Articles – Page 37

Happy Birthday To Free Market Liberalism

This year what we think of as modern free market liberalism turns 50.

We can thank the 1962 book by the American economists James Buchanan and Gordon Tullock, The Calculus of Consent, for laying the intellectual foundation of the philosophy of limited government.

Call it economic rationalism or “neoliberalism” if you like.

This is not to suggest that all free marketeers have read deeply in the academic field – public choice – that this book spawned. Or that the philosophy of freedom isn’t a lot older. Supporters and opponents are more likely to focus on the more famous names of Adam Smith and Friedrich Hayek. No surprise there. Calculus of Consent is dense and mathematical.

Smith and Hayek studied the market. They were looking at the way human society was spontaneously and efficiently ordered by price system. Buchanan and Tullock shifted the focus; grounding free market thought not in how markets work, but how politics doesn’t.

Half a century later, that is still where the debate is.

Buchanan and Tullock start with a simple, seemingly obvious assumption: people are people. Whether they work in the private sector or in public service, all people respond to incentives. Everybody pursues their own goals and interests. Everybody has their own preferences about what they would like to do. Economists sometimes describe people as “profit-maximising” but this isn’t quite right. People can be salary-maximising, or enjoyment-maximising, or compassion-maximising, or leisure-maximising. Anyway, we’re all trying to maximise something.

The first half of the 20th century saw economists explore the implications of self-interest as it existed in the marketplace. They derived theories of monopoly, public goods, information problems, externalities, and predatory pricing. And they argued that when markets break, government must clean up.

Buchanan and Tullock just extended those theories to government itself. They argued that the public policy question isn’t whether markets have flaws. It is what happens when you try to resolve those flaws through collective action. The Calculus of Consent applied economic analysis to non-market decision making. The book explores the incentives faced by individuals acting in a political environment. After all, people don’t stop being people when they enter a voting booth or sit down at their computer in the Department of Agriculture. Everybody is still motivated by their own personal goals.

This was a necessary corrective to political economy, and a radical one. It is easy to imagine solutions to social and economic problems – the optimal solution is simple to design on paper. But designing and implementing those solutions in the real world is not a trivial matter. Getting self-interested individuals to work towards collective goals is hard. Special interests seek advantage. People use the public apparatus for private gain. Politicians drop good policy and embrace good politics. In a democracy the majority tend to support what is good for the majority, not what is theoretically ideal. What was optimal easily becomes corrupted.

The public choice school is relentlessly realist. It offers a vision of politics without the romance. Public choice counsels caution – if not outright scepticism – about government activity. It underpins the popular claims like Ronald Reagan’s “government is the problem”.

In his 1963 review of the Calculus of Consent, the British economist James Meade criticised his colleagues for being “much too ready to call in the State as a deus ex machina to remove the imperfections of the laissez-faire market”. It was an uncomfortable critique. Meade was a former Labour Party advisor and a firm advocate of government intervention.

The lesson Buchanan and Tullock drew from their research was that rules matter. Buchanan spent his career looking at the structures which could constrain government action and therefore keep the actions of the public service as close to the desires of the public as possible. He won an economics Nobel Prize in 1986 for this work.

So far, so good. A full recognition of the problems of collective action in government should lead to a general reluctance to trust government to act on our behalf. Not to no government, but to modest government, constitutionally restrained. The British political philosopher Mark Pennington says the goal is a “robust” political order. That is, one which is designed to face political as well as market failures – and to limit the damage caused by either.

Certainly, public choice hasn’t penetrated mainstream policy thinking. Conservative politicians (at least those of the free market variety) should be sympathetic but are as embedded in the system as anybody else. The public may be sceptical about bureaucrats and politics but they still, instinctively, want government to fix things. There always ought to be a law. And clever people pushing policy ideas tend to assume their ideas will be implemented wholesale and uncorrupted.

But we shouldn’t underestimate how much Buchanan and Tullock’s book influenced the political contest.

Even the most populist supporter of small government uses language and insights gained from public choice – the understanding, implicit or explicit, that the question isn’t whether society has problems, but whether we can really rely on the strange institution of government to solve them.

Politics Of Contradiction Mean Democracy For Me, But Not For Thee

Only 60 per cent of Australians think democracy is preferable to any other form of government, according to a Lowy Institute poll published last week. It gets worse. Just 39 per cent of 18- to 29-year-olds favour democracy.

This anti-democratic scepticism seems to have taken everybody by surprise. But it shouldn’t, because we live in a profoundly undemocratic age.

The key is a follow-up question which asked whether the right to vote is important to the poll respondents – 98 per cent believe we personally deserve the vote. There’s no contradiction here. Many Australians think they should have a say on how the country is run but other Australians shouldn’t. We could dismiss this as the famed arrogance of Generation Y, but it’s more troubling than that.

Democracy requires a belief that all Australians have an inherent right to decide the future of the country. Every person can help choose the government, regardless of their background, wealth, intellect, or knowledge about public policy and current events.

