ABC The Drum – Page 24

The True Origins Of Anti-Paternalism

Opposition to government paternalism wasn’t always a conservative or libertarian thing. Indeed, the use of the word “nanny” to describe state interference in individual choices originally came from the left.

In a 1960 article in the New Statesman, the magazine set up by members of the Fabian Society, nanny was deployed to attack the British Board of Film Censors. “Novels and the Press get along, not too calamitously, without this Nanny; why shouldn’t films?” asked a New Statesman columnist William Whitebait. Nanny “exercises a crippling drag on the growth of a serious and healthy British cinema.”

Eight years earlier, the American journalist Dorothy Thompson (and one time wife of Sinclair Lewis, the Nobel-winning socialist writer) was using nanny to describe British imperialism in the Middle East.

Western empires, Thompson wrote in her syndicated column, have “filled the role of headmaster, or Nanny-governess”. The West does not treat the inhabitants of its colonies as equals. She continued:

It is an amusing notion that comes to me that, with the retreat of empire, Britons are turning Britain itself into a Nanny-state, perhaps out of a long habit in persuading or coercing natives to do what is good for them.

Anti-censorship and anti-empire. These are not typical conservative positions. But both were drawn from the same anti-paternalism that drives the modern resistance to public health regulation – a belief that a powerful class should not impose their own values on the rest of society.

Colonial masters instructed their subjects in the best way to live their lives – lessons given force by military domination. And 20th century censors claimed to be protecting the less refined from the crude excesses of popular culture – judgements only moral superiors could make. Whitebait made much of the fact the British censors were aging aristocrats. Sir Sidney Harris, 83, was being replaced by Lord Morrison of Lambeth, 72. Who were they to tell Britons what they could or could not watch?

Of course, this is not how public health activists record the history of anti-paternalism. I gullibly took their claims at face value in May last year when I wrote in The Drum that “nanny state” is first found in the Spectator in 1965. This is more than a decade after Thompson used it.

According to this story – told by the Australian public health luminary Mike Daube in a 2008 paper in Tobacco Control – it was coined by the former Conservative minister of health Iain Macleod, who later died of a heart attack. (Macleod was a deeply ill man, suffering from an inherited weakness for gout, a war wound, and a chronic inflammatory disease. But Daube and his co-authors imply it was just smoking that did him in.)

Does nanny’s origin matter? Yes, insofar as it demonstrates that anti-paternalism is not – or at least was not – the exclusive preserve of the right.

How would the readers of those words in the New Statesman have responded to the claim by the British Labour leader Ed Miliband last week that the Tories had failed to stop the sale of discount chocolate oranges to the masses? Yes, Cameron complained about the same thing when he was in opposition. But, as our New Statesman readers might say, Cameron is a Tory. You’d expect a bit of Tory paternalism from him.

Or how would those who nodded along with Dorothy Thompson’s distaste of imperial paternalism feel about the recent Australian complaints that Aldi is selling cheap alcohol?

Rejecting eight out of Aldi’s 20 liquor license applications in New South Wales, the chairman of the state liquor regulator said last week that “I don’t know if there are areas that have too many bottle shops but certainly there are areas that have enough”. Are there? That seems a call best made by Aldi and its customers.

One could even go so far as to say that cheap is a good thing. Recall that it was Aldi which consistently won the Rudd government’s Grocery Choice competition. Aldi is at once hero for selling consumers goods they want cheaply (food), and pariah for selling consumers goods they want cheaply (alcohol). This doesn’t have just a whiff of paternalism. It has a stench.

And somehow such paternalism is even more obnoxious when it is petty, as it is with the Aldi licence rejection. Sure, reports suggest Aldi’s cheapest wines are rubbish. This is no surprise at $2.49 a bottle (By contrast, a critic in The Australian suggests that the 83c beer is “gluggable”). But so what? Cut-price bottom-shelf alcohol is already available at other stores. Geographic limits on bottle shop numbers are designed to do nothing more than frustrate purchasers. “All this of course for our good,” as Whitebait sarcastically told his New Statesman readers.

Those who seek to limit our choices usually have good intentions.

The film censors who banned Battleship Potemkin for three decades believed they did so in the British people’s best interests. The colonialists believed the same about the third world. And those who would limit bottleshops in New South Wales also believe they are doing the right thing.

But the underlying philosophy is the same: a deep paternalist belief that people must not be trusted to look after themselves.

The Dramatic Collapse Of Trust In Government

The real story of the financial crisis isn’t bank bonuses, the impending collapse of the Eurozone, or the Occupy movement.

It is how, in every Western country, trust in government has suddenly, dramatically collapsed in the crisis’ aftermath.

Gallup polls have found that a massive 81 per cent of Americans are dissatisfied with the way their nation is being governed. This is the record. Vietnam and Watergate did not induce such broad cynicism. Dissatisfaction only peaked at 66 per cent in 1974.

Americans believe more than ever that the government wastes their money and that congress doesn’t work in their best interests. Even the poor old Supreme Court is taking a beating.

It is just as bad in Europe. A Guardian survey of five countries in March 2011 found that 78 per cent of people did not trust their governments to deal with the problems facing the country. Eighty-nine per cent of people did not trust national politicians to act with honesty and integrity.

Australia fares much better, but here the decline has been steepest. Eighteen per cent of Australians now think that the most important problem facing the country today is “better government”, according to an Australian National University poll in October last year. In March 2010, that figure was just 5 per cent.

We’re coming into an era of post-trust politics – where voters no longer offer politicians and governments an assumption of good faith. Instead, voters now assume political promises will not be kept, that governments are hopeless unless proved otherwise, and, no matter how honest and charming they appear, all politicians are in it for themselves.

