Author: Chris Berg

Don’t Just Tinker With Government – Reduce It

There are few concepts more nonsensical in Australian politics than the “efficiency dividend”.

Yet in the politics of public service cuts, few are more heavily relied upon.

You’d think that an efficiency dividend was a financial benefit that came once efficiencies were found. That’s what it sounds like, after all. Nope: it’s the other way around. By cutting the public sector, governments take the dividends first – in the form of reduced payroll costs – and just hope the efficiency comes later.

The reasoning is pretty crude: with fewer staff, the public service will simply have to be more efficient. How, exactly? They’ll figure it out. Efficiency through adversity.

Of course, there’s nothing wrong with reducing the size of the public service. It’s worthwhile.

The Commonwealth employs 160,000 people; the states and territories around 1.2 million. These are huge figures. So while it sounds pretty extreme that the Federal Coalition might cut 12,000 jobs over two years, that’s a small part of the whole and roughly the pace of natural attrition.

Campbell Newman’s target of 20,000 jobs is more ambitious, but even then that comes out of Queensland’s public service pool of 207,000.

In any organisation, labour costs are among the biggest costs. Governments that need to balance budgets tend to look at public service size first – particularly conservative governments, who don’t see bureaucrats as a voting constituency.

Public service cuts have their own little ritual. “Frontline staff” will be fine, assures the government. “Essential services” will disappear, counter public sector unions. Bureaucracies – for whom size is a measure of success – shift around staff and threaten to eliminate their most politically popular functions. The press speak of promises broken and everybody tries to divine in the entrails of Newspoll and Essential what it all means.

By the end of this, the poor old government will be lucky if it gets its dividend. It certainly won’t get any “efficiency”.

Because these big job cuts – a dozen thousand here, a dozen thousand there – are like taking a baseball bat to a photocopier: briefly satisfying, perhaps, but it won’t make it copy better.
The only way to meaningfully reduce the size of government is to reduce what government does.

There are, no doubt, inefficient elements within the public service. But those inefficiencies will not be identified through orders from on high about across-the-board workforce reductions.
Cutting jobs without cutting the tasks which those jobs exist to perform will – in every likelihood – undermine service delivery, without sustainably lowering the burden on the taxpayer.

This is an uncomfortable reality. Far easier to insist the public service goes on a diet.

The vast majority of public finances are tied up in health and welfare. Take the Commonwealth, for instance. Its largest agencies are Centrelink, the Taxation Office and Defence. These agencies harbour between 20- and 27,000 staff each. The next largest agencies are substantially smaller: immigration has a labour force of around 7,000, Medicare just over 5,000.

You can see why for new governments, it is appealing to shave these departments by a fraction.

But they are also the departments most closely integrated within the political system. Welfare and defence are two of the central features of the modern state. You can tell how serious an opposition is about reducing the size of government by whether they talk about these biggies, or whether they just rabbit on about marginal things like foreign aid, which are, in truth, a tiny fraction of the budget.

So if governments want to reduce the public sector permanently they’ll have to be creative and courageous. Want Centrelink to be a lighter load? Then your priority has to be welfare reform, not public service cuts. Want the Defence Department to be less of a money pit? Then reassess our defence strategy, or our wasteful acquisitions program. Simplify the tax system if you want to shrink the tax office.

It’s not completely hopeless. There are many things that could be done. For instance, a truly cost-cutting government could get the Commonwealth out of education – that is, return education to the states where it is constitutionally allocated. (And, because they actually run schools, the states have a far better idea than Canberra about where money should be spent.)

In other words, find the efficiencies, and then take the dividend.

Of course, there is no government or opposition in the country that wants to seriously rethink what the public service does. There’s a lot of tinkering planned, but no reform.

Targeting the bureaucracy mistakes the symptom for disease. If you really want smaller government, you need to reduce its functions.

Why Capitalism is Awesome

Each year the glossy business magazine FastCompany releases a list of what it considers to be the ‘World’s 50 most innovative companies’. This list is populated much as you would expect.

In 2012, the leader is Apple, followed by Facebook, Google, and Amazon.com. Spot a theme? In the top ten, there are only two companies that are not primarily digital companies. One, Life Technologies, works in genetic engineering. The other (try not to laugh) is the Occupy Movement. FastCompany describes them as ‘Transparent. Tech savvy. Design savvy. Local and global. Nimble.’ One might add: pointless.

Put fashionable Occupy aside. Not only are most of the others digital firms, but they’re all flashy, unique, and they’re almost all household names.

Everybody from BRW to BusinessWeek hands out most innovative company awards. They’re all pretty similar and predictable.

But these lists have a perverse effect. They suggest that the great success of capitalism and the market economy is inventing cutting edge technology, and that if we want to observe capitalist progress, we should be looking for sleek design and popular fashion. Innovation, the media tells us, is inventing cures for cancer, solar panels, and social networking.

This widely held belief couldn’t be more wrong. The true genius of the market economy isn’t that it produces prominent, highly publicised goods to inspire retail queues, or the medical breakthroughs which are duly packaged up for a 7pm news bulletin.

No, the genius of capitalism is found in the tiny things — the things that nobody notices.

A market economy is characterised by an infinite succession of imperceptible, iterative changes and adjustments. Free market economists have long talked about the unplanned and uncoordinated nature of capitalist innovation. They’ve neglected to emphasise just how invisible it is.

