Opening statement to Commonwealth Senate Select Committee on Red Tape inquiry into the effect of red tape on the sale, supply and taxation of alcohol

With Darcy Allen

The Institute of Public Affairs welcome the opportunity to appear before this inquiry. Red tape is one of the most pressing challenges facing Australia. A recent IPA estimate calculated that red tape costs us $176 billion in forgone economic output every single year. That $176 billion is more than we pay in income tax and it is the equivalent of Australia’s largest industry. Cutting red tape is one of the keys to ensuring our future prosperity; therefore the present inquiry into red tape is welcome. Liquor licensing in particular is a significant burden on Australian businesses. This is a red-tape problem not only for late-night venues but for thousands of cafes and restaurants across this country.

If we look to South Australia as an example, there are more liquor licences for restaurants than under any other category. Business owners spend millions of dollars in compliance costs each year and these pieces of red tape generate economic distortions that hold our country back. The central contribution of our submission is a broad, cross-jurisdictional analysis of liquor-licensing regulations. We have two main findings. First, that across various states there are multiple different types of liquor licences, sometimes over 10; and, second, many jurisdictions exhibit complex and tiered fee structures ranging into the tens of thousands of dollars. Based on these findings, we make three recommendations. First, Australian states and territories should seek to streamline the number of licence types to the minimum viable level. A wide range of different licence types acts to increase business uncertainty and thereby compliance costs. We see no logical reason that some states would require 13 different licences, for instance.

Our second recommendation stems from the fact that many jurisdictions are characterised by excessive and complex liquor licence fee structures. The fees for application and renewal of liquor licences are progressively tiered from the cheapest to the most expensive licence, based on factors such as venue capacity and patron numbers. Some states even apply complex multipliers based on these factors. We recommend the structure of the licence fee system across Australia be flattened. By ‘flattened’, we mean: to reduce the difference between the lowest and the highest licence fee. There is no clear reason why the current fee structure is tiered, apart from the chance to raise more government revenue.

Our final recommendations concern licensing more broadly. We recommend that all Australian jurisdictions shift their regulatory resources away from licensing, first towards enforcing the basic principles of the regulation of liquor on operating businesses. That is to say, we should proceed by enforcing defections from agreed, simple laws, rather than increasing the red tape and compliance burden, which collectively impacts all businesses. Indeed, this broad principle, if applied to many Australian industries, would help ameliorate Australia’s growing red tape problem. Thank you for your time. We welcome any questions you may have.

The Legacy And Abuse Of Ayn Rand

Paul Ryan told an audience in 2005 that “the reason I got into public service” was the novelist Ayn Rand.

That makes no sense at all.

Mitt Romney’s vice-presidential candidate may be fond of Rand but Rand would not have been fond of him. She hated the idea of “public service”.

No, her ideal pursuits were industry and science and art. By Rand’s death in 1982, she had elaborated this view over two best-selling novels (Atlas Shrugged and The Fountainhead) and numerous essays and treatises.

Rand admired people who produced things; people who created value. The people opposed to producers are “looters” and “moochers”. They take that value and redistribute it to rent-seeking businesses and the welfare state. They are at home with the government and the tax system; they live in a world of subsidies and congressional hearings … and bailouts.

Paul Ryan supported the bank and automotive bailouts, among the most obscene examples of looting in American history. He now says he regrets those votes, and claims to oppose “corporate welfare” passionately.

His remorse would have done little for Rand. There was nothing she disliked more than inconsistency in the name of politics.

Bailouts and inconsistency are not the only differences between the novelist and the candidate. Ryan claimed his budget plan was based on his Catholic faith. Rand despised religion. Ryan is a fan of Ronald Reagan. Rand thought the Gipper was “trying to take us back to the Middle Ages”.

The war on drugs, civil liberties, abortion, take your pick: Rand and Ryan part more often than they converge. She described the modern conservative movement as the “God-family-country swamp”.
So it’s hard to understand the hyperventilating that has greeted the announcement that Ryan will join Romney on the presidential ticket. In the New Yorker, Jane Meyer suggested that by picking such a dedicated Ayn Rand fan, Romney had “added at least the imprint of an extra woman”.