Democracy won’t inevitably result in the best decisions. That’s not why it’s valuable – it’s valuable because it says we all have an equal right to participate in collective decisions.
The results of the Lowy poll show a rejection of that value. This is the fruit of a long process. We’ve been undermining political egalitarianism for decades. We no longer have any faith in the capabilities of other Australians.

Critics of the modern world claim Australians act contrary to their own best interests. We’ve apparently been brainwashed into buying things we don’t need with money we don’t have. We work too long and too hard for wealth that doesn’t make us happy, but we’re too miserable to stop.

Naturally, these criticisms are never self-applied. They’re faults found exclusively in other people.

If we’re all hopeless in our private affairs, no wonder we are second-guessing voting about public affairs.

There’s a psychological bias called the Dunning-Kruger effect, named after its authors, which says that incompetent people don’t know they’re incompetent. In February, David Dunning told the science website Life’s Little Mysteries that this has consequences for democracy: “most people don’t have the sophistication to recognise how good an idea is”. His comments were reported around the world as meaning science has proven democracy “doesn’t work”.

So this is a great time to be an expert. Elected politicians cannot possibly steer the ship of state by themselves. As Laura Tingle shows in her new Quarterly Essay, Great Expectations, Australians want government to solve almost every problem. Governments likewise want to be in control. And fulfilling our limitless demands requires technocrats, not democrats.

Policymakers often talk about regulations being administered “at arm’s length” from government. This is to ensure they are not subject to political interference. If we’re going to regulate, that’s probably a good thing. But we should be clear about exactly what “arm’s length” means: outside the control of the democratically elected representatives of the people.

Nothing illustrated our technocratic age better than Kevin Rudd’s 2020 Summit, where the ”best and brightest” were assembled in Canberra to set policy agenda. The new PM said he was “throwing open the windows of our democracy”. But Rudd had just won a landslide election and had all the democratic approval he could need. The symbolic purpose of 2020 was not democratic at all. It was to hand the reins over to experts.

The cohort most sceptical of democracy is also the cohort that most votes Green. This is unlikely to be a coincidence. The sympathetic author of the textbook Green Political Thought, Andrew Dobson, writes of the “palpable tension between radical green objectives and the democratic process”. The public opposes much environmental action. Anybody with radical politics will be just a little bit disappointed by democracy’s results.

The response to the Lowy poll was telling. Some said it showed how badly we teach civics. Others flocked to social media to complain darkly about how intelligent the poll respondents were (“these people vote!”).

But ironically, the complaints show why Australians have come to be sceptical about democracy in the first place. Do we really want people who are too uninformed or too stupid to trust democracy to vote? Talk about reaping what you sow.

Remittances Dominate Aid Yet Remain Unspoken

The underappreciated thread that ties the global economy together is remittances – the money sent by migrants back to their home countries.

Remittances are the silent player in the immigration debate. They’re almost never referred to in our domestic politics or press.

The news monitoring site Factiva records just two mentions of remittances in Australian newspapers over the past two years.

Compare that to the reams of copy filed about foreign aid – 706 newspaper articles in the same period. Then add all the vox pops, chat shows, and talkback calls. Recall the hand-wringing which greeted Wayne Swan’s announcement that foreign aid growth would be modest in this budget. Yes, both left and right positively obsess about the cash the government gives to the third world.
But, even though we’re also constantly yabbering about immigrants, the vast sums of money foreign workers privately send home themselves goes entirely unnoticed.

So a new World Bank report, Migration and Remittances during the Global Financial Crisis and Beyond, released last week is all but guaranteed to be ignored. This is a shame.

The report underlines that the amount of money migrants send home far, far exceeds the amount of money the West spends on foreign aid. Remittances are a big deal.

And they’re an increasingly big deal. Total remittances used to be double the total amount of aid, which was impressive enough. But now, after the financial crisis, they are more than triple.
This is not because foreign aid has declined – official development assistance has continued to grow during the economic downturn. It’s because remittances have shot up further. While the developed world spends roughly $US100 billion on aid every year, migrants now send more than $300 billion home. And as remittances are extremely hard to measure (not all of it is sent through formal channels) it is likely to be much more.

This is a good thing. The financial crisis demonstrated that remittance income is stable income. Foreign direct investment in the developing world has wildly fluctuated since 2008 and has not yet returned to pre-crisis levels. By contrast, remittance flows have remained relatively steady. They dipped slightly in 2009 but quickly popped up again; in two years, the World Bank believes global remittances will be close to $600 billion a year.

We’re all familiar with the long-running “trade versus aid” debate. Which is the most effective development policy? There’s an increasing consensus that the actual winner is remittances.
So the significance of the global remittance economy ought to dominate the immigration debate.

But it doesn’t. Understandably, Australians look at immigration through Australian eyes. The emphasis is on us: how will migration programs affect domestic employment? How will migrants culturally integrate?

Barely do the fortunes of the migrants themselves figure. Working in the rich world, whether temporarily or permanently, is extraordinarily beneficial for people born in poor countries. The opportunities are much greater, and the prevailing salary for equivalent work much higher.

