Competitive neutrality in finance: an idea who’s time has come

I wrote this piece in the Guardian to keep stirring the pot on post-ideological reform, unaware that I would be outflanked and outgunned on my left by Peter Costello who wants to socialise compulsory super. #Srsly.

Which bank could give Australians a better bang for their buck? The RBA

How’d you like to get most of your mortgage from the Reserve Bank of Australia at the cash rate of 1.5% rather than three times that after your bank has slapped on its margin for the same money?

How would you like to forget worrying about how to exercise your “super choice” wondering how much of your money will disappear in commissions on the side and multimillion-dollar senior executive salaries? You wouldn’t need to if you could access the super schemes governments already run for their own public servants. They’re professionally managed with lower fees and better investment returns than retail and industry super funds.

It’s strange, given all that reform we had in the 1980s and 90s, that we didn’t make it to something as economically rational and helpful as that.

Still, the Productivity Commission’s current inquiry into competition in finance gives it the opportunity to make that right with simple, compelling recommendations from the heart of the reformer’s playbook. Continue reading

Posted in Economics and public policy, Innovation | Leave a comment

Inspirational video du jour

Here at Troppo, we’re not that big on inspirational videos. But, to use the immortal words of Groucho Marx, in this case the entire Troppo collective (which in this case includes me) is making an exception.

Posted in Life | 1 Comment

Observations, lessons, and predictions for the Catalan situation

[cross-posted, slightly updated, from Pearls and Limitations]


  1. About 40% of the population of Catalonia and its capital Barcelona was not born there, but largely comes from the rest of Spain.
  2. Internal migration is high, with about 0.4% of the population moving from one region in Spain to the other every year. This means that over the centuries, the Catalonian population is ethnically mixed with many other groups in Spain and outside, with no more than a fraction attributable to the population of centuries ago. All stories of ‘we Catalans’ had this or that done to us over centuries ‘by others’ are myths that impose a constant group on a fluid population (which is true for most national myths).
  3. The best polls available mid 2017 said only 41% of adults living in Catalonia supported independence. This is a bit higher than the proportion that reportedly has voted in the quasi-referendum of this week so it’s a fair bet that even now, a majority living in Catalonia is not pro-independence.
  4. The Catalan language, suppressed under the Franco regime that ended in 1975, first became an option in Catalan schools in 1983, and is now for several years an ‘immersion language’ wherein all children are forced to become fluent in Catalan, with Spanish in second place (a non-tuition language).
  5. Catalan history education was reformed shortly after Catalan nationalists became important in regional government (1980), with a shift away from the hundreds of years wherein Catalonia was a ‘normal’ part of Spain, towards those periods in which something resembling the current region (usually incorporating bits of France) were more autonomous. The celebration of the ‘conquest by Spain’ in 1714 is a case in point of a now strongly-remembered event. The bitter 1936-1939 civil war in which Barcelona fought alongside Madrid against Franco has been less favoured in the new history dispensation. In the new history telling, the repression by Franco is equated with Madrid.
  6. The vast majority of trade from Catalonia goes to the rest of Spain; the Catalonian economy is likely to collapse if it were suddenly no longer in the EU.
  7. Corruption is high in Spain and Catalonia, leading to politicians eager to whip up other stories. The Catalan leaders have thus knowingly violated both the Spanish constitution and several Catalan laws to get their referendum on track, without even a majority in their own parliament. A high-stakes but also imaginative strategy.
  8. Nationalism in the rest of Spain is fairly strong and sympathy with Catalan leaders is very limited. The EU has openly committed to staying out of it and supportive of national unity, so the Catalan issue will be an internal affair.

Lessons and predictions (over the fold): Continue reading

Posted in Democracy, Economics and public policy, Education, Ethics, History, Immigration and refugees, Inequality, Life, Media, Politics - international, Social Policy, Society, Theatre | 8 Comments

EU plans for VAT taxation are doomed to fail. Again.

Taxation is the potential downfall of the EU as an institution. The reason is that within the EU, several member states are making money from the tax evasion in other member states, a situation akin to having a wife slowly murdering her husband with poison. Unless this stops, a divorce becomes inevitable.