Those are, to be fair, reasonable hypotheses.

But we’ll miss trust when it’s gone. The father of liberalism, John Locke, wrote that voters hand governments power with “express or tacit Trust, that it shall be employed for their good, and the preservation of their property”. Government relies on trust to justify its most basic legitimacy – a trust that it will at least try to govern according to the wishes of the voters who put it there.

Certainly, there’s been a decline in trust across the board – no institution is immune.

But for the first time since they started asking the question, Gallup has found that in the United States satisfaction with the size and influence of the federal government is lower than satisfaction with the size and influence of big corporations. Americans now think those faceless, amoral, profit-seeking corporations are slightly more sympathetic than the governments they vote for and who claim to act on their behalf.

And polls consistently show that, as loathed as business leaders are, they’re not as loathed as politicians. The Edelman Trust Barometer is a survey of educated people in 25 countries which this week recorded the biggest decline in its history. It also found that while 27 per cent of people did not trust business leaders to tell the truth, 46 per cent did not trust government leaders.

Nor can we blame the financial crisis. In the United States, trust was at record lows even before the economy tanked.

Anyway, in times of crisis people are usually drawn to government, not away from it. After September 11, American faith in government surged – doubled, in fact, despite the obvious failure of the federal government to stop the attacks. It is not simple enough to say that failure breeds contempt (even casual observers of politics know that failure sometimes brings support).

Governments are the biggest organisations in society. In Western countries they consume between one-third and half of the nation’s economic production.

They have their fingers in every pie. They are relentlessly expansionary: politicians and bureaucrats are always looking for more areas to intervene in. Some people may feel this is not necessarily a bad thing, but it means that governments easily overstretch themselves; they promise too much and deliver too little. Politicians try to take responsibility for everything: from interest rates to waist sizes to the price of milk, petrol and Apple products.

Sure, a government which promises to fix everything is briefly appealing. But it is always, inevitably, a disappointment. We saw this, in a micro way, with the Rudd government – where too much was promised too quickly and it all fell in a heap. We’re now seeing the same phenomenon play out in a macro way with the sovereign debt crisis in Europe. Too much social support was promised for too long to too many people.

For a long time politicians have argued that they “create” jobs and “manage” the economy. Paul Keating was speaking for all candidates and incumbents when he claimed that to change a government is to change a country.

Now, having taken responsibility for everything good, they suddenly have to take responsibility for everything bad.

The result is a massive decline in trust, and a challenge to the foundations of democratic legitimacy.

Distrust has its upside though. Future politicians promising the world will be met with the cynicism they deserve. Perhaps – perhaps – governments might focus on doing a few things well, rather than a lot of things poorly.

Car Makers Cling To Subsidies Of Old

Seeing a Commonwealth minister beg on behalf of a special interest is embarrassing.

The Manufacturing Minister Kim Carr wrote in The Australian over the weekend that automobile manufacturing is “an industry at the core of the society we want to be”.

Less than half of one per cent of the labour force works for the car industry. Yet it is, according to the Minister, absolutely central to our national identity.

Perhaps he’s right; insofar as our national identity is tied up with handing taxpayer money over to a few politically well-connected and otherwise uncompetitive businesses.

It’s all well and good to believe that Australian industry should be encouraged to “make things”. But in practise it leads to the complete subordination of an entire industry to politics, backroom dealing, and electoral calculations.

Few other industries get such hands-on cabinet attention. Every investment, every new product announcement, every decision to open or close a factory is met with a media release and ministerial statement.

In the lead up to the 2007 election, Carr spoke about how he would “thump the tables in the boardrooms of Detroit, in Tokyo, in Beijing” if Labor won government.

The promise was apparently kept. The car industry appears to have their own Minister of the Crown deputised to help with business negotiations, and their own pool of taxpayers’ money on hand to sweeten deals.

This naked corporatism is surely no person’s idea of the “society we want to be”.

The first federal tariffs in 1907 covered vehicle components, as part of “protection all round”. Since then, state support for other industries has fallen away. The car manufacturers’ stubborn hold on their subsidy is only thanks to close political friendships.

Carr’s demotion in the reshuffle late last year was widely noted. But his new roles are important too. Carr is not only the Minister of Manufacturing; he is also the Minister for Defence Materiel – that is, minister in charge of the wasteful sink-hole of military equipment acquisition.

The two roles have a perverse synergy.

Carr has long argued that that a domestic manufacturing industry is needed for national defence. He told ABC radio back in 2008 that “You can’t make a jet fighter without having a strong car industry”.

This is obviously ridiculous. Holden needs $100 million just in case World War Three starts and the international arms market no longer sells Joint Strike Fighters? Australians will need to beat their ploughshares back into swords? If the Government truly believes this scenario is anything other than fantasy, well, aircraft production is the least of our problems.

Carr firmly believes that taxpayers’ money should artificially prop up domestic manufacturing. Now that he is also in charge of defence acquisitions, it is easy to see how Australian-made military equipment will be favoured even when there is better, cheaper, foreign equipment available.

On The Drum last week, Annabel Crabb pointed out almost every other country pours cash into their automobile industry.

But that doesn’t mean that we need to keep supporting ours. Right now, the rest of the world supports the car industry for the same reason we do – because during the second half of the 20th century, manufacturing unions built extremely close relationships with political parties. Those relationships have paid off handsomely in subsidy, protection, and parliamentary representation.

