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How A Joker Sent Battman To The Rescue

Confident that the Prime Minister can steer us out of the financial crisis? Don’t be. Every policy announcement, every job-creation program, every plan to fix the economy point to one thing: The Government’s just makin’ it up.

Want proof? The team at the Department of the Prime Minister and Cabinet have developed www.economicstimulusplan.gov.au to tout all the ways they’re fighting the downturn. And the first, most prominent, measure listed on the website is a subsidy to home insulation.

Call me cynical, but it seems very unlikely that historians will describe the recovery from the financial crisis as “insulation driven”.

Sure, they say the victors write the history books. But unless Moorabbin Coat-O-Foam Discount Insulation opens a publishing arm, there’s a fair chance Pink Batts won’t ever get the place in the history of the Australian economy that Kevin Rudd appears to think it deserves.

If there is one overarching theme in this crisis, it is that nobody really knows what they are doing.

When the Government announced the commercial property bail-out in January, it claimed the measure would save 50,000 jobs. In the Senate inquiry that followed, Treasury officials admitted they really didn’t have any idea how many jobs their measure would create – they just extrapolated job losses from a previous downturn and wished upon a star.

And the multibillion dollar stimulus package announced in February? The Secretary of the Treasury, Ken Henry, admitted to another Senate inquiry that the Government had no idea whether the package would help the economy at all.

All these exciting announcements, but the only thing anybody knows for certain is how much they will damage the federal budget.

It’s like going to a magic show where a magician keeps making bunches of roses disappear. The show is entertaining and uplifting, until you leave – and discover a sad, discarded pile of battered roses on the floor by the exit. There was no magic. You just spent your evening watching a goateed guy destroy flowers.

Sure, it seems fun watching the Government conjure up jobs and prosperity out of nowhere, but in retrospect, after none of those jobs appear, the economy keeps going down the toilet, and bureaucrats have eventually admitted they made it all up – it’s actually quite depressing.

Another unlikely measure to drag us out of the global financial crisis is the $150million Boom Gates for Rail Crossings Program that Infastructure Minister Anthony Albanese believes will “support local jobs and local businesses during the current global recession”.

Hey, we’re all for boom gates. But claiming that they can help stave off recession seems a bit of a stretch. Same goes for solar hot water rebates, repairing the gutters on school portables, or refurbishing playgrounds.

And isn’t it a little dubious that the best way to fix the crisis just happens to be $900 delivered straight into the bank accounts of almost every Australian voter? Wouldn’t you be more convinced the Government was trying its hardest if they thought they had to do something that the electorate absolutely hated?

I’d have a lot more faith in Rudd’s healing powers if he believed he had to raise taxes massively on working families or sympathetic pensioners to save the economy – you know, something that really hurt his poll numbers. If he announced he needed to slaughter one cute puppy every day until toxic debt was completely eliminated, he’d be cuckoo, but at least you’d know he was trying.

Last week there was another example of how the Government is trying to save the economy by giving away stuff – the latest iteration of the National Broadband Network, which, by all accounts, was developed on the back of a napkin after six or seven beers.

For a paltry $43billion, we are told that the new broadband network will directly “support” 37,000 jobs. If I have entered enough zeroes into my calculator, that’s a cost of over $1 million per job.

Whatever. Jobs are jobs, dude. It’d be a bargain at twice the price.

But it must take a lot of hubris to follow your failure to get an $8billion broadband plan off the ground with a $43billion plan, and still pretend you are in control.

When we get out of this crisis, it won’t be because the Government has come up with a policy that works, it will be more likely because the economy just can’t bear to be miserable any longer.

Market traders will discover pretty much every stock in the world is hugely undervalued, and blue chips are a better investment than canned soup, shotguns and pre-fabricated bomb shelters.

While we wait, it’s hard not to conclude that the Government is just tossing a random collection of expensive policies at the wall and praying for one eventually to stick.

The Winds Of Change Will Not Wait For Rudd’s Broadband

The failure of the National Broadband Network tender to find a sensible and willing private sector company is not surprising. But the failure cannot be blamed on the global financial crisis – the economy may look pretty dismal, but the government’s broadband policy was never very good anyway.

Partly this is because technological change has boxed the government into a corner. Earlier this year, while the NBN expert panel was dithering about looking for a firm to make good on the Labor Party’s election promise of a 12Mbps network, Telstra announced that it was planning to upgrade its already-existent cable network to 100Mbps, without a scrap of government support or subsidy. Even the firm’s mobile Next G service – which right now covers far more of Australian population than any future fixed-line network could hope to – is being upgraded to 42Mbps. And it’s not just Telstra – Optus has been periodically upgrading its cable network to match the speeds of its competitor.

Simply put, it would have been humiliating for Communications Minister Stephen Conroy to trumpet a 12Mbps network while there are superior products in the broadband marketplace.

And these are just the private sector’s plans for the next twelve months. The government intends to roll its network out over eight years – who knows what we will expect from our internet connections in 2018? There’s a very good chance that the new network will be long obsolete by the time it is finished.

While the Prime Minister announced that the network will cost “up to” $43 billion over those eight years, it has only committed to an initial $4.7 billion investment into the project. This cost is, at least on the face of it, a drop in the bucket. Since coming to office, the Rudd Government has increased the size of government by a massive 21%. And the Commonwealth Government’s contingent liabilities have increased ten-fold in the last year. Nevertheless, the new NBN plan opens the door even wider to future financial obligations, especially if the fundraising and rollout doesn’t proceed as smoothly as the government is hoping.

So far no government has been willing to treat the cause of our broadband problem – the long outdated access regulations which compel Telstra to share its network at a regulated cost.Today’s announcement just maintains the fiction that the government can buy its way out of a long-term regulatory mess.

Generation Pepsi All Froth And Bubble On Leadership

Demographers fantasise that we can all be split into distinctive groups: baby boomers, and generations X and Y. But there are other categories.

The Australian Bureau of Statistics calls those born between 1926 and 1946 the “Lucky Generation”, which surely must be an inside joke, considering those years contained the Great Depression and World War II. Those born after 1986 are trendily described as “iGeneration”, which seems to have displaced the better-known title of “generation Pepsi”.