Luxemburg, the Netherlands, Ireland, Lichtenstein, Austria, London, and several others are at it: they help large corporations avoid their taxation responsibilities. They either make deals that allow companies to hide their tax obligation, have idiosyncratic definitions under which there are less tax obligations, provide re-labelling services such that head-offices can be a mere post-box, etc.

These tax-avoidance enablers have also systematically frustrated all attempts over the last 30 years to harmonise taxation and reverse the damage they have done to the integrity of the other nation states in the EU. Whenever the issue of tax evasion was in the public eye, for instance during the GFC, they stalled by insisting tax evasion should be solved internationally and should include all other tax havens. Predictably, these were impossible demands. They have also made life difficult inside committees and government forums.

The EU bureaucracy has just put out a new set of proposals regarding VAT on large international corporations (like Google and Amazon), impact evaluated and all. I have read them and predict they will not be implemented, nor would they work anyway.

For one, the EU commission has no power to enforce new tax rules, and these proposals are in a long line of ignored prior proposals. To become law they would need the unanimous backing of all EU members. They hence need the cooperation of about 5 countries that would lose billions if they complied. Fat chance, even with Brexit reducing the political clout of London.

Secondly, the proposals repeat the main mistake of the past: they advocate a rules-based administrative system of taxation which is cumbersome, highly-complex, and easy to game. I explain how over the fold. Continue reading

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Greek Film Vestibule

Top Picks

Trailer Icon 03 Roza Of Smyrna (Opening Night)
Preparing for an exhibition in the Turkish city of Izmir (formerly known as Smyrna), a collector of historic objects and curiosities, Dimitris, finds an untold story waiting in the depths of a small antiques store: a wedding dress stained with blood, a photograph and a letter. These three items lead Dimitris and his girlfriend Rita, to the enigmatic Roza, matriarch of a once powerful family who has been holding the weight of the past on her shoulders for decades.
☆☆☆☆☆ IMDB

Twelve-year-old Socrates spends his summer riding through the mountains of his picturesque village, tormenting the neighbours and making illegal fireworks with his cousin Markos. His days of innocence come to an abrupt end when faced with unrelenting violence at the hands of his menacing uncle. Setting out to teach him a lesson, Socrates’ actions will put him at the heart of a murder investigation and change his life forever.
☆☆☆☆ IMDB

In Cyprus, north and south are separated by a wall of barrels and barbed wire known as the ‘Green Line’ of Nicosia. It is here that two soldiers, Greek-Cypriot Kypros and Turkish-Cypriot Murat, find themselves on guard – face to face on a daily basis – with the weight of history bearing down on them. When Kypros discovers that Murat is living in his old family home, they propose an exchange, each taking a secret trip to ‘the other side’ – one for love, the other for revenge.
☆☆☆☆ IMDB

Five seemingly unrelated murders find a common thread with an unlikely calling card – each is accompanied by a quote from Pythagoras. With police at a loss and the threat of more deaths on the horizon, an autistic Professor of Criminology Dimitris Lainis, finds himself drawn into the mystery. Joined by maths Professor Marcel de Chaffe, Lainis must solve the clues and walk a dangerous path to uncover the truth behind the murders.
☆☆☆☆ IMDB

Charismatic surgeon Steven Murphy and his wife Anna, live a seemingly idyllic life with their two children. Outside of hours, Steven meets with Martin, a troubled and troubling boy who has a habit of showing up when not expected and paying undue attention to the Murphy family. When the Murphy’s youngest child is struck down with a mysterious illness, the power that Martin holds over Steven will mean the difference between life and death.
☆☆☆☆ Cine Vue
☆☆☆☆ Eye For Film
☆☆☆☆ IMDB

A homeless man, a farmer, a politician, a husband caring for his sick wife, a career woman, a factory owner and the President of Greece himself – seven people with seven very different stories take centre stage in Vassilis Mazomenos’ look at how the Greek economic crisis affected – and continues to affect – those on the frontline. As the crisis hits, people from all walks of life find their worlds irrevocably changed. A final desperate act connects them all – a phone call to a psychological support centre called Lifeline. As they fall apart, it’s their only hope. Based on a nightmarish reality, Lines is an apocalyptic drama set in the darkness of a very contemporary climate, where being seen as more than just a number means fighting hopelessly against a broken system.
☆☆☆☆ IMDB

