Articles – Page 19

Anti-Terrorism Law Reform Follows Legislate In Haste, Repeal At Leisure Approach

The national security debate over the past four months has been one of the most revealing about Australian political culture in a long time.

It’s exposed serious weaknesses in parliamentary oversight. It’s offered a case study of how big reform needs careful work. And it’s demonstrated how easily public debate slips into well-worn factions.

On August 5, the Abbott government launched its national security legislative agenda – three giant tranches of new anti-terror laws.

For good measure it also announced it was abandoning the proposed reforms of Section 18C of the Racial Discrimination Act. They were, apparently, a “complication”.

This was as complete a philosophical reversal as Australian politics has ever seen. One day the government was wholeheartedly dedicated to restoring freedom of speech. The next day Prime Minister Tony Abbott was saying that the delicate balance between liberty and security would have to shift, and not in favour of liberty.

But there were actually good reasons for the government to be in such a rush.

A knee-jerk reaction against any and all national security changes is not merely wrong, it’s dangerous. There is no more basic responsibility of government than security.

It’s hard to believe now, but until the 9/11 attacks anti-terrorism policy was the responsibility of the states, not the federal government. The first proper Commonwealth anti-terror legislation was enacted in 2002.

Even after more than a decade, in 2014 there is still a strong case for national security law change. The security environment has materially changed over the past 12 months. The Islamic State has attracted more foreign fighters – Australians travelling to be militants for the caliphate – than any other conflict since the war on terror began.

This is a big problem. A study published in the American Political Science Review last year found that one in nine Islamist foreign fighters between 1990 and 2010 later attempted terrorist attacks in their home country.

So we need to be talking about passport control and how to prosecute somebody under the Crimes (Foreign Incursions and Recruitment) Act 1978. Many of the Abbott government’s legislative changes reflect recommendations along these lines by the Council of Australian Governments and the Independent National Security Legislation Monitor.

It’s all complicated stuff. It’s highly technical and legalistic. It concerns marginal changes to existing legal frameworks.

Yet the debate over anti-terror law changes has been dominated by that school of thought which believes that to offer anything less than uncritical support of government proposals is to downplay the threat of terrorism.

This is incredible considering the number of extra security changes the government has pushed through the parliament over and above those targeted at the foreign fighter problem – and over and above those recommended by the many inquiries into counter-terrorism law in recent years.

The government hasn’t explained why the particular threat of foreign fighters means we need to make it illegal for journalists to report on ASIO operations.

Nor has it explained why IS means we need mandatory internet data retention, a requirement that internet service providers store vast databases of information about their users for two years.

The government’s national security laws look more like a shopping list of security desires rather than a targeted response to the specific foreign fighter threat.

Indeed, if you add all the legislative tranches together, it constitutes a reform program of incredible size. It’s a much more ambitious reform program than anything else the government has pursued, even including the budget. It’s more ambitious than you’d expect from any government in its first year.

But pushing through a reform program of this size in such haste has created problems.

For instance, last week parliament passed a follow-up bill to a security bill that was passed in October, designed to fix problems identified in the earlier legislation.

The debate has exposed some remarkable ignorance of the details of the legislation being proposed.

Take Anthony Albanese’s objection that the security measures threaten freedom of the press. This only came after he had supported those measures in parliament. Labor is terrified of looking soft on security, but that’s no reason not to do due diligence.

Likewise, the Attorney-General George Brandis seems to have been caught off guard by the details of his own bill. First Brandis denied that the restrictions on releasing information about ASIO operations was targeted at the media, then he tried to assure journalists he wouldn’t personally approve the prosecution of one of their number.

These issues should have been resolved while the legislation was being drafted. Not weeks after it was passed.

Then there are the problems the national security reforms have caused for the government’s economic agenda.

The time the government spent negotiating with the crossbench on national security issues not directly related to the urgent foreign fighters threat was time not spent negotiating the $7 medical co-payment and the higher education changes.

Now politics has been reset to where it was left in August. Parliament’s focus is back on the budget and the economy.

The foreign fighter threat is likely to ebb when it becomes obvious to Western jihadis that a trip to the Islamic State is a trip to certain, pointless, death.

But the hurried security decisions made in the past few months will stay on the books for a very long time.

Qantas: The Spirit Of Australian Nationalism

It’s hard to believe but – if what the Treasurer Joe Hockey said last week is accurate – the government is seriously weighing up the partial renationalisation of Qantas.

That’s one option, anyway. Qantas CEO Alan Joyce has been complaining that his competitor, Virgin, has an unfair regulatory advantage. Virgin does not suffer under the Qantas Sale Act, which limits access to foreign investment.

So renationalisation, and the taxpayer funds it would require, would prop up the airline against its competitor.

