Club Troppo

Fiji’s president takes charge (SMH)

Fiji is in a state of political flux after President President Ratu Josefa Iloilo announced he had repealed the country’s constitution, appointed himself head of state and set a 2014 election deadline.
He said on Friday he had also sacked all the judges and established a “new legal order” following Thursday’s Court of Appeal ruling that the country’s military regime was illegally appointed following the 2006 coup.

So much for rule of law and democratic contitutionalism Fiji-style. Here is the Court of Appeal decision (fairly large .pdf file) for those interested. Fiji actually has a Constitution which appears on its face to be very well drafted. Why do you think they’ve had no less than 4 separate coups/major constitutional crises in the last 20 years, in contrast to Australia which has had none in more than a hundred years?

There are clearly factors other than constitutional and legal ones in play here. What might they be?  Tensions between Polynesian/native and Fijian/Indians were obviously a large factor in previous coups. But is that still the case? I gather that a lot of Indians have simply “voted with their feet” and left Fiji for good.  Is it just that power has corrupted Bainimarama in the Lord Acton sense like Mugabe in Zimbabwe?  Or are there other factors?  I’m not as closely familiar with Fiji’s current situation as I should be.

Internet company to be sold by 2022 (SMH)

THE Rudd Government will next month try to lock Parliament in to approving the sale of its new broadband company by 2022 in a bid to avoid a repeat of the bitter Senate debates over the privatisation of Telstra.

In an interview with the Herald, the Broadband and Communications Minister, Stephen Conroy, revealed the legislation to set up the company will also prevent the government from keeping it in majority public ownership.

“We’re legislating that sell-down provision. It will be a mandatory requirement to do it,” he said.

But how can the federal government legislate effectively to make it “mandatory”? Can Federal Parliament constitutionally entrench ordinary legislation using “manner and form” requirements? How else could it prevent some future government from taking a different view? Do these sorts of assertions square with responsible government or other norms of liberal democratic constitutionalism, or is just empty political rhetoric?

Herewith my column in today’s SMH, replacing Ross Gittins as you eat your Weeties. Thanks as ever to James Farrell for reading an earlier draft and making suggestions – something he does and I fail to acknolwedge on many columns.  

Cut-throat behaviour makes empathy flow

Ages ago I watched a film by Salvador Dali in which an eye is deliberately slashed open with a cutthroat razor. Swooning as the jelly oozed, I looked away. It was if my own eyes had been slashed. You might call it vitreous reality. I remembered this, and various other high points of theatrical and cinematic ghastliness, elation and arousal as I wrote this column. Oh, and don’t worry. Writing in the space where you usually wake up to read Ross Gittins over your Weeties, this column does have some connection to economics – or at least to its founder.

You see, this month a quarter of a millennium ago, Adam Smith published his great bestseller. No, not The Wealth Of Nations butThe Theory Of Moral Sentiments, which was published 25 years earlier and sold much better during Smith’s lifetime.

Like his compatriots in the Scottish Enlightenment, Smith felt that self-interest was too powerful a force to be demonised in moral philosophy, as he felt Christian teaching had done. As he observed: “The appetites of hunger and thirst, the sensations of pleasure and pain, of heat and cold, etc may be considered as lessons delivered by the voice of nature herself Their principal object is to teach [us] how to keep out of harm’s way.”

Smith’s great theme was that self-interest was healthy if balanced by similarly powerful forces tending towards the public good. In economic life in freely competitive markets, competition and self-seeking behaviour would – miraculously – serve both private and public interests. So long as a bargain was free and informed – for instance free of a merchant’s monopoly power or of fraud – it would improve the lot of all concerned.

And Smith’s Theory Of Moral Sentiments argued that people seeking their own interests in a society were united by their sympathy or fellow feeling for others. If that sounds a bit lame to you – a monopolist’s sympathy for his customers rarely stops him exploiting them – Smith wasn’t arguing that people always do the right thing. His point was subtler and more powerful. (Continued)

The police have been dusting for prints. There are dark smudges on the laundry door around the handle and locks. The forensics officer suggested I wipe it off with a dry cloth. It turns black if gets wet, she said. The powder is surprisingly difficult to remove and seems to have eaten into to glossy white paint of the door. It’s already turned black so I suppose a damp cloth won’t make it any worse.

