Club Troppo

I haven’t paid much attention to Telstra’s participation in the public policy debate. It usually manages to get itself seen in a fairly poor light at least if one is not paying much attention as I haven’t been. Even so, I’ve just read this speech by Phil Burgess (pdf), and I’m impressed. I’m impressed with it because its argument is interesting, and quite persuasive - except for one thing. He outlines some differences between Australian and American political culture. He does so in a very informed and perceptive way (at least for someone who’s only been here a while - and I presume he had some decent research assistance, and indeed wonder whether, as such leaders often do he’s passing off research assistance as his own wide reading. But I may be being ungenerous.)

In any event, Phil thinks that Australian debate is not vigorous enough. That people defer too much to what the government and senior government figures think. He points to the greater engagement with leading business people’s views in the US. And to its greater separation of powers, it’s greater corralling of political power with umpteen checks and balances. I think all this is very interesting, enlightening. I think he’s right, though at least to some extent - for instance in his criticism of our think tanks - he neglects to mention that a lot of their shortcomings here are a function of a much smaller population and as a result a much shallower market.

But I have a problem - one might call it a problem of tone. It’s not just bad manners and bad politics to turn up somewhere in a powerful position and tell the locals that they don’t quite measure up to standards back home. It’s bad in another sense. I think Phil makes his case about our shortcomings well. But it’s also unbalanced and simple minded. Because these are the downsides of a way in which Australia is different to the U.S., not an illustration that it’s worse. It is a bit amazing that he couldn’t have popped a few lines into his speech about the sorry state of US political culture. Try catching a taxi in the U.S. and you find out about all those marvellous checks and balances when you pay double once you cross the county line. When you have a free trade agreement with a country but if you want to export ships to the US, they’re banned by the Jones Act. When the checks and balances are such that the voting system is in such disarray that a national election in 2000 was held hostage by the political connections of one of the contestants and some dodgy state officials and we landed one of the biggest turkeys in the history of modern Western democracy.

I’m not saying these things out of wounded pride for Australia. His criticism is welcome and valuable, but it would have been more impressive if it had been a musing on differences rather than a naive assertion of one being worse than another even in the respect he is speaking of. Checks and balances are a good thing, but we’ve got them too. And our politics doesn’t seem as feverish as U.S. politics. McCarthyism wasn’t as bad here. And Australia’s reaction to Bali was dignified, sombre and sane in contrast to the hysteria of the US’s reaction to 9/11.

It reminds me of the scene in Annie Hall in which Woody’s mother finishes an argument with his father by saying “Have it your own way, the Atlantic Ocean is a better ocean than the Pacific Ocean”.

One of the respondents to my earlier post on NSW electricity privatisation accuses me of a possible “ideological bias against privatisation” and proceeds to make sweeping generalisation about the benefits of privatisation.. I thought I might clear the air on this issue.

I have always adopted an agnostic stance on privatisation - i.e. I do not start with a prior presumption for or against. I certainly refuse to start with a belief that it is unsound public finance for our governments to borrow or that government borrowing for infrastructure investment puts upward pressure on inflation and interest rates whereas a comparable private investment does not (an economic nonsense of the very first order).

I then ask myself the question: will the private sector prove a more efficient owner-manager of the proposed infrastructure than government? There is little doubt that the private sector is generally better than the public sector in design, construction and operation of infrastructure. But capturing these benefits does not require private ownership. Governments can and do out-source most operational matters to private companies and consultants.

On the other hand, the efficiency case for private ownership of infrastructure is based on a number of preconditions which may or may not apply in practice.

Firstly, it assumes that the equity risks of the infrastructure project are largely commercial in character. But the equity risks are often more regulatory and political in character and in such cases the private sector is likely to demand an excessive risk premium. In the case of electricity privatisation, I accept that the electricity business requires skills in trading and hedging which the private sector is likely to be better at.