There’s nothing special about automobiles that demands government support. They’re not particularly challenging to make. They’re not particularly central to the economic structure. They’re not particularly hard to buy from overseas. Their manufacturing is not particularly high-tech, at least compared to any other industry. Yet they are particularly well connected. And that’s it. That’s why we support them.

Happily, this week has demonstrated how increasingly hard it is for the automobile industry to justify their claim on our money.

But what on earth is the Coalition thinking?

A big part of Joe Hockey’s plan to reduce government spending is a $500 million cut to car industry subsidies. That would be great.

Yet last week there were suggestions the cut may be abandoned.

Shadow ministers now talk about how critical the automotive industry is. How “savagely” the Government abandoned the Cash for Clunkers scheme. How cruelly the Green Car Innovation Fund was decimated.

The Coalition was rightly scathing about these boondoggles when they were announced.

Hockey and Andrew Robb – both described by their colleagues as “economic rationalists”, in a neat throwback to the 1990s – are apparently holding firm on the cuts.

That the Coalition is going wobbly on spending reductions is no surprise, given Tony Abbott’s deliberate attempt to take Labor’s industrial base, and his embrace of economic nationalism to do so.

Still – car subsidies? If the Coalition can’t even bring itself reduce this irrational, wasteful, pointless, politicised corporate welfare program, they’re going to struggle to cut anything at all.

What’s Wrong With ‘No’?

The Government and its supporters apparently believe Tony Abbott’s big character flaw is that he opposes their policies. They make up cute little jokes about it. Noalition. Mr Negativity. There is apparently an ALP pamphlet called The Little Book of Dr No.

But who is this critique supposed to convince? Apart from people who believe the Government can do no wrong, that is.

Every government accuses those on the other side of parliament of being too negative. When they were in power, the Coalition did the exact same thing.

“It’s not the job of an opposition to be negative when it’s against the national interests to be negative,” said John Howard in 2005. Government press releases said Kim Beazley opposed Coalition legislation “for the sake of opposing”. So did Simon Crean. And Mark Latham.

While he was the workplace relations minister, Tony Abbott complained bitterly about Craig Emerson’s “feral” opposition to any workplace reform.

Presumably Emerson genuinely thought workplace reform was a bad idea. If so, opposing it seems to be exactly what a person in his position should have done. And Abbott, presumably, thinks that the carbon price is a bad idea. (At least, he does now. He’s definitely more convinced of its badness than Julia Gillard is convinced of its goodness.)

On the surface, the attack on Tony Abbott’s “relentless negativity” is a claim that the Opposition has no values, that it is only driven by political considerations.

But the attack is guilty of the same. It has nothing to do with the content of any of the Government’s policies – just an assertion that the Opposition is getting in the way… of what?

Abbott is a conservative, and one who understands what conservatism means. His book Battlelines heavily cites Edmund Burke and Roger Scruton. No fair reading would dismiss his discussion of conservatism as lightweight. Abbott has tried to shape the Liberal Party as not simply a conservative party, but a philosophically conservative party.

For a philosophical conservative, change should be incremental and hesitant. Even reluctant. In Battlelines, Abbott approvingly quotes the philosopher Michael Oakeshott when he said the “modern mindset” is “in love with change … fascination of what is new is felt far more keenly than the comfort of what is familiar.”

Abbott responds that the known status quo, with all its flaws, is preferable to a hypothetical ideal.

“Conservatism prefers facts to theory… To a conservative, intuition is as important as reasoning, instinct as important as intellect.”

This may seem like a deeply anti-intellectual approach, but it isn’t. Conservatism is a recognition that very smart economists working with very smart legislators can sometimes get things wrong – even though they’re very, very smart, and their intentions are very, very good.

So a conservative would absolutely oppose the majority of new government programs – especially reforms on the scale of the carbon price or the mining tax.

And the No Strategy certainly is better than the aimlessness of most oppositions. Shadow ministers under Brendan Nelson and Malcolm Turnbull would criticise the Government for being “all talk and no action”. A program is behind schedule! An election promise hasn’t been kept! But a bad promise that hasn’t been kept is a good thing, surely? Before Abbott, the Coalition seemed to be arguing that the Rudd government was not being the best Rudd government it could be.

The real problem with Abbott’s No Strategy isn’t that it is negative. The problem is that his negativity might not be consistent.

There’s no point saying no in opposition if you’re going to say yes in government. As prime minister, Abbott will be lobbied by ministers trying to fund their pet projects. Some of those ministers will be puppets of their departments, for whom prestige and expenditure are the same thing. Other ministers will just want to spend their time in government divvying out cash. Abbott knows all about the latter ministers. He was one of them.

Unfortunately, even in opposition Abbott’s negativity is selective. When he doesn’t say no – that is, when he comes up with positive policies of his own – they don’t tend to be very good. Take his expanded anti-dumping program, which requires importers to prove they’re not selling in Australia below cost. Or take his parental leave scheme and the vast increase in middle-class welfare that it represents.

Just last week Joe Hockey proposed a crackdown on foreign investment in agriculture. This is a prime candidate for no. But many in the National Party don’t like it when Chinese companies buy farms, and Abbott doesn’t want to be negative to his Coalition partners.

There’s nothing wrong with no. Abbott just needs to say it more often.

And You, Sir, Are No Libertarian

Last week, the New York Times editorialised the Ron Paul newsletters could “leave a lasting stain” on libertarianism and the libertarian movement. Who knew the Newspaper of Record was so concerned about the reputation of small government and individual liberty?

Yes, the newsletters matter. Libertarians mustn’t pretend they don’t reflect poorly on Ron Paul himself. But, no, the actions, or even views, of a presidential candidate 20 years ago don’t discredit a philosophy of government.