One exception is the great Adam Smith. In his Wealth of Nations, the example he used to illustrate the division of labour was a pin factory. He described carefully the complex process by which a pin is made. Producing the head of the pin ‘requires two to three distinct operations’. To place the head on the wire is a ‘peculiar business’. Then the pins have to be whitened. The production of a pin, Smith concluded, is an eighteen step task.

Smith was making an argument about specialisation but his choice of example was important. It would be hard to think of something less impressive, less consequential than a pin. Smith wanted his contemporaries to think about the economy not by observing it from the lofty heights of Windsor or the lecture theatre, but by seeing it from the bottom up — to recognise how a market economy is the aggregate of millions of little tasks.

It’s a lesson many have not yet learned. We should try to recognise the subtleties of the apparently mundane.

Capitalism means efficiency

Ikea’s Billy bookshelf is a common, almost disposable, piece of household furniture that has been produced continuously since 1979. It looks exactly the same as it did more than three decades ago. But it’s much cheaper. The standard model — two metres high and 80cm wide — costs $79. And from an engineering perspective the Billy bookshelf is hugely different from its ancestors.

In those 30 years the Billy has changed minutely but importantly. The structure of the back wall has changed over and over, as the company has tried to reduce the weight of the back (weight costs money) but increase its strength. Even the studs that hold up the removable book shelves have undergone dramatic changes. The studs were until recently simple metal cylinders. Now they are sophisticated shapes, tapering into a cup at one end, on which the shelf rests.The brackets that hold the frame together are also complex pieces of engineering.

Ikea is a massive company. Tiny changes — even to metal studs — are magnified when those products are produced in bulk. There is no doubt somebody, somewhere in the Ikea product design hierarchy whose singular focus has been reducing the weight and increasing the strength of those studs. They went to sleep thinking about studs and metals and the trade-offs between strength and weight. Their seemingly inconsequential work helps keep Ikea’s prices down and its profits high. With each minute change to the shape of the Billy’s metal studs they earn their salary many times over.

Being massive, however, Ikea has an advantage: it is able to hire specialists whose job is solely to obsess about simple things like studs. Ikea is well-known for its more prominent innovations — for instance, flat-packing, which can reduce to one-sixth the cost of shipping, or the extremely low staffing of its retail stores.

Big-box stores have revolutionised retail in the last decade. In the United States, Wal-Mart’s extremely well-managed logistics have ground down the price of consumer goods across the American economy. Costco has done the same, eliminating the barrier between consumers and wholesalers. Even Amazon.com, usually thought of as an internet firm, could be easily seen as a big-box retailer. Amazon’s network of warehouses across the US are not so different to Wal-Mart’s.

The success of these firms rests entirely on the management of their supply-line. For big-box retailers, innovation is about efficiency, not invention. Famously, Wal-Mart’s logistics capability proved greater than the American Federal Emergency Management Agency (FEMA) during Hurricane Katrina in 2005. Wal-Mart brought supplies to stricken New Orleans suburbs well before FEMA managed. As one New Orleans sheriff told the press: ‘if [the] American government would have responded like Wal-Mart has responded, we wouldn’t be in this crisis’. Another suburban mayor said that Wal-Mart was his town’s ‘only lifeline’.

Extremely resilient supply chains may not win glossy innovation awards but they are the source of much of our modern prosperity.

But Ikea and Wal-Mart are big and famous companies. So let me suggest another icon of capitalist innovation and dynamism: pizza.

Capitalism tastes better, cheaper

Pizza is one of our most mundane and simple foods. It would be the last place most people would look for innovation and engineering. It is, at its most basic, a thin bread topped by tomatoes and cheese — a food of the poor of Naples, exported, and endlessly interpreted by the rest of the world. The most expensive pizza in the world is $450, topped with lobster, Russian caviar, Alaskan cod, and has to be ordered a day in advance. Yet it does not deviate from the basic model: pizza is, and will always be, just flatbread with toppings.

Forty one per cent of Americans eat pizza at least once a week, whether purchased frozen and reheated in home ovens, delivered or taken away, or cooked from scratch at home. All of these choices are more complicated than they seem. Keeping a pizza crisp long out of the oven so it can be delivered, or making sure it will crisp up in a variable home oven after having been frozen for weeks is anything but simple.

Moisture is the enemy. For frozen pizzas, this means that toppings have to be pre-cooked precisely to avoid some ingredients being burned while others are still heating through. Frozen pizza takes a lot of abuse — it is partially thawed each time it is transferred from manufacturer to supermarket to home freezer. So the dough has to be precisely regulated to manage its water content. Cheese freezes poorly, and consumers expect it to melt evenly across the base, so manufacturers obsess about cheese’s pH range, water and salt content.

And of course all these decisions are made with an eye on the customer’s budget and the manufacturer’s profitability. The consumers of family-sized frozen pizzas tend to be extremely price sensitive. The opportunities for innovation in processes, equipment, automation, and chemistry are virtually endless.

It gets even more complicated when we factor in changing consumer tastes. The modern pizza customer doesn’t just want cheese, tomato and pepperoni. As food tastes grow more sophisticated they look for more sophisticated flavours even in frozen pizza. It’s one thing to master how cheddar or mozzarella melts. Dealing with more flavoursome brie or smoked Gouda is another thing entirely.

