Micromanagement In The Regulatory State

Another year, another 6,369 pages of law. Spread over 150 acts, that was the Commonwealth’s total new legislation in 2010.
Not a bad effort considering their usual legislative binge was interrupted by an election.
The received wisdom about Australia’s political and economic history over the last few decades is wrong.
Think we’ve been living in an era of deregulation? In an era of small, timid, “neo-liberal” government?
The data suggests otherwise.
The Australian Government has been massively, overwhelmingly, and comprehensively expanding its intervention into all aspects of the economy.
Compare 2010’s 6,369 pages to the 1980s, when the parliament only passed around 2,000 pages of law every year. Twenty years before that parliament would pass even less: just 500.
The first few Commonwealth parliaments were lucky to pass more than 100 pages a year. In 1907 the Governor-General ticked off on a paltry 17 pages of new law.
It took just a few hundred pages of legislation to set up the Commonwealth. But 110 years later it apparently takes more than 6,000 new pages to just keep it running.
Admittedly, these figures come with a lot of caveats. In 2010, Australians didn’t have to obey 150 more laws: some legislation is passed to alter or repeal existing legislation. Not all of it, by any means, but some.
And the figures don’t factor in the immense volumes of statutory legislation implemented by the Commonwealth last year, usually hovering around 2,500 to 3,000 pages. Or the pages of legislation passed by state governments, which varies between 1,000 and 4,000 depending where you live. The states implement statutory legislation too.
Yet with all its caveats, looking at the number of pages of law passed each year illustrates two things.
First: the more laws a government passes, the busier it is. We have increasingly busy governments. Australia’s legal and regulatory system is being continuously shuffled around. Continuous change has its consequences. To take one of the more prominent examples, in the last few years businesses have had to get up to speed with niceties of Workplace Agreements, then the complexities of WorkChoices, and now the nuances of Fair Work.
Second: the regulatory framework which governs the economy is increasingly complex. Longer laws are more complex laws. The WorkChoices act was 762 pages. The Fair Work act was 651. People (not just lawyers) have to read and understand those tomes.
Regulation spawns more regulation. Not all regulation works to achieve its goals, so regulators and politicians just pile more and more rules on top. And a great deal of regulation is imposed just for its symbolic benefit – the need to “do something” in response to public demand. The OECD calls all this “regulatory inflation”.
Condemning the “volume and complexity of federal laws”, the Chief Justice of the Federal Court of Australia Patrick Keane told the Australian Financial Review Friday that “opening the tax act is like entering the door to a parallel universe”.
This growth in government control over the economy is hard to reconcile with Kevin Rudd’s view that a “particular brand of free-market fundamentalism, extreme capitalism and excessive greed” has dominated the last decades.
Take the now-orthodox view the global financial crisis was caused by a lack of regulation. This view seems to ignore the abundance of regulation governing the banking and finance sector in the United States, and, indeed, globally.
Certainly, in the aftermath of the crisis, a batch of new international banking regulations have been implemented, most notably the Basel III accords. But rarely is it pointed out there was a Basel I and a Basel II. Each were substantial regulatory frameworks themselves.
Indeed, the perverse incentives created by Basel II’s capital requirements (which encouraged banks to hoard AAA-rated mortgage backed securities) were one of the major causes of the crisis in the first place.
Other regulations administered by the American Securities and Exchange Commission protected the private ratings agencies – which granted the AAA grades – from competition. It gets worse. Jeffrey Friedman convincingly argued in Cato Policy Journal last year that not even the SEC knew about this latter regulation, which it itself had imposed in 1975.
If there are too many regulations for even the regulators to keep track, then our problem isn’t too little regulation.
The expansion of regulation is a bipartisan project. The Howard government was just as enthusiastic about regulating as the Rudd and Gillard Government has been.
With 6,369 pages of legislation, 2010 was unfortunately an unexceptional year.
So it’s time we recognised our political system for what it is. It’s not neoliberal. Nor is it social democratic. Australia is a regulatory state – one in which three levels of government have wrapped society with a complex and confused mesh of rules and laws which micromanage everything we do.