This simple and obvious fact is virtually absent from discussions about immigration. Perhaps it is an unstated assumption shared by all participants. But as the development economist Michael Clemens has pointed out, the benefits which are conferred on the migrants and their countries of origin are almost uniformly neglected by all sides of the debate.

No more so than with remittances. The flow of money from migrants helps fund investment and grow capital in the world’s poorest countries. It keeps families above the poverty line. It goes directly to households.

And as a form of third world development, remittances put no pressure on taxpayers in the first world. They are not planned by clever development economists or policymakers. They have not been coordinated by an international bureaucracy. Indeed, remittances are nothing but the result of the hard work of migrants.

That might sound hard-hearted but it helps keep the flow of money stable and targeted – certainly more stable and targeted than foreign aid, which is highly influenced by political decisions, and subject to the budget planning of treasurers for whom third world development is not an urgent priority.

But there’s also a political reason that remittances don’t get talked about. It’s in nobody’s interest to do so.

They don’t fit the left’s vision of economic development. Foreign aid is grand and interventionist and state-driven. Remittances are earned by individuals and spent in ways the migrants and their families choose. One small, pathetic, but indicative criticism of remittances from the left says they encourage “conspicuous consumption” in the developing world. It’s a common complaint and a bizarre one. Is the third world’s problem really not poverty but consumerism?

And it’s clear that many calls for foreign aid are driven by a belief in distributive justice – that foreign aid should be a penance for first world wealth. Certainly this is the message broadcast by the fashionable anti-poverty causes marketed to young people.

Nor do remittances appeal to conservative populists. Remittances offer one of the most compelling utilitarian arguments for importing foreign workers from the developing world – not only is immigration good for our economy and the migrants themselves, it’s also good for the countries the migrants come from. This is not a story that those sceptical of immigration want to tell.

But it is one we’ll have to start recognising if we want to understand our place in the global age of migration.

Gillard Plays The Unedifying ‘Small Australia’ Card

It’s obvious what Julia Gillard was doing when she claimed Enterprise Migration Agreements for mining projects would not favour foreign workers.

Talking to the press on Saturday, the Prime Minister said, “I can assure everyone that we will be putting the interests of Australians at the front of the queue and we will be putting Australians looking for work at the front of the queue.”

Ah, yes. Our old friend The Queue.

There’s not much more evocative in Australian politics than The Queue. For more than a decade it’s neatly divided asylum seekers into moral categories. The virtuous wait in refugee camps; cheaters hop on boats.

Even more than most politicians, Gillard thinks carefully about what she says. Her advisors are smart. When she brings up The Queue in the context of immigration, it’s not likely to be a slip of the tongue. Language matters. This language is about those who are deserving and those who aren’t.

Especially considering that just like the Refugee Queue, the Mining Jobs Queue is fictional. It doesn’t exist. As Peter Martin pointed out in Fairfax papers on Monday, Enterprise Migration Agreements are used for work Australians simply don’t want. There can be no queue if nobody is standing in it.

Most press about this furious little debate has focused on how it makes Julia Gillard look weak, and her hold on the Lodge look weaker. But the debate reveals something more important than the leadership soap opera.

Think back to the 2010 federal election. Few things in that campaign were more dispiriting than the “small Australia” doctrine.

Both the Coalition and the ALP tried to link resentment about asylum seekers to resentment about traffic congestion. The whole thing was farcical. Gillard took Western Sydney MP David Bradbury to Darwin to hunt for refugee boats. And the opposition, trying to demonstrate just how serious they were about slowing immigration, proposed to rename the Productivity Commission the “Productivity and Sustainability Commission”.

The last few days have made it clear the small Australia doctrine was not a temporary anomaly, confined to a weird election held under weird circumstances. It’s no longer just asylum seekers that are controversial. Bipartisan immigration scepticism now looks like it could be an enduring feature of the Australian political landscape.

The Enterprise Migration Agreement is going ahead. But the announcement sent the Government into a tailspin. In Parliament on Monday, Gillard didn’t want to say whether she supported the agreement. How extraordinary: it’s her own Government’s policy.

The unions are opposed to the migration agreements, and Gillard owes her position to them. But unions make all sorts of ambit claims which the Labor government pay no attention to. This one was apparently too big a deal to dismiss.

So the worst part is that instead of ignoring the unions’ shrill protest, the Prime Minister has all but apologised for thinking about foreign workers.

From Gillard’s press conference on Saturday:

My concern here, and the concern of the Labor Government, is always to put Australian jobs first … we put Australian jobs first and now we are putting Aussie jobs first too … we’re working to make sure Aussies get jobs first … we are skilling Australians first and getting them the jobs first … Australians will always come first in getting these job opportunities.

And with the hastily announced Jobs Board (a mining jobs website with the purpose of favouring domestic workers over foreign ones) the Government is ratifying the union movement’s claim that immigration crowds Australians out of work. This is a staple argument made by opponents of immigration, and it is completely wrong. No Australian Prime Minister should indulge it.
Yet this time last year it seemed we’d gotten over small Australia.