Despite the millions of words amateur sociologists and management consultants have written concluding that generations X, Y and iGen are flighty, demanding, reckless, and prone to switching jobs without warning, there is no doubt that younger workers will make more rational career choices as the economy slows. Just because someone was born in the ’80s doesn’t make them stupid.

Still, those who deliberately go out of their way to describe themselves as “the youth of today” do seem to be unusually daft. (I say this as someone who is only 26, so, happily, I escaped the “youth” designation two years ago.)

This daftness is no more evident than in the recently published collection of essays called The Future By Us. The book claims to take a bold, fresh approach to Australian public policy. Not surprisingly, most of its proposals are unrealistic, unlikely to be effective, or just deeply unappealing. And some of its proposals are off the planet. For instance, the book’s authors recommend that, along with IQ tests, the Government test every citizen’s GQ (global intelligence quotient) to measure individual awareness of foreign cultures, their travel experience and language ability. Seriously? That’s the quality of ideas that our brightest youths are devising?

Another proposal concerns a healthy fast-food chain, which could, the author imagines, “become a new drive-thru craze”. That’s true, but I wouldn’t bet the organic farm on it. Surely, if an idea like this is really that great, it would be far more productive to open the fast-food chain than write about it.

A strange belief of those who advocate greater youth engagement in politics is that young people bring fresh perspectives to policy debates.

Sure, being able to step back from an area of expertise to look at it from a new angle can be helpful. But simply not knowing very much about a topic doesn’t provide “fresh” perspectives, it just provides uninformed perspectives. Despite the manifest absurdity of policy proposals in The Future By Us, the Prime Minister gave the book a highly complimentary foreword.

The authors of The Future By Us are a typically star-studded bunch. They have been Young Australians and Young Victorians of the Year. Their collaborators serve on councils of youth, they head up youth movements, the United Nations Youth Association and Youth Climate Coalition. They are the directors of youth-specific think tanks, they join state and federal government youth consultancies, become youth ambassadors, chair youth boards and youth advisory committees, and they attend youth-only summits.

Apparently, there is even a discernible youth establishment, with its own turf rivalries, and resistance to competition from other self-appointed youth representatives.

And, consistently, all these proud youths conclude that there should be more engagement between the Government and young people – more boards, more committees, more panels and more consultancies.

But the Federal Government does not exist merely to help people pad their resume. Australia’s cultural obsession with “representation” just results in everybody spending an inordinate amount of time discussing silly ideas instead of getting on with the job.

Anyway, do we really want people under the age of 20 understanding what the phrase “interdepartmental advisory reference group” means, let alone them being members of one? Steering committees should be left to the adults who are compelled to join them only to keep their jobs.

It’s a good thing that most of these young people won’t actually become the leaders of tomorrow. Nobody likes people who describe themselves as leaders before they have found any followers. So attending a youth parliament makes it less, not more, likely that you will ever get a go at “adult” parliament.

Australia’s self-appointed youth representatives will have to start realising that they can’t keep pretending their naivety is actually creativity and therefore demand serious attention. Generation Pepsi deserves better.

More Police, Fewer Daft Ideas, The Answer To City Violence

Everybody has an idea how to fix the problem of “alcohol-fuelled” violence in the city. Last week, the Victorian Parliament tried another idea. It granted the liquor licensing authority $17.6million a year for 30 new “civil compliance inspectors” to patrol the city’s nightlife and fine pub owners. These inspectors can also enter premises without warrants if they suspect license breaches, and demand the names and addresses of patrons.

But surely there are certain legal powers in a liberal democracy that should be only held by the police? Police go through extensive education about the legal and practical limits of their powers. They are accountable to their superiors.

By contrast, the primary qualification that these new liquor inspectors require is the ability to pass a police check. They also apparently have to be of “good repute, character, honesty and integrity” – qualities that are hard to determine from a resume submitted via the internet. Should we be really giving such rudimentarily qualified bureaucrats a fair chunk of the powers of the police force?

Six months after the 2am lockout of Melbourne’s clubs and pubs resoundingly failed – late night violence went up during that period, not down – it is understandable that governments are trying new ideas to tackle the problem.

By far the most surreal idea to restrain city brawling has been Lord Mayor Robert Doyle’s recent proposal to make the hailing of taxis on the street illegal every Friday and Saturday night. He wants to direct all taxi-seekers to four giant taxi ranks around the city.

How this idea actually connects to the problem of violence isn’t entirely clear. Doyle’s plan appears to depend on the not entirely convincing theory that drunks would be less violent if they were all put in the same spot and told to wait for half an hour in a queue.

Other ideas to reduce violence are not much more convincing. Should we really ban the sale of single shots of liquor, as local governments have done in many smaller towns around the country? (Only if you believe that violent thugs exclusively drink Midori slammers.) Or should we stop people from purchasing more than a few drinks at a time, as they have done in NSW? (This rule effectively makes the Australian custom of buying rounds illegal.)

In fact, in NSW they are even stopping bars from serving alcohol for a 10-minute period every hour after midnight. In that 10-minute time-out, bar staff have to refuse any request for alcohol and offer water instead, even to those who lined up to be served well before the time-out began. Understandably, this policy tends to make drinkers more aggressive, not less.

Australians have a proud history of making a mockery of silly drinking laws – the legendary six o’clock swill was, after all, a massively counterproductive result of restrictions on the sale of alcohol. Getting around annoying regulations is just as much an Australian custom as buying rounds for mates.

Anyway, just because somebody comes up with an idea that will make buying alcohol harder, or more expensive, or just less fun, doesn’t mean that idea will prevent violent idiots from hitting each other at the end of the night.

If there’s one thing about Australian public debate, everybody has a lot of bright ideas – we don’t lack for initiatives or proposals or different ways to do things.

Every year small publishers release a few dozen books with titles like Reinventing Australia’s Green Future into the Next Century of Prosperity, or 27 Social Ideas for a Good Australia Now. These books are inevitably filled with possible new laws and government spending initiatives that are certainly creative, but are usually totally nuts.

Indeed, the only accomplishment of Kevin Rudd’s long-forgotten 2020 summit was to show just how many stupid ideas there actually were floating out there in intellectual-land – ideas that were vague, bizarre or, like the Lord Mayor’s taxi rank plan, completely disconnected from the problems they were trying to solve.

Government policies should be as direct as possible. The Government shouldn’t just arbitrarily punish drinkers and liquor licensees in the dreamy hope that the results will be politically beneficial.