Like Ikea’s stud specialist, there are hundreds of people across the world obsessed with how frozen cheese melts in a home oven. These sorts of complications are replicated across every ingredient in this simple product. (How does one adapt an automated pepperoni dispenser to dispense fetta instead?)

Customers demand aesthetic qualities too — as they say, we eat with our eyes as much as our tastebuds. Processed food can’t look like processed food. Frozen products have to look authentic. Customers like their pizza crusts to have slight burn marks, even if home ovens won’t naturally produce them. So manufacturers experiment with all sorts of heating techniques to replicate the visual result of a wood-fired oven.

Takeaway pizza seems easier but has almost as many complexities. Some large pizza chains are slowly integrating the sort of sauce and topping applicators used by frozen goods manufacturers. Cheese is costly and hard to distribute on a budget. Dominos use a proprietary ‘auto-cheese’ which takes standardised blocks of cheese and, with a push of a button, shreds them evenly across a base.

For takeaway pizza, moisture problems are even more pervasive: the cooked pizza has to survive, hot and crispy and undamaged for some time before it is consumed. If the box is closed, the steam from the hot pizza seeps through the bread, making it soft and unappealing. But an open box will lose heat too quickly. Engineers have struck a balance. Vents in the box and plastic tripods in the centre of the pizza encourage airflow. Deliverers carry the pizzas in large insulated sleeves to keep the heat in and reduce the damage from the steam.

We could easily replicate this analysis for almost every processed or manufactured food in the typical supermarket. Then we could reflect on the complexity of serving food, not in a home kitchen, but on an airplane flying nearly 1000 kilometres an hour, 36,000 feet in the air, cooked in a tiny galley, for hundreds of people at a time. Some of the most extraordinary logistical accomplishments of the modern world are entirely unnoticed.

Some—like airline food—we actively disparage, without recognising the true effort behind them.

Why capitalism means innovation

One of the great essays in the free market tradition is Leonard Read’s ‘I, Pencil’. Read was the founder of the influential American think tank the Foundation for Economic Education. In his essay, he adopts the perspective of an ‘ordinary wooden’ lead pencil and purports to write his genealogy. He began as a cedar tree from North California or Oregon, was chopped down and harvested and shipped on a train to a mill in an Leandro, California, and there cut down into ‘small, pencil-length slats less than one-fourth of an inch in thickness’. Read goes into detail about the lead—not really lead, but a complex graphite and clay mixture whose components are sourced from Ceylon and Massachusetts—the lacquer, the labelling, the eraser and the metal that holds it in place.

Read’s point: ‘not a single person on the face of this earth’ knows how to make a pencil on their own. There is nobody in the world that can harvest, construct and bring together all those components. The construction of a pencil is entirely dispersed among ‘millions of human beings’, from the Italians who mine pumice for the eraser to the coffee manufacturers who supply the cedar loggers in Oregon.

Read was vividly illustrating a famous point of Friedrich Hayek’s — these separate people manage, through nothing but the price system, to make something extraordinarily complex. None of the pumice miners intend to make a pencil — they simply want to trade their labour for wages. Adam Smith’s invisible hand does the rest.

Read published his essay in 1958. The chemical formula for the eraser — known as the ‘plug’ — has changed repeatedly over the interim half century. The production is highly automated, and the supply-lines are tighter. Chemicals are added to keep the eraser from splitting. Synthetic rubber production in 2012 is much different than it was in 1958. These tiny plugs look pretty much the same but have evolved in a dozen different ways.

‘I, Pencil’ magnificently captures the complexity of markets, but it doesn’t quite capture their dynamism. The millions of people involved in pencil production aren’t merely performing their market-allocated tasks, but trying to find new ways to make their tiny segment easier, cheaper, and more profitable. The pencil market — as far from a cutting edge firm like Facebook as you could imagine — is still full of entrepreneurs trying to break apart established business models, to shave costs and rationalise supply chains.

In 1991, a gross of 144 simple, Chinese-made wood pencils sold on the wholesale market for US$6.91. In 2004 that price had declined to $4.48. And this is before we consider the variety of pencils available to consumers — not just wooden ones of different shapes, sizes, and different colours and densities, but mechanical pencils, jumbo sized childrens’ pencils, rectangular carpenters’ pencils, and on, and on, and on.

Why government doesn’t understand innovation

Even the most iconic devices of the modern age have behind them this quiet iterative change.

Apple launched its iPod in 2001. In retrospect it seems like the device exploded on the scene and created an entirely new market overnight. But it took years, and many iterations of the iPod for it to become iconic — the first model’s price was far higher than any of its competitors (the iPod was not the only MP3 player on the market) and its user navigation was clunky.

There have been nearly two dozen versions of the iPod. Some features and designs have been tried and dropped. The software has been revamped over and over. It wasn’t until 2003 that Apple even launched the iTunes store, which is tied so closely to the iPod (and iPhone) consumer experience today. Each new feature added to a device like the iPod creates its own problems, and they take time to sort out. Steve Jobs did not manage a team of inventors. He managed a team of refiners.

If FastCompany has a warped view about the nature of innovation in a market economy, they are not alone. Governments do too.