Another option, also being considered by the government, is more straightforward: amend theQantas Sale Act which is creating the problem in the first place.

An easy choice, you’d think. But apparently the Abbott Government can’t decide whether it prefers state socialism or free market capitalism.

How on earth did the government get into this extraordinary jumble? Tony Abbott said he hopes the airline stays strong as “Qantas is a great Australian icon”.

The Australian aviation market has been indelibly shaped by the same simple, superficial nationalism which constrained Australian industry throughout the twentieth century.

The government this week demonstrated we haven’t shaken that out-dated industrial ideology.

Why else would the Coalition – a party that claims to be for free markets and an open economy – even suggest that it was contemplating, for a single second, in a partial way, the nationalisation of a private company?

For most of the twentieth century, the airline industry was dominated by ‘flag carriers’. These were big airlines, owned or sponsored by national governments, servicing international routes. Think British Airways, Lufthansa, Malaysia Airlines, SwissAir, Singapore Airlines, Aeroflot.

Flag carriers served many purposes. They were supposed to be semi-official ambassadors for their home countries. An attractive national airline was supposed to impress the rest of the world. A nice, financially stable, globe-trotting airline was a sort of demonstration of national virility.

Qantas was one of these. It was nationalised in 1947 by Ben Chifley’s Labor government. Lots of countries set up their own flag carriers in the post-war era. It was the era of national champions and “scientific” industry policy. A bonus: a government airline could be easily mobilised in case of war.

Of course, along with this model came heavy levels of protection, little market competition, and extremely high prices. The flag carriers suited the purposes of politicians rather than consumers. The airlines flew uneconomic routes just for the prestige they offered.

When the market for air travel was deregulated, the old flag carriers were left holding the can. They were over-extended and uncompetitive. They were over-unionised and over-politicised.

No wonder low-cost no-frills airlines have ripped the market apart. They’re not bound to any national feeling – or to the political controls that come with such feelings.

When it was privatised, Qantas was saddled, unreasonably, with restrictions on how much capital it could raise from foreign sources. The Parliament just couldn’t bring itself to let the flag carrier fall into foreign hands. Qantas was too special. Australia needed to keep its flying symbol.

Most foreign investment restrictions are driven by a combination of xenophobia and paranoia. GrainCorp is just the latest victim of this anti-foreign bias translated into public policy. But theQantas Sale Act lacks even that boorish logic.

Our politicians are happy to privatise state-owned firms but unwilling to accept the lack of political control that privatisation implies.

And our politicians like holding onto Qantas. Patriotism is their profession. Trite orations on Australia’s national dignity are the bread and butter of politics. They don’t pay for their flights, anyway, and they get access to the Chairman’s Lounge.

On the weekend, Alan Joyce demanded the government revoke Virgin’s international flying licence. This is an obvious ambit claim. Cancelling Virgin’s licence is unimaginable. Joyce must know this. He doesn’t think the Qantas Sale Act will be changed, but he clearly thinks he can get something.

We’ll know Qantas is playing hardball when they start re-running the ‘still call Australia home’ ads. Samuel Johnson said patriotism is the last refuge of the scoundrel. For the crony capitalist, it’s the first.

Just a year after Ben Chifley nationalised Qantas he launched the first wholly Australian-made car, the Holden FX, helpfully subsidised by the Australian taxpayer. In the words of the National Museum, the Holden “was a vivid manifestation of Australian dreams of prosperity”.

We’re in a bind with our automotive industry because, like airlines, cars are also seen as a sign of national prestige. Real countries make cars and have planes that operate out of Heathrow.

But we’ve seen how fruitless a century of automotive protectionism has been. Australia has expended billions in tariffs and direct subsidies to prop up those firms, and they’re still on the brink of collapse.

Qantas’ privatisation was left uncompleted. The government can deal with the problems caused by partial privatisation in two ways.

It could abolish the absurd, nationalist and anachronistic restrictions on foreign investment in theQantas Sale Act – completing privatisation and increasing Qantas’ competitiveness. Or it could commit Qantas to the cycle of subsidy and decline that has entrapped our car industry.

It’s amazing the Coalition government even thinks that is a real choice.

Fixed Terms Made A Farce Of Victorian Politics

It’s true that on Saturday the Coalition government became the first one-term Victorian government in more than half a century.

But it’s also true that the Coalition was the first government to form under the new constitutional arrangements – the four-year fixed-term system.

The fixed term nurtured Ted Baillieu’s instinctive lethargy. It created an environment in which it was plausible to roll a premier two years into their first term. And it led to the constitutional crisis that prevented Denis Napthine from regaining any sense of movement.