While state and local governments have been dithering about with their own creative punishments for taxi hailers and pub owners, the most direct way to tackle violence still remains an increased police presence.

Unfortunately, like his predecessor Christine Nixon, new Chief Commissioner Simon Overland seems to believe that creative new regulations, not more police on the streets, will provide a solution to the city’s violence problem.

Sure, thinking outside the box is great. But when it comes to problems of law and order, don’t forget the box is there.

Keeping up with Kevin: Kevin Rudd’s testosterone technocracy

From time to time in human history there occur events of a truly seismic significance, events that mark a turning point between one epoch and the next.

If the Prime Minister’s rhetoric is anything to go by, big things are brewing. He announced in February that he would ‘move heaven and earth’ to keep Australia out of recession. And in his highly-publicised essay in The Monthly that same month, Kevin Rudd declared that ‘the great neo-liberal experiment of the past 30 years has failed’ and ‘the challenge for social democrats today is to recast the role of the state… as a comprehensive philosophical framework for the future.’

These are strong words. Certainly, the Australian Prime Minister has an aggressive pen. HisMonthly essay reflects a desire to brand the Liberal Party as rabid ideologues – which he did very successfully during the 2007 campaign – as well as win back the Labor intelligensia that have been put off by the government’s embrace of internet filter, its strong words against Bill Henson, and its apparently weak stance on climate change. This may be good politics, although it is hard to imagine many swing voters being convinced by a 7,000 word treatise in a literary magazine.

The Prime Minister’s essay is an attempt to build an intellectual basis for centre-left government in Australia – a goal which has preoccupied large segments of the Labor Party for some time.

But in truth his essay only reveals that Rudd has a deep confusion about the nature and origin of the financial crisis, and promises to head the federal government in a very uncertain direction. His beliefs, as far as he is able to articulate them, will have major consequences for the operation of the Commonwealth Government for many years.

The Prime Minister may want to be a philosopher and revolutionary, but he is, at heart, a technocrat whose crude, pseudo-utilitarianism promises the expansion of government into all aspects of Australian life.

What neo-liberalism?

It comes as no shock that Rudd blames ‘neo-liberalism’ for the global financial crisis. But what on earth is it? As Andrew Norton of the Centre of Independent Studies has pointed out, ‘neo-liberal’ is not a term people ever use to describe themselves; it is a term used exclusively by its critics:

Using ‘neo-liberal’ is code for ‘I am a left-winger who does not like markets’. It is a leftist version of the secret handshake; a signal that the reader is with fellow travellers.

In many ways, the phrase ‘neo-liberalism’ is an anachronism. What could possibly be ‘neo’ about a philosophy of government that stretches back to well before Adam Smith? The core tenets of liberalism, ‘neo’ or otherwise, have a very long heritage – free trade, the primacy of individual rights over collective rights, an emphasis on individual responsibility, and governments providing physical security and the enforcement of contracts. Liberalism has been responsible for emancipating every part of the globe where it has had influence. Liberals, after all, abolished slavery, seeing it as both inhumane and contrary to their belief in human equality.

But if all Rudd means by ‘neo-liberalism’ is open economies and free market economics, then his own party has contributed far more to the cause of neo-liberalism over the last few decades than the Liberal Party ever has. It was Gough Whitlam who cut tariffs across the board by 25 per cent, and the Hawke and Keating Governments who made the most progress shifting Australia’s great government enterprises from public to private ownership. Rudd tries to resolve this apparent contradiction by arguing the ALP was ‘compassionate’ when it modernised the economy (and engaged in substantial deregulation of the financial sector.) The Prime Minister seems to believe that the Labor government’s privatisations of the Commonwealth Bank, Qantas, Australian National Rail, the Snowy Mountains Engineering Corporation, and CSL were compassionate and necessary, but the Liberal privatisation of Telstra was crude and dogmatic market fundamentalism.

Perhaps Rudd’s partisan contortions account for some of his more bizarre policy positions. He argues that his government strongly supports free trade. But free trade has been the central policy position of liberalism for centuries – apparently, Rudd’s crusade against neo-liberalism does not extend to an attack on its most basic and well-known doctrine.

The causes of the crisis

Rudd’s narrative of twentieth century history is a shallow but common one – the Great Depression and the New Deal abruptly shattered the laissez-faire doctrines and practices of the nineteenth century, but those doctrines were rejuvenated under the neo-liberal revolution of the late 1970s and 80s. According to Rudd, neo-liberalism has been the dominant ideology of the last thirty years, as market fundamentalists have pushed the state out of spheres of regulation and public ownership. And for the Prime Minister, the global financial crisis is the shock that allows for – and necessitates – the re-emergence of social democracy in Australia and across the world.

More specifically, Rudd claims that it has been the neo-liberal tolerance for innovation in the financial sector that has caused the crisis. ‘Unregulated’ financial instruments and trading entities-the middlemen of global finance like mortgage brokers, hedge funds and private-equity investors-operate outside the purview of state regulators. And one specific act of deregulation by the (unnamed in Rudd’s essay) Clinton administration, the repeal of the Roosevelt-era Glass-Steagall Act, led to the creation of mega-banks that governments judged were ‘too big to fail.’

This is a lovely and neat story. But neither the Prime Minister’s historical understanding, nor his analysis of the cause of the crisis hold up.

In Australia and around the world, the last thirty years have certainly seen some dramatic changes, most particularly in the areas of privatisation and trade liberalisation. But to describe these changes as an across the board deregulation and the retreat of the state is, simply, incorrect.

In those countries that have experienced the ‘neo-liberal’ revolution, the last few decades been ones of significant increases in government spending and even more significant increases in regulation. While the state may have largely rejected the direct ownership of public utilities, it is far from the Hayekian state Rudd seems to believe exists-governments have instead traded direct ownership for regulation and welfare.

In Australia, the Institute of Public Affairs has found that regulation and legislation has seen massive growth in the period that the Prime Minister describes as neo-liberal. The Whitlam government passed less than 2000 pages of legislation per year. But the neo-liberal Howard Government passed an average of 7000 pages.