The May 2011 budget was a repudiation of the previous year’s excesses. It was then that the Government introduced the Enterprise Migration Agreements policy in the first place. Wayne Swan also announced another 16,000 immigration positions, the majority of which were skilled migrants sent to rural areas.

Australia’s great project has always been to attract more workers and a bigger population. The 2011 budget resumed that course.

But at that stage the next election was far in the distance. Now one is closer – with or without the Thomson and Slipper scandals – and the Labor government is much more frail. Gillard knows if she doesn’t play the Aussie-jobs-for-Aussie-workers card in the future campaign, then the Coalition certainly will. If the past is any guide, they probably will anyway.

The good money says the next election will be played out on the depressing terms of the election of 2010 – a populist, unedifying backlash against population growth and immigration. Australia will not be better off for it.

Obama Beats Bush In Assault On Civil Rights

It’s been fun for the left in Australia to fixate on the Republican candidates for the American presidency. It’s been fun to joke about their policy quirks and eccentricities. Fun to pronounce that nothing is scarier than the prospect of a Santorum or Romney administration. Yes, the Republican race has been a convenient distraction.

Because it would not do to dwell on an uncomfortable, undeniable reality – Barack Obama, the left’s man in the White House, who was supposed to restore America’s standing in the world and end George Bush’s assault on civil liberties, has been much worse than his Republican predecessor.

Obama has undermined more individual rights, and hoarded more presidential power, than Bush ever did. It’s not that he has simply failed to roll back Bush’s anti-terror excesses. Although that is true, as well. It’s that Obama has trumped them. More than 10 years after the September 11 attacks, the White House is still amassing extra security powers. On December 31, Obama signed the National Defence Authorisation Act.

This act allows the military, without judicial authorisation, to arrest and indefinitely detain anybody within American borders.

This power is quite an increase. Under the Bush administration, the military could legally arrest and detain people only in other countries.

American citizens were protected by an 1878 act banning domestic military deployment. Obama no longer observes this legal nicety.

And Obama has claimed the right to assassinate any American citizen he deems a terrorist threat, at any time, according to nothing but his judgment, anywhere in the world. As a former CIA chief recently pointed out, while the President needs a court order to eavesdrop on Americans abroad, he does not need a court order to kill them.

There’s more. George Bush’s once-controversial covert surveillance program has dramatically expanded under Obama. The President’s emergency powers have been boosted. An executive order Obama signed in March (number 13603) grants more to the president in an emergency than any order yet, allowing the government to take over all food, transport, water, energy and health resources and, if the President wants it, to reintroduce conscription.

Executive orders are used to bypass the usual checks and balances in Congress and the courts. As the Cato Institute’s Jim Powell pointed out last month, there is nothing in order 13603 about protecting constitutional rights.

No wonder the director of the American Civil Liberties Union is “disgusted” by the Obama administration’s record. Sure, Obama has withdrawn troops from Iraq. Mission accomplished, as they say. But, on the other hand, he has also personally pioneered an entirely new, more enduring form of global warfare. Drone attacks will remain long after the wars in Iraq and Afghanistan have faded into historical memory.

Because drone war is permanent war. It is limited by nothing more than the whims of the president. It is the first war run entirely by the CIA. It is conducted on the territory of countries to which America is not formally hostile. And it took until February for the administration to even admit the drone war existed.

George Bush’s wars of liberation, right or wrong, had their precedents. Barack Obama’s never-ending global bombing campaign by remote control is his innovation.

It’s a fair bet that no administration will ever shut down the drone program. A competent intelligence agency can always find new threats for a bombing into the Stone Age. So if we simply apply the criteria the left used to condemn Bush as one of the worst presidents in history, there is no ambiguity. Obama is far worse again. Not that you would know about it.

Partisanship has a habit of excusing anything, with 77 per cent of those who describe themselves as left-wing Democrats wholeheartedly approving of Obama’s drone program. Imagine if a Republican did the same thing. There would be anti-drone marches in Washington and candlelight vigils in Paris and Berlin. Now the left is more interested in complaining that Republicans are sceptical about climate change. They ignore, excuse, even – according to the polls – defend their President’s abominable record on war and individual rights. Because he isn’t a Republican.

Locking People Away Forever Because ASIO Reckons

It’s a scandal that administrative decisions which result in indefinite detention are made outside judicial scrutiny.

In his 1885 book An Introduction to the Study of the Law of the Constitution, the great English jurist AV Dicey said, “No man is punishable or can be lawfully made to suffer in body or goods except for a distinct breach of law established in the ordinary Courts of the land.”

This, he argued, was the first principle of the rule of law. With his book, Dicey shaped the English-speaking world’s legal philosophy. He formalised the ideals suggested in documents like the Magna Carta, but which can be traced back to Aristotle.

So compare Dicey’s high principles to a statement made by the head of ASIO, David Irvine, to a parliamentary committee in November last year.