Published in the late 1980s and 1990s under titles like The Ron Paul Survival Report, they purported to be written by their namesake. Some of them are foul. They’re racist and homophobic and shrill. Like “We can safely assume that 95 per cent of the black males in [Washington DC] are semi-criminal or entirely criminal”. Or “I miss the closet. Homosexuals, not to speak of the rest of society, were far better off when social pressure forced them to hide their activities”.

There’s a lot more of those quotes. They’re no better – often worse – when read in context.

Until recently libertarianism was a niche philosophy. Its tenets have been held by few, and professed by even fewer. The content of Paul’s old newsletters reflects a strategy by some libertarians in the 1990s to build a coalition with cultural conservatives – to bring those cultural conservatives to radical free market economics.

This paleolibertarian strategy was formulated by Lew Rockwell and the economist Murray Rothbard, both friends of Ron Paul. Writing in 1990, Rockwell said the “Woodstockian flavour” of contemporary libertarianism was off-putting. It was time for libertarians to abandon the “Age of Aquarius” and ground themselves in religion, the family, Western culture, and the middle class. Libertarianism and libertinism are not the same thing; paleolibertarianism was supposed to sever whatever connection there was between the two completely.

That was the theory. The practice was the reactionary racism seen in the newsletters. Many libertarian commentators believe Rockwell ghost-wrote the most incendiary material. It is fairly well established Paul did not, and few believe he holds – or held – any of the views attributed to him by the newsletters.

Yet that isn’t quite an excuse. Paul may not have written the newsletters personally, but he signed off on the paleo strategy, gave his name to it, and handed his byline to its advocates. He didn’t write them, sure, but they went out with his blessing.

Strictly, libertarianism is only a philosophy of government. It does not offer a vision of the good or moral life. A libertarian can, in theory, hold any social belief they like. All they have to do is oppose the government forcing those beliefs on others.

Yet it is hard to square the racism of the newsletters with the understanding of human worth that underpins libertarian philosophy. It does not make sense to place individuals at the centre of your politics then to denigrate people based on their group membership. Ayn Rand famously said racism is the most primitive form of collectivism.

And libertarians have always emphasised the role of markets promoting toleration, because toleration is a good thing.

So the paleo fusion was awkward. Re-read the quotes at the start of this column. They’re not remotely libertarian. Society was better off when all gay people were in the closet? How do you reconcile that claim with a belief in the moral autonomy of free individuals?

And as a political strategy, it didn’t work. Libertarianism isn’t now popular because Lew Rockwell decided to play on white resentment. It is popular because it is the only philosophy of government that takes individual liberty seriously across all policy areas.

The issues animating the libertarian resurgence in 2012 are “cosmopolitan”, not paleo. Keynesian economics and the response to the global financial crisis. Drug law reform. The expansion of presidential power. Just last week Barack Obama authorised the indefinite detention without trial of US citizens suspected of terrorism. Not even George W Bush did anything so draconian, yet Ron Paul is the only presidential candidate opposed.

As Ed Crane, president of the Cato Institute, wrote in the Wall Street Journal on Saturday, Paul is the sole contender who believes in constitutionally limited government. All candidates have talked big about small government; only Ron Paul means it.

And Paul’s arguments on civil liberties (on, for example, the Bradley Manning case) have meant that his political base is now college students, not survivalists.

Paul’s most questionable policy views are the ones calibrated to the latter audience. His opposition to the North American Free Trade Agreement is less about the virtues of bilateral trade deals and more about “sovereignty”. In 2006 he claimed NAFTA was a stalking horse for a North American Union that would have a common currency, international bureaucracy, and “virtually borderless travel”. This is conspiracy theory stuff. The newsletters are full of it.

Views like those detract from the seriousness of Paul’s other messages. A recent feature on the Daily Beast of “10 Outrageous Ron Paul Quotes” lumped his NAFTA allegations with his support for property rights and drug reform, as if they were all equally crazy.

It’s disappointing that Paul’s run crowded former New Mexico governor Gary Johnson out of the Republican debates. Johnson doesn’t have a paleo bone in his body. He has none of Paul’s baggage. In many ways he is also more libertarian. Johnson switched to the Libertarian Party in December.

I wrote earlier that the past actions or views of a candidate don’t discredit a political philosophy. That’s not quite true. It’s never the scandal that hurts, it’s the cover-up.

Yes, many progressives have jumped on the newsletters to attack Paul while excusing the appalling civil liberties record of the Obama administration. Such is politics.

But if those who support Ron Paul in 2012 pretend the newsletters are no big deal (or worse, try to rationalise them) it will suggest to others intrigued by the philosophy of freedom that there is a relationship between racism and libertarianism.

There isn’t. And libertarianism is about more than Ron Paul.

The Socialist Calculation Debate

The great debate in political economy isn’t between Friedrich Hayek and John Maynard Keynes, but between Friedrich Hayek and Oskar Lange.

This debate began in the 1920s and focussed on whether it was theoretically possible for a socialist country to plan its economy, as advocates of socialism suggested.

Could a socialist planner allocate scarce resources efficiently? How would they decide whether to send rubber to Tyre Factory 12 or Hose Factory 7? In a market economy, the factory that needed the rubber most would be willing to pay the highest price. But there is no natural price system in socialism – consumer prices are decided by the planner, and rubber allocated according to their diktat.

Hayek thought socialist planning was practically impossible – the information to choose without prices was too hard to get. His mentor, Ludwig von Mises, also believed planning was theoretically impossible – without market prices, the necessary information simply wouldn’t exist.