And in the United States, the Competitive Enterprise Institute’s Clyde Wayne Crews has calculated that the government has added an extra 727,000 pages of regulation to its federal register since 2000. Compare this figure to the ‘social-democratic’ decade of the 1960s, when it only added 170,000. Just as in Australia, the ascent of neo-liberalism in the United States in the 1970s saw a sharp and dramatic spike in government regulation.

Obviously, these are not the actions of states in retreat.

And when we look at financial regulation specifically, the Prime Minister’s story is even less accurate. The sector which is in the most trouble – the banking sector – is in fact one of the most highly regulated sectors in both the United States, where the financial crisis originated, and here in Australia. Contrary to Rudd’s assertions, it is a sector which has seen little, if any, deregulatory activity. Indeed, the American Federal Deposit Insurance Scheme predates the Australian one introduced last year by nearly two decades, as it was instituted under a raft of regulatory increases following the Savings and Loans crisis of the late 1980s. The international regulatory environment that governs the banking sector is elaborate and extremely complex.

Two other critical instances of regulatory expansion deserve a mention. While the Prime Minister claims that the Basel II accords have been found to be inadequate, the simple fact that the international banking system was adopting a comprehensive global regulatory framework certainly seems to indicate that regulation was not contracting as Rudd believes, but dramatically expanding. And he also fails to recognise the extraordinary regulatory and direct government intervention in the US housing market. The existence of Fannie May and Freddie Mac, and the now-infamous Community Reinvestment Act – which encouraged banks to make the high-risk subprime loans that precipitated the financial crisis – are uncomfortable facts which his narrative is unable to accommodate.

Certainly, the crisis was borne of decisions made by actors and investors within a market framework, but those decisions were heavily distorted by competing and highly convoluted national and international regulations. The byzantine financial regulations provided investors with many opportunities to play regulations off against each other, to shift investments between different jurisdictions, and to invest in otherwise less profitable enterprises simply because they are less regulated. With all this dense and difficult regulation across the world, to describe the international finance market and banking sector as ‘unregulated’ is a gross caricature. And to extrapolate this misunderstanding of financial regulation into a belief that the Australian economy has never been less regulated is just wrong. One could plausibly claim that we could be better regulated – although that argument would still have to be taken with a grain of salt – but to claim that we are less regulated than in the past is exactly the opposite of the truth.

Unfortunately, the Prime Minister’s Monthly essay is not the only example of his shallow understanding of the nature of the crisis. His constant references to excessive ‘greed’ and his smug mention in November 2008 of the ‘greed is good’ attitude parodied in Oliver Stone’s film Wall Street, simply shows that he is trying to reduce the global financial crisis to a cheap moral lesson.

Labor and the search for the Third Way

And in the place of neo-liberalism, the Prime Minister proposes… well, it’s not clear.

Kevin Rudd has been, at various times since he came to national attention in the lead up to the 2006 leadership ballot, ‘an old-fashioned Christian socialist’, then ‘not a socialist’, and during the 2007 campaign, an ‘economic conservative.’ Unfortunately, in his new guise as ‘social democrat’ and scourge of neo-liberals, he is no closer to ideological clarity.

While Rudd has peppered his rhetoric with words like ‘open-hearted’ and ‘compassionate’, these words are absolutely meaningless as ideological or policy descriptors. There is a peculiar strand of left-wing thought for which policy decisions should be as simple as making the most ‘kind’ choice-many columnists seemed to think that describing John Howard as ‘mean’ was the most damning indictment of his government.

On the policy front, Rudd’s lack of seriousness is clearly demonstrated by his inconsistent approach to the leaders he admires. He goes out of his way to critique the Institute of Public Affairs’ Alan Moran – the only living neo-liberal mentioned in the essay – who wrote in The Australian in January that public service salaries should not be immune to the sort of cost cutting and rationalisation that is occurring across the economy; in response, Rudd argues that ‘social democrats, by contrast, stress the central role of the state in maintaining aggregate demand, both for consumption and investment spending, at a time of faltering growth.’

But those very same social democratic American Presidents that he admires – Franklin Roosevelt and Barack Obama – contradict his case. One of FDR’s first acts upon entering the White House was to dramatically cut public service salaries by 15 per cent. And one of Obama’s first acts was to announce a public service wage freeze. If, as Rudd claims, ‘social democrats’ rely on the public service to spend their country out of recession, then the social democracy he is referring to is some peculiar regional variant cooked up in the Prime Minister’s department – not the worldwide ideological movement that he seems to believe it is.

But the deeper origin of Rudd’s ideological incoherence is one which is common to large swathes of the Labor Party itself-the centre-left doesn’t quite know what it believes in.

Australian party politics has long been out of sync with its Anglosphere cousins in the United States and Great Britain. The collapse of the Keynesian post-war economic settlement compelled all nations to pursue significant microeconomic reform in the 1980s. In the US and the UK, those reforms had a strong ideological flavour-the stirring anti-state rhetoric of Thatcher and Reagan left no question where the philosophical sources of the reforms lay-but in Australia, the privatisations and trade liberalisations of the 1980s were presented by Hawke and Keating simply as necessary modernisation, a jettisoning of economic structures unsuited to a late-twentieth century nation.

For American Democrats and British Labour, the 1980s were a long period in the political and philosophical wilderness. The loss of faith in old certainties led to the development of the Clintonian and Blairite ‘Third Way’ – the ideological amalgamation of economic policies that abandoned mid-century socialism, respected market dynamics and adopted social policies that are just as technocratic as they are ‘compassionate.’ Privatisation is pursued in order to achieve the government’s social goals; Third Way politics has no ideological or emotional reason to maintain state ownership. Education is emphasised less for its poverty-alleviating effects as its impact of national productivity. Market forces are not to be resisted, but regulated to achieve non-market outcomes.

However, being a decade out of sync with the Labour and Democratic political theorists who articulated the precepts of the Third Way has left the ALP uncomfortable with its intellectual basis. While the centre-left in the UK and US were theorising in the early 1990s, the ALP was an aging government. And when Clinton and Blair were enacting – and assessing – their Third Way policies, the ALP was floundering moribund in opposition.

Keating may have had a distinctive ‘Keating Project’-to position the ALP as the party of continuous reform, and the Liberal Party as the party of conservative stagnation-but the post-Keating era has shown just how shallow that project penetrated into the party which he led. (Certainly, there are instinctive reformers in the Keating mould within the modern ALP. But Lindsay Tanner must be a bit unsure what a Minister of Deregulation is supposed to now that deregulation is just the destructive dogma of neo-liberal ideologues.)