The Australian federal government has its very own Minister for Innovation (currently Greg Combet) and his Department of Industry, Innovation, Science, Research and Tertiary Education doles out grants for inventions and start-ups. The Commercialisation Australia program sponsors inventors who ‘have transformed an innovative idea into reality’. Innovation Australia funds grant-seekers to turn their ‘ground-breaking ideas into commercial products’.

But ideas are the easy part. Getting things done is hard. Setting up a business, paring down costs, acquiring and retaining market share: those are the fields in a market economy where firms win or lose. Apple’s iPod wasn’t a success because of the brilliance of its idea, the elegance of its prototype, or the financial backing of its parent firm. It was a success because it was continuously refined and changed and the prices of its components were kept as low as profitability would allow.

The brilliance of the market economy is in that — the small innovations made to polish and enhance existing products and services. Invention is a wonderful thing. But we should not pretend that it is invention that has made us rich. We have higher living standards than our ancestors because of the little things. We ought to be more aware of the continuous creative destruction of the market economy, the refiners who are always imperceptibly bettering our frozen pizzas, our bookshelves, our pencils, and yes, even our smartphones.

A Crackdown On Illegal Immigrants. Interested? Anyone?

Last week Immigration Minister Chris Bowen introduced a bill into parliament. Had we been any other country on the planet this would have been extremely controversial.

Columns would have been published. Talkback callers would have been enraged. Television panels would have pontificated.

But our immigration debate is peculiar. The Migration Amendment (Reform of Employer Sanctions) Bill 2012 will in all likelihood be ignored.

It shouldn’t be. This legislation significantly increases the penalties for employers who hire “illegal workers” and gives a whole range of new inspection and police powers to the Immigration Department to enforce them.

The bill erodes the right to silence, for one, and establishes powerful search warrants with which immigration officers can enter premises to hunt down evidence of illegal workers.

More broadly, the bill puts meat on a new and punitive immigration regime: it is now the legal responsibility of employers to find out whether the people they hire are entitled to work in Australia.

So yes: a crackdown on illegal immigrants! The stuff tabloid dreams are made of.

Or not. In the Australian consciousness, immigration politics is purely about asylum seekers.

By definition, asylum seekers want authorities to find them. Illegal workers do not. They are people who are working in breach of their visa conditions. They may have overstayed their temporary visas, they may be here on tourist visas, or they might be working more hours than their student visas permit.

It’s hard to measure, but we know there are at least 50,000 illegal workers in Australia. A Government report (PDF) in 2010 suggested it could be as many as 100,000.

That figure is a lot more than the few thousand who have sought asylum in Australia by boat.

Why the disconnect?

Immigration politics is not about quantity but visibility. And our borders are uniquely secure. The twentieth century fantasy of full state control over who enters and exits a country has only come close to realisation in Australia.

Those dinky boats may seem like a threat to our “sovereignty”, but they are actually a demonstration of it. Our high-tech Navy picks them up, and our bureaucrats ploddingly process each one in turn. Every migrant interacts with the system at some point. There are no exceptions.

In almost every other country, borders are far too porous to imagine a government could be this diligent.

So in the United States, the United Kingdom and the richest nations in Europe, it is illegal workers who bear the brunt of the political and public attention. We obsess about the people who want to come here. The rest of the world obsesses about those who already are there.

This focus on asylum seekers means we ignore the great issue of our time: the clash between national borders and an increasingly global employment market.

The Government’s new illegal worker bill is evidence that we are not as isolated as we think. One hundred thousand people is not trivial.

But the Immigration Department’s arguments for why we need to crackdown on illegal workers are unfortunate.

First: if we allow illegal workers to work, our immigration controls will be weakened. In other words, immigration restrictions are needed to maintain immigration restrictions. It gets even more circular from there. Illegal workers are a problem because of “costs associated with locating and removing illegal workers”. Read that one again.

Second: illegal workers “deny Australian citizens and permanent residents the opportunity to obtain a job”. It would be nice if the Immigration Department didn’t endorse the claim that foreigners crowd residents out of the employment market, but, well, there you go. Likewise, we might put aside the claim that illegal workers “may not meet … stringent health and character tests”.

One final argument is the most convincing, but perhaps not in the way it is intended: illegal workers are susceptible to exploitation.

This is undoubtedly true. But it is because those workers face the threat of deportation that they are so vulnerable. The stricter we are about visa overstayers, the more we increase the chances that they will be exploited by unscrupulous employers who threaten to call Immigration if they complain.

We know from international experience that an aggressive pursuit of illegal workers and their employers can create as many problems as it tries to solve.

So that this crackdown on illegal workers is likely to sail through unexamined has nothing to do with its desirability. It is, instead, a window into the strangeness of the immigration debate in Australia.

McMansions A Sign Of Our Country’s Wealth, Not A Lack Of Taste

Is there any more snobbish word in the Australian vocabulary than “McMansion”? This nasty term describes the big, new houses out in suburbs with names like Caroline Springs and Kellyville. McMansions, their nickname suggests, are the McDonald’s of housing – they’re super-sized, American and mass produced.

Australians build the largest new houses in the world. The average size of a new freestanding home is 243 square metres. That’s 10 per cent larger than the average new American home. Naturally our big houses have critics. Sustainability advocates say McMansions are bad for the environment. Yet there’s more going on here. Because even the most high-brow academic critiques of McMansions seem to focus less on the houses and more on the people who live in them.