The Victorian election has already been raked over for its federal implications. Denis Napthine tried to run an ‘ideology-free’ government. As my Institute of Public Affairs colleague James Paterson writes in The Age today, “the risk-averse, moderate, cautious approach to politics favoured by state Liberals is no guarantee of re-election”.

Institutions matter. All this happened under the shadow of the new fixed term.

In 2003, the Labor government under Steve Bracks introduced fixed terms as part of a broader suite of constitutional changes. The idea was to facilitate long-term thinking and allow governments to get on with governing.

The flip side is that long fixed terms reduce any sense of urgency.

Nobody expected Baillieu to win in 2010. When the Coalition got into office, there was no agenda ready to go, and no eagerness from the premier to push ahead. The ‘star chamber’ vetting process for ministerial staff meant that it was months before offices were even working at full capacity.

One line was the Coalition had “hit the ground walking”.

Of course, fixed terms aren’t unique to Victoria. They’ve done nothing to limit the popularity of the New South Wales Coalition Government.

But government is a marathon. It needs pacing. Faced with a new and unfamiliar electoral cycle, the Victorian Coalition got the pacing badly wrong.

The fixed term also played a role in the March 2013 leadership change from Ted Baillieu to Denis Napthine.

That spill was remarkable because it came so shortly after the spill of Kevin Rudd, which was being seen by almost all participants as an unmitigated disaster.

With that unhappy precedent, the spill in Victoria was only plausible because of the newly extenuated parliamentary terms.

Julia Gillard became prime minister on the cusp of an election. By contrast, Napthine had years to run as premier. A four-year term gives ample time to reset and rebuild a government.

Yet ultimately the Victorian Liberals made the same mistake as did Labor federally – a sudden change in government leader without explanation.

Which brings us to Geoff Shaw, the former Liberal member for Frankston. Napthine’s attempt to reset the government was hostage to the parliamentary soap opera played out between Shaw and another angry rogue Liberal, the former speaker Ken Smith.

The specific ins and outs of this debacle are known only to the participants.

Shaw and Smith created a serious constitutional problem. The Coalition only had a parliamentary majority of one, including Shaw. (Incidentally, that tiny margin was the defence Baillieu supporters offered for the early-term go-slow strategy.)

With the Parliament in such a precarious way, Napthine should have called an election. That’s the Westminster way. But under the fixed term he couldn’t.

The only way for an election to be held early was if Labor introduced a motion of no confidence in the government. (Antony Green outlines the procedure here.) At one stage Shaw was willing to support such a vote, giving it the majority needed.

Daniel Andrews didn’t want an early election. The worse the Parliament looked, the better it was for Labor when the election was held at its regularly scheduled time.

Instead, we were treated to an obscene and undemocratic debate about whether Parliament should expel or just suspend Shaw, a legitimately elected representative.

It looked terrible.

Every budding reformer has their own pet change they’d like to make to Australia’s political system. Perhaps they’d like elections to be run differently, or restructure the levels of government, or ‘get money out of politics’, or change the preferential voting system, or fiddle with upper houses.

Fixed terms were one of those reforms. Only a few months after it was introduced in Victoria, Steve Bracks was urging the Commonwealth to follow his state’s lead.

But it would be hard to see that fixed terms had delivered the sort of long-term thinking that its supporters prophesised.

Rather, it left Victoria with a sluggish government, encouraged a leadership spill, and turned a tight parliament into a farcical parliament.

There’s another sense in which the Coalition loss on the weekend isn’t that strange. The journalist Paul Austin pointed out in 2007 that a premier who lasted two terms would now expect to be in power for eight years (assuming they were not rolled in the meantime). While most Victorian governments have lasted longer than a single term, few lasted as long as eight years. Jeff Kennett only managed seven.

The fixed term isn’t the reason Denis Napthine lost. But it’s impossible to understand why they lost without understanding how it shaped the Coalition’s time in power.

Election Campaign A Time For Politicians To Promise What They Can’t Deliver

Election campaigns are incredibly frustrating.

It’s not just that they consist almost entirely of promises that we, the voters, have no way of ensuring will be kept.

Elections are just a bunch of claims and counterclaims about what might happen in the future – claims which rely on opaque assumptions and are offered without detail.

Take, for instance, this week’s little infrastructure costing spat. Labor wants to extend the South Morang train line by eight kilometres so that it ends at Mernda. Labor says that “many aspects of the project are still to be finalised” but they estimate it will cost between $400 and $600 million.

The Coalition disagrees. Treasurer Michael O’Brien said this week the Department of Treasury and Finance has costed the extension at $700 million. Thus another Labor black hole.

