Tag: The Sunday Age

When politicians suddenly quit halfway through their term, they’ve usually done something naughty, or stupid, or are so awful at their job that they’ve worked out the electorate can’t stand them any longer.

But if the only reason state Labor MP Evan Thornley has resigned his seat is so he can re-enter the private sector, then, well, that’s fantastic. In 2009, we’re going to want every business person on the ground working overtime to create jobs. The last thing we need is talented entrepreneurs spending their lives stuck in the world of petty rivalries and disproportionate egos that is Australian politics.

Anyway, we have a more than sufficient number of politicians trying to engineer political solutions to what is an economic crisis. Thornley founded a company that, at its height, was worth just shy of $1billion. His commercial acumen and skills could be far more useful building the economy than regulating it.

The position that Premier Brumby was reportedly going to offer Thornley – minister for industry, trade and industrial relations – is one that could easily have a few responsibilities shaved off it. A general consensus among economists is that the best trade policy is to have no trade policy at all. Industry policy has a long and venerable history of comprehensive failure. And Victoria has ceded the vast majority of its industrial relations responsibility to the Commonwealth.

It must be strange for someone who has spent his life adding value to the economy to be offered one of the ministries most dedicated to taking value out of it.

It is a widespread delusion that the best way for a person to serve others is to enter politics; that politics is a noble profession of public service. But there’s just something far nobler about working in private industry or in the not-for-profit sector – individuals who spend their whole careers trying to figure out just what sort of products or services consumers want, or trying to understand social problems and how to resolve them. If the idea of service to others has any validity, surely social and commercial entrepreneurs are worthier than the politicians who seek, above all else, the highest level of political power.

And while many people dismiss success in business as little more than the greedy pursuit of fortune, how does that compare to politics? The business of the politician is, essentially, the pursuit of power over others. The top politicians may be paid a lot less than the top CEOs but, while a CEO can at most control their corporation, many politicians seem to believe they can move everybody’s private resources around like chess pieces.

Far from being noble, politics is a profession that rewards expediency and even deception. Political decisions are guided mostly by polling data and a desire to hurt the other team. Legislation is the result of manic horse-trading that seeks not to find the best way to do something, but to mollify as many interest groups as possible and please the bizarre preferences of the independents that often hold the balance of power.

So it is no surprise that so many laws and government programs are ill-defined, have no clear goal, and provide no method of assessing whether they are actually working. But politicians find it’s a lot easier to start a government program than to close an old one. Bureaucracies, commissions, departments, boards, committees and taskforces pile up upon each other, each insisting on a slice of the annual budget. They say that laws are like sausages: it’s better not to see them being made. But do we really have to be forced to eat so many?

Many in the private sector are now being sadly reminded that jobs that are underutilised or unnecessary have a habit of being eliminated. This does not occur in Parliament. Inefficient or just plain disinterested backbenchers need little more than a lock on their preselection and a safe seat to feel relaxed and comfortable. Even if they underperform by every possible measure, they can remain employed for decades.

As the Austrian economist Joseph Schumpeter once wrote: “Politicians are like bad horsemen who are so preoccupied with keeping in the saddle that they can’t bother about where they go.” The private sector is much less forgiving of people who spend most of their working day preparing for the next round of job interviews.

Indeed, there’s a lot to be said for the private sector. No hairdresser or bank manager can cut your hair or take your money unless you specifically ask them to do so. Politicians have no such limit – laws that impact on everybody are enacted with only the barest of consent from what constitutes a democratic majority.

While Thornley’s political colleagues might be furious at his resignation, hopefully he is able to show them that only the private sector can create the jobs that Australia will need next year.

Do we want our councillors to be even less interested in local government policy than they already are?

As potential councillors submit their nominations for Victoria’s council elections next month, this is the message the State Government is broadcasting. A legislative change to local government administrative law now filtering through Parliament will exclude councillors from being able to vote on an issue in which they have an indirect interest.

Across the nation, councils have been embroiled in scandal after scandal over alleged corruption concerning development approvals. It would be nice to clean up council politics. But this new indirect interest rule is remarkably broadly defined. Apart from the obvious possible conflicts of interest – family members owning property that might be enriched by council decisions, and so on – it also considers an improper interest to exist if the council member had, at any time in the past, made a submission on the issue at hand.

But what if the councillor was elected specifically because of his or her position on that issue? Those activists who have in the past taken legal action against, say, the St Kilda Triangle or the 2am lockout would be unable to vote against them in council when the time came.