Gillard’s Government Balancing Act

As 2011 opens, Labor is going to face that Julia Gillard’s biggest problem is a crisis of legitimacy.
Not the sort of legitimacy Tony Abbott was talking about in the weeks after the election: a government formed in a hung parliament is a valid government, and Gillard is as much a Prime Minister as any other prime minister.
But Julia Gillard commands neither influence over her colleagues, control over the processes of government, nor direction of the media cycle. In the months since taking the leadership, she has utterly failed to stamp the Government with her brand or even made clear her philosophy of government.
Everybody has noticed that the Gillard Government has no vision, but increasingly you have to wonder whether it has any purpose at all.
Kevin Rudd had an awful 2010, but his control over all these things in the first 18 months of his government shouldn’t be forgotten.
It was just the way Rudd achieved that control – the endless parade of announcements and policy revolutions that spectacularly blew up this year – that eventually did him in.
By contrast, Gillard’s leadership was precarious from its first moment. The leadership spill did more than install a new Prime Minister; it appears to have undermined the internal coherence of federal Labor’s parliamentary party.
The Greens have received the credit for the recent debate over gay marriage, but it wouldn’t have been possible if not for the erosion of Labor’s internal discipline in the wake of the spill. Gillard’s strong claim that she doesn’t support gay marriage did nothing to halt dissent from within her own government. She may have even stoked it.
It’s no longer fashionable to do so, but I still blame Rudd for Gillard’s problems.
Much was made of Gillard’s claim in an interview from Brussels that foreign policy was not her passion – education was. Yet education has been stubbornly out of the Prime Minister’s orbit since.
Rudd left so many balls in the air that Gillard’s first few months has been entirely focused on tackling them one by one.
Take the politics of asylum seekers. Rudd’s dithering between toughness and compassion throughout 2009 and his last months in 2010 left the Government with no coherent message to counter Abbott’s simple mantra.
Rudd then threw a bomb at Gillard in his penultimate press conference, incoherently and confusingly claiming that the leadership question was whether the Government should “lurch to the right” on asylum seekers.
Once she got the job, Gillard grasped a badly underdeveloped East Timor solution which didn’t seem to have left the whiteboard stage. (It’s only last week that East Timor received a document outlining the plan – five months after it was announced.)
And she struggled to demonstrate that her East Timor plan was at all different from the Pacific Solution her party had spent a decade condemning.
It’s not much better across the policy portfolios. The lavish Henry Tax Review has ended with the resignation of its author and a mining tax going into its third iteration. Gillard tried once to wrestle the mining tax down once before, but the drama looks to intrude well into the New Year.
Or a price on carbon. Gillard is committed to ambitious climate reform, we’re told. She’s just not entirely sure what that reform is yet. Perhaps it depends on Rob Oakeshott and Tony Windsor.
Gillard has struggled to balance these huge policy battles (you could also include health and water reform) with her avowed belief that Labor lost its way in July. She doesn’t want to abandon the appearance of reform zeal which Rudd cultivated, but knows those attempts at reform were the sources of the Government’s problems.
It leaves her government hesitant, cautious, and ever so slightly intimidated by its own policies.
The Government is deeply uncomfortable in its own skin, led by a Prime Minister whose principal qualification for leadership was being agreeable to union bosses and ALP heavies who felt neglected under Rudd.
That’s not to say Julia Gillard couldn’t have been a good Prime Minister – or even a great one – or that she couldn’t be one in the future. Right now there’s no reason to suspect this government won’t be able to survive a full term. She has time to grip the wheel of leadership.
But one thing is clear right now. Kevin Rudd’s problem was never just communication, although it must be comforting in Labor circles to imagine it was. Gillard’s struggle over the last few months surely has shown how much a fallacy that belief is: changing the messenger hasn’t helped at all.
It’s only become worse for the ALP. Tony Abbott is if anything much more electable than he was while Kevin Rudd was leader.
Hence Gillard’s legitimacy crisis. One by one, the justifications for July’s leadership spill have collapsed: the Government is less popular than it once was, it is no better managed, its suite of policies are no more coherent, accepted, or closer to implementation.
In 2010, Gillard was given the role of Prime Minister. In 2011, her goal must be to own it.