What are voters supposed to make of this dispute? Yes, the Department of Treasury and Finance is a more reliable estimator of costs than whatever policy unit Labor has cobbled together in its backroom for the election campaign. But, then again, Labor’s plans are so vague that the track extension could really cost anything.

If Daniel Andrews becomes premier, the South Morang line will be Treasury’s problem. They’ll have to make it work – or get the new government to drop it.

The certainties of the campaign ebb away when faced with the responsibility of government. This is inevitable. It’s like a law of nature.

Andrews offered a rather spectacular illustration of the difference between campaigning and government on Friday. Labor proposes an independent body, Infrastructure Victoria, to advise on new projects. Andrews was asked what he would do if it recommended, say, building the East West Link. The answer was politic. Labor would consider it.

But recall that East West Link is the project whose contracts Labor says it will rip up, regardless of the extraordinary cost of doing so – both the cost to the budget, which will likely have to bear the penalty for contract cancellation, and the cost to Victoria’s reputation with future investors.

Now East West Link 2 is an option?

It’s funny how things can change once an opposition gets the big offices.

The Coalition is proud the budget is in balance. There’s a projected surplus of $1.3 billion in 2014-15. Labor would be secretly chuffed about this too. The healthy budget is how each side can justify their campaign spending sprees. But the government only has a budget surplus because it was conservative with spending over the last term. Voters like spending but they don’t like being taxed to pay for it.

Polls say Labor is ahead. This is not due to any Herculean effort on their part. If Denis Napthine loses next week it will be because any prudent government is vulnerable to being called “uninspiring”. In politics there are few more devastating epithets.

But reform is Canberra’s job now. The states deliver services and build infrastructure. Where’s the room for inspiration in that?

The Abbott Government’s Chance For Real Reform

The word “deregulation” has been steadily degraded over the last two decades. Like the word reform, it is both overused and overly abstract.

Earlier this month Malcolm Turnbull’s Department of Communications released a discussion paper on the way the government manages the radiofrequency spectrum.

The paper has received little attention. That’s not a surprise. Spectrum governance is about as interesting and accessible as how the tax office calculates franking credits.

But what’s being proposed is rather radical and incredibly important – a move away from the Soviet-style command-and-control regulation of spectrum to market-orientated governance.

It is, in other words, the sort of deregulation that the government is going to have to pursue if it wants to be remembered as a reforming government.

Spectrum is one of the economy’s most valuable assets.

We need spectrum for everything from broadcast television to mobile internet access.

The services and technologies that rely on spectrum add billions to the Australian economy. One British estimate of the economic value add of spectrum in that country was AU$90 billion.

Yet for all its economic significance we regulate and control it in an incredibly retrograde way – through central planning and government allocation.

Think of spectrum a little bit like land. There’s a limited amount of it, but it can be divided up almost infinitely and used in different ways.

And of course, some ways are better value than others. We’re using spectrum more efficiently than we used to (the spectrum that once could only fit one broadcast television channel can now fit many) but we’re also demanding more of it as new technologies are adopted.

The Australian Communications and Media Authority (ACMA) dictates how spectrum is allocated – which parts are used by broadcasters, which are free for domestic uses like WiFi, which parts are for military or law enforcement use.

Nobody seriously suggests that ACMA allocates spectrum efficiently – that is, to its best use. And basic economics tells us that inefficient resource allocation is an unnecessary burden on the economy, on long term growth, and ultimately on our living standards. And it slows the spread of new technologies.

Indeed, it is the government’s tight control of spectrum which has kept the entire broadcast sector so farcically protectionist. This archaic system of spectrum allocation is why there is so much rent-seeking and crony capitalism in broadcasting.

The commercial television broadcasters have long lobbied against a fourth television network which would undercut their profitability. When broadcasting moved from analogue to digital, the government gave away masses of spectrum to the existing broadcasters – shirking this once-in-a-century opportunity to inject some competition into the sector.

If you’re unhappy with the quality of commercial television in this country, well, blame the government’s spectrum protectionism.
Likewise, centralised spectrum management gives the government a stick to control the free speech of broadcast media. All those hapless ACMA investigations into Alan Jones are based on a threat – however distant – that station broadcasting licenses might be revoked.

Turnbull’s discussion paper raises a number of proposals to simplify spectrum management.

But the most important is number 8, under the rather bland title “Facilitate greater user involvement in spectrum management”.

Under this proposal, ACMA would devolve spectrum management to users and private spectrum band managers.

Users and private firms would decide how spectrum was allocated, the rules under which it was used, figure out pricing mechanisms, and they’d adjudicate disputes. ACMA would be reduced to a spectrum watchdog.

Imagine band managers with a financial incentive to allocate spectrum to the highest value. This would be a big step towards treating spectrum like an economic asset like any other.