MSNBC host Chris Matthews went further – Ryan actually “is Ayn Rand”, and he wants to “screw” the poor. One Huffington Post writer described him as a Rand “devotee”. Social media, of course, went bananas.

Ryan is a common type. He apparently insists interns read Atlas Shrugged when they join his staff. Politicians like to think they are in the business of ideas, but that’s nonsense. Politics is the business of power. Ideas are an optional extra, more useful for appealing to already committed supporters than formulating policy.

All those horrified progressives trying to draw a direct line from Rand to Ryan are playing his game, suggesting this senior politician is driven by ornate principle rather than base politics.

Ayn Rand’s books are abused in this way more than most. Her novels may not be great literary works, but are rich and readable (something you could not say about Friedrich Hayek’s dense prose, for instance). More than any other iconic free market writer, she creates a world with its own specific – that is, strict – moral code. And moral codes developed through fiction are seductive in a way that economic treatises are not.

We are so used to popular culture praising public service that the story of a heroic industrialist is highly subversive. If progressive thinkers want to hunt down the source of Rand’s peculiar appeal, it will be found there – radicalism is always appealing. Right now there are few more truly radical notions than private success as noble, or of capitalism as admirable.

Rand has a reputation. But she did not believe virtue was a reflection of wealth. She was careful to draw portraits not only of industrialists but of workers and artisans. One small passage in Atlas Shrugged is more suggestive of Rand’s world view than any of her later claims about altruism and Aristotle: she describes a train engineer as having “the ease of an expert, so confident that it seemed casual, but [his] was the ease of a tremendous concentration, the concentration on one’s task that has the ruthlessness of an absolute”.

Simply put, her novels are about human excellence, small and large. The plot of The Fountainhead pivots on an architect refusing to compromise his unique artistic vision. You can imagine the appeal. And, of course, opposed to such achievement are the predatory looters with powers to tax and regulate it all away.

Does it all seem a bit cartoonish? Surely no more cartoonish than those stories about evil industrialists and heartless capitalists defeated by noble truth seekers and crusaders for the underclass. Rand was working in a popular fiction genre full of heavy-handed socialist tracts like Robert Tressell’s The Ragged-Trousered Philanthropists or the novels of Upton Sinclair.

The difference is that most of those socialist works have been forgotten and Rand’s writing endures. The themes of Tressell and Sinclair have collapsed into cliché. Rand’s remain subversive.
Rand’s books have not penetrated Australia as they did the United States. She is not part of our national consciousness. Yes, she has her fans. Malcolm Fraser was one. But as John Singleton wrote, “Malcolm Fraser admires Ayn Rand. Ayn Rand admires Malcolm Fraser. All this shows is that neither knows what the other is talking about.”

Rand was part of a distinctly American tradition. The libertarian writer Charles Murray rightly notes Rand’s idea of freedom is particularly Jeffersonian. In her lifetime, she was supported by the anti-Roosevelt, anti-New Deal movement that died out with Robert Taft’s loss to Dwight D Eisenhower for the Republican presidential nomination in 1952. That movement was reprised, in a very different form, by the presidential run a decade later by Barry Goldwater – one of the few politicians Rand liked.

Australia has none of that rich history. Our free market tradition owes more to nineteenth century British liberalism than the American Old Right. Rand is an import. When Singleton helped form the libertarian Workers Party in Australia in the 1970s, he admitted he’d given up on Atlas Shrugged 80 pages in.

There’s a reason one of the great histories of the American libertarian movement was titled It Usually Begins With Ayn Rand. But it rarely ends there.

Gillard Plays The Unedifying ‘Small Australia’ Card

It’s obvious what Julia Gillard was doing when she claimed Enterprise Migration Agreements for mining projects would not favour foreign workers.