Terry Burke, a professor of urban studies at Swinburne University, wrote in The Conversation last year that McMansions breach the ”good principles” of environmental sustainability. Fair enough. But Burke doubled down: McMansions are very ugly, and their occupants, who also apparently own four-wheel-drives and send their children to private schools, are giving ”an ‘up yours’ message to the world”.

That sort of sneering contempt is not uncommon. The word ”McMansion” is usually deployed not to appraise a type of house, but an entire way of life. It is all about culture – the inner city world trying to understand their strange, alien suburban cousins.

Suburban living in general is more environmentally friendly than inner-city living. A study by the Australian Conservation Foundation (no fan of consumer capitalism) concluded that, even taking into account car use, “inner-city households outstrip the rest of Australia in every other category of consumption”.

Someone who lives in a big home can still train to work, conserve energy or water, and, if they choose, live a fashionably carbon-neutral life.

Why do we build our houses so big? Well, Australia has a lot of space. But more importantly: we can. Australia is probably the richest country in the world. We have the fastest growing income in the world. We have the highest median wealth. Our only real competition in the rich stakes comes from city-states such as Singapore and Hong Kong or oil plutocracies such as Qatar. And many Australians have decided to spend their riches on new homes.

Even if you don’t put much stock in income statistics, the size of our houses is – by itself – evidence that Australia is well off. Prosperity is about more than GDP data. Money isn’t everything. Anybody who has lived crammed into too few rooms knows living standards and adequate space are closely related. In rich Australia it’s understandable that many people desire extra living and storage space.

The people who best understand the relationship between housing size and living standards aren’t architectural academics or urban planners. They’re archaeologists.

Historians of the ancient world don’t have tables of wealth and income data. To estimate how rich societies were, they look at proxies. House are among the best and most accessible.

For instance, excavated homes are one way we know ancient Greece was far richer than other civilisations in the Mediterranean. According to the historian Ian Morris, between 800BC and 300BC the median Greek house size ballooned from 80 square metres to 360 square metres. And this wealth was shared among the free population, not concentrated among the ruling elite. Just as it is in 21st-century Australia. Large homes are now within the reach of moderate-income families. This is something worth celebrating, not deriding.

Antiquity had its share of sceptics about prosperity, too. Aristotle believed there was such a thing as too much wealth. The philosopher had determined what the ”good life” was, and he argued any excess property was unnatural.

It’s easy to imagine Aristotle tut-tutting about the big houses built by fellow Athenians. But it’s just as easy to imagine those Athenians ignoring his snobbery and enjoying the prosperity Greek society could afford.

Is navel-gazing our fastest growing industry?

Our economy is doing well. We have none of the endemic problems of Western Europe. We’re not facing a fiscal cliff like the United States.

Yet the Australian response to the Global Financial Crisis – after an initial flurry of policy – has been a collapse into self-reflection.

Navel-gazing is Australia’s fastest growing industry.

Trolling on Twitter, parliamentary standards, criticism of the prime minister: that these are the issues which dominate Australian public discussion surely says something about how self-absorbed we have become.

But what if Australian public debate is getting better, not worse? That the cacophony which greets every political announcement is good? And what if, yes, parliament is full of insults, procedural tricks, and partisan talking points, but this is nothing to worry about?

Put it this way: Australia’s century has seen mass street protests and vicious industrial disputes. Political parties have split. Prime Ministers have been dismissed. Now we are consumed by debates about civility, tone … etiquette. It’s bizarre.

This week Rob Oakeshott is trying to get a parliamentary code of conduct through the House of Representatives.

The draft code says that “members must at all times act honestly, strive to maintain the public trust placed in them, and advance the common good of the people of Australia”. They must “base their conduct on a consideration of the public interest”. They must “exercise due diligence” and perform “to the best of their ability”. It goes on like that.

Codes of conduct are indulgent at the best of times. Yet there’s something deeply surreal about this parliament being asked to confirm they have “due regard for the rights and obligations of all Australians”.

Saying those Australians haven’t warmed to Julia Gillard doesn’t quite capture it. And the opposition leader has had no more success drawing popularity than the prime minister. The idea their disapproval is based on a disrespect for parliamentary procedure, or an un-parliamentary attitude, or treating their office with insufficient solemnity, is ridiculous.

But it’s a classic, concrete example of this weird narcissism. Our little nation has such promise! Yet our politicians are unbecomingly partisan, and we allow Kyle Sandilands to be crude on the radio. Few other Western nations are brooding like us. (Obviously, you can only navel-gaze if everything else is going well enough.) But the causes are universal.

Partly it is a function of the opening up of the public sphere. We shouldn’t underestimate how much the elimination of barriers between the press and its audience has changed the former. Commentators used to speak into a void. They now receive an avalanche of feedback. If public debate is about exchange, we’ve never been richer. If democracy is about participation, we’ve never had it better.

Many people in public life are tricked into believing that what they see on social media is a reflection of Australia as a whole. How could they not be?

Reading the mood of the nation is art not science. Polls are expensive. Receiving harsh feedback from the public used to be like seeing mice: if you saw one you could assume there were hundreds of others the same. That rule of thumb made sense when it took effort to write to a politician. It doesn’t work anymore.

But when journalists and politicians see hundreds of tweets telling them that whatever happened in parliament that day is an embarrassment, it is bound to shape their views. Never mind that Twitter is populated entirely by statistical outliers. Its directness encourages us to see one tweet as indicative of a broader trend.