Explaining why he wouldn’t even tell Parliament the grounds on which his organisation makes security assessments for refugees, the ASIO boss said, “Once the criteria for making assessments are known, then you will find very quickly that all the applicants will have methods of evading or avoiding demonstrating those characteristics.”

The Department of Immigration only refers asylum seekers to ASIO for security checks after it’s been determined they qualify for refugee status. It’s one of the last steps. By the time ASIO looks at them, the Australian Government already believes they have a well-founded fear of being persecuted.

So when a refugee receives an adverse security assessment, they’re thrown into administrative limbo. They are unable to return home (too dangerous for them) and they are unable to enter Australia (too dangerous for us). The result is indefinite detention. It’s a classically bureaucratic non-solution. Just lock them up forever and hope the problem goes away.

This is pretty bad, but no-one said national security wasn’t about tough choices.

What makes the situation fundamentally and egregiously illiberal is the fact that these refugees have no idea why they have been detained.

The refugees are not told why ASIO believes they are a security threat. They are not told what evidence the belief is based on. And they have no opportunity to challenge the assessment. There is no review process where the merits of their case can be scrutinised.

In the interminable debate about asylum seeker policy, much has been made of the distinction between incarceration – which happens to criminals – and immigration detention – an administrative process which all asylum seekers undergo. Temporary administrative detention is not punishment.

But when a person is detained indefinitely because the government believes they are a security threat, that distinction is nowhere near as clear. We should never be asked to take a government department on its word that someone must be locked up.

This makes the claims that there are heavy national security issues at stake quite hollow.

No doubt there are circumstances where security demands that some people not be let into the country. David Irvine assured the parliamentary committee that ASIO makes negative findings sparingly and hesitantly. In his words, “We do not take a decision to issue an adverse security assessment lightly and nor are we contemptuous of or blasé about the human rights of the individuals involved.”

That may be true. ASIO could be bureaucratic paragons. But with no checks, we cannot have any confidence they are. Ronald Reagan was fond of the phrase “trust, but verify”. It applies here. A liberal society trusts its bureaucratic and judicial administration because of safeguards built into that system – not because of the inherent honesty and virtue of the public service.

So the issue here is not simply about justice for the 50-odd refugees stuck in this administrative black hole. Without institutional safeguards, the Australian public should have no confidence in ASIO’s decisions. The ASIO chief may have meant his assurances to be comforting, but they only remind us that his assurances are all we’ve got.

In a story on Monday night, the ABC’s 7.30 spent time discussing the adverse assessments made about refugees with links to the Tamil Tigers. The program offered up academics with different views about the security risks they presented, and an interview with a former member now living in Australia.

All very interesting. But this debate is in many ways premature. It grants the system an institutional legitimacy which it does not have.

By not implementing a right for refugees (or their security-cleared advocates, or a tribunal) to question the merits of individual cases, we have, by accident, established a system where we literally lock people away forever just because somebody at ASIO “reckons”.

It’s hard to imagine anything more illiberal, anything more contrary to Dicey’s great principles, than that.

The Unhappy Compromise Of European ‘Austerity’

Has austerity worked in Europe? Well, if “austerity” means savage cuts to government spending, then there has been no austerity.

Figuring out whether a particular policy approach to a given problem has been successful is complicated, and the answer is rarely clear-cut. This gets a lot harder when it’s not obvious that policy approach has even been taken.

The French election earlier this month was a referendum on Nicolas Sarkozy’s apparent austerity approach. But between 2007 and 2011 – that is, since the financial crisis began – France actually increased the size of government as a percentage of GDP from 52.6 to 55.9.

It’s the same in virtually every other major European economy. Italian government spending has gone from 47.6 per cent of GDP in 2007 to 49.9 per cent in 2011. Greece went from 47.6 to 50.1. The United Kingdom jumped from 43.9 to 49.0. Spain was at 39.2 in 2007, and is now at 43.6.

These figures come from the European Union’s statistics agency, Eurostat. There are other sources, and other ways you can slice and dice the numbers. The economist Veronique de Rugy looked at the raw and inflation-adjusted expenditure figures published by the OECD. She found the same thing.

Each approach tells a variation of the same story. All of the major European economies are spending more now on government than they did before the global financial crisis began.
That’s not to say there hasn’t been some cutting. In Greece, Spain, and Italy, spending peaked in 2009. A large part of the expenditure growth has been due to unemployment payments. But, as the free market economist Russ Roberts recently pointed out, the makeup of government spending shouldn’t matter – according to the Keynesian model, all government expenditure should boost demand.

There is no avoiding it: European spending is much higher now.

This simple fact ought to put a big question mark on claims of cruel austerity. After the French and Greek elections, Paul Krugman wrote in the New York Times that a “Franco-German axis … has enforced the austerity regime” on Europe. But European governments haven’t turned off the tap. They haven’t even decreased the water pressure. At most, they’ve slowed the pace of growth.
So why is there an electoral backlash against a policy that doesn’t exist? There are two things going on.