Only having managed to achieve government in 2007 – a decade after the Third Way-doyen Tony Blair achieved power in Britain, and fifteen years since Bill Clinton entered the White House – the ALP now faces not only significantly different challenges, but the intellectual movement which carried Blair-style government has largely dried up.

By now, the Third Way is looking a bit rusty. As one former Blair advisor commented on a recent tour in Australia:

It’s been more complex, double-edged and tricky than some would have thought. You look back at 11 years of uninterrupted Labour Government [in Britain] and the patterns of distribution of wealth and opportunity, and you see the Third Way was not the silver bullet that many thought it would be.

Nevertheless, it has been a long-standing project within some ALP circles to forge a long-term philosophical and intellectual basis for Labor governments of the future. And this has involved replicating the sort of institutional structures that the UK Labour Party used to develop and publicise their relatively coherent Third Way philosophy. A think tank, Per Capita, was set up in Australia in 2007 to explicitly replicate the success of UK think tanks Demos and the Institute for Public Policy Research. One of Per Capita’s research fellows, Dennis Glover, wrote that Rudd’s recent Monthly essay simply showed how important ‘ideas’ are to the new Prime Minister.

Indeed, the first policy director of Per Capita was a former staffer to Mark Latham – a Labor leader who genuinely thought deeply about the intellectual basis of centre-left government. Latham had the same sort of depth as Tony Blair, and the same sort of depth that Kevin Rudd is desperately trying to clone.

It is nearly impossible to imagine Rudd, or, for that manner, many people in his government, having the same sort of reflexive, self-critical approach that Tony Blair has repeatedly displayed in rethinking the tenets and effects of Third Way policy. Blair’s often-quoted speech to the Institute for Public Policy Research in May 2005 about the relationship between government, individual risk and regulation – made while he was still Prime Minister – was a candid reflection of the challenges of Third Way governance. It would be unthinkable for Rudd to be so honest in public as to draw public criticism from the national regulator, as Blair did from the Financial Services Authority after his IPPR address.

Instead, given the opportunity in his Monthly essay to describe, completely unfiltered, the direction of his government to a highly literate audience, the Australian Prime Minister could do little more than deal in vague caricatures, make broad, partisan accusations, and write empty ideological history. Rudd is more interested in trying to cast Hayek, Mises and the Liberal Party as screwballs than spelling out his plans for Australia. Rudd’s attempt to characterise his post-neo-liberal government ends up being more about what he opposes  – he makes it abundantly clear that his government is not one influenced by Hayek, and it’s not a Liberal government, but he can’t seem to get any further than that.

In fact, Mark Latham’s description of Rudd’s never-released foreign policy document during the 2004 campaign fits just as appropriately to Rudd’s Monthly essay: ‘wads of commentary about world events, but next to no policy… an empty vessel. He doesn’t write books or policy material, and he never will.’

Of the few policy proposals within his essay, most concern international policy rather than Australian policy. For example, Rudd claims that the failure of the Basel accords to prevent the crisis necessitates further global regulation. This may be an argument the Prime Minister can mount in an international forum (he followed it up in an opinion piece in the Wall Street Journal) but an Australian Prime Minister’s attention would probably be better kept at home. Australia is no more likely to single-handedly reform the global financial system than it is to shame China into reducing its greenhouse gas emissions or halt North Korean nuclear armament.

Testosterone and technocracy

One of the most striking things about Rudd’s essay is its tone-presented in an intellectual frame but actually remarkably breathless. The lines that open his essay (and this one) are the sort of stirring words that one would expect to accompany dramatic economic and social reform.

But even with the escalated sizes of the stimulus packages being pushed through parliament, it is not clear that there has been any fundamental shift in policy since Rudd became Prime Minister. If the Liberal Party had held power in 2007, it is likely the government’s response to the financial crisis would not have been that much different. Perhaps the size of the stimulus package would have been smaller, but its design could plausibly have been very similar (after all, transfer payments to favoured constituencies were a hallmark of the previous government) or perhaps the stimulus could have been delivered through the slightly different medium of targeted tax cuts.

Certainly, Kevin Rudd has big rhetoric, but, looking closely at his policy initiatives, not yet a huge amount to back it up. Policy for policy, the government still resembles the one which was elected in 2007. The big ticket items have either failed to emerge (the national broadband network) or have been dramatically watered down or delayed (the government’s emissions trading scheme.) The policies which have been or will be enacted could still be hugely costly and damaging, but nobody from either side of politics seems to want to admit that, as yet, not very much has actually happened under Rudd. As significant as it is, simply dropping the Commonwealth budget immediately into a deficit is not quite a revolution. Running a deficit is not a fundamental change in the philosophy of government.

When we clear away Rudd’s misunderstandings, errors and ideological confusion, we are left with not much more than machismo and bluster.

But there has been a discernable change in the government’s approach to policy. The hallmark of Kevin Rudd’s tenure so far has been his technocratic approach to government-that is, the belief that there are no problems which cannot be conceivably fixed by regulation or legislation designed by experts and implemented by an efficient bureaucracy. Rudd has the career bureaucrat’s conceit in the infinite possibilities of government action-now in a position to personally direct policy, there are no limits to what Canberra can achieve.

The Howard Government may have been embarrassingly high-taxing and high-spending, but it at least had a certain modesty. It knew that it could not alone fix the problem of obesity, or protect all Australian minors from a dangerous internet, or reduce global greenhouse emissions.

And there is nothing more frustrating to a technocrat than ideological passion. Ideology – or any philosophical approach to political action – does nothing more than frustrate a technocrat, who, after all, is just trying to ‘get things done.’ But technocracy is an ideology, although its proponents would horrified to think so. Technocracy is inevitably a belief in the radical expansion of government power – after all, for a technocrat, there are no philosophical limits to government, and there are an infinite array of problems government can solve.

And just as intellectuals often want to be technocrats – deeply versed in the complexity and detail of public policy – technocrats often aspire to be intellectuals. And Rudd seems to think he is John Gray, assessing and critiquing the moral basis for the market economy.

Kevin Rudd’s philosophical musings may not reflect any deep intellectual thought, but they do show us the depths to which he wants to take his government.