Secondly, the government is not always able to effectively transfer to the private sector the ultimate risk of default. Whatever the formal contracts might say, if a privatized hospital, school, road or railway network fails to perform, the government is held responsible. This is not relevant to electircity.

Thirdly, private ownership is able to deliver benefits to users only if there is sufficient contestability in financial and service markets, thus preventing costly regulation and close monitoring. This condition will largely apply in electricity.

Fourthly, private ownership will often lead to improved managerial incentives. And this is true of electricity. But in other areas it is far from clear. While government agencies are often derided for their lack of modern management expertise, in recent years they have developed ways to auction out community service obligations to avoid opportunistic political interference while also giving managers clear goals and well-structured performance incentives.

Finally, in some cases, assigning infrastructure ownership predominantly to the private sector leads to a misallocation of capital resources. For example it may create a bias in favour of infrastructure investments with good commercial potential and against social infrastructure with high social returns (an issue I return to later). As well, in the case of new roads, privatization can distort patterns of usage (forcing motorists to take less time-saving alternatives).

In short, I have few qualms about privatisation of electricity (the non-natural-monopoly bits) but each privatisation case needs to be assessed on its merit. .

Let me stress again. As an economist, I have nothing against private financing in principle. I just want to see the decision made on grounds of cost-effectiveness – not prejudice or preconceptions.

The AFR published a letter of mine today on this topic. It is reproduced below. It was brief so in this post I elaborate on why I think Iemma and Costa messed up their arguments very badly.

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Previous tatooed breasts scales of justice deep-sixed to avoid bad taste distraction from a post intended to provoke serious discussion …

John Greenfield is a conservative blog commenter who occasionally fulfils a useful function, rather like a canary in a coal mine.  He can always be counted on to trot out a stereotypical Tory response to any issue, but sometimes that reveals basic misunderstandings which might well be shared by other more sophisticated conservatives not so impervious to rational arguments.  So it was with John’s comment about my previous post on charters of rights:

None of the statists has been able to argue why we need a Bill of Rights. I am sorry, but the argument “everyone else has got one” doesn’t wash.

In fact (and leaving aside the fact that I was talking about a legislated charter of rights not a constitutionally entrenched Bill of Rights, a distinction that seemed completely to escape John), the purpose and effect of a charter of rights is almost the exact antithesis of John’s assumption.  it is an “anti-statist” measure designed to limit excessive power of the political arms of government, albeit preserving parliament’s sovereign power to legislate to remove, suspend or limit rights in a democratically acccountable manner whenever governing politicians wish to do so and think they can make a sufficiently persuasive case of necessity to the voting public to avoid being kicked out at the next election. Most libertarians are strong advocates of bills or charters of rights precisely because they limit excessive governmental power and enhance individual freedoms.

The kneejerk opposition to a charter of rights by many conservatively-minded Australians evinces historical and constitutional “deafness”.  The entire edifice of liberal democratic constitutionalism which Australia’s system of governance exemplifies is premised on the need for multiple checks and balances on excessive power.  The principle dates back at least to the 17th century when the British discovered the hard way that anyone with excessive and unchecked power was apt eventually to use it as an instrument of oppression and unfreedom. 

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The Canberra Times published today an opinion piece of mine on a topic I have been writing about since late November and is familiar to Club Troppo readers. My original version is set out below. For various reasons, I may not be able to respond to comments quickly. Sorry.

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Love him or hate him . . . (when I grow up I want to be director of cliche management for Hill and Knowlton).

Anyway John Quiggin has a characteristically good post about Paul Keating, contrasting the expression ‘Howard haters’ with ‘Keating haters’.  His point is that the world was not full of people who hated Howard (in contrast to his policies) but that it was true that lots of people hated Keating (despite not strongly objecting to his policies).