On the other side was a group of socialist economists, led by the Polish Oskar Lange. Lange argued all the information buried in prices would be accessible to socialist planners: they could carefully watch inventories to ascertain supply and demand and therefore where goods should be allocated. Lange’s views firmed in later life as he recognised the power of computers, writing just before his death in 1965 the market process was just “a computing device of the pre-electronic age” and therefore “old-fashioned”. Computers could do everything a market does, and do it fairer.

Such was the theoretical debate. Lange and his contemporaries lost twice: first with the fall of the Soviet Empire, and second with the left’s apparent embrace of the market. The same Australian Labor Party that damned Hayek during the global financial crisis can’t stop praising the virtues of market pricing when talking about its emissions trading scheme.

But both sides of the socialist calculation debate spoke in ideal terms. Lange and his contemporaries imagined a unified and purposeful socialist commonwealth. And, however critical they were, Hayek and Mises assumed the same. The question was whether socialism could work in theory – not whether socialism worked.

Actually existing socialism was nothing like Lange’s ideal model. In a 2004 book, The Political Economy of Stalinism, the economic historian Paul R Gregory dug through the Russian archives to see how socialist planning worked in practice.

It was chaotic. At best, resources were allocated throughout the Soviet Union “by feel and intuition”. Stalin had an enormous bureaucracy at his command but there was little delegation. Even the smallest economic decisions were pushed up to the Politburo, and to the dictator himself. Should the state buy an oil tanker? Should they sell 200 trucks to Mongolia? Should steel pipes be imported or produced domestically? It was not disinterested planners working towards efficiency, but Stalin and his senior colleagues who decided such things.

This extreme centralisation was not some Stalinist aberration, as Gregory points out. Any political order that wishes to plan for national uniformity inevitably has to concentrate power. Stalin was not overworked because he was a totalitarian leader, but because he was a socialist one.

There was a great irony in Oskar Lange’s faith in the power of computers to resolve the calculation problem. The development of a Soviet computer was itself a case study in the inability of socialism to efficiently produce and innovate. While the West had pushed ahead with the development of computers after the Second World War, the Soviet hierarchy apparently saw little need to do so until the mid-1960s.

When a native computer was finally mass-produced, it was so poorly built it was virtually worthless. And the central plan called for the production of lots of computers, not for them to be well maintained or integrated. The USSR was never able to implement the technocratic ideal. It was constitutionally unable to do so.

Central planning failed not because it was logically impossible, but because it couldn’t deal with the ignorance and self-interest that characterises all human activity.

This is still the basic problem in public policy. Governments no longer comprehensively “plan” their economies. Yet they now try to supervise them. We are often told the debate between Hayek and Keynes is the great question in political economy. But whether governments can spend their way out of recessions is just one element of the larger debate about the coordinating power of markets.

Lange believed economic calculation was just a matter of throwing enough computing power at the problem. Today’s regulators believe the same thing – extensive risk models purport to give regulators enough information to manage the private sector. The global financial crisis demonstrated that those models are elaborate fictions. Yet the response from regulators has been to double down and insist on greater powers and more complex models.

The calculation problem is endemic in highly regulated sectors like health, where it is not the price system that coordinates resources, but bureaucrats and politicians. Every government proposes to reform health but the sector will remain unreformable until this basic problem is recognised. In the meantime health will continue to be dominated by rent-seekers and rife with inefficiency.

And the calculation problem shapes the debate over tax and spending. Social democrats claim in certain circumstances governments can spend money more rationally, more efficiently than taxpayers could. But this claim relies on a belief that bureaucracies have enough knowledge to do so, and can surmount the political and commercial interests which flock to the centres of power.

Much has changed since the 1920s but the basic problem in political economy has not – ignorance. We should not be talking about Hayek versus Keynes, but Hayek versus Lange.

Convergence Review: Complete, Spectacular Failure

The Convergence Review “has assembled what could be a workable model for regulating the converged media environment,” said Greens Senator Scott Ludlam last week.

Really? The review’s interim report, released on Thursday, is a lot of things but “workable” isn’t one of them.

The Convergence Review’s purpose is to reshape communications and media law in light of the rapid technological changes over the last decade.

And if its interim report is anything to go by, the review has completely, spectacularly failed.

Just take one of the most prominent examples of its entirely unworkable suggestions. The report recommends imposing minimum Australian content requirements on all “Content Service Enterprises” that provide audio-visual services. Those Content Service Enterprises include websites.

The extent of regulatory intervention to do so would be extraordinary. The effort to distinguish Australian websites from international websites would be significant. The incentives to avoid these new regulations would be enormous.

Certainly, the Interim Report says “emerging services, start-up businesses and individuals should not be captured by unnecessary requirements and obligations”.

Yet that one-sentence caveat begs more questions than it answers. Who draws the line between an “emerging service” and an established one, and according to what principle? And why, exactly, is it that start-ups and individuals should be excluded? What theory of media regulation distinguishes between old and new companies, between companies run by one person and companies run by two, between companies doing innovative things and those which are not?

So that caveat, rather than suggesting the Convergence Review has thoughtfully engaged with the complexities of its task, reveals it has been unable to devise a coherent model of communications regulation which makes sense in an online world.

This failure is a particular disappointment because the Convergence Review was supposed to be the real game. Yes, it is just one of a bunch of reviews into media law. But only the deliberately naïve think the Independent Media Inquiry is anything but a political attack on hostile newspapers, and the National Classification Scheme Review is too constrained by its limited brief to recommend any serious reform.