Can’t Compare: Emissions Trading And Reforms From The Past

It’s now an accepted part of political folklore: the era of reform is over. Our boldness has gone. No longer are we able to push through major economic changes. We have no appetite for challenge.
Australian politicians are hesitant to take risks, intimidated by polls, and the Government is cripplingly scared of focus groups and opposition.
That’s the broad outline. Fill in the details yourself.
This story has a lot of truth in it. In his recent Quarterly Essay, George Megalogenis carefully and convincingly documents the way federal Labor reacted to falling opinion polls in ways which only made those opinion polls drop further.
But the end-of-reform tale pivots on one critical comparison which doesn’t hold up – that between the liberalisation of the Australian economy in the 1980s and early 1990s, and the failure to (so far at least) introduce an emissions trading scheme.
The parallels are admittedly seductive. The decade-long program of financial deregulation, reduction in tariffs and industry protection, privatisation and corporatisation of state enterprises, and labour market reform required unheard-of boldness. It caused pain. Industries which had relied on protection were no longer viable, workers were exposed to the stresses of competition and new private operators took knives to the bloated payrolls of formerly public sector businesses.
The emissions trading scheme will bring hurt too: making some forms of energy production unprofitable (with the attendant risk to jobs) and add substantially to everybody’s power bills. The government that introduces it will be a bold government.
But that’s where the similarities end.
The reform of the 1980s had one clear and unambiguous goal: to clear up a century of accumulated, unnecessary or entirely counterproductive regulatory burdens. These burdens were holding back Australia’s economic growth, limiting personal income, and entrenching private interests at the public expense.
The goal of an emissions trading scheme is very different: to impose burdens on the Australian economy.
Not a bug, a feature. Placing new costs on the cheapest energy will inspire people to reduce their energy use. It will also make technologies which were uncompetitive in a world of cheap coal suddenly competitive.
That’s the plan, anyhow.
In practice, the emissions trading scheme was rife with exemptions, subsidies, wealth transfers and policy distortions which favoured some industries above others. Emissions-intensive, trade-exposed industries were eligible for assistance, so the definition of what constituted “emissions-intensive” and “trade-exposed” was pretty important.
The lucky winners, according to a paper released by the Department of Climate Change in October: Alumina refining (of which there are four companies operating in Australia), aluminium smelting (also four companies), carbon black production, (one company), carbon steel from cold ferrous feed (one company), clinker, copper, ethylene, flat glass, fused alumina, and glass container production, among others, are now considered “highly emissions intensive” and “trade exposed”.
Other businesses, like tissue paper and white titanium dioxide pigment production, are considered to be trade exposed but only moderately emissions intensive. They get a different rate of assistance.
Then there were the free and subsidised emissions permits. And the household assistance payments to compensate poorer Australians for higher energy costs.
The end result of all this regulatory complexity, new subsidies, and tax-welfare churn shouldn’t remind us of the great reform movement of the 1980s. It should remind us of what that reform movement tried to clear away.
Treasury suggests emissions reduction will cost Australia’s economy 2 to 3 per cent of GDP over the next 50 years.
That too compares poorly with the great reforms of the 1980s, which were designed to boost, not restrain, economic growth.
The pain of deregulation was limited to companies which had profited at the expense of the rest of everybody else. Like the tariffs which kept inefficient clothing companies in business and inflated clothing prices. The pain of emissions reduction will be borne by all Australians who use energy.
In a speech last week, the Chairman of the Productivity Commission, Gary Banks, tackled just this question: what constitutes “reform”?
At the very least, reform has to be productivity-enhancing. Reform has to achieve its goal – if carbon pricing is to be considered a success, it has to go some way to mitigating global emissions and then climate change. And reform has to be long term – not so precariously controversial it will be eliminated at the next change of government, like, for instance, WorkChoices.
Banks also cited the Baby Bonus, light globe bans, FuelWatch, Grocery Choice, and Cash for Clunkers as “reforms” which failed to meet these modest but important criteria.
Emissions trading would fail too. No emissions trading proposal before Parliament could achieve its ambitious goal. And no proposal before Parliament would be “sustainable”; that is, would be able to survive into the long term without major revision.
Banks does not go so far as condemning emissions trading. But his argument for action on climate is half-hearted: “perhaps the strongest economic argument for carbon pricing is that it would displace more costly alternative measures targeted at particular products or technologies.”
In other words, it would be marginally better than the even-worse things we’re doing now. That’s hardly an inspirational argument for bold new reform.
How desirable you think carbon pricing is will depend on your view of the science of climate change and the likelihood of significant global action.
But to compare it to the great reforms of the 1980s and 1990s is a mistake. It does a disservice to the legacies of Bob Hawke and Paul Keating. And it gives emissions trading a sense of historical inevitably which this compromised, undercooked, and ineffective policy has not earned.