Talking to the press on Saturday, the Prime Minister said, “I can assure everyone that we will be putting the interests of Australians at the front of the queue and we will be putting Australians looking for work at the front of the queue.”

Ah, yes. Our old friend The Queue.

There’s not much more evocative in Australian politics than The Queue. For more than a decade it’s neatly divided asylum seekers into moral categories. The virtuous wait in refugee camps; cheaters hop on boats.

Even more than most politicians, Gillard thinks carefully about what she says. Her advisors are smart. When she brings up The Queue in the context of immigration, it’s not likely to be a slip of the tongue. Language matters. This language is about those who are deserving and those who aren’t.

Especially considering that just like the Refugee Queue, the Mining Jobs Queue is fictional. It doesn’t exist. As Peter Martin pointed out in Fairfax papers on Monday, Enterprise Migration Agreements are used for work Australians simply don’t want. There can be no queue if nobody is standing in it.

Most press about this furious little debate has focused on how it makes Julia Gillard look weak, and her hold on the Lodge look weaker. But the debate reveals something more important than the leadership soap opera.

Think back to the 2010 federal election. Few things in that campaign were more dispiriting than the “small Australia” doctrine.

Both the Coalition and the ALP tried to link resentment about asylum seekers to resentment about traffic congestion. The whole thing was farcical. Gillard took Western Sydney MP David Bradbury to Darwin to hunt for refugee boats. And the opposition, trying to demonstrate just how serious they were about slowing immigration, proposed to rename the Productivity Commission the “Productivity and Sustainability Commission”.

The last few days have made it clear the small Australia doctrine was not a temporary anomaly, confined to a weird election held under weird circumstances. It’s no longer just asylum seekers that are controversial. Bipartisan immigration scepticism now looks like it could be an enduring feature of the Australian political landscape.

The Enterprise Migration Agreement is going ahead. But the announcement sent the Government into a tailspin. In Parliament on Monday, Gillard didn’t want to say whether she supported the agreement. How extraordinary: it’s her own Government’s policy.

The unions are opposed to the migration agreements, and Gillard owes her position to them. But unions make all sorts of ambit claims which the Labor government pay no attention to. This one was apparently too big a deal to dismiss.

So the worst part is that instead of ignoring the unions’ shrill protest, the Prime Minister has all but apologised for thinking about foreign workers.

From Gillard’s press conference on Saturday:

My concern here, and the concern of the Labor Government, is always to put Australian jobs first … we put Australian jobs first and now we are putting Aussie jobs first too … we’re working to make sure Aussies get jobs first … we are skilling Australians first and getting them the jobs first … Australians will always come first in getting these job opportunities.

And with the hastily announced Jobs Board (a mining jobs website with the purpose of favouring domestic workers over foreign ones) the Government is ratifying the union movement’s claim that immigration crowds Australians out of work. This is a staple argument made by opponents of immigration, and it is completely wrong. No Australian Prime Minister should indulge it.
Yet this time last year it seemed we’d gotten over small Australia.

The May 2011 budget was a repudiation of the previous year’s excesses. It was then that the Government introduced the Enterprise Migration Agreements policy in the first place. Wayne Swan also announced another 16,000 immigration positions, the majority of which were skilled migrants sent to rural areas.

Australia’s great project has always been to attract more workers and a bigger population. The 2011 budget resumed that course.

But at that stage the next election was far in the distance. Now one is closer – with or without the Thomson and Slipper scandals – and the Labor government is much more frail. Gillard knows if she doesn’t play the Aussie-jobs-for-Aussie-workers card in the future campaign, then the Coalition certainly will. If the past is any guide, they probably will anyway.

The good money says the next election will be played out on the depressing terms of the election of 2010 – a populist, unedifying backlash against population growth and immigration. Australia will not be better off for it.

Manufactured Crisis

Ford has announced a week-long production halt in Australia. Toyota is mired in a labour dispute. But is Australian manufacturing in trouble? No. In fact, it’s thriving. Not that you’d know that from most commentary or political debate, which suggests that manufacturing is falling off a steep cliff. No matter how much taxpayer money we hand to the car industry, it is always flirting with collapse. For decades, the nightly news has told ominous tales of factory closures.