Eventually the vast bulk of ACMA’s regulatory apparatus should be replaced by a property rights based spectrum regime. In other words, the market would decide how spectrum is allocated.

The idea that the market could allocate spectrum better than government planners is an old one in the history of economic thought.

The economist Ronald Coase won his 1991 Nobel Prize for a program of work that begun with an examination of how the Federal Communications Commission in the United States prevented the efficient allocation of spectrum.

A paper commissioned and published by ACMA itself in 2007 acknowledged some benefits of granting property rights in spectrum – not least in reducing the inefficiencies caused by command-and-control allocation.

And we’ve been inching towards a property rights based spectrum regime over the last few decades.

The government has been allocating some spectrum licences through competitive auctions since the early 1990s. The Gillard government’s Convergence Review called for “a market-based pricing approach” for all spectrum, broadcast and non-broadcast. And the Communications Department is trying to figure out how to create deeper secondary markets in spectrum trading.

In other words, fully embracing the property rights model of spectrum management would be reform in the direction we are already travelling.

The Abbott government has trumpeted loudly its deregulation and red tape reduction agenda. But it’s likely that the real reforms will come outside those highly publicised “repeal days”.

Government spectrum management dates back to the Wireless Telegraphy Act 1905, when the Commonwealth decided it wanted absolute control over the new communications technology.

That makes spectrum control one of the oldest and most stubborn regulatory constructs in Australian history.

For more than a century it has been a burden on the economy, a handbrake on the adoption of new technologies, and a weapon for suppressing free speech.

Deregulating spectrum might be one of the most important things the Abbott government could do.

Abbott Deserves Only Praise For Embracing Free Trade

The economics of trade can be a little counter-intuitive.

This is no more so than for its central lesson, which is this: the benefits of tariff liberalisation primarily accrue to the countries that lower their own tariffs, not their trading partners.

Or, putting it another way, even if we lived in a world where every single country had high barriers to trade and refused to budge them, it would still be in our interest to lower our own.

So while the China-Australia free trade agreement (FTA) is a big deal, it’s not a big deal for the reasons most reports have suggested.

Take the provision in the FTA which phases out Chinese tariffs on Australian dairy for infant formula over a four-year period.

The Age is predicting that this formula market will be “enormously lucrative” for Australian businesses. The Australian Dairy Industry Council is chalking the agreement up as a win.

But the winners here are really Chinese consumers.

Access to quality infant formula is a serious problem in China. In 2008, there was aninternational scandal when it was discovered the largest budget infant formula firm had been adding industrial chemicals to fake protein content.

More than 50,000 children were reported to have become sick from the formula. Four died.

Now, understandably, Chinese parents don’t want to buy domestically produced formula. The demand for formula imports is so high that Hong Kong and Macau have placed limits on the amount of formula Chinese tourists can bring home with them.

So while it might be true that opening up the Chinese formula market will be lucrative for Australian firms, this seems to miss the point. The real winners are surely the Chinese people who have been genuinely suffering from their government’s dairy protectionism.

A lot of trade discussions are like this – focused on the benefits to firms and workers when it ought to look at how consumers fare.

Of course, most people are both workers and consumers, and are interested in both the supply and demand parts of the economic equation.

But as Adam Smith wrote, “Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.”

Hopefully we all love our jobs, but no doubt what we most love about our jobs is the fact that we get paid to do them, and that money is available to spend on the things we want or need.

So a few happy Australian dairy firms is nothing compared to the millions of Chinese families who will benefit from the FTA.

It is this producers’ bias that has led us to a world where the cause of free trade is being driven by two-party trade agreements.

For while it might be easy to demonstrate that – on an academic level – a country will be better off if it lowered its own trade barriers unilaterally, few politicians have the sort of political nous and conceptual clarity to present such a case to the public.

Governments have worked out that the politics of trade liberalisation is easier if it is done on a piecemeal and bilateral level – emphasising what it has managed to get other countries.

This isn’t necessarily a bad thing. Anything that makes beneficial change more politically palatable should be welcomed.

But the fact that trade liberalisation benefits the liberaliser first and foremost suggests that the economics of FTAs are very different from the way they are presented.

Have a look at the official Australian announcement of the deal. It is completely dominated by reforms China will have to make to allow market access to Australian firms. There is very little mention of what we have to do.

The deal involves Australia reducing tariffs on clothes, cars, components and electronics from China. We also will be relaxing our foreign investment guidelines. Tony Abbott said on Monday that some aspects of the deal would require legislation to be passed.

Politics being what it is, using self-interested producers eager to open up foreign markets to agitate for the reduction of protectionism at home isn’t a bad way to build a political coalition for change.