WikiLeaks and the virtue of transparency

WikiLeaks’s release of American diplomatic cables “may put lives at risk”. The White House spokesman Robert Gibbs claims that the release may damage the “cause of human rights”. WikiLeaks’s actions are “reckless” and “dangerous”.

Sounds serious. But we’ve heard these claims before.

When each of the Afghan and Iraqi war logs were released earlier this year, US officials lined up to condemn the whistleblowing site in the strongest possible language. The Afghan documents, “put the lives of Americans at risk”, according to the US national security advisor. The Department of Defense said the Iraq files dump “could make our troops even more vulnerable to attack in the future”.

On Sunday night a Republican Senator from South Carolina wildly argued on Fox News that “The people at WikiLeaks could have blood on their hands.”

The operative word in that sentence is “could”.

Having lived with WikiLeaks’s release of the Iraq and Afghanistan war logs for months now, Pentagon officials concede there is no evidence that a single person has lost their life as a result. Not one.

And when requested in the lead up to the latest release, the State Department refused to guide WikiLeaks as to which documents should be redacted to protect against “significant risk of harm”.

Instead they insisted the site delete all the documents and forget it ever happened – something the messianic and volatile WikiLeaks head Julian Assange was quite unlikely to do.

Crazy-brave, with all those lives at stake. But more likely just a bad bluff. Major government departments aren’t good at poker.

The passionate assertions that national security will be compromised, that lives will be lost, that the cause of human rights will be set back: shameless, unadulterated hyperbole, by a government not even sure what’s about to be released. Transparent attempts to dissuade WikiLeaks from revealing uncomfortable material.

To take a random example out of the 243 documents released so far, it mustn’t be nice to have it publicly known US diplomats think Bavarian premier Horst Seehofer is “unpredictable” and has only “shallow foreign policy expertise”.

The full diplomatic archive of a quarter of a million documents will be released in dribs and drabs over the coming months.

Some of what we’ve seen is little more than banal gossip. Nobody needed leaked diplomatic communication to realise, say, Dmitry Medvedev “plays Robin to Putin’s Batman” as one cable put it, although it’s great fun to see it in an official document. Or that Kim Jong-Il is a “flabby old man”. That Silvio Berlusconi is “vain” with a “penchant for partying hard”. It will shock the international community to learn Hamid Karzai is “extremely weak”.

One overwhelming impression from the cables which have been released: professional diplomats are unimpressed by the politicians they’re compelled to work with. If only we could see their pens turned against their US political masters.

Other cables are more important, but still only embellish what we know already.

For instance: the US government has been trying to convince other countries to resettle its Guantanamo Bay detainees for years. But thanks to WikiLeaks we now know how desperate those US negotiators sound: officials tried to convince Belgium accepting prisoners would be “a low-cost way for Belgium to attain prominence in Europe”.

This is not materially new information. But it is more revealing than the sterile reports we’re familiar with.

After all, it is one thing to know the world’s superpower is negotiating to resettle detainees. It’s quite another to learn that the superpower sounds like an anxious salesman as it tries to do so. Or like a shonky political party treasurer selling tables to a fundraiser: Slovenia was told resettling a detainee would earn Slovenian leaders an audience with Barack Obama.

These cables further underline how the original decision to set up Guantanamo Bay dropped the US into a complicated long-term legal bind from which it is still struggling to extricate itself. It’s not revelatory. But the desperation is very, very revealing.

So too is the deep mistrust within the Middle East towards Iran.

Arab leaders in the region endlessly crow about Israel, but in private it is Iran they worry about. The cables vividly show that the leadership of Qatar, Abu Dhabi, Oman and Bahrain are all deeply concerned about Iran’s nuclear program. Saudi Arabia has been urging a US attack on Iran.

Analysts have been saying this for years, of course. But the unadorned cables make their points starkly and unambiguously.

Julian Assange is anti-war. But when the world reads the Egyptian president telling the US ambassador to only enter dialogue with Iran “so long as the [US] does not believe a word [the Iranians] say”, the case for dealing with Iran as soon as possible is strengthened, not weakened.

The documents are unlikely to damage America’s global reputation.

While foreign governments will kick up a fuss about what they read, they know how diplomacy works. They’re worried they could be the victims of the next WikiLeaks release.

Neither are they likely to be of great interest to foreign intelligence services. At a minimum, 3 million American soldiers and officials have access to the cables and the clearance to read them. That’s the security problem, not WikiLeaks. Let’s assume much of these cables have leaked before, just less publicly.