The only councillors who would be able to vote would be those who have no particular concern for the issue. Imagine this rule extended to state or federal government – democratic representatives could only vote if they didn’t care about what they are voting for.

It would be wrong to have a politician determining fiscal policy if they have a mortgage, or health policy if they have a relative in hospital.

The Government claims this new rule will apply in a small number of cases, but the legislation is worded so ambiguously that many councillors will have to excuse themselves to avoid an inevitable legal backlash.

Other ways the Government believes that councillors might have an indirect interest are just as dubious. One test is whether the councillor ever received a gift worth more than $200 from one of the parties appearing before the council. A sum of $200 is ridiculously small considering most contentious council development applications involve projects worth many millions of dollars.

Does Spring Street really think that bribing local councillors is that easy? If so, we have a much more serious problem than the State Government is making out.

When such trivial donations come to be considered a conflict of interest by the new law, councillors will find it hard to identify prominent members of the community who they don’t have an indirect interest in. Remember, councillors are politicians who have, over many years, needed to fund-raise from within their community.

While we all enjoy feigning moral outrage over the influence of money in politics, as long as councillors are able to make decisions that can make or break property developments worth millions of dollars, money is going to flow into councillors’ campaign chests, whether overtly or covertly.

The problem the State Government is trying to tackle is actually quite real. Councillors are asked to do two separate jobs that can easily come into conflict with each other. Half the time, they are supposed to be politicians, pressing palms, kissing babies and pronouncing judgement on the issues of the day.

The rest of the time, their role in Victoria’s planning framework requires them to be dispassionate judges, prostrating their personal opinions upon the cold concrete slab of administrative law.

This tension between councillors’ democratic and quasi-judicial functions is one they are not well-equipped to manage.

Local government seems to attract the dregs of our political class. There are young factional hacks from political parties who view local government as well-paid work experience. There are activists who don’t know much about government but know they hate ugly new houses spoiling their suburbs’ “traditional character”. And there are earnest greenies who campaign to declare their council “nuclear-free”.

Yes, local councillors are a bizarre collection of the uninformed, the uninterested and the weirdly over-interested.

But they were democratically elected. The State Government should allow them to vote on the issues that got them there.

Pundits, letter writers, talk-back radio callers, John McCain and the Prime Minister all agree: It Woz Greed Wot Done It. In a speech in Sydney last week, Kevin Rudd recalled the movieWall Street and its main character, Gordon Gekko, before declaring that the era of “greed is good” is over. And McCain’s campaign – or at least what is left of it – has been busy blaming money-hungry fund managers for the financial crisis.

It seems that everyone knows who the villains behind the crisis are – those greedy, greedy share traders who grubbily fondle their portfolios with their fat, stumpy fingers, and all those greedy consumers hoarding investment properties.

But if there’s one thing constant in human history, it is greed. Even 2000 years ago, Roman moralists sounded old-fashioned when they complained about the avarice of the common people – the satirist Gaius Lucilius wrote that “a man can be cured of his lust, but never a fool of his greed”. So greed wasn’t invented with Facebook.

The causes of the financial turmoil have to lie elsewhere.

An extraordinarily elaborate patchwork of national and international regulation gave banks and traders a false comfort that regulators were protecting their investments. And after September 11, the US Federal Reserve lowered interest rates, making it seem that only a sucker wouldn’t borrow vast sums for their home. Restrictions on land use in many areas raised house prices so high that it became almost impossible to buy a home without borrowing 20 times your annual salary. Compounding all this were government policies that encouraged banks to loan to individuals with non-existent credit histories.

On the other side of the market, traders relied on complex models of the riskiness of certain assets that, it is now clear, were systematically hiding dodgy mortgages. The existence and practices of quasi-government mortgage lenders – Fannie Mae and Freddie Mac – further obscured the riskiness of subprime lending and, indeed, the risks of subprime borrowing. There was a lot of hubris – Western democracies have seen decades of rising house prices and traders have increasingly filled their investment portfolios with assets that appear far removed from the individual debtors at their source.

So, where is all the “greed”? Share traders working hard to increase wealth isn’t greed – it’s their job. And if we are to be completely honest, most Australians would prefer that their super fund managers were eager to beat the market.

It was complacency, not greed, that made everyone underestimate how risky their investments actually were. Greed might be a deadly sin, but so is sloth.