These stories mislead. Australia is by far a more successful, efficient, profitable manufacturing nation now than it was in the 20th century. When Kevin Rudd famously said in the 2007 election that he wanted to be prime minister of a country that “made things”, Australian manufacturing was already making more things than it ever had.

Over the past 60 years, the output (that is, the making of things) of manufacturing has increased fourfold, according to the Productivity Commission. Sure, that output has dipped about half a per cent since 2008. But blame the (temporary) global recession.

So why the big fuss? Well, the debate over manufacturing has never really been about manufacturing. It’s never been about economics or prosperity or even employment. The manufacturing fetish is nothing more than a marriage of nostalgia and special interests.

Manufacturing may be doing well but it holds a declining share of the total economy. Service industries are growing quicker and assuming the pre-eminent place.

People find this change hard to grapple with. Perhaps understandably. Factories are as much cultural icons as they are venues for production. For two centuries, the factory was an emblem of Western prosperity. Factory jobs were stable, well-paid, and open to all.

Our culture and politics reflected this. It was the factory wage for a married family man that underpinned our protectionist industrial relations system. Pre-war consumer advertisements tended to feature factories more prominently than the products.

By contrast, modern service industries are more diverse and less tangible. But productive work is productive work. What should it matter if we make a dollar’s worth of tractors or code a dollar’s worth of websites?

Preconceived ideas of what constitutes a healthy economy don’t disappear overnight. Especially when they’re promoted by union-tied politicians and lobbyists.

Announcing the federal government’s manufacturing taskforce last year, the then innovation minister Kim Carr said the government needed to “ensure manufacturing remains a key part of our economy for generations to come”.

That might be Labor’s priority, but it shouldn’t be ours.

The number of people working in manufacturing is a declining share of the total labour force. That’s a big political problem for the ALP. Many Labor politicians draw their support from the old industrial unions.

These unions are now less the vanguard of the proletariat, and more ageing, derelict fiefdoms. They are still able to depose prime ministers, sure, but that’s about it. The dysfunctional union-Labor relationship creates the perfect environment for dirty deals to flourish; hence the steady stream of cash the government sends the car industry’s way.

Immediately after Prime Minister Julia Gillard fended off Kevin Rudd this year, the unions were calling on her to keep manufacturing jobs from going overseas. They want some reward for their support.

But the unions are wrong. Jobs aren’t going overseas. Larry Summers, former economic adviser to US President Barack Obama and no free-trade ideologue, has pointed out that even in China manufacturing jobs are in long-term decline. It isn’t foreign competition, offshoring or the high dollar shrinking the relative importance of manufacturing. It’s technology.

This is great. Not all factory jobs are good jobs. Why have 10 people do a mind-numbing repetitive task that could be done by one machine?

In the future Australia may no longer assemble cars. Robots will. But we will design the cars. We will design, program and build the robots. We will construct the most intricate, high-value components that require the best technicians to produce. We’ll then ship everything off for final assembly in a lower-skilled country.

The industrial revolution was propelled by technological change. “De-industrialisation” is propelled by the same.

Even in some shrinking sectors of manufacturing there are niche Australian successes – particularly those areas that require high skills and high precision. But nimble niche industries won’t furnish the unions with a secure power base.

What to make of the claims that we need domestic manufacturing for national security?

Put aside that we have a vibrant manufacturing sector already. If a war came that forced us to make all our tanks – that is, if the global arms market was suddenly closed to America’s closest friend – the state of our car industry would be neither here nor there. We’re going to lose that war.

That this apocalyptic scenario is a foundation of the case for manufacturing subsidies just shows how desperate the industrial unions and the ALP are.

Manufacturing will never be the linchpin of the Australian economy. Nor should it. The sooner we get over our manufacturing obsession, the sooner we’ll be able to embrace a richer, more modern Australia.