Anyway reading the post it struck me how differently John and I see the world of politics.  For John, Keating lost because “[f]or the majority of Australians, Keating was tied to the recession and that was that.”  I have little doubt that Keating was tied to the recession and that that didn’t do him any good.  But the problem with this interpretation is that Keating won the election where the recession was most strongly in people’s minds.   True, they got spooked by Dr Hewson.  But that gave Keating plenty of time to get the recession out of people’s minds.  He didn’t.  Why not? Because people wanted to see a bit of contrition.

They wanted to see a bit of humility and failing that they wanted to see the common touch.  The strange and sad thing about Keating was that he had all the talent to give them what they wanted.  All he had to do was edit out a few of the less attractive features of his personality - or those that the people didn’t like.  His aggression in Parliament, his contemptuous and arrogance in dismissing contrary views. Editing our personalities for the onlooker is a skill all of us learn from primary school on.  It’s not a hard skill, though perhaps editing out the more visceral aspects of one’s persona might require a little more self discipline. But it’s not as if people weren’t giving him this advice.  But he was somewhere else.

Keating lost because of the way he presented his personality.  Of course “the recession we had to have” became one of the things onto which people focused their dislike.  And vice versa those who reacted negatively to the way he put himself over fulminated about the recession we had to have. But a few presentation skills, a bit of humility - faux or otherwise - would have given Keating a good chance at victory.

It is strange watching someone want something so much and yet be unable to hang onto what they have because they cannot yield on points of such little consequence.

Writing a post about a Janet Albrechtsen column is almost certainly an advanced symptom of insanity, ranking just behind hairy palms and checking to see if you have them.  Nevertheless,  her effort in yesterday’s Oz about the alleged perils of an Australian charter of rights merits a response, if only because it appears to embody the current centrally mandated universal neocon talking point¹1. KP: along with “global warming stopped 10 years ago but the evil scientists are keeping it secret” [↩], at least in the wake of the 2020 Summit’s expression of enthusiasm for moving towards a Victorian-style charter at federal level.

Albrechtsen claims that a legislative (i.e. not constitutionally entrenched) charter of rights would be a “post-democratic model” which would “vest power to decide major social issues in an unelected group of guardians of the greater good: the judiciary”.

However, Albrechtsen’s claim is hyperbolic to the point of being almost totally fictional.  The very purpose of a legislative charter of rights is to ensure that Parliament remains responsible for law-making and that the courts are not empowered to override the clearly expressed will of Parliament. As with any other legislation, a law enacted after the charter of rights will always prevail provided that it unequivocally expresses an intention to abrogate any of the rights enshrined in the charter. It’s hardly revolutionary to insist that parliaments should be required to express themselves unambiguously if they wish to remove fundamental rights and freedoms; indeed far from being “post-democratic” this concept is a basic aspect of democratic accountability. 

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I’ve proposed a theory of political momentum on Troppo before - somewhere . . . don’t ask me for the link (actually I’ve just thought of one).  But it goes like this.  The really good politician is not focused on the next election, but rather trying to strategise a way of getting over the line it the next election with enough gas in the tank to win the one after.  It may be unfair, because the ALP Government was in a pretty bad state when he managed to pull an election victory out of the hat, but Paul Keating’s LAW tax cuts might have won the next election but severely compromised the one after.

Now I’ve seen an aphoristic summary of this theory from Bernard Keane in Crikey!

Political capital must be spent. It can’t be hoarded. Eventually it dissipates if unused.

I agree with this and share his fears that, at least so far, we’ve not seen the hard headedness, the preparedness to take hard decisions in their own (ultimate) interest from the Government that is necessary for it to maximise its chances of long term survival and success.  But I admit we haven’t really had our first real test which is the Budget.  So I may revise my suspicion at that stage.

I have my own ideas, but I thought I’d throw this open to Troppodillians.  How should the Rudd Government spend its (considerable) political capital.  Remember, I’m not asking about how you would like them to sacrifice some popularity for something you hold dear. Rather I’m suggesting that some pain they take early can convert into political momentum in the future, a sense of achievement - and in this sense political capital spent, or invested, rather than hoarded and dissipated. Actually I’ve already implicitly suggested what it could be from my perspective, a really really tight budget, with some pain all round (I don’t think you need to break promises to do this) to limit the risk of interest rate rises having to do more work and to give the Government more breathing space on the budget into the future.