Social media is not the public but it is rapidly changing what some people imagine the public is. And this “public” is almost uniformly disappointed.

Paul Kelly argued a decade ago that the pseudo-democratic nature of talkback radio had permanently changed Australia’s political culture. Our new changes are much larger than that, and they’re happening more quickly.

It is no surprise then that public debate has collapsed into ceaseless self-reflection. Yet step outside the bubble and everything looks pretty healthy.

Australia’s parliament is as robust as anywhere else in the world. Democratic politics is meant to be about a peaceful clash of interests: we ought be worried if the political parties started working together. And when we are not sulking, the contentious issues are the big issues – immigration and the carbon price.

Australian politics is not prone to conspiracy, unlike the United States.

And we are thankfully free of that combination of ostentatious radicalism and institutional stagnation that infects much of Europe. Yes, Australia has a very middle-class democracy. And there’s nothing the middle-class enjoy more than talking about themselves.

Privacy To Be Sacrificed As Roxon Takes Liberties With Our Freedoms

Last week Attorney-General Nicola Roxon argued for one of the most significant attacks on civil liberty in Australian history – internet data retention.

There aren’t many details yet. From what we can tell, the government wants to force all internet service providers to record details about every email their customers send, every website they visit, and every communication they make.

The providers will have to store those records for up to two years, just in case the police or the Commonwealth spy agency ASIO want to look at them later.

This data retention scheme would be an institutionalised, systematic invasion of our privacy – at least as bad as the Hawke government’s proposed Australia Card was in the 1980s. And it is certainly scarier than any of John Howard’s post-September 11 security laws.

Admittedly, data retention is not an original Australian idea. Similar policies have been implemented across Europe. But their record is not flattering. Germany’s parliamentary research unit surveyed European crime statistics between 2005 and 2010 and could not find any evidence to suggest data retention was helping solve crimes. And several European countries have even found data retention unconstitutional. In 2009 the Constitutional Court of Romania found that “continuous limitation of the privacy right … makes the essence of the right disappear”. In other words, data retention is so pervasive that it eliminates privacy. You can understand why Romanians would be sensitive. They suffered under communist police state surveillance for nearly half a century.

The idea behind data retention is to try to replicate for the internet what police have enjoyed with telephone calls for decades – access to records of who we called and when. Yet there’s a big difference between phones and the internet. Telephone companies keep those records in order to bill us. So phone records already exist. Internet data retention would require companies to create a giant new database of what their customers were doing online.

This database would be many times larger and much more revealing. Most Australians make a couple of calls a day. But we send and receive dozens of emails. We visit hundreds of websites. In 2012 we do everything from banking, to researching health concerns online. The internet is nothing like a telephone.

On top of this, the government wants internet providers to take responsibility for keeping these vast new information archives secure. But there are hundreds of internet companies in Australia. Many of them are tiny. Few of them are security specialists.

The Attorney-General argued on Tuesday last week that the police needed all this new surveillance to tackle identity theft. This is clever: we need to destroy privacy in order to save it. But it is nonsense.

These new databases would be attractive targets for those very identity thieves. Criminals could just crack the security of a small internet provider. We’ve seen in the past few years how insecure corporate data can be. Even big firms struggle with security.

Making their case, Roxon and her A-G’s Department say they need to “modernise” their powers to deal with cybercrime. Yet the urgent need to modernise this law would be more convincing if it wasn’t for the fact that the 1979 Telecommunications Interception Act has been “modernised” 64 separate times since then. It has been changed on average twice a year for three decades. Indeed, the last modernisation was as recently as August.

Roxon is talking about more surveillance powers literally a fortnight after she has been granted new ones. Our Attorney-General must know this. So when will enough be enough?

Anyway, the August reform gave law enforcement agencies exactly what Roxon claims they need: the flexibility to investigate crime online. Now if police identify a suspect, they can order internet companies to log the data of specific individuals. Such targeted data preservation is reasonable. It’s like traditional phone tapping. Police get investigative powers, but don’t treat every Australian as a criminal.

Internet data retention isn’t the only new weapon the government wants. A parliamentary committee is currently considering a government discussion paper with dozens of complex proposals to extend security power over the internet. The discussion paper makes some stunning claims. Apparently, some limits on ASIO and the police merely “reflect historical concerns about corruption and the misuse of covert powers”.

Are those concerns really out of date? Politicians like to talk about balancing the need for security and the need for liberty, as if they are shouldering a heavy philosophical burden. Yet it seems new laws only ever satisfy the former. Liberty loses, inevitably, every time.

Opening statement to Parliamentary Joint Committee on Intelligence and Security Potential reforms of national security legislation

With Simon Breheny

The suite of policies proposed in the Attorney-General’s discussion paper add up to one of the most significant attacks on civil liberties in Australian history. Many of the proposals breach the rule of law, severely curb civil liberties and threaten freedom of speech. Our submission focused on the data retention proposal. We were disturbed to see the Attorney-General support this proposal yesterday. In our view, the data retention proposal is a much greater threat to privacy than even the proposed Australia Card was in the 1980s. The complexity of these discussion papers’ proposals is significant. Many of them interact with multiple pieces of legislation. Few have been elaborated or justified. They should be dealt with separately, with separate legislation and separate inquiries. The burden of proof rests on the government to prove to the public that after 10 years of continuous, unrelenting increases in national security power—the last major change was as recently as August this year—there is still a clear need for such extraordinary changes. Almost every single proposal in the discussion paper has serious problems. For instance, the proposal to establish an offence for failure to assist in the decryption of communications is a clear abrogation of the government’s responsibility to uphold the privilege against self-incrimination and the right to silence—vital features of our criminal justice system. We call on this committee to reject this proposal.