First: voters don’t like cuts. As a general rule, the public isn’t happy when governments announce they are going to spend less. The size of those cuts is a mere detail – after all, voters don’t respond to Eurostat data, they respond to impressions.

Political leaders have been stuck between two rigid forces. On one side, there is the economic need to demonstrate, loudly and confidently, to financial markets that they can keep their budgets under control. But on the other side, there is a political need to keep the faucet of government benefits flowing to voters and special interests.

The inevitable compromise satisfies nobody. There’s neither enough restraint to make serious headway into restoring fiscal credibility, but more than enough to upset groups that rely on taxpayers’ largesse.

This is doubly a problem because the usual benefit of cutting spending – cutting taxes – can’t be delivered. In many cases taxes have gone up substantially as governments try desperately to bridge the gap between revenue and expenditure. Raising taxes without corresponding increases in services is not the best way to buy popularity.

The second reason is more politically fatalistic. Voters punish governments when things are going badly. It doesn’t matter whether it’s those governments’ fault or not.

The Australian academic-turned-parliamentarian Andrew Leigh found in a 2009 paper that voters respond more to a government’s luck than its competence. If the global economy does well, incumbents benefit. If it does poorly, oppositions benefit – no matter who is responsible.

This effect might seem unfair, but it is remarkably persistent. Another paper, also published in 2009, built on Andrew Leigh’s work by looking at disaster relief in India. It found many voters even punish incumbent governments for bad weather.

So the foul economy was always going to make European voters hostile to incumbents.

Yet none of this explains why claims of European austerity are so overhyped outside of Europe – why our economic commentary is littered with moral lessons supposedly drawn from their mistakes.
Yes, advocates of aggressive fiscal stimulus would be no more pleased by the European experience than anyone else. There hasn’t been any austerity, but there certainly hasn’t been any ambitious increase in government spending either. After initial stimulus programs at the start of the crisis, governments pulled their horses back.

But those governments’ reluctance to toss budgets further into deficit on another round of stimulus has, somehow, been recast by Keynesians as a test of high-brow economic philosophy, rather than a test of policy compromise and half-heartedness.

So, despite a demonstrable lack of austerity, the “age of austerity” has become a legend – as if it is a natural experiment in free market economics, proving once and for all the efficacy of a small-government approach to dealing with recessions.

If only. Surely both Keynesians and free marketeers should be able to recognise the European approach for what it is: an unhappy compromise that satisfies nobody.

The Politics Of Projection: There’s A Reason We Can’t All Just Get Along

Politics is almost entirely in the eye of the beholder. Obviously conservatives, libertarians, progressives and environmentalists have different ideas about government. But their clash goes much deeper. Political disagreement isn’t really about politics. It is about competing worldviews; different conceptions of ethics, morality, relationships and communities.

With that in mind: how polarised do you think Australian politics has become? Have Australians really bunkered down into bitter, warring camps on issues such as climate change and refugees?

How you answer says a lot more about you than anything else. According to a fascinating paper just published in the Journal of Personality and Social Psychology, the more radical your politics are, the more radical you imagine everybody else’s politics to be. As the authors find, “people project their own polarisation onto others”.

Projection is a basic human trait. We believe others share more of our attitudes than they do. If we like dark chocolate, we assume others like dark chocolate. If we like walks in the park, we assume others like walks in the park. Humans are social animals: it’s important that others validate our preferences.

In politics, this doesn’t necessarily mean we think everybody agrees. (Although psychologists have found we imagine a false consensus about everything from animal rights to nuclear energy.) But it does mean we assume everybody is as passionate as we are. So when radical partisans encounter disagreement, they see aggressive conflict and polarisation.

Projection confuses virtually every aspect of politics. It makes us assume a greater degree of consensus on the big moral questions than there really is. When that consensus is shown to be an illusion, it breeds hostility.

In a book released in March, The Righteous Mind: Why Good People are Divided by Politics and Religion, the American academic Jonathan Haidt explains the psychological basis of our political divide. Using thousands of interviews, Haidt discovered that progressives had three moral foundations for their political views. But conservatives had twice as many.

Progressives are driven by compassion, fairness, and liberty. Conservatives share those ideals, but they add group loyalty, respect for authority, and “sanctity” – that is, a sense that some things, like marriage or the flag, should be sacred and untouchable. Both sides have to manage trade-offs between their ideals, but conservatives have more ideals, and have to manage more trade-offs. This explains a lot about why left and right are at loggerheads.

Haidt argues that conservatives cope best: when they project their own moral beliefs onto progressives, they recognise compassion, fairness and liberty, and identify that loyalty, sanctity and authority are missing.

But when progressives look at conservatives, they get bewildered. Projecting their moral framework onto conservatives doesn’t seem to explain much. So the progressives offer different explanations: conservatives must be selfish, heartless.