The Convergence Review, by contrast, had scope and ambition. Scope: it was to look at all media from broadcast television to blogs to newspapers. Ambition: it was to take the communications revolution seriously and construct a regulatory framework which could last 20 years.

And it asked the right question. Now that you can listen to the radio on your computer, browse the internet on your TV, and read newspapers on your phone, why should the law treat each service and each technology differently? Forget whether News Limited gave the stimulus package a fair go, or whether Rob Oakeshott is being quoted accurately. This is the most important media policy question right now.

In The Drum in September I argued media convergence necessarily implies deregulation.

It is impossible to impose on the internet the same complex, technocratic, micromanaging regulations which have governed Australian broadcasters.

And even if it were possible, it would not be desirable. Any limit or imposition on what an organisation can publish or broadcast is a restriction on freedom of speech. In Crikey last week, Bernard Keane wrote the Convergence Review “represents the most far-reaching proposals for internet regulation since the Howard government banned online gambling” – much more substantial and threatening than the internet filter ever was.

It follows that if we are to have a new framework regulating all services consistently, broadcasting regulations should be lowered, not internet regulations raised.

Yet such genuine reform would require challenging the obsolete content regulations which have built up over the last half-century. The idea “Australian voices” need to be protected and subsidised is anachronistic – since the rise of home video, television networks or regulators stopped being able to dictate what media content we watch. More than ever our media consumption is about choice. If Australians want Australian content they will seek it out. If they don’t, they won’t.

The Convergence Review goes boldly in the other direction. Drawing on a “wide range of views”, the report concludes there “is an ongoing need for government intervention to support the production and distribution of Australian content”. This claim makes it impossible for the review to meet its brief.

Not to say they haven’t tried. One option for Content Service Enterprises, if they can’t produce Australian content themselves, is to support “a converged content production fund”. In practice, that seems to be a tax on websites to fund Australian television production companies.

Not quite the radical, principled rethink about media regulation we were hoping from the Convergence Review.

But a sad reminder of how hard it will be for regulators and legislators to ever come to grips with the communications revolution.

New Technology And The Call For Censorship

The first recorded call for press censorship wasn’t for reasons of politics, or heresy, or public morality. It was to police “quality”. The gatekeeper mentality is a very old one indeed.

Printing spread rapidly after Gutenberg’s first Bible went on sale in 1454. Following the Bible and legal documents, one market priority for early printers was ancient texts. The first edition of Pliny the Elder’s Natural History produced in Italy was printed in 1469. It was riddled with errors and was in some parts incomprehensible. A second edition was printed the next year, by a printer in Rome, whose editor was a Bishop by the name of Giovanni Andrea Bussi.

Bussi’s edition also had problems. Lots of them. Demand for books at their now much lower prices was enormous, and Pliny was not the only book the editor was working on at the time. (Bussi blamed “technical reasons” for errors in his work – an excuse no more convincing then than it is today.)

The print industry was already highly competitive, and Bussi’s rivals played dirty. One of those rivals was Niccolò Perotti, an archbishop and author of one of the earliest guides to Latin grammar.

Perotti wrote a letter to Pope Paul II. Bussi’s corrupt version of Pliny, Perotti complained, was one of many corrupt versions of Roman and Greek books being pushed around Italy. Editors who “set themselves up as correctors and masters of antique books… pervert what is correctly written”. They do not understand what they are editing. They interfere and impose their own views on the classical masters.

Perotti’s solution was two-fold. First, there should be a common standard for editors – a code of practice, we would say. But no doubt some editors would violate the standard. So Perotti asked the Pope to set up a bureau to regulate the quality of books. This bureau would “prescribe to the printers regulations governing the printing of books” and “examine and emend” each book. “Reckless advertisement” of the editor’s views would be limited. The performance of this task “calls for intelligence, singular erudition, incredible zeal, and the highest vigilance”.

The Pope did not take up Perotti’s proposal. Censorship in the decades to come focused on banning heretical and Protestant books, and regulating obscenity.

But this early peculiarity in the history of censorship looks conspicuously like a debate we are having five and a half centuries later.

It took a few decades for Church and secular authorities to understand the revolutionary potential of mass printing. But they got there. The institutions to censor and restrict bad books were being developed half a century before Martin Luther posted his 95 Theses against Rome. The medium necessitated censorship more than the message.

Perotti’s argument is almost an exact parallel of one made today. Online media is out of control. In the print media, editorialising is crowding out description. The pressure of competition is undermining quality everywhere. New technology is bringing out the worst in the journalist and reader alike.

Niccolò Perotti welcomed the printing press yet said it was being abused and needed to be regulated. The head of the Press Council Julian Disney told the Independent Media Inquiry last month that the internet is “a cacophony” and that “serious bloggers and serious websites” should submit to Press Council regulations. The council has written that bloggers exist in a “regulatory void” and “print or post material before facts have been adequately checked”.

One academic submission to the Media Inquiry decried “blog troll chatter”. Another group of academics suggested that the Media Entertainment and Arts Alliance’s union code of ethics was vital for blogs (even though they are not bound by it) because the codes’ “standard is one against which their actions can be judged”. Ken McKinnon, a former Press Council chair, argued “news-type” blogs should be dragged into the council’s jurisdiction.

The internet is to these advocates what the printing press was to Perotti – something that, unless judiciously tamed, will lead to the coarsening of public debate. According to this mindset, new technology has to be bought under old frameworks. It is too anarchic to be left by itself. Online debate is wild and uncontrolled.