Even if greed did cause the crisis, then it was greed unfulfilled. All those sharks who have spent their careers scurrying around the big banks and mortgage houses looking for investment opportunities have had their dreams of mega-wealth spectacularly dashed. After all, it wasn’t the CEOs packaging up those dodgy assets; it was the ambitious middle-rung traders who are now filing out of their offices. It’s easy to be greedy. It’s a lot harder to be successfully greedy.

It is sort of understandable that people are trying to portray the financial crisis in moral terms – there are a lot of people watching their small investments hit bottom, for reasons that are complex and technical.

But the financial crisis is not a crisis of consumerism, or of morality. The international banking system isn’t a telemovie of the week, where the good guys are obvious because they love their mothers and the bad guys have silly moustaches and curse a lot. Gordon Gekko is a character in a movie written and directed by Oliver Stone – a guy who thinks that the US government is competent enough to execute its own president and keep it a secret. Wall Street is not a documentary; it is a well-executed caricature.

And it is remarkably patronising to tell people who are living in rented property that owning their own home would be greedy. Greed is easy to identify in others, but hard to identify in yourself.

There are serious discussions going on about what regulations caused or failed to prevent the crisis. But trying to compress the world’s economic problems to a cheap morality play helps no one.

How do we know that our local councils have raised far more money than they need?

It isn’t the fact that local governments have enough money to send councillors on “diplomatic” missions to negotiate “friendship city” relationships. Moreland City Council proudly notes that it has relationships with councils in China, East Timor and on the beautiful island of Sicily. Ararat City Council carefully points out on its website that it took “many visits” to forge its relationship with the city of Taishan in China. And thank goodness for Latrobe City — apparently its fraternity with cities in Japan and China is responsible for all that peace, goodwill and friendship around these days.

But that’s not it. And it’s not because local councils have enough extra money and surplus bureaucrats to organise those cringe-inducing “community” events — the sort of events that assume people wouldn’t say hello to their neighbours unless they were coaxed to do so by a public servant.

Every council has a half-dozen silly programs that help the bureaucrats feel like they are encouraging diversity, harmony and other nice things. Boroondara has a spring planting festival, Frankston has a pet’s day out, Brimbank has a leisure challenge, Stonnington has a thrilling-sounding follow your recyclables tour and, rather ambitiously, Monash sponsors the clean up the world weekend.

No, what makes it most obvious that local councils have jacked our rates up far higher than they need to is this: council workers appear to have woken up one day and decided that they were no longer petty bureaucrats deciding the orientation of road signs. Instead, they decided that they were investment bankers, with striped suits and a large bundle of equity-leveraged, investment-shared, portfolio-bearing, interest-asset options.

Councils are harvesting such an enormous amount of money from home owners and businesses that they can afford to play the sharemarket. So, obviously, the financial crisis has hit local governments hard.

In NSW, where the law lets councils invest in pretty much anything they feel like, the subprime crisis has sucked so much money out of council investments that they are trying to sue their way out of the crisis. The ratepayers of Manly City Council probably didn’t expect that by paying their rates they were also speculating in low-doc mortgages in San Diego. They no doubt thought their money was going towards vital diplomatic missions to sunny Italy and essential dog beauty pageants. Instead, their councillors were being seduced by stockbrokers eager to sell shiny new investment portfolios that may not have been technically blue chip, but were definitely a secure-looking aquamarine.

In Victoria, our councils’ lesser subprime exposure is only due to the fact that they have been legally restrained from making the most stupid investments. Local governments have never been very competent at the best of times — if you want to organise a hard-rubbish pick-up in April, you had better get on to the council now — but it is particularly damning that the only reason Victorian councils haven’t all gone under from shonky trading is because the State Government made doing so illegal.

Of course, it’s a bit ironic watching local governments fall foul of the financial crisis. To a certain extent, it was local governments around the world that caused the crisis to begin with. For many years, local governments have attentively listened to those prudish property owners who are eager to block their neighbours’ development plans. Council bureaucrats have had great fun heritage-listing otherwise useful buildings and blocking subdivisions. And council planners have helped state governments restrict development in the name of stopping evil “sprawl”. These are the sorts of heavy-handed planning regulations that have artificially raised the price of housing and contributed to the housing bubble that spectacularly imploded earlier this year.

Admittedly, local governments didn’t invent the hoarding of tax. The Federal Government’s Future Fund — that accumulating mountain of cash — has now morphed into a giant cheque account that tries to make a virtue of the fact that budget after budget, Canberra is taxing us more than even they can think of ways to spend.

But instead of funding overseas trips, or playing the stockmarket, or hoarding for the future, perhaps governments should think about not taxing so much in the first place.