Kevin Rudd famously wrote that free market conservatives dressed greed up as economic philosophy. He might just as well have said he was completely mystified that anybody could disagree with him. Rudd could not reconcile his moral philosophy with the beliefs of others. His projection failed. And people attack what they cannot understand.

Rudd’s successors are no better. Julia Gillard and Wayne Swan claim they represent the ”fair go”. Perhaps this excites Labor’s base, who can smugly fantasise that if the left like fairness, the right must like unfairness. But conservatives like fairness too. For them, fairness manifests as an interest in working hard and not relying on charity – or welfare.

When progressives look at their opponents, they don’t realise the right has a different and legitimate moral framework. And when radical partisans of all stripes confront their opponents, they imagine a great political divide, and become more radical in response.

When we believe our values are the only possible ones, we make politics more hostile than it need be. We’re angry not because we think we’re all different, but because we think we’re all alike.

We Can’t Stop Climate Change – It’s Time To Adapt

The release of the Productivity Commission’s draft report into climate adaptation at the end of last month could have been a spark that changed the debate in Australia.

That’s because it implicitly suggested that adapting to climate change – regardless of whether its origin is anthropogenic, ‘natural’, or whatever – is now the main game.

And the PC is not alone. In the 2007 report of the Intergovernmental Panel on Climate Change, there was just one chapter on adaptation. The previous report in 2001 was the same: one chapter. Now, according to the outline of the 2013 report, the adaptation section will blow out to four chapters.

This new attention on adaptation makes sense. Nobody believes global emissions will be reduced to the extent the IPCC claims is urgent and necessary. Supposed deadlines for action have come and gone, over and over. By 2012, sceptics, alarmists, realists, and optimists should all agree that seriously mitigating climate change is a pipe dream.

So, given this, it was very disappointing the Productivity Commission’s draft report entered the public sphere with such a quiet thud last fortnight.

The mainstream press had a few short, passionless bites. The online specialty service Climate Spectator, which usually scrutinises every aspect of climate economics and politics, simply reposted a newswire report announcing the release. No further analysis apparently needed.

The final product will be released at the end of this year. But even in draft form, it starkly illustrates how much of a philosophical shake-up moving from a mitigation focus to an adaptation focus will be.

The PC’s report discusses worthy things like emergency management and information gathering. But its bulk argues this: in order to boost the resilience of Australian society, a rigorous program of deregulation, tax reform, and liberalisation is needed.

According to the PC, Australia needs economic growth and regulatory reform to deal with climate change. Yes, it is very disappointing this report didn’t get the attention it deserves.

As the PC says, regulations can make the economy inflexible. They make it harder for us to adapt to change. After all, individual regulations are written with certain circumstances in mind. When those circumstances change (as they would in a world with a shifting climate) the existing stock of regulations can add friction to adaptive action.

Other regulations increase costs and thereby reduce adaptation incentives – like those which meddle with insurance markets.

It’s the same with many taxes. The PC rightly says “taxes that influence the way resources are used … could inhibit the mobility of labour, capital, or both”. For example, property taxes make it more expensive to move out of low-lying areas at risk from sea level rises.

Government programs can also impede flexibility. Drought assistance creates an incentive for farmers to stay on marginal land, rather than relocating.

These are the practical issues. But an adaptation program is more than just a collection of policy recommendations. It is a different philosophy.

Rather than focusing on a single, over-arching, world-historical goal (achieved through unprecedented consensus and political action at the national and international level), adaptation focuses on process, institutions, and diversity. It asks: what makes communities most flexible, resilient, and responsive to environmental change? It’s about developing strategies to deal with uncertainty, not politics to achieve global reform.

In a 2009 paper published in the journal Atmospheric Sciences, Robert L Wilby and Suraje Dessai characterise this as the difference between top-down and bottom-up approaches.

The IPCC looks top-down. This view is purpose-built for mitigation, but no good for adaptation. The IPCC struggles to assess climate change risks on a continental scale, let alone regional scale.

As Wilby and Dessai point out, the IPCC records a low level of scientific agreement even about the direction of rainfall change in much of Asia, Africa, and South America. That degree of uncertainty offers no guide for practical action.

By contrast, a bottom-up approach focuses on how communities adapt to local pressures, not global ones. After all, it isn’t the United Nations that will adapt to climate change. It is individuals. This approach is less flashy, but then, why should climate policy be flashy?

And emphasising adaptive capacity and resilience is a good thing, regardless of whether climate change is a naturally occurring phenomenon or the result of human recklessness. Wilby and Dessai call adaptation measures “no-regret” or “low-regret”. The PC calls them “win-win”.

In his 1992 book Earth in the Balance, then senator Al Gore wrote that adaptation was a “kind of laziness, an arrogant faith in our ability to react in time to save our skins”.

Gore was writing when the IPCC was in its formative stages. This sort of thinking led to an explicit decision to focus on global emissions reduction. That decision has shaped the last two decades of climate debate. (Even including one chapter on adaptation in the 2001 report was seen as somewhat revolutionary.) But the decision built an analytical framework which no longer makes sense.