We also oppose the default extended period for warrants from 90 days to six months, the lowering of thresholds for obtaining warrants, the power of the Attorney-General to unilaterally vary warrants and the power of ASIO to move, alter or delete data. But the most extraordinary proposal we would like to talk about is that of data retention. This draconian proposal for mandated and indiscriminate retention of the online data of all Australians is completely lacking in proportionality, undermines basic freedoms and is in fundamental conflict with the right to privacy. Extraordinary claims require extraordinary evidence, yet no evidence has been presented to justify one of the world’s most onerous data retention regimes. Abstract references to emerging threats and cybercrime are patronisingly insufficient as justification for such an extreme example of state power.

The collection and storage of data by internet service providers also creates a considerable data security problem. Rather than dispersing information, data retention creates silos of information begging to be attacked by the very criminals this proposal seeks to limit. Many European nations have had data retention regimes in place for a number of years. A study conducted over a five-year period, from 2005 to 2010, found no statistically significant increase in crime clearance rates in countries that had adopted data retention. ‘Australians should not allow themselves to be bullied into accepting a proposal which has ominous implications and particularly a grave temptation for abuse by the government.’ That was said by the IPA in 1986 in relation to the proposed Australia card, and the same holds true for the proposals being considered here today.

Australia’s Unfounded Foreign Investment Fear

Nothing better illustrates how phoney the debate over foreign investment is than the Coalition’s discussion paper on foreign investment in agriculture.

This deeply unsatisfying document was released last month. That is, just a few weeks before the Commonwealth approved the sale of Cubbie Station in Queensland to a Chinese and Japanese textile consortium and the foreign investment debate blew up again.

The discussion paper proposes a government land ownership register, and proposes reducing the investment review threshold to $15 million. (These ideas are hard to reconcile with the Opposition pledge to reduce red tape, but, well, there you go.)

Yet there’s almost nothing in its 15 pages to explain why on earth we need a crackdown on foreign investment at all.

This absent justification is frustrating but it’s no surprise. The debate over foreign investment is a peculiar one. Investment sceptics never quite offer their full argument.

It ought to be an obviously good thing that foreigners give Australians money for things Australians want to sell. The original owners make the sale voluntarily and they profit. No-one is forced to sell their property to someone they don’t want to. And owners seem happy to deal with Chinese-Japanese consortiums.

Economists have been arguing for decades that as long as foreign investors obey Australian law there’s no reason their dollars will pose a problem. Foreign money is as good as local money.
That argument has been unsuccessful. The public disagrees strongly. According to a Lowy Institute survey (PDF) of public opinion over time, more Australians are opposed to foreign ownership of major companies than are opposed to death penalty or the Iraq war. Even “illegal immigration” is more popular.

The sole reason the Coalition’s discussion paper offers for even considering any change is this:

There is growing community and industry concern that some types of acquisitions may be contrary to the national interest and that a strengthening of the regime may be advantageous to the long-term prosperity and food security of Australia.

This bare sentence is all that’s offered to say we have a problem. “National interest” and “food security”? It’s hard to think of vaguer terms. The paper does not explain why foreign ownership may be contrary to these two concepts. And how could reducing investment make us more prosperous? Compounding the confusion, the paper informs us the Coalition “unambiguously welcomes and supports foreign investment”.

It’s all pretty thin and contradictory, but that may be the point. The Coalition’s foreign investment position is a hedge between free marketeers in the Liberal Party and agrarian socialists in the National Party. Tony Abbott seemed to have joined the latter side when he claimed in July that “it would rarely be in Australia’s national interest to allow a foreign government or its agencies to control an Australian business”. Happily, the discussion paper is not as bellicose.

Yet all political parties struggle to square what the public say they want, and what is truly in the national interest. As I argued in March in the Drum, Labor is no free market hero on foreign investment either. The Greens are openly hostile.

Cubbie Station is not a thriving business. It went into administration a few years ago. The Chinese and Japanese consortium, Shandong Ruyi, is picking up a distressed asset.

Nevertheless, according to Barnaby Joyce, the sale is a “disgrace”. Australians should have had a “first crack” at Cubbie Station.

In his view, the Chinese-Japanese firm might “compromise market competition”. Certainly, Cubbie Station is big. It produces up to 13 per cent of Australia’s cotton crop. But how would foreign ownership change that? If new owners have power to distort cotton prices, then so might any Australian owner who sold their crop overseas.

Or Shandong RuYi might avoid paying their fair share of tax in Australia. But the tax office is used to dealing with reluctant taxpayers by now.

In an interview with ABC Brisbane, Joyce said “land sovereignty” demands Cubbie Station stay in Australian ownership.

The political class expects policy debates to be economic debates. The language of public policy is the language of cost-benefit analyses, of trade-offs and productivity gains and multipliers and impact studies.