In the past, the US government itself made use of WikiLeaks to expose corruption and mismanagement in the United Nations. One of George Bush’s senior officials said in July, “Transparency and accountability in government and international institutions is a best practice and of great importance and WikiLeaks previously has been a force for good in the area.”

It must be harder to see the virtue of transparency when you’re the target.

Chris Berg is a Research Fellow with the Institute of Public Affairs. Follow him attwitter.com/chrisber

Staring Through The Greens’ Populist Prism

In The Drum last week, Liberal shadow minister Kevin Andrews described the Greens as little more than Marxists for Forests.
The Victorian Liberal Party’s decision to not preference the Greens in the state election, was, in part, because that view is widely held within the party’s grassroots. The decision seems to be the right thing by their supporters: Liberal voters do not want to feel responsible for entrenching the far-left in a position of power.
But this presumes the Greens’ policy views are driven by a bleak, terminally unpopular radicalism.
The recent political melee over banks and their stubborn insistence on making profits suggests otherwise.
Neither the ALP or the Coalition are the biggest populists in Federal Parliament. The Greens are.
Compare the major parties’ responses to the recent interest rate rises with that of this blossoming minor party.
Seeking to get a leg up over the Government on interest rates, Joe Hockey flirted with naked and obvious populism – railing against the Government for not acting against the perfidy of bankers, and full of dark hints about “levers” which the Coalition could pull.
Yet when challenged on what those levers actually were, Hockey stepped back from the populist brink. The shadow treasurer released a complex nine-point plan for regulatory reform of the finance system.
Wayne Swan has had great fun threatening the banks on talkback radio when they’ve callously raised rates, but the art of governing is managing competing objectives – it wouldn’t be prudent, or good policy, to directly stop them from doing so.
So the Federal Treasurer met the political opportunity of the Commonwealth Bank’s interest rate rise with assurances he, too, would be releasing a detailed and complicated plan for regulatory change in the future.
But then there’s Bob Brown.
On Sunday the Greens leader announced his party would prefer to simply ban banks from lifting their interest rates past Reserve Bank movements for two years.
In other words, Brown had no complicated plan; no attempt to delicately balance the incentive structures of the banking industry with community dissatisfaction about those profitable institutions. He proposed a bludgeon: outlaw banks doing what the Greens think is a bad thing.
“It’s time they gave something back to the average Australian,” Brown said.
Then forcibly lower ATM bank fees, force banks to offer fee-free savings accounts, and forcibly limit mortgage exit fees: all to stop, in Brown’s words “excessive profiteering”.
Helpfully, profiteering is defined. “Banks continue to exploit this essential service to maximise their profit.” In other words, profiteering is exactly what all businesses try to do, all the time.
Of course, all parties are prone to blustery populist rhetoric.
A Google site search uncovers nine uses of the word “profiteering” on the Liberal Party website, (mainly about people smugglers, and, for some reason, lobster fishers) and two uses on the Labor Party’s site.
But that’s nothing compared to the Greens, whose website features the word “profiteering” 295 times.
And there’s something deeply populist about a party which thinks it can give everything to everyone, at any price, at any time.
In Victoria, the Greens transport plan for Melbourne pours tasty infrastructure manna across the city. Under the Greens’ plan, the city would receive 10 new rail lines, nearly 40 new stations, 12 new tram lines, and 550 new trams. (Why not 650? Why not 11 new rail lines? Why stop building stations when you get to your 40th?)
And, of course, the Greens promise to reinstate tram conductors, because, well, people say they miss the old conductors.
This plan will never, ever happen. Not just because Greens won’t win government in their own right. But because there is no chance they’d ever be able to afford it if they did.
Understandably, the major parties have been a little miffed by the Greens’ transport generosity. Why should the Greens be able to shower the electorate with promises of gifts it will never be able to give, when Labor and the Coalition are so constrained by the tradition of pretending their policies are cost-effective?
In Victoria, the reluctance of the Greens to have their policies costed is a tacit admission that, really, cost-effectiveness isn’t the point. It’s the thought that counts. Their plans and policies are specifically designed to make the major parties look miserly.
When seen through the populist prism, the Greens’ policy platform looks very different to their radical reputation.
They’re the most vocal defenders of the anti-siphoning laws, which “protect” sports fans from having to get Foxtel. (Sure, the anti-siphoning laws entrench the free-to-air television oligopoly, but that is a minor point when there is pandering to be done.)
The Greens want the Government to limit private sector working hours, which sounds appealing after you’ve worked a long day, but only makes sense if you don’t believe government policies can have any unintended consequences whatsoever.
The Greens claim Australia has an expansive immigration program only because nasty “big business” controls population policy.
And, of course, there’s no government service they don’t plan on spending more on. Governments have limited resources. Popular expectations of what government should do are limitless. This is, however, not a constraint the Greens feel applies to them.
Of course, there are many deeply unpopular policies the Greens support. Parties should be praised for defending unpopular things. Too often it’s the only way we get positive reform.
And it’s more noble than the alternative.
Better a party stands up for unpopular radical views it truly believes in than succumb to simple populist demagoguery.