Internet Laws A Sledgehammer Approach To Privacy

Legislators with little knowledge of internet privacy will do more harm than good.

The protest against the American Stop Online Piracy Act recently, where Wikipedia and 7000 other websites went dark for 24 hours, made two things plain.

First, online activism can be effective. Before the protest, 31 members of Congress opposed the act. After the protest, that number swelled to 122. The bill died overnight.

More importantly, the protest emphasised that the internet is not the Wild West. Domestic laws and international treaties pervade everything we do online. And bad laws can cause profound damage.

The Stop Online Piracy Act (SOPA) is an example of legislative over-reach. SOPA would have given the US government broad powers to shut down access to foreign sites that were suspected of hosting material that breached copyright. This would have given governments the power to interfere with the internal workings of the internet. Such a power would have been an unconscionable threat to free speech.

Yet SOPA is not alone. The internet is surprisingly vulnerable to laws that, with good intentions or bad, have the potential to stifle online liberties. Take for instance, the European Union’s proposed ”right to be forgotten”. Changes to data protection laws now being considered by the European Parliament would give internet users the power to force websites to delete information about them.

There would be privacy benefits from this law. No question it would be lovely if we could make websites remove embarrassing photos or uncomfortable facts years after we uploaded them.

And yes, we need to keep pressure on social networks to protect our privacy. Too many companies are reckless with user data. Yet the EU’s plan goes way too far. A legislated ”right to be forgotten” would be, like SOPA, a threat to freedom of speech. These new rules would, according to the American legal scholar Jane Yakowitz, ”give EU residents an unprecedented inalienable right to control and delete facts that were once voluntarily communicated”.

In the age of social media we all happily put information about ourselves in the public domain. A right to be forgotten is actually an obligation for others to forget things they’ve been told.

Apart from being unworkable (erasing stuff from the internet is a lot more complicated than politicians seem to believe), this new obligation would envelop the internet in a legal quagmire.

The law would turn every internet user into a potential censor, with a veto over everything they’ve ever revealed about themselves. Every time media organisations referred to freely obtained information, they would have to be sure they could prove they did so for a ”legitimate” news purpose. This would create enormous difficulties for journalism. Censorship to protect privacy is just as dangerous as censorship to prevent piracy.

But unlike SOPA, there has been no outcry about these new rules. No blackout of popular websites, no mass petitions.

SOPA was driven by American politicians in the thrall of an unpopular copyright lobby. The European data protection rules are being driven by social democrats claiming to protect people’s privacy. And, in 2012, privacy is a value that many people claim to rate above all others.

By contrast, free speech seems daggy and unpopular. Even our self-styled civil liberties groups have downgraded their support for freedom of speech. Now other rights – privacy is one, the right not to be offended is another – are seen as more important. So these new laws could slip through with disastrous consequences.

Should Australians care what the European Parliament does? Absolutely. The big internet firms are global. If a legislature in one country or continent changes the rules of the game, those firms have to comply. The easiest way to comply is by making global policy changes, not regional ones.

And regulations introduced overseas have a habit of eventually being introduced in Australia. Already our privacy activists are talking up the EU scheme.

Whatever the EU decides about a right to be forgotten, it will have significant effects on the online services we use in Victoria.

Free speech isn’t the only problem with the EU’s proposed privacy laws. As Jane Yakowitz points out, people trade information with corporations all the time – for discounts or access to free services. No one compels us to share stuff on the internet. We share because we think we’ll get something out of it. The new right to be forgotten would make such trades virtually impossible. It could cripple the information economy overnight.

Governments have always struggled to legislate for the online world. Not only do politicians have little understanding of the technological issues, but the internet doesn’t take very well to regulation: according to one old tech saying, ”the net interprets censorship as damage, and routes around it”. So legislators over-compensate.

The internet is complex, borderless and dynamic. Laws are inflexible and heavy-handed. Too many attempts to protect privacy or combat copyright infringement take a brickbat to freedom of expression and internet liberties.