Any other suggestions?

Following my outlining of Web 2.0 ideas for the ABC on Counterpoint, innovator and entrepreneur Ralph McKay got in touch with me to tell me of his own efforts to develop online opinion markets.  These are interesting because they’re not principally prediction markets. They’re devices to elicit the opinions of large numbers of people using the net.  Elections do this of course, but in a less flexible way than the online opinion markets that one can develop on the net - where people can change the questions being asked and so on.

Ralph argues that his site BigPulse offers new possibilities in discovering and expressing the opinions of large numbers of people.  My suspicion is that this won’t work on a very large scale in society - because only the blow hards will be interested.  But it could work well for well defined organisations in which people recognise themselves as having a stake.  Ralph says that he thought of associations when he designed the system but associations tend not to be interested in orchestrating the interests/opinions of their members - at least where they might threaten those of their officials.  Perhaps the same applies to unions.  Anyway, he says that companies are a good market.  Or I think that’s what he said in a brief phone conversation with me.

But the thing that really looked promising was a similar system for tackling bullying, which has been trialled with some success in some schools.

That’s David Marr’s verdict on the national song, and he asserts that many of his fellow best and brightest agree:

EXTENSIVE soundings among delegates confirm I was not the only one who suddenly realised on Saturday morning as I was singing Advance Australia Fair that among the urgent tasks we face as a nation is ditching this wretched anthem.

I was grateful to Marr for raising the topic, since it seems to be almost off limits in public debate. This is partly because the anthem seems a trivial issue by comparison to aboriginal health, global warming, soil erosion, the tax system, and even the monarchy; so any interest in it betrays a trivial frame of mind. But a likely second reason is that the globalised, globe trotting chattering intelligentsia don’t want to appear condescending to their less reflective, more patriotic, non-chattering brothers and sisters, who seem quite fond of their anthem, even if they don’t know what girt means.

So I was surprised when Kerry O’Brien raised the issue with the PM on tonight’s 7.30 Report. ‘Does it move you?’ was his question, in a tone that left no doubt O’Brien is of the same opinion as Marr. Well, if it isn’t a taboo topic with journalists, it certainly is with politicians. Rudd at first resisted offering an opinion at all, suggesting that the choice of anthem is immutable. But he finally realised he’d seem cold-blooded if he couldn’t say he was moved one or the other, and unpatriotic if he didn’t stick up for the anthem. He could have defused the question just be saying that as a proud Australian he would be moved by any anthem with a bit of tradition behind it; but instead he opted to champion the song, and managed to put his finger on those very few lines in it that, though they sound naive to a contemporary ear, do in fact carry an elevated sentiment:

For those who’ve come across the seas
We’ve boundless plains to share;

Unfortunately Rudd spoiled this performance with a bit of petty point scoring of the same kind that briefly marred his Sorry speech, by gratuitously invoking Howard’s refugee policy. Nonetheless, I was pleased to discover that my leader wanted something more than chest-beating and swagger from in his national song.

But once we know what we want in terms of message, there must be plenty of songs that convey that message better than Advance Australia Fair, and with a much more uplifting tunes. This includes song that have been written and songs yet to be written. My favourite in the first category is (Continued)

My own incredibly undergraduate, ~750kb pisstake below the fold. (Continued)

I didn’t want to let the Summit pass completely without sharing a few thoughts about it from an overseas Australian.

Australians at home may be sick of the saturation media coverage of the 2020 Summit, but for many overseas Aussies these are exciting times. I can’t obviously speak for all Australian expats, but amongst the people I know (admittedly mostly liberals), there’s a buzz about Australian politics these days. This isn’t a feeling just about the Summit, it’s been a mood captured by the ratification of Kyoto, the apology to indigenous Australians and the appointment of Australia’s first female Governor General. Though it’s early days, there’s a sense of genuine anticipation in the air.