As a paper published in the journal Regional Environmental Change last year put it, under an adaptation-focused framework, “Science would thus place itself in the role of being a tool for policy action rather than a tool for political advocacy”.

Because the arrogance now rests with those who still believe they can coordinate massive, immediate global political action towards a single goal.

It is, surely, time to face up to the demands of adaptation.

Convergence Review Is Clever, Subtle … And Worrying

One pregnant sentence in the Convergence Review says, “It is important to note that the current Australian Press Council regime where members can opt out or reduce funding is not an acceptable situation.”

When the review’s draft terms of reference were released in 2010, nobody expected proposals to regulate ‘fairness’ in newspapers would form a core part of the review’s final report.

And that sentence’s claim – that voluntary press regulation is unacceptable, and regulation is necessary – undercuts the review’s repeated assertions that its “underlying approach [is] in favour of deregulation”.

The Convergence Review’s final report was released on Monday. Its task was to develop a framework whereby all media communications is regulated equally, regardless of whether it is distributed by radio, television, or the internet.

So it’s disappointing that the review got caught up in the swirling currents of vitriol between Rupert Murdoch’s newspapers and the Gillard Government.

The Convergence Review has proposed a new, mandatory agency to regulate “standards” in news journalism and commentary. In this, it offers a watered-down version of the proposals made by Ray Finkelstein in the Independent Media Inquiry earlier this year.

But Finkelstein Lite is also Finkelstein Possible.

Unlike Finkelstein’s proposal, this new body would not be a statutory authority, but “industry-led”. It would be funded by a mixture of private and government money. It would be analogous to the Australian Press Council, but no newspaper or broadcaster would be able to quit the new agency if they didn’t like the way they were being regulated – by law, membership would be compulsory.

And unlike the Finkelstein report’s proposal, it wouldn’t have an absurdly large jurisdiction. It wouldn’t catch those websites that had just 41 hits a day, or those tiny street magazines, or those email newsletters. Just the really big guys – Fairfax, News Limited, Ten, Foxtel, etc.

Indeed, the Convergence Review is a very clever document.

It avoids being too clear about what “sanctions” the industry-led regulator would have in its tool kit. And it is ambiguous as to how the regulator would enforce its sanctions. A short sentence buried in the report’s appendix suggests that enforcement would be “contractual” rather than legislative. This odd distinction raises many more questions than it answers.

But nowhere is the cleverness of the Convergence Review clearer than in a diagram which visually represents the media outlets that would fall under the jurisdiction of another new regulator – the “super-regulator” – which is to replace the Australian Communications and Media Authority. (The diagram is on page 12, for those playing along.)

Media organisations will have to meet certain revenue and audience thresholds to qualify. Those thresholds just happen to include all major newspapers and broadcasters, and they just happen to exclude all online media.

The thresholds have been drawn to make sure that Telstra, Apple and Google just fall just below them, and smaller broadcasters like Macquarie Radio Network and Grant Broadcasters pop just above. How convenient.

To be fair, this is thankfully a long way from the expansive plans of an interim convergence report released in December, which would have included everything except “emerging services, start-up businesses and individuals”.

But it’s pretty clear why the thresholds have been drawn so precisely. First: nobody wants to wake up to the headline “Gillard government’s plan to regulate the internet”. Second, and more critically: the Convergence Review doesn’t seem to have quite figured how converged regulation could actually work.

By deliberately excluding even the biggest websites, all the Convergence Review does is kick the ball down the court, and hope the super-regulator will take responsibility later.

It’s a neat way to avoid seriously rethinking the justification for old, legacy media regulations. And, given the Convergence Review’s focus on political feasibility above all else, it helpfully avoids upsetting the status quo too much.

Take for instance the Australian content requirements currently imposed on broadcasters. Sure, it would be tough to ween the culture industry off those long-standing subsidies. But it will be even tougher to shoehorn those requirements into the online world.

The best the Convergence Review can do is offer future online media outlets that provide “professional television-like drama, documentary or children’s content” an option to be taxed to support a “converged content production fund”.

Right now this is all hypothetical, because the Convergence Review draws its thresholds just above Telstra, Apple, and Google. Good decision. Another unhappy headline would be “Gillard Government to introduce internet tax”. But that is the practical upshot of its proposals … just not yet.

For the Government, the Convergence Review has the advantage of being possible to implement. It’s Conroy-ready.

But like Finkelstein’s proposal, the Convergence Review recommends a substantial intrusion into the free press.

Yes, not every little blog will be wrapped up in its regulatory arms. But it would still impose a regulatory body on newspapers, with some unspecified coercive powers, overseeing what is printed.

Don’t be deceived by the claim that the standards body would “industry-led”: it would be a compulsory regulator administering compulsory regulation. There is a world of difference between that and the currently voluntary Australian Press Council.

The authors of the Convergence Review have gone to a lot of effort to make their report subtle, not-too-obvious, politically feasible, and to avoid obviously upsetting the status quo.
But that shouldn’t be any comfort for those of us who still value freedom of the press.