IPA Review Editorial, March 2009

Is this the biggest financial crisis since 1987? Since the 1970s? Since the Second World War? Since the Great Depression? Since the word ‘finance’ was coined?

Who knows – my economist can beat up your economist. Like those American political commentators who try to predict the results of elections with absurd comparisons – ‘A two-term Senator from Texas who hasn’t ever been a three-term Governor has never taken the White House in a year divisible by 32′ – history too often distorts our understanding of contemporary events more than it enlightens.

What historical comparisons do show, however, is that the last three hundred years of liberal capitalism have been a never-ending series of crises and crashes. The economic history of the United States reads like a slapstick cartoon: there was the panic of 1797, the depression of 1807, panics in 1819, 1837, 1857 and 1873, the ‘Long Depression’ between 1873 and 1896, further panics in 1893 and 1907, a recession following the First World War, the Great Depression, recessions in 1953 and 1957, and an oil crisis in 1973. A recession has opened each decade since the 1980s.

In Australia, when the financial journalist Trevor Sykes documented the continuous corporate failures that have dominated our history, that experience led him to title his book on the topicTwo Centuries of Panic. More recently the former Reserve Bank Chairman Ian Macfarlane has described seven financial downturns since 1980.

When Walter Russell Mead delivered the 2008 CD Kemp Lecture for the Institute of Public Affairs in Melbourne in December, he made an important point: our long history of crashes, depressions, panics and recessions are an integral part of the system. When firms fail – even when entire market structures fail, as it appears they have for the more aggressive Wall Street trading firms – we discover better ways to manage risks, better ways to seek profit. Mead argued that the history of liberal capitalism is the history of markets gaining complexity until they were beyond our understanding, leading to a spectacular crash, followed by a recovery based on what we have learnt went wrong, and then another, inevitable building up of complexity. Mead pointed out that since the Dutch tulip mania of the 1630s, none of these crises had fundamentally shifted the West off its path of liberal economic development. Markets crash, and markets recover.

But this resilience of financial institutions and of individuals transacting within them is not the only factor to worry about. The other side of the equation is how governments respond to market panics and crashes. As Julie Novak points out in this issue, the financial crisis is exposing weaknesses in governments’ policy settings across the board, and bringing old ideological biases out of the political basement.

The risk is that, in its eagerness to respond to the crisis as forcefully and politically popular as possible, the government will subsidise, or regulate, or tax, or redistribute in a way that makes the recovery slower, or fundamentally redirects the economy off a path whereby individuals look to their own self-interest.

As Andrew B. Wilson writes in his article ‘5 Myths of Great Depression’, also in this issue of theIPA Review, there is good reason to believe that the Roosevelt administration’s New Deal did much to prevent the economy from recovering as it otherwise would have.

It seems indicative that while we don’t know whether Australia has yet gone into formal recession – although it seems highly likely – and unemployment is still at historical lows, the federal government has immediately plunged itself into a massive deficit.

Nobody can reliably predict the market. But nobody can predict the government either.

Despite Job Fears, We Must Keep Migration Door Open

The United Nations High Commissioner for Refugees, Antonio Guterres, was right when he noted last week that the first people to cop the blame for an economic downturn are foreigners. In the UK, the “British jobs for British workers” movement is getting more popular and more shrill.

So, until recently, it was good to see that Kevin Rudd’s Government was intent on maintaining – and even increasing – the high migration intake it had inherited.

But Immigration Minister Chris Evans announced on Monday that the Government was planning to reduce the number of skilled workers it lets into the country every year.

ACTU boss Sharan Burrow pretty much gave the game away when she claimed in response that migration had to be restricted to “protect jobs” because of the financial crisis. The union movement has never met an immigration cut it didn’t like.

The idea that one more immigrant equals one fewer job for Australians sounds vaguely plausible. But modern labour markets are far more complicated than that. A national economy isn’t just a fixed number of jobs waiting to be divvied up between all the available workers – it is a constantly changing mixture of opportunities to work, produce and profit.

Let’s be honest: if there were a real risk that immigrants were going to rip potential employment away from red-blooded Australians looking for work, those Australians would be doing those jobs already.

Critics of immigration conveniently forget that immigrants do more than just work – they buy houses and consume products too. Hell, they even pay taxes. Adding more people into the economic mix is a recipe for long-term growth – this is as true when the economy is slowing down as it is when the economy is booming.

After all, there are a lot of things to do in an economy, even during a recession. The whole country doesn’t immediately seize up because a department store reports that their mid-January sales figures are down 17 per cent on last year’s.

So if we respond to the economic crisis by dramatically shrinking our migration intake, we could easily end up in the bizarre situation of having both widespread unemployment and widespread job vacancies. Sound unlikely? Perhaps, but we haven’t seen those laid-off Macquarie Bank alumni hopping on V/Line to pick pistachios in Swan Hill yet.

Sure, there are now a lot of people actively seeking work since the global financial crisis really hit six months ago. But there have been unemployed people since before then, and those jobs in the fruit-picking industry have long been unfilled.

Only when the finance industry’s brightest sparks begin seeking agricultural employment should we start denying farmers the labour force they need – and denying eager migrant workers the opportunity to earn.

Ever since the First Fleet landed, Australia’s most pressing economic problem has been our population size. Our labour force has always been small, our consumer base small, and the size of our national market small. Compounding this has been the fear of an inexorably ageing workforce. But the credit crunch has presented long-term opponents of immigration with an opportunity to flog their favourite dead horse.

Even more erroneous is the belief held by many opponents of immigration that we should limit the entry into Australia of certain non-Western religions because our cultures are incompatible.

The history of migration has surely taught us that individual liberty and equality are quite appealing when seen up close – every migrant group has integrated into Australian society within a generation or two.

What we ask from immigrants to Australia is that they obey the nation’s laws, just like those whose families came over two centuries ago. And we have a shiny, expensive police force to make sure we all do.

Anyway, we have a moral necessity to maintain a high immigration intake.

Much more than foreign aid, charity, Live Aid wristbands, and even the bulk-purchase of fair trade coffee, the most effective way we can help somebody living in the third world to crawl out of poverty is allowing them to move to the first world.

On the one hand, the ACTU’s Union Aid Abroad claims solidarity with overseas workers, but on the other hand the union insists that poor workers in other countries be restrained from doing the one thing that could most comprehensively help them – moving here.