“Cacophony” is an evocative word. It doesn’t mean simply too many loud voices. It means too many loud, discordant, clashing, harsh voices. Online debate is not being coordinated by a body like the Press Council. It is meaningless until it is tamed by regulators. Julian Disney’s complaint seems like an aesthetic one on the surface, but it masks a deeper objection to the nature of democracy. When everybody can have a say, everybody will have a say.

You would think this is a good thing.

But just as Perotti’s vehement attack on Bussi was driven by rivalry, so too is the backlash against online media being driven by those who see it as a threat to the established order.

Perotti eventually took Bussi’s job. He produced his own version of Pliny’s Natural History in 1473 – which was promptly denounced by another scholar for being even more error ridden.

And his proposal was ridiculous – Perotti obviously did not foresee the explosion of book production in the subsequent decades, let alone centuries. Obviously the Church had no moral issue with censorship. But even if the papacy had wanted to enforce quality in the press, how could it do so?

We will remember complaints about the “cacophony” of the internet as just as foolish.

Every new media technology is met with earnest concern that it undermines standards or is out of control.

The ‘Right’ Morally Culpable For Breivik’s Actions, Really?

Serial killers and terrorists often claim to be making political statements through violence. But we don’t immediately have to take their word for it.

Last week Norwegian psychiatrists declared that Anders Behring Breivik, who killed 77 people in Oslo and the island of Utøya in July, is insane.

Breivik disagrees. Through lawyers he told a Norwegian newspaper that the psychiatrists “do not have enough knowledge of political ideologies”.

The psychiatrist’s 243 page report will be reviewed by the Norwegian Board of Forensic Medicine – the assessment may then be changed – and then presented to the court – which may not accept it anyway.

Perhaps Breivik is clinically insane, perhaps he is not.

But a surprising amount seems to rest on the diagnosis.

On Utøya: Anders Breivik, Right Terror, Racism And Europe was launched by Lee Rhiannon in October. Edited by Elizabeth Humphrys, Guy Rundle and Tad Tietze, the book is an unapologetic attempt to make “the Right” morally culpable for Anders Breivik’s actions.

They argue “the significance of Utøya has been demoted, obscured and ignored” by “hard right commentators”. Calling Breivik insane is a furphy used to downplay his political significance (Tietze also argued this on The Drum last week). Breivik executed terror “in the name of the West, against those too ‘tolerant’ of Islam”. The Utøya massacre was “an unambiguous attack on the Left” and now “[t]he task for the Left is … to ruthlessly expose the true nature of the Right and its authoritarian project”.

If the shape of this argument seems familiar, no wonder: it is an almost exact inversion of that made by some conservatives in response to terror attacks carried out by Muslims.

The conservative thesis is that terror conducted by Muslims reflects something intrinsically violent in Islam itself. The thesis of Humphrys, Rundle, Tietze, and their contributors is terror conducted by someone who cites John Howard and claims to be of “the Right” reflects the dark heart of mainstream conservatism.

It is no more convincing when the protagonists have been reversed.

Mainstream Muslims exist in the same “general ideological framework” as Osama bin Laden, insofar as they share a religion. Yet Muslims who condemn violence are in no way responsible for violence perpetrated by others. It is obscene to suggest otherwise. So surely neither are conservatives, who loudly condemned Breivik in any way, responsible for his actions.

One could draw other parallels which would be equally damning and equally hollow. All supporters of the carbon price have some moral relationship to eco-terrorism. Stalin’s Great Terror means mainstream social democrats need to have a good hard think about themselves. Scientists are at all times one step away from fascist eugenicists. This makes good polemic, and it’s idiotic.

There is an enormous moral leap between believing multiculturalism is a bad policy and systematically slaughtering 77 members of the Norwegian Labour Party, some as young as 14 years old. To suggest they are on the same continuum is to obscure how anybody could make that leap.

And to suggest so in order to make a domestic political point (Andrew Bolt is not mentioned once in Breivik’s manifesto, but is mentioned 21 times in On Utøya) is opportunistic and petty.

The authors argue Anders Breivik is a leading indicator of the rise of a violent far right in Europe: the massacre “marked the transition of a section of the current European far Right to lethal violence against political enemies, characteristic of the fascist era.”

If that’s true, so then Breivik’s actions would take on a greater significance, putting aside On Utøya’s cheap political digs.

But the data on politically motivated violence does not bear this claim out.

The latest report of the European Police Office on domestic terror within EU member states documents 249 separate terror attacks in 2010. Of those, 3 attacks were conducted by Islamist organisations. The vast bulk were separatist (160 attacks). There were no “right-wing” terrorist attacks. But there were 45 “left-wing and anarchist” attacks. The Europol report cites the “increased violence”, and “increased transnational coordination between terrorist and extremist left-wing and anarchist groups”.

If we are simply looking for trends, the data suggests we should watch our left, not our right.

In fact, Europol concluded right-wing terrorism was “on the wane”.

Obviously, that assessment was tragically inaccurate. Europol’s analysis may well be very different next year – that is, if they determine the Norway massacre was not an isolated incident.

But, while we wait, the authors of On Utøya do not offer much evidence Breivik is part of a newly violent movement, rather than a shocking outlier. Right-wing terrorism deserves study, certainly. Guy Rundle’s contribution on the history of right-wing terror confidentially reaches back to Julius Caesar’s Gallic campaigns, but stops in Italy in 1980.

Commentators are sickly eager to pin extremist violence on their ideological opponents.

The attempts to characterise Jared Loughner (the definitely mad person who tried to kill a Democratic congresswoman earlier this year) as a child of the Tea Party is just the most farcical illustration. There was, and still is, no reason to believe Loughner had strong political views.