Earlier this year in The Drum, I argued that the bilateral trade negotiation process holds back the cause of domestic reform. It can perversely encourage countries to hold back unilateral changes as a bargaining chip.

But here’s the thing. The Abbott Government has been criticised for being too eager to sign these agreements. Bill Shorten says that Labor is pro-free trade but thinks the government is “more focused on booking a venue for the signing ceremony than examining the fine print or getting a better deal”.

Yet if we view FTAs as primarily a tool for shifting domestic policy, then what sort of deal are we holding out to get? Playing the tough negotiator would be counter-productive – harming ourselves by delaying our own reform program. It is in the interest of the Australian economy to conclude these agreements as quickly as practicable.

And that’s why it is in the realm of free trade agreements that the Coalition has been most clearly successful.

For all the Gillard government talked about the ‘Asian century’, it has been the Abbott Government that has given us free trade agreements with Korea, Japan, and China.

Victoria’s Transport Policies Ruled By The Heart, Not The Head

Possibly the most economically irrational and counterproductive policy of this state election was offered by Labor this week.

You won’t be surprised to learn it was a transport policy. On Tuesday Daniel Andrews’ team proposed a freeze on the Napthine government’s expansion of the number of new taxi licences.

Over the last few years, the release of new licences has seen the market price of a taxi plate plummet. Now there are more taxis on Melbourne’s streets (a win for consumers) and the drivers themselves are more able to afford them (a win for drivers). The only losers are investors who speculated on taxi plates hoping the government would keep them artificially scarce.

Incredibly, Labor also wants to establish a compensation fund for licence holders. (And to think Labor used to be opposed to “rentiers”.)

The Napthine government was only doing what scores of economists have recommended over decades: break the taxi-licence cartel.

But, then, transport policy is ruled by the heart, not the head.

The taxi announcement got little press. It’s not what the parties want us thinking about. It’s just another micro-policy for a micro-constituency.

The Napthine government is pinning its transport vision on one great big project to rule them all: East West Link. Andrews is going with everything but East West Link: most distinctively removing 50 level crossings.

It is fundamentally absurd that the connection between the Eastern freeway and Citylink involves a one-lane crawl through a park, past a zoo, and over a tram crossing. If we can’t fix these sorts of problems Victoria is going to stagnate.

Labor figures giant infrastructure projects are a little abstract, whereas every voter can think of a level crossing between home and their kid’s creche they’d like removed.

But that sort of retail politics cleverness is undermined by Labor calling its transport plan Project 10,000 – after the 10,000 construction jobs it will create. This is weird. You’d hope infrastructure plans were more about what was being constructed than how many people will do the constructing. And the label doesn’t do much to dispel the impression that Labor is doing the bidding of a militant construction union.

There are a near infinite number of infrastructure projects governments could build. Figuring out which is the “best” project is a non-trivial problem. Market-based pricing systems like tolls would offer some guidance to policymakers but these mechanisms are politically unpopular.

The two parties have competing metro rail projects, and competing plans for new ports. On Friday they both committed to overhaul of the Frankston transport hub.

We’re at that end of the campaign.

The parties are honing in on just two or three marginal electorates.

So whose projects appeal most to you? With the exception of Labor’s surrender to taxi rent-seekers, there are few great matters of principle at stake here.

But this is transport. We’re used to that by now.

Big Government, Big Opportunity For Rent-Seekers

In the 2012-13 financial year, the Australian Labor Party received $55 million in donations. The Liberals received $73 million. The Greens and the Nationals attracted around $8 million each.

Name a large corporate in Australia and their name is almost certainly somewhere on the Australian Electoral Commission’s donations register. Lots of firms even donate to both sides. And of course the Labor Party has a healthy union donor base as well.

But that’s only a fraction of the total amount of money spent on trying to influence government. Federally, Australia has 590 registered individual lobbyists representing 1,708 corporate and non-profit clients.

Then there’s all the money firms spend lobbying with their in-house government affairs staff (who don’t show up on the lobbyists register).

Sounds like a lot? But consider this: the Abbott Government says it plans to reduce the regulatory burden by $1 billion every single year.

Never mind how accurate that figure is. $1 billion is an enormous amount. It makes the amount of money spent on lobbying and rent-seeking in Australia seem tiny by comparison.

Whole industries live and die on the regulations and taxation laws imposed upon them. A new regulation, or a tiny alteration of an existing one, might destroy an enterprise or create a monopoly.

So the real question is, why isn’t there more lobbying? Why don’t firms spend much more money trying to influence the political process than they do?

This is called the Tullock Paradox, named after Gordon Tullock, the great American political economist who died last week at the age of 92.

The puzzle is even deeper because we have lots of evidence that suggests the return on investment from lobbying is enormous.

