as a Luddite, as if they were opposed to the very idea of the internet and just a sledgehammer away from machine breaking. Conroy won’t be able to play that card now. You couldn’t parody Turnbull’s love of technology. He was not just the chairman of Ozemail; he recently released an iPhone application dedicated to all things Malcolm.

The Coalition can’t stop the broadband network, but it will be able to show how poorly thought through the project has been. After all, the network the government is building is not the network it took to the 2007 election. That first plan failed.

On a now infamous flight between Canberra and Sydney in April last year, Conroy used the time he could get with Kevin Rudd to explain their $4.7 billion scheme wouldn’t work. The two men sketched the

$43 billion scheme we’re getting now.

If we’ve learnt anything about the internet, it’s that we always find new uses for it and we always want more speed. But that doesn’t mean this specific network at this specific price, built in this specific style is the best way to get it. And it doesn’t mean the network has to be built by government. Before the 2007 election, Telstra was desperate to roll out high-speed broadband itself. Had the Howard government made some regulatory changes, we would already have the network at no cost to the taxpayer.

There’s a catalogue of problems with the NBN. A decade after Telstra’s privatisation, the government has taken responsibility for telecommunications.

Unfortunately, the Coalition’s alternative policy does little to resolve the deep regulatory issues that have held back Australian broadband. But right now, the burden of proof is on the government to show its NBN is worth the price tag.

The Liberals need their old, discarded leader to knock serious holes in the national broadband network.

Chris Berg is a research fellow with the Institute of Public Affairs.

Tea Party conservatives are brewing up a storm

It was hardly needed, but the Tea Party confirmed this week it’s a big deal in American politics. It’s a big deal for conservative politics internationally. New technology is giving conservative activists the power to form the sort of genuine grassroots movements the left has been for decades.

On Tuesday, the Tea Party scored a huge win when Christine O’Donnell beat Mike Castle in a Republican Senate primary in Delaware. Castle is the embodiment of an establishment Republican. He’s enjoyed a nine-term run in the House of Representatives. He was Delaware’s governor for seven years. He’s a great-great-great-great-great grandson of Ben Franklin. He’s very, very moderate.

He lost to the deeply conservative Christine O’Donnell, who carried a Sarah Palin endorsement. Defeating Castle scored her one of the biggest victories of the Tea Party so far.

Few overseas political movements are less clearly understood in Australia than the Tea Party. That’s no surprise. Sometimes not even the Tea Party is entirely sure what it stands for.

Take a questionnaire for Republican and independent candidates, written by a small, obscure Tea Party group in Erie County, Ohio. They call themselves the Freedom Institute. To get its approval you must believe marriage is solely between a man and a woman, gays should be kept out of the military, tariffs should be increased, the Federal Reserve should be abolished, and ”the regulation of carbon dioxide in our atmosphere should be left to God and not government”.

The Freedom Institute wants tax cuts and government workers to be exposed to ”the free-market system”. But they also want to impose trade barriers to keep jobs in the country. They want their politicians to be conservatives, but populist conservatives with some eccentric and jumbled views.

But compare the Freedom Institute’s list with a similar one supported by FreedomWorks, a large non-profit organisation with headquarters in Washington. They sum up the Tea Party’s central tenets as: start fundamental tax reform, stop the tax hikes, end runaway government spending, and protect the constitution. In other words, limited government, low taxes, and an end to government waste.

Few of those policy positions would be opposed by conservative, small-government Republicans. In Australia, they’d easily recognised as free-market liberalism. But for the international press, the Erie County list is far more interesting. The revolt against the Republican establishment is as much a revolt against big spending, big taxing George Bush as it is against the Obama administration.

Bush’s Republican administration instigated the rolling program of Wall Street bailouts which have plunged the US into debt. The US government deficit this year will be $1.3 trillion. That’s larger than our entire economy.

A Bloomberg poll found overwhelmingly the thread which ties the Tea Party together is a belief the US has lost its way in the past few years. Eighty per cent agreed the recent expansion of government was a threat to liberty.

A CBS/New York Times poll found Tea Party supporters tend to be more educated than the general public. And they’re not bad judges of character. The majority believe Sarah Palin is unqualified for the presidency. Bear that in mind when you next hear the Tea Party dismissed as a crazy fringe.

The political class isn’t sure what to make of the Tea Party. It comes from outside the polished environs of Washington. Few members have been involved in politics before.

They’re all simply plugged into networks of blogs and mailing lists. That makes the Tea Party sometimes confused, often naive, and easily led astray. It also makes its members powerful.

In Australia, we just saw how potent a conservative grassroots can be. The implosion of the parliamentary Liberal Party late last year over climate change was driven by a membership which saw Malcolm Turnbull’s support of the emissions trading scheme as unacceptable.

Thousands of emails were sent by party members and others calling for the position to change. In the end, they had to change leaders. Hopes for bipartisan climate action disappeared, and Kevin Rudd’s prime ministership died in the Liberal party room. A conservative grassroots destroyed a Labor prime minister.

Compare the attention that movement got to the praise heaped upon the even tiniest left-wing movement. Poor old GetUp! wishes it was half as effective as the Liberal membership last November.

Technological change has given conservative popular movements the power to challenge their establishment in the same way left-wing movements have for half a century. That’s the real story of the Tea Party.

It may get sucked into the Republican mainstream. Or its candidates may fail at election time. But the Tea Party isn’t wrong. America has serious problems. Those problems have energised the conservative base.