Healthy Living… In A Nanny State

If there was one area of human existence which should be left to individual choice, you’d think it would be what we eat.

So the National Preventive Health Agency Bill, now ferreting through federal parliament, is quite a big deal. The agency is charged with preventing chronic disease caused by obesity, alcohol and tobacco through education campaigns and the mass-production of research papers.

It sounds harmless, but if it passes, it will represent the institutionalisation of the Australian nanny state.

The agency is to be a government-funded body with the specific purpose of expanding the scope of government – colonise spheres of human existence that have, until now, been left free from state interference.

We got some indication of the ambition of the new agency from the Kevin Rudd’s Preventative Health Taskforce, which, when it reported in 2009, recommended its formation. That and 121 other recommendations to tax, regulate, and impose national standards on food, beverages, and tobacco.

Julia Gillard announced last week the agency will not have the power to impose taxes on junk food. But that misses the point: the agency has no power to impose taxes on anything. It will, however, be empowered to lobby the government incessantly to do so.

In the long run, the formation of a permanent institution like this is more pernicious than any individual nanny state tax the government might decide implement.

Last year the British government spent 38 million pounds funding institutions to lobby for new laws and regulations, according to a 2009 study by the Taxpayer’s Alliance.

When that government launched a public consultation on potential methods to control tobacco use in 2008, there were a massive 96,515 responses. But a full 70 per cent of those responses were email campaigns originating from government-funded lobbyists – bureaucratic offshoots from the United Kingdom’s National Health Service, like “D-MYST”, the youth wing of SmokeFree Liverpool.

The situation is already much the same here: submissions to the Preventative Health Taskforce were dominated by government-funded entities. Councils, non-profits, health networks, and university public health departments all submitted proposals for new laws – and more funding.

One of the key tasks of the new agency is to develop a “national prevention research infrastructure”.

Usually, more research into the social problems and policy effectiveness is good. You can never have too much research.

But much preventive health research is highly politicised, value-laden, and of use only to those who share its predetermined conclusions.

We’re all familiar with the regular announcements that alcohol use, for example, costs Australia an enormous amount of money every year. These massive numbers are described as “social costs”.

As the New Zealand economists Eric Crampton and Matt Burgess have shown, the methodology which underlines almost all of these social cost studies (one endorsed by the World Health Organisation) is fundamentally flawed.

They typically mix costs borne by private individuals and firms – like workplace absenteeism – with costs borne by government – like funding the health system.

But the more critical problem is the failure of these studies to adequately account for the benefits of “harmful” behaviour.

And humans like fat and salt and ale; that’s the way we’re wired. To look at only at the negative consequences of human behaviour without mentioning the positive consequences is rigging the game.

Health paternalists who propose government intervene in individual choices never make explicit the value judgements which inform their belief. After all, not everyone has maximum health and minimum risk as their overriding goal. (If they did, the automobile industry would disappear immediately.)

The National Preventive Health Agency cannot divine everybody’s personal, highly subjective values. For instance, how much they value their current selves (the immediate sensory pleasure of hot chips right now) compared to their future selves (the potential they will get fat if they consume too many hot chips).

But the public health community assumes the most “rational” decision in any circumstance is to favour your future health by limiting your present consumption.

And if you think otherwise, then, well, you’re wrong.

Many argue, pragmatically, that we need to interfere in individual decisions because we pay for them. Our public health system means that the cost of obesity is borne not just by the obese but by every taxpayer. It’s a fair concern.

But first of all, it’s not always true: particularly in the case of tobacco, where the taxes levied on cigarettes overwhelmingly exceed the costs smokers impose on the health system.