I want to pick up my guitar — I often do when I’m feeling tense. But the guitar is gone. I got it in San Francisco more than 20 years ago — the same year I saw the Grateful Dead play at Laguna Seca. and watched U2′s Bono spray paint "Rock ‘n’ Roll Stops the Traffic" on the Vaillancourt Fountain.

When I first walked into the guitar store in bare feet and a tie dyed t-shirt, the sales assistant asked me to leave. I might step on something and sue them, he said. So I came back another day with a pair of shoes and a couple of Canadians who I’d met at the youth hostel. The Canadians said they played in a punk band in some small town whose name I didn’t recognise and can’t remember. I tried out the only two left handed guitars in the store — a Korean Fender and a Japanese Yamaha. The Canadians complimented me on my technique. The sales assistant must have heard them because came by to suggest I work on my rhythm before trying any Jimi Hendrix stuff.

In the end I got the Yamaha – a basic six string acoustic. The sales assistant and I haggled over the price and he threw in a battered second hand case (I think the case was headed for the dumpster). For several years now the guitar has lived on a stand in my study. I often reach for it while I’m working on the computer — when I’m pausing to think about what to write. As I type this now I keep turning around half expecting it to be there.

It’s sad to lose the old stuff — my Japanese Les Paul copy is gone too. But most of the things the thieves took when they broke into my house are easy to replace. I thought being burgled would be more traumatic than it has turned out to be. But then, in the last couple of weeks, I’ve been to two funerals, seen an 89 year old man host a flower show and arranged to spend time with my parents over Easter.

I’ll keep an eye out for the guitar, but I still have the memories. For now.

I’m in a London pub thinking of all the Troppodillians back home and of course I’m thinking of intellectual property.  Today’s column in the Fin outlines a very stupid situation we have gotten outselves into. (This was a direct washup of our previous Prime Minister’s leadership – the man of steel.  Anyway, if you can think of anything sillier in the way we administer intellectual property law, please enter the competition.  The winner will be given an extension on James Watt’s patent for the steam engine (why not, parliament extended it long after the invention had been delivered to society).

Manufacturing Generic Pharmaceuticals for Export

Beggars cant be choosers. Any job we can create right now is welcome, but the greater skill it involves and the less it costs government, the more value it will generate and more secure it will be. And, to get on top of our ballooning current account deficit and resulting rising debt we need to put less effort into consumption and more into exporting. Enter U.S. based pharmaceutical firm Hospira which has its second largest manufacturing and R&D investments in Australia. It doesnt want handouts. It wants to manufacture new generation biologic generic drugs for export markets where drug patents have expired. Whats there not to like?

Hospira asked that a few years ago. It turned out there was a catch.

The major pharmaceutical companies had persuaded Australias Government to extend patent protection beyond the standard 20 years to make up for the time taken for clinical trials and regulatory approvals before new drugs can reach market. But partly because drug companies typically seek Australian approvals after they apply in really big markets, most Australian patent extensions lapse after similar extensions in the U.S. and Europe. They certainly expire after patents expire in countries like New Zealand, South Africa, India and Canada, where they dont offer patent extensions at all.

Now, given that virtually all the commercial benefit to patent holders arises from their exclusive right to sell into a market, its silly also to give them exclusive rights to manufacture, and thus the right to prevent other firms manufacturing for export. After all, generic drugs would be produced for those markets anyway, so the seller of the patented drug had virtually nothing to gain from preventing their supply from Australia.

Still, Hospira could have lived with that providing that the patent extensions mentioned above didnt prohibit manufacturing for export. There was a further complication. Wed been negotiating a free-trade agreement with America. An overarching American objective was to modify our intellectual property laws to their own advantage (the U.S. is a net exporter of intellectual property to every other country in the world).