The Summit encapsulates those good feelings. Yes, it is a talk fest. Yes, we should be extremely dubious that anything substantive will come out of it. Yes, the selection of the candidates was too biased towards academics and other insiders. Yes, more could have been done to involve ordinary people – not least, allowing a live message board or chat room to generate debate in people’s living rooms. But the Summit is fundamentally an opportunity to usher in a new way of thinking, to capture a reinvigorated enthusiasm in politics and I applaud that.

A few brief comments on the substance then. The Summit’s conclusions provide a potential sense of direction for a nation but are vague enough to allow the Government of the day to fill in the detail in any way that it sees fit. I particularly liked the recommendation “Create a “seamless national economy” to reduce bureaucratic overlaps and improve competitiveness”- which was perhaps the most meaningless of the lot. But I thought this was a wise decision - we don’t want national policy coming out from a few hours deliberation.

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Quoth Christopher Pyne in an interview on ABC Radio this morning:

There are a thousand ideas, there are 660 minutes of discussion on the summit program, which means for every idea there are 39.6 seconds put aside for discussing that particular idea.

So far this claim has been repeated by the ABC and others, without contention, for about 4 hours. It’s a great soundbite.

But 39.6 seconds of contemplation will show that Pyne’s maths is faulty. It runs thus:

660 minutes of talk time / 1000 ideas = 39.6 seconds per idea.

All good and well, except that ideas won’t be getting discussed serially. They will be discussed in parallel.

The conference is divided into 10 subject areas of 100 participants each. Assuming serial discussion in each stream, that takes the time per idea to 6.6 minutes each. Assuming working groups are composed of ten people, that takes it to 66 minutes each. About an hour per idea: brief but not all bad.

I can only assume that the journalists have been deprived of desktop calculators: multiplying and dividing things by multiples of ten is of course notoriously difficult to do mentally.

Maybe the terrorists stole them via email?

Update: Brendan Nelson spotted on tonight’s SBS news making the same argument. Does he doctor his own figures?

Dave Bath at Balneus tends to perform a public service by nagging people to do their civic duty by contributing submissions to public inquiries and consultations. In that spirit I’ll mention a two that caught my eye:

Inquiry into the Stolen Generation Compensation Bill 2008. This one is based on a Private Member’s Bill introduced by Senator Bartlett. The scheme proposed seems reminiscent of one mooted by Ken Parish in February. Unfortunately the deadline for submissions passed last week — sorry Andrew.

Inquiry into The Current State of Australia’s Space Science & Industry Sector. I found out about this because of a link to a submission in Missing Link a few days ago. I submitted a brief (2 page) document yesterday and today the Committee has notified me that they don’t mind it being published. What upset me was that mine was submission #5. C’mon, I know Australia has more space buffs than that! Deadline for submissions is this Friday.

So yesterday I lost my temper at a monumentally silly bit of policy making on-the-run by the new ALP government. After that tantrum I learnt that there was both more — and less — than met the eye.

To start with, let’s review what Julia Gillard said yesterday to start the whole shitstorm:

“We want to make sure that they are safe from terrorist attack,” Gillard said. “Part of doing that is making sure we’ve got the right powers to ensure that we can tell if there’s something unusual going on in the system.”

Any changes to the Telecommunications Act would be based on national security and not “an unseemly interest in people’s private emails”.

As I and others pointed out yesterday, companies already have this power. They own the equipment and generally, control of email and web access is a contractual rider. It couldn’t make a difference to detecting terrorism (or indeed any other criminal activity) over what already exists.

I was angry about the proposal, mostly because of the tragic ignorance it highlighted. So I decided to ring my local member’s office. They told me to ring Julia Gillard’s office. Her office told me to ring the Attorney-General’s office. And there I found out what the proposal actually was.

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