One American lobby group brags that for the $11 million it charged its clients in fees, it has delivered $1.2 billion in regulatory advantage. An academic study found that $1 of lobbying resulted in $220 in benefits – an incredible 22,000 per cent return on investment.

There are a few possible ways to resolve the Tullock paradox.

Tullock titled the 1972 article where he outlined this paradox “The Purchase of Politicians”. But perhaps politicians aren’t available for purchase, and the examples we have of large returns for small amounts of money lobbying are, in truth, just coincidences – the government was likely to make that decision anyway.

Alternatively, perhaps the returns to rent-seeking are so unpredictable that firms see it as a gamble. If so, then the big lobbying windfalls are extreme outliers. Most experiences with lobbying aren’t as incredibly successful.

Or businesses might not be aware of the opportunities that lobbying presents – they might be irrationally avoiding easy opportunities for profit, or wrongly believe it’s not worth their time to learn their way around the complicated world of rent-seeking.

Perhaps corporate donations are given with no expectation of benefit. Individuals donate to political parties as a form of expression. Maybe corporations do as well. Perhaps, by donating, or even by lobbying, they seek to signal to regulators and consumers than they’re in the tent, rather than outside it. They’re cooperating.

Or perhaps corporate executives just enjoy the access to celebrity politicians that being a big donor can assure. We shouldn’t assume that executives, who decide whether to donate and how much, are always acting in the best interest of their shareholders.

Anyway, lots of possibilities. Some are more plausible than others.

But the Tullock paradox isn’t just a little intellectual conundrum, and it isn’t just about clarifying how much money is spent on politics.

Rather, it’s a window into one of the central dilemmas of government – how can we ensure that government works in the interest of the people who elect it?

Gordon Tullock is most famous for inventing the economic concept of rent-seeking, where private interests influence the government to deliver private benefits. (He didn’t invent the name. That was Anne Krueger.)

The lesson from the vast literature on rent-seeking that has sprung up since is simple: where there is political power, special interests will try to capture that power.

It’s easy to think of ideas for new laws or regulations or government programs that might, on paper, make us better off.

But these laws, regulations and programs won’t be introduced by benevolent and omnipotent dictators. They’ll be introduced by politicians and bureaucrats – plain old humans, swimming in a pool of competing interests.

The more a government does, the more opportunities are presented for rent-seeking. Rent-seekers thrive in the minutiae of policy detail. Corporations know much more about how regulations affect their business interests than regulators or politicians do. It’s not hard for lobbyists to take advantage of that knowledge gap.

Resolving the rent-seeking problem isn’t as easy as banning or restricting donations, putting barriers in front of lobbying firms, or any of those other solutions we regularly hear.

The Tullock paradox emphasises how enormous the gains from rent-seeking are.

With such great windfalls available, money is going to flow into the system no matter how we try to prevent it.

Labor Party Reluctant To Ditch Union Ties In Victoria

On Friday, Labor’s planning spokesman, Brian Tee, insisted he would not resign his membership of the Construction, Forestry, Mining and Energy Union if he became planning minister.

This is rather incredible.

Federally, the Labor Party is slowly, emotionally, wrenching itself through reform to separate the party from the unions. It’s long overdue. The relationship hurts both sides.

Yet Daniel Andrews, the man who might be Victorian premier, is against this reform program. Not only that, but he wants to install a CFMEU member in the very portfolio where they could be most damaging – planning.

Nowhere in the country is the relationship between the Labor Party and the union movement as clearly dysfunctional as in Victoria.

Much more than Steve Bracks or John Brumby, Andrews is a creature of the Labor-union nexus; a party man close to the union interests that financially back Labor.

Last week submissions to the Royal Commission into Trade Union Governance and Corruption alleged the Victorian CFMEU has committed criminal blackmail, breached Supreme Court injunctions and violated the Fair Work Act, Commonwealth Competition and Consumer Act and the Victorian Competition Policy Reform Act.

John Setka, the Victorian CFMEU boss, has a long history of criminal charges, including for assaulting police.

It’s all very salacious. Yet Andrews’ Socialist Left faction invited the CFMEU back into its power-sharing agreement. He relies on their support. Now the CFMEU gets a say in preselections and what the party’s polices will be.

The Coalition has been trying to put the CFMEU-Andrews connection at the front of voters’ minds. Oppositions are usually risk-averse. You can imagine how much Andrews would like to distance himself from union militancy. It’s revealing that he can’t.

Sure, the Labor-CFMEU friendship is fodder for that most off-putting sort of politics – the politics of talking points and condemnations and press releases. But it does raise serious issues.

So much state government policy has been taken over by Canberra. This gives what is left a disproportionate significance. When we vote for state politicians we’re really only voting on a few issues.