Certainly, the economic crisis is hard.

But blaming foreigners and cutting immigration isn’t going to get us out of it any quicker.

Bring On The Acid Bath

Australian public debate is usually sober and routine. Policies are proposed, criticised and eventually watered down. One person calls another person a “neo-liberal” and everybody goes home at a quarter past five.

So when novelist Peter Carey claims that a technical legislative change affecting the publishing industry will encourage the growth of “a new species that can swim in acid”, it is at least an entertaining break from the normal banalities.

The Productivity Commission is investigating the removal of the ban on parallel importing, which makes it illegal to import for sale any book that has already been published in Australia. It seems that any proposal to lift this ban is like kryptonite straight to the groin of Australia’s publishing fraternity.

If the ban is lifted, Carey imagines a very bleak future: “long-term devastation” and “cultural self-suicide”; Australian book editors will be “reduced to nothing, to become marketers and publicists for Paris Hilton”. And according to Carey, treacherous – and apparently acid-resistant – global retailers will take over. They plan to rob Aussie publishers “blind”.

Also chiming in, Tim Winton was slightly less surreal but more poetic, predicting a “great bitterness” would wash through the Australian literary community.

And Matthew Reilly, whose books have sold more than 4 million copies, compared the possible influx of popular books if the ban is lifted to the introduction of McDonald’s.

Our novelists are adopting a whole new strategy into debate over microeconomic reform: emotional blackmail. As a general rule, if a law needs a lot of exceptions to avoid being idiotic, it’s probably not a very good law. And there are a lot of exceptions to the ban on parallel importing.

To ensure Australian readers aren’t shut out of the worldwide book market altogether, if a new book hasn’t found an Australian publisher within 30 days, importers are free to bring it in. Other regulatory exceptions ensure that overseas travellers don’t get arrested for bringing in the Dan Brown novel they picked up at Heathrow, and that booksellers aren’t jailed for ordering books that are out of stock in Australia.

The hardest thing in retail is trying to figure out how much consumers are willing to pay for your product.

Australians might be willing to pay a relatively high price for books, but for the less affluent Indian market, authors and publishers might have to sell at a lower price. Clever capitalists try to segment their market as much as possible – rich people pay more, poor people pay less.

So if parallel importing is legalised, Winton, Carey and a lot of publishers are worried that bookshops will be able to import those cheaper copies.

Well, hey – cheaper books for everyone! And if authors really want to keep selling their books at different prices in different markets, they should be able to use private contracts to prevent their own retailers from undercutting them. Like all protectionist laws, the ban on parallel importing privileges producers over the consumers they are supposed to serve – novelists no more deserve to be insulated from competition and consumer demand than farmers, computer programmers or line workers.

In an era where everything is available on the internet, segmenting a market is getting harder and harder. Over time, the whole issue of parallel importing may become obsolete – call it the Amazon effect. The debate shows how much Australian cultural producers have made it appear that our culture is only possible with government protection.

But strong and vibrant culture doesn’t usually come from a bureaucratically orchestrated jumble of subsidies, regulations and writers’ workshops. Culture shouldn’t need a legislative umbrella to protect it.

Peter Carey may believe that parallel importing will silence Australian authors, but there’s something anachronistic and nationalist about the crusade to encourage specifically Australian voices, Australian stories and Australian images. It is peculiar that while we might believe that modern Australia is a cultural collage of backgrounds and value systems, culture warriors on both sides of politics are not able to admit that this makes the deliberate encouragement of a uniquely Australian culture a sham. Many Australian Muslims might find Islamic authors published overseas more personally enriching than Tim Winton’s descriptions of surf in Western Australia.

Unique voices will continue to find their way in a marketplace no matter how globalised that marketplace is – globalisation may spread McDonald’s outlets across the world, but it also makes far-away Peruvian cultural products easily accessible to punters in Narre Warren.

Yet Australia’s cultural legislation protects and subsidises authors with the aim of constructing some sort of universal story that can be shared by the 21 million people living within the territorial limits of Australia. Apart from being futile, this attitude imagines that Australia is a solitary island, rather than deeply integrated in cultures spanning the globe.

Culture evolves in the wild, battered and shaped by the elements, and by the pressure of competitors. It is more likely to stagnate or starve when protected in an artificial environment. The more Australian authors have to compete, the more rewarding our cultures will become.

Tinseltown Ideology Reflects Our Cultural Obsessions

It’s no surprise that when Hollywood decided to remake the 1951 sci-fi classic The Day the Earth Stood Still for modern audiences, the theme would change from nuclear war to the now much more popular fear of environmental collapse. There is a long tradition of movies with political messages.

But the strikingly different approach of each film speaks volumes about a shift in green philosophy of the last few years. It is apparently now unremarkable to believe that humanity should be sacrificed at the altar of Gaia.

The plot of both The Day the Earth Stood Still films is very simple – an alien named “Klaatu” visits Earth to teach humanity a lesson about its bad ways.

In the 1951 film, Klaatu is a sort of Christ-like figure, whose extraterrestrial intervention into human affairs brings about an age of peace. This original Klaatu is a charming alien who firmly but gently convinces mankind to abandon politics and warfare. Humanity obediently pulls back from the nuclear precipice. Peace and good times are then had by all.

In 2009, the filmmakers have changed Klaatu into a dictatorial environmentalist with a penchant for genocide. Keanu Reeves plays a Klaatu who fairly quickly decides that all humans need to be immediately eliminated for the sake of the earth. The new film is sort of like an episode of Doctor Who where the Daleks are the good guys.

Indeed, the alien civilisations of 2009 appear to be everything that the alien civilisations of 1951 were trying to stop. When the 1951 Klaatu steps out of his space ship, he immediately states that he has come to visit the earth “in peace and with good will”. By contrast, it seems that Keanu Reeves steps out of his space ship only to briefly survey the species he plans to destroy. This film has to be one of the most deeply anti-human movies in a long time.

So what does it say about our collective mental health that, when we try to imagine a “good” race of aliens, we also imagine that they would want to systematically slaughter us? If we’re lucky, the next bunch of extraterrestrial visitors will bring us the anti-depressants we so obviously need.