But the problem with On Utøya is deeper than that.

One of the fundamental mistakes in American strategy in the War on Terror has been feeding the egos of the terrorists. Trials by military commission of terrorists confirm their self-image as soldiers of God, where trials in civilian courts would classify them more accurately and mundanely as criminals.

On Utøya does something similar, but does it deliberately. Breivik fantasised his actions and spoke on behalf of critics of multiculturalism. Those critics have uniformly rejected him. Yet On Utøya seeks, bizarrely, to legitimise Breivik – and to claim violence is a logical extension of political debate (There is a striking parallel with Marxist philosopher Slavoj ?i?ek’s argument that terror is a justifiable weapon to fight liberal democracy).

The contributors to On Utøya say Anders Breivik’s actions have been depoliticised. They seek to “repoliticise” them.

But by opportunistically trying to get conservatives to own the Norwegian massacre, they break down the moral barriers between democratic debate and evil.

The World Will Be No Safer Under Basel III

The Basel Committee on Banking Supervision is about to introduce its Basel III accords, global regulatory standards which govern how much capital banks are required to hold.

But it’s not typically a great idea to introduce huge regulatory increases when the world is on the brink of economic collapse.

And the Institute of International Finance (IIF) suggests Basel III implementation could slice 3.2 per cent of GDP in Europe, North America, Japan and the United Kingdom in the next five years alone, and leave the global economy with 7.5 million fewer jobs.

Sure, the IIF represents more than 400 banks, so they would say that. Governments admit it will slow the economy, but by much less. (They would say that too.)

Basel III was developed in haste after the financial crisis. Like its predecessor, Basel II, its purpose is to ensure banks have an adequate buffer of capital if there is a bank run.

Regulators say capital requirements are necessary because governments insure bank deposits. The idea of deposit insurance is to guarantee depositors won’t lose their money if the bank goes under. But the insurance also means banks and their customers don’t wear the cost of wild speculation and risky banking practices. So regulators believe banks need to be compelled to be prudent.

In other words, a new regulation introduced to patch up the unintended consequences of older regulations.

The existence of Basel II in the lead-up to the financial crisis has always been a gaping hole in the theory that we should blame a lack of regulation.

But it’s worse. The Basel II Accords – designed to keep the banks secure, designed to protect the depositors against excessive risk-taking, designed by some of the world’s most intelligent people – were the primary cause of the crisis in the first place.

That is the conclusion of Engineering the Financial Crisis: Systemic Risk and the Failure of Regulation by the political scientist Jeffrey Friedman and the economist Wladimir Kraus. The book was released in October.

Friedman and Kraus’s argument complicates both left and right crisis narratives. The causes of the housing bubble are well known: policies to boost home ownership, low interest rates, and Freddie Mac and Fannie Mae’s 71 per cent stake of the non-traditional mortgage market.

But explaining the housing bubble is just the half of it. You have to explain how that bubble turned into a banking crisis.

Basel II actively encouraged banks to hoard mortgages. Its capital buffer rules weighted mortgages far higher than business or consumer loans. When the bubble burst, the banks were holding a disproportionate number of dodgy mortgages because they’d been urged to do so.

This is not a completely new story. Friedman and Kraus give it empirical support. They show that American bankers weren’t actually that reckless. They favoured what they imagined to be safer, more expensive assets over cheaper, riskier ones. And the banks were nowhere near as leveraged as they had a legal right to be under Basel II.

Furthermore, it wasn’t “irrationality” that caused the crisis. That widespread theory assumes bankers and regulators had enough information to know what they were doing was bad, but they all went crazy and did it regardless. The irrationality thesis has no explanatory power.

It was just that everybody – regulators, bankers, politicians, investors – thought highly-rated mortgages were a lot safer than they were.

So how did the banking crisis become an economic crisis? Basel II, after all, was supposed to halt a contagion at Wall Street’s edge.

Friedman and Kraus argue that Basel rules are inherently contradictory. The capital buffers which Basel requires aren’t buffers at all. The idea behind capital buffers is, again, that if there is a run on a bank, the bank will be able to dip into reserves to survive. But if it uses those reserves, even in a crisis, it will suddenly be under Basel’s required capital threshold, and will be legally penalised.

As one economist pointed out, there has been little “consideration of the paradox that the buffer function of regulatory capital is limited because this capital is needed to satisfy the regulator”. When the banks hit Basel’s capital minimums in the last months of 2008, credit froze, and the “real” economy started to hurt.

So it is sickly perverse that Basel III’s main purpose is to raise capital minimums even higher. And analysts from the Cato Institute have argued that it “retains many of the weaknesses of its predecessors” – particularly “a highly gameable weighting system” that led to the hoarding of mortgages in the first place.

Basel III shows that governments are trying to fix the finance sector’s problem before they’ve figured out what the problem actually is. The first and most important question has to be why the crisis occurred. Answering that takes reflection.

But legislators work faster than academic economists. Already by 2009 politicians were running down new regulatory paths. In February that year Kevin Rudd had concluded that Basel II was “inadequate” and that it needed a successor. This is meaningless. All regulations were inadequate at stopping the crisis.

Anybody who says they’ve got a handle on the causes of a crisis that big and that complicated in its immediate aftermath is wrong. And they’re being deceitful if they say they know how to fix it.

The United States Congress passed the Dodd-Frank financial reform act six months before its own Financial Crisis Inquiry Commission released its report into the causes of the crisis.

Such is the false confidence of regulators and politicians.

Basel III standards are about to be disseminated around the world. There is no reason to believe that the economic system will be any safer or more stable. And it could be a lot poorer.