Yet Joyce’s idea of land sovereignty is nothing like our usual mechanical utilitarianism: he is making a moral claim. Australian land should be owned by Australian passport holders. It just should. There is no need to elaborate.

It is true that a big part of the foreign ownership debate is economic xenophobia, but that’s not the only part. For agrarian socialists in the National Party, it’s about nostalgia. It is about a rural Australia characterised by small family farms rather than agribusiness, of communities rather than capital markets, of local owners rather than foreign consortiums. It’s also a vision of a rural Australia where the National Party still dominates.

That world is rapidly dissipating in the face of global food markets and global competitors. Once successful agricultural businesses have to change or get out of the industry. So with this enormous structural adjustment, could it really be in our national interest to prevent distressed farmers from getting the best price for their assets? Surely not.

WorkChoices Demon Used To Fire Up The Labor Base

Nothing scares the pigeons more than WorkChoices.

Anyway, that’s the theory. Just a hint of industrial relations reform (no matter how vague) by anybody remotely associated with the Coalition (no matter how obscure) brings out the WorkChoices demon. Ministers pound out tweets. Hawker Britton squawks. WorkChoices is back!

It’s like a verbal tic – it’s what you say when you’re not sure what to say. WorkChoices is for Labor Party strategy what “umms” and “errs” are for impromptu speeches.

One day in February 2010 the ACTU said it would campaign against Kevin Rudd’s industrial changes – they did not believe Fair Work was fair enough for workers. The next day Julia Gillard put out a press release: “Abbott must come clean on WorkChoices”.

“Australians can’t trust Tony Abbott on WorkChoices”, the ALP told Australia citizens during the 2010 election. The next day Abbott promised that WorkChoices is dead, buried, and cremated. Undeterred, two days later Simon Crean sent out a press release: WorkChoices “has been dug up, dusted off, and is ready to be rolled out should the Coalition be elected.” Labor’s divining rod finds WorkChoices everywhere.

So no wonder the Labor Party went into convulsions when this week the Australian Financial Review reported that John Howard wants revive the industrial relations debate. It’s the perfect storm. The guy they defeated, calling for the policy they campaigned to destroy. Wayne Swan rushed out a press conference. Abbott-to-bring-back-WorkChoices was again the message of the day.

But Howard wasn’t even talking about WorkChoices. The former prime minister wanted Abbott to adopt the Peter Reith model, which predated WorkChoices by nearly a decade. As he said, “There is no reason why this country should not go back to the workplace system we had between 1996 and 2005 where you had individual contracts.” This line was widely cited in articles which nonetheless claimed Howard was calling for the return his post-2005 policy.

At most – at most – Howard suggested the Fair Work Act’s loose unfair dismissal provisions be tightened. His words: “you have got to do something about unfair dismissals.”

This is a reasonable view, even if you don’t agree with it. Under WorkChoices, one exception to an unfair dismissal finding was if an employee was made redundant for ‘genuine operational reasons’. That exception has been replaced by a vaguer ‘genuine redundancy’ standard, which (for instance) only allows dismissals if workers cannot be given another job elsewhere. This new standard turns industrial judges into human resource managers. Questioning the new standard isn’t revolutionary. Howard’s view is modest; almost shy.

Anyway, Howard’s views are moot. He’s no longer prime minister. There is no reason to believe Abbott is thinking about touching this hot potato. Dead, buried, and cremated, remember? Given his campaign against the carbon tax, there’s nothing a first term Abbott government will be more sensitive to than charges that the Coalition has broken an election promise, or didn’t tell the voters about its plans. The firmest guarantee an Abbott government will do what it says is how brutally they’ve attacked Labor for doing the opposite.

WorkChoices is an apparition. When it is mentioned, it rarely has anything to do with the specifics of what the 2005 reforms actually were. Four years after it was abolished, WorkChoices is now less a policy than a freelance stand-in for anything that might fire up the Labor base. That is, anything that might bring back the old magic of the 2007 election campaign. In those happy days, Labor campaigned as if WorkChoices was the culmination of a century of Tory attacks on the Australian settlement.

But for the right, WorkChoices is an emblem as well: emblematic of an aging government willing to trample Australia’s institutions to get what it wanted. The right wasn’t much more sympathetic to Howard’s last industrial relations reform than the left.

WorkChoices took industrial relations forever out of state hands, eliminating any principle of federalism in workplace policy. And it was an extraordinarily complicated piece of law. It increased, rather than decreased, government involvement over labour markets.

It is mostly forgotten that the great workplace bogeyman, the HR Nicholls Society – the fortress of managers’ rights, the unions’ bête noire – was opposed to WorkChoices. In 2006 ACTU boss Greg Combet described WorkChoices as “Kremlin-like”. The president of the HR Nicholls Society, Ray Evans, agreed. “It’s rather like going back to the old Soviet system of command and control, where every economic decision has to go to some central authority and get ticked off.” He went on: “I don’t believe the Howard Government is that keen on freedom.”

This makes recent claims that the rebirth of the HR Nicholls Society is a harbinger of WorkChoices comically ludicrous.

But then, what does it matter? The point of talking about WorkChoices isn’t to warn Australian workers. It is to find anything that might restore Labor’s support. WorkChoices is a scare campaign, sure. It’s also very tired and probably futile.

The Legacy And Abuse Of Ayn Rand

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

That makes no sense at all.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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