And the medical cost of obesity and alcohol is often mitigated by the unpleasant but nonetheless true observation that alcoholic and obese people tend not to live long enough to cost taxpayers as much as the healthy elderly. If you’re going to calculate the cost of individual choices to taxpayers, you should at least include all the data.

Nevertheless, this argument proves too much. Is government provided health care really incapable of coping with free will? So should we be changed to suit the health system – as the health paternalists would seem to suggest – or should the health system be changed to suit us?

If it wants to do its job properly, the National Preventive Health Agency will tackle these heady philosophical, economic and social questions.

I wouldn’t put money on that.

Instead, it’s a fair bet the agency’s output will be drearily predictable: inflated estimates of the costs of obesity, alcohol, and tobacco use, and incessant lobbying for new laws and regulations.

Greens have an irrational fear of foreign money

Over the past decade, the Greens have rebadged themselves as a polished and sophisticated third party. But their spat over the potential sale of the Australian Securities Exchange is a revealing one.

On Tuesday, Bob Brown announced his party has deep reservations about allowing the ASX to merge with the Singapore stock exchange. Brown says the merger may not be in the national interest, and Australia needs to protest the lack of Singaporean democracy and the execution of Australian citizen Nguyen Tuong Van in 2005.

The Greens leader is no doubt heartfelt about Singapore, which definitely has human rights problems. The death penalty is one. Its mandatory military service is another.

But his outrage about the ASX-Singapore merger is all too convenient. If you were to take Brown at his word, you’d have to assume he has been apoplectic over Optus’s prominence in Australia (Optus is owned by Singapore Telecommunications), and furious about American investment – last year, 52 people were executed in the US.

Instead, Brown’s symbolic stand on the ASX seems motivated by quite another thing entirely: a general opposition to foreign investment in Australia. Economist Wolfgang Kasper called this ”capital xenophobia” – the irrational fear of foreigners’ money.

Bob Brown would say the ASX is special, as Australia’s primary stock exchange, a privilege granted by government. But the government has already licensed another exchange. Chi-X will start trading in early 2011.

Foreign companies owning assets and operating businesses in Australia have to operate under Australian law, even if those companies are partly owned by foreign governments. That should be the end of the story.

The ASX sale may not go through. But it’s not the only foreign investment the Greens oppose. They want to limit foreign ownership of land and water to ”avoid exploitation”. As Greens Senator Christine Milne said in her July blog: ”Our children will never forgive us if we become tenant farmers in our own country.”

For years the Greens have stoked fears international investors might buy farms, claiming they threaten ”food security”. Perhaps, but only if you believe global trade is going to suddenly collapse and foreign investors flee the country, burning their crops as they go.

Despite their urbane and worldly image, and their compassion for the poor in developing countries, the Greens are oddly hostile to the world actually coming to Australia. They want to keep Australian stuff in Australian hands, paid for with Australian money.

The Greens seem to be motivated by a peculiar form of nationalism – it’s downbeat, stripped of any patriotism or even pride of country, and one which imagines the ideal Australia to be small, self-sufficient, and somewhat isolated.

Take, for instance, their attitude to immigration. They want Australia to accept more refugees, which is good. But they also want to reduce the total number of migrants coming into Australia by further limiting skilled migrant places. The world should keep its money and stay where it is.

Australia has one of the most restrictive foreign investment regimes in the OECD. The Financial Times described our system as a ”protectionist relic”.

The Australian and Singapore stock exchange merger will have to go through the Foreign Investment Review Board, which could easily recommend the government reject it.

Then it has to get past the Treasurer, who can knock it back if he determines the investment wouldn’t be good for the ”national interest”. (Read: ”for any reason whatsoever”.)

The economic consultancy ITS Global suggests we forgo $5.5 billion of investment every year because of this strict regime. That’s money which could have created jobs, and been used for innovation and training. And even been taxed.

Joe Hockey has also been asking Wayne Swan to explain why Australia should let the Singapore exchange buy the ASX.

Admittedly, this has not been Hockey’s best week. Yet on foreign investment, the Coalition and the Greens line up disconcertingly often. During the election campaign, Tony Abbott called on the government to monitor – with a view to limiting – foreign investment in farmland.

These announcements make the Coalition look like populists abandoning their lofty free-market principles.

But for the Greens, opposition to foreign ownership and immigration seems to be a key plank of their political philosophy.

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.

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.