The extraordinary ideological change between the original The Day the Earth Stood Still and its remake shows how mainstream apocalyptic environmentalism has become. Obviously, the vast majority of those who care for the environment also think that the human race is probably worth keeping alive. But what was, just a few years ago, the harmless spluttering of Malthusian academics certain that the Earth needs to halve its population, is now being repackaged approvingly as infotainment.

Movies have always both reflected and distorted our cultural obsessions. Filmmakers aren’t stupid – they want movies to sell to as wide an audience as possible, so they try to mimic as best they can the attitudes and interests of the population at large.

But at the same time, the political views of most filmmakers hardly reflect the political views of that audience. You could shove the number of conservatives and libertarians in Hollywood into a small Prius, and still have enough room for their pets, or their guns – or whatever profit-loving, environment-hating, worker-oppressing things they like to carry around with them.

So every year, Hollywood produces a couple of films that are little more than vehicles for Tinseltown’s latest trendy ideology. Last year’s otherwise charming Wall-E depicted humanity as not just destructive, but also morbidly obese morons encased in hover-chairs. And the global warming disaster movie The Day After Tomorrow implied that the world was just one bonfire away from a climate implosion.

Presumably the next iteration of Godzilla will be born because of an aggregate global temperate change of 3 degrees spread over a century.

Of course, if you’re too quick to jump at the latest popular cause, it’s easy to make mistakes. Hollywood can get it spectacularly wrong. Remember the overpopulation crisis of the 1970s? A steady stream of films like Logan’s Run, Soylent GreenThe Last Child, and Z.P.G. (which stood for the environmental movement’s aim of “zero population growth”) tried to popularise the bizarre idea that the amount of people the world had in 1978 was exactly the maximum population the world could hold.

But despite Hollywood’s best efforts at convincing us not to, we kept on breeding. At the time of writing, we have not yet had to resort to turning our dead into basic foodstuffs.

For decades, the film industry churned out films about the need for love, peace and just generally getting along. What made them stop? Bring back the original, kindly Klaatu, who wants to help humanity, not destroy it.

The Bail-Out Disease

If pop psychology has taught us anything, it has taught us that individuals go through five stages of grief – denial, anger, bargaining, depression and acceptance.

Governments do, too. Presented with the biggest economic crisis in 50 years, the Federal Government first tried to ignore it and then angrily blamed it on greedy capitalists. Now having reached the bargaining stage, Canberra has convinced itself that it can fix the crisis if it applies just the right sort of stimulus and bails out just the right sort of companies.

Already the number of industries being prepared for bail-outs is large. Car dealers have been bailed out. Commercial property investors look to be bailed out. Banks are being bailed out with the fluffy blanket of a government guarantee. Deputy Prime Minister Julia Gillard appears to have spent the past few months moonlighting as the liquidator for a chain of child-care centres. Now the dairy industry wants a bail-out, presumably because of the importance of marinated fetta to economic growth.

We could also add to that list the car industry, but I’m not sure that we can blame the global financial crisis for that – propping up this sector with piles of cash and legislative favours is sort of an Australian tradition. We were probably going to do it anyway.

All of these are dwarfed by the strong possibility that the Federal Government will have to eventually bail out the state of NSW. Collectively, the NSW Government is far worse than the most reckless, hard-partying, due-diligence-ignoring Wall Street CEO. When NSW inevitably goes into receivership, its citizen-shareholders will wish they could sue.

Seriously, who isn’t eligible for a bail-out? Your guess is as good as anybody’s. None of the traditional policy justifications for propping up failing companies – whether you agree with them or not – seem to apply to our great bail-out bonanza.

For example, child-care organisations are clearly not “too big to fail”. Car dealers are clearly not “too important to fail”. If there is a formula governing which industries are eligible for a government bail-out, it sure is an obscure one.

But the sad reality is that the decision about which companies deserve a bail-out – and which companies should join whale oil merchants and abacus makers in the cemetery of dead businesses – is entirely arbitrary, dependent only on the political winds in Canberra.

So there’s a certain hypocrisy about a Government that on the one hand is deeply concerned about the influence of lobbyists and donations on the political process, and on the other is making it more and more attractive for businesses to seek political favours. Own a company? You’d be stupid not to try for a guarantee, or a loan, or any other trick that transfers money from the Government to you. Bail-out lotto is a surprisingly easy game to win, and it offers big prizes.

Of course, bail-outs are extraordinarily unfair to those who aren’t on their pleasant receiving end. Shareholder capitalism should be pretty simple. People bet their money in the market on businesses that they think might be a good thing. They profit when they are correct and lose when they aren’t. The companies that make bad decisions, or make products that no one wants to buy, fail. And the good ones survive.

While government bail-outs are no doubt well-intentioned – nobody likes to see companies collapse and jobs disappear – they dramatically alter this basic formula. They undermine the certainty that is so important to economic confidence – investors have no idea how the Government will react to a business heading south. Bail-outs mean that people aren’t financially punished for their bad financial decisions. They keep companies afloat that probably should sink – if your business model isn’t working, do something else with your time.

And bail-outs are expensive. There’s no clearer example of corporate welfare than the Government taking money from taxpayers and adding it to the revenue spreadsheets of Australia’s biggest businesses. Bail-outs are paid for by everybody, but they’re not available to everybody.

Does anybody doubt that if the Government was presented with the imminent collapse of Ansett that it would have quickly ponied up the cash? At the time, the Howard government resisted the howls of Ansett executives and the unions and let Ansett die the death it deserved. Nearly a decade later, flights have never been cheaper and it is safe to assume that most of those who were laid off at the time have been able to find work in a more productive enterprise.

The political eagerness to bail out failing companies just reveals that they – like a lot of us – don’t quite understand what is going wrong with our economy.

It’s actually a bit misleading to describe our economic woes as a crisis.

If anything deserves that title, it was the asset bubble that was burst in the crash last year.

All the downsizing and unemployment that we face over the next year is not the crisis, it is the correction.

So when the Government tries to stimulate the economy with big spending and tries to resuscitate dying companies, it isn’t resisting the crisis, it’s resisting the correction. And preventing the economy from healing itself isn’t doing Australians any favours.

Things fail. Napoleon failed to conquer Russia. Baz Luhrmann’s Australia failed to be the nextTitanic. And companies fail. In fact, building a successful business is an extremely hard thing to do.

The sooner we get to the last stage of grief – acceptance – the quicker our economy is going to recover.