Spring Street can’t set the corporate tax rate. It has almost no control over industrial relations and a minor influence on the level of economic regulation. The quality of our health and education – the centre of Labor’s message this week – is heavily dependent on how much federal funding Victoria receives.

But Spring Street does decide how open the state is to new building projects. So giving militant CFMEU interests a lever over development could have long-lasting effects on the shape of Melbourne, and even the Victorian economy.

Earlier this week it was revealed that two Liberal candidates have been interviewed by the Victorian Ombudsman’s office relating to corrupt donations and planning decisions. Labor is understandably excited. It all sounds very New South Wales.

But Victoria has its own native problems. What will it mean for business when this old union state gets an old union government?

The Jig Is Up On Data Retention Plans

Last week was the second time the Government announced its mandatory data retention policy, and the second time it gave the game away while doing so.

Data retention keeps spinning out of the Government’s control.

First, in August, Tony Abbott admitted in a television interview that requiring internet service providers to retain data on their customers’ activity was not just about anti-terrorism and national security but could be used to fight “general crime”.

This time the mistake was made not by politicians but by the Australian Federal Police commissioner Andrew Colvin.

Asked whether data retention could be used to police copyright infringement, Colvin responded:

Absolutely, I mean any interface, any connection somebody has over the internet, we need to be able to identify the parties to that connection … So illegal downloads, piracy … cyber-crimes, cyber-security, all these matters and our ability to investigate them is absolutely pinned to our ability to retrieve and use metadata.

Over the next few days George Brandis, Malcolm Turnbull and Colvin tried to roll this back. Copyright is a civil wrong, not a criminal one, they said. Copyright holders are responsible for bringing legal action against pirates. The AFP isn’t interested in civil cases. (This is only partly true. Commercial scale copyright infringement is a criminal offence.)

But here’s why Colvin’s misstep matters.

Mandatory data retention would create massive new databases of internet users’ activity in every internet service provider across the country.

A lot of opponents of data retention have pointed out that this creates a very real risk of unauthorised access. It’s hard to keep data secure.

Yet just as concerning is authorised access. Once these databases have been created they will be one subpoena away from access in any and every private lawsuit.

Many people have some residual faith that police and security services are benevolent. After all, their mission is absolutely essential – to protect us. But do Australians have the same faith in movie studios? Their neighbours? Their employers?

After all, it’s been undeniable that data retention could help copyright infringement cases ever since the Government included “download volumes” in the list of data it wanted ISPs to retain.

But this is just getting started. Think about how useful mandatory data retention might be in other civil cases.

It would be easy to trace where somebody has been based on the source IP addresses of their mobile phone, as the phone moves from cell tower to cell tower, connecting and reconnecting to the network and internet every time.

In other words, under mandatory data retention ISPs will have to keep records of your movements for two years.

Imagine how this sort of information might be used, for instance, in a workplace relations lawsuit.

Likewise, online defamation cases will be strengthened by records that match IP address to account holder. Do you sometimes comment anonymously on blogs and news websites? Under data retention lawyers could track down who you are months after the fact.

We could go on.

Remember the Government wants this data stored solely for the purpose of future law enforcement investigations. It would be deleted otherwise. It has no business purpose.

Yet not everything about the policy the Government announced last week is terrible.

It was long assumed that data retention would be shoehorned into the existing telecommunications access regime – the regime that allows agencies and authorities from ASIO to the RSPCA to access your phone records without needing a warrant.

Instead, the Government has decided to change that regime.

The proposed bill limits warrantless access to the both the existing set of data, and any future data retained under the new policy, to “criminal law enforcement agencies”. Those agencies are the AFP, Customs, state police, and the state anti-corruption commissions. (You can see the list in the explanatory memorandum here, paragraph 197.)

The upshot is that the RSPCA will no longer have warrantless access to phone records. Nor will the Australian Competition and Consumer Commission, the Australian Securities and Investment Commission, or any of the dozens of bodies that have enjoyed such access for years.

They, like movie studios and your neighbours, would have to ask a judge for permission.

I’d guess there was a fair bit of jaw-dropping in bureaucracies across the country when Brandis and Turnbull announced that new rule.

Now, the legislation allows the Government to authorise more agencies at will, so the list could easily expand.

Still it is a striking admission that there has been too much access to too much data by too many bureaucrats for too long.

And that’s why the new limits on agency access to telecommunications data doesn’t compensate for the threat to civil liberties that is mandatory data retention. Fewer agencies, sure, but with access to a much more complete record of our lives.

One of the clichés of the internet era is that “information wants to be free”. But information doesn’t want anything, of course. People want information.

Data retention will create vast archives of data about what we have done and where we have been. People will definitely want that.