In this environment, Australian officials and politicians patiently explained how sympathetic they were to Hospiras intentions. But, really Hospira had shown such inconvenient timing! (Continued)

I dont know whether youve noticed, but theres a bit of an obsession with crime thats built up the last few years. I put it down to the Underbelly effect. The writhing naked bodies and the brazen offhand, almost pedestrian depiction of violent and murderous crime, has been mighty popular and its got plenty of company on the small screen.  Theres a plethora of reality-TV cop, Customs and criminal gang shows in orbit around Underbelly trying to grab some spillover ratings.  Its like everyones getting in on the act. The present dispute between the Hells Angels and Comancheros seems to fit quite neatly in the mix.  As thought the necessary groundwork is being set for a future installment. Underbelly 5: Hell on Wheels

Into this crime drenched media landscape comes Andrew Fraser former highflying criminal lawyer, cocaine abuser and maximum security prisoner, with his Comedy Festival panel show Highly Sus.

(Continued)

Dave Bloustien looks like a cross between Dr. Who and a 1960s mod with a cravat, waistcoat and sideburns. Certainly a contrast to the t-shirt and jeans that constitutes the usual comedy clobber, but Mr. Boustein doesnt deliver the usual stand-up routine either. Instead he offers an intriguing story that forms the spine of his current show, The Social Contract, playing at the Melbourne comedy festival.   Its a story about the deep self-doubt that must surely wrack all but the wealthiest of cocaine-fuelled comedians.  Its the big existential question.  I want to be a comedian, but am I funny?   And its a question that Mr. Bloustien has had tested, through an interesting chain of circumstances, in a court of law.

It is the story of a contract with a Sydney event promoter, a subsequent gig on board a Harbour cruise boat with an audience of schoolies, the deep humiliation of dying and the ramifications that lead to the Waverley Magistrates court and the testing of his funniness in front of a judge.  

(Continued)

As most of you know by now, I’ve been slowly working in my spare time on a dot-com project. I haven’t knuckled down to do a proper risk analysis yet — let’s face it, coding is much more fun — but I’ve certainly kicked various scenarios around in my head while working on it.
(Continued)

At last, a brief article on the financial crisis that goes behind the facade to look at some of the deeper structural issues.

The author is Satyajit Das and the article (“Built to Fail “) was published in the latest Monthly. He sees the principle cause as excessive debt:

The most important lesson of the financial crisis may be that the current economic order was built to fail, for the global economy used debt and financial engineering to enhance growth, requiring ever more stimulus to maintain performance. The spike in debt globally caused a spike in growth rates. As much as $5 of debt was required to create $1 of growth. Approximately half the recorded of growth in the US over recent years was driven by borrowing against the rising value of houses (that is, mortgage-equity withdrawals). As the level of debt in the global economy decreases, attainable growth levels also decline.

This is now a fairly widely held view. More interesting, I think, is the beautifully simple fashion in which he goes on to consider the real-world impact:

The world economy used debt to accelerate consumption. Spending that would normally have taken place over many years was squeezed into a relatively short period because of the availability of cheap borrowings. Business over-invested, misreading demand and assuming that exaggerated growth would continue indefinitely, creating significant over-capacity in many sectors.

Until household balance sheets are restored, a significant portion of demand is quite simply gone and hence the capacity created to meet it is of questionable value. It’s a brute fact that can’t be easily papered over; it will take time, and considerable pain, to make the necessary adjustments. It’s also why all the frantic efforts to reflate, to get the credit machinery running again, to encourage consumption, may more often than not fail to gain purchase:

The current initiatives of governments and central banks are a hair-of-the-dog treatment. The problems they seek to address can be traced to the high levels of debt accumulated by banks, companies and consumers. In effect, this is now being replaced by government debt and, simultaneously, the debt-fueled consumption of companies and consumers is being replaced by debt-funded government expenditure. Yet adjustment in the level of debt and asset prices is part of the process through which the global economic system will re-establish itself. Like King Canute, central bankers and finance ministers cannot hold back the tide.

Nevertheless, they all feel they must try and already the severity of the crisis has created a “Whatever It Takes” attitude. This is (arguably) all very well if it works, but if it doesn’t it risks utter disaster. Not only economically, but in terms of social stability and trust in the political system.

We better hope they’re right.