Six average guys are on a private yacht in the Aegean Sea for who-really-knows-what reason. When a mechanical hiccup leaves them marooned at sea, they choose to wile away the time playing a game of one-upmanship called ‘Chevalier’. Amid the penis measuring, Ikea furniture assemblage and comparison of cellular ringtones, an insightful and wry unpicking of human male pack behaviour occurs, as well as the revelation of personalities within the pack. But, as one of the participants admits, “Even if you win, it doesn’t mean you’re best in general.”
☆☆☆☆ Cine Vue
☆☆☆☆☆ Eye For Film
☆☆☆☆☆ IMDB
☆☆☆☆☆ Slant Magazine

The late filmmaker Nikos Triantafyllidis composes a cinematic love letter to his greatest passion, the Panthessalonikios Athlitikos Omilos Konstantinoupoliton Football Club, or as everyone else calls it, PAOK. More than just a team, PAOK represents an ideal. From its amateur league beginnings, it was a club that gave refugees an escape from poverty and a place to play. Greek Constantinopolitans fleeing from war to Thessaloniki established the club and its colours: white for life and black for death. 90 Years of PAOK celebrates a milestone of football and culture, featuring interviews with players, coaches and members, and a sumptuous visual style that brings sepia and black & white photography to life.
☆☆☆☆☆ IMDB

Trailer Icon 03 Cloudy Sunday (Closing Night)
It is 1942 and Thessaloniki is under Nazi occupation. But even brutal totalitarian oppression cannot stop a young Christian, Yorgos, and Jewish woman, Estrea, from falling in love. They find refuge in a tavern run by Vasilis Tsitsanis, at a time when he composed many of his most famous songs, including the titular Cloudy Sunday.
☆☆☆☆☆ IMDB

Trailer Icon 03 Xamou (Special Event)
Hotel manager Johnny is a high flyer defined by his work – that is, until the economy collapses, along with his job. Stuck at home, avoiding his family and mounting a pile of debt through online gambling, he’s forced to finally wake up to himself and head outside. At sea with a crusty fisherman, picking grapes with the workers and getting charmed by a charismatic goat shepherd, Johnny finds a world that was always there, even if he couldn’t see it through his old eyes.
☆☆☆☆☆ IMDB

Posted in Films and TV | 2 Comments

Taking competitive neutrality seriously: My challenge to the PC

It’s pretty obvious why this picture came up forth in a Google Image Search of the expression “competitive neutrality” but if you can’t figure it out for yourself frankly the Troppo collective are disgusted. We’re through with spoon feeding here at Troppo. #NoMoreMrNiceGuy

Reproduced from today’s  Mandarin

Around the world, finance is a major policy problem driven ultimately by the ease with which insiders can advantage themselves (sometimes illegally, but mostly legally) against outsiders — the mug punters who must pay for financial services. It’s ironic that these problems have burgeoned in the wake of a generation of policy-making that putatively paid increasing deference to economic expertise.

Still, had we taken one principle from the economic reformers’ playbook seriously, we’d have finessed lot of the problems we’ve encountered. Margins in two of our most inefficient industries — banking and wealth management — could be cut by at least a fifth, but probably more.

This would involve using the principle of competitive neutrality not just as a shield for business against unfair government competition, but as a sword, guaranteeing all-comers unsubsidised access to the financial services governments already provide a favoured few — as they provide central banking to banks and superannuation to public servants.


As the dust settles on economic reform, how much have successes been confined to ‘stroke of the pen’ reform — where we swept away the detritus of the political deal-making of the Australian settlement — for instance in tariffs, the two airline policy, the regulation of shopping hours? We were also successful where a singular idea could be implemented with the stroke of a pen within existing systems — as in the case of HECS or the Child Support Agency.

Where we reformed government involvement in the economy that was there to solve inherent ‘market failures’, we’ve done much less well. In infrastructure and utilities, monopoly and asymmetric information problems abound, regulation remains inevitable and new rent-seeking political pathologies lie in wait for those unpicking the old ones. Here our reform efforts brought forth excessively priced energy, tollways, airports, desalination plants and financial tricks many of which saw governments paying more for what they already had, as occurred with the sale and lease-back of government offices. To this day, policy-making and private investment in energy, infrastructure and telecommunications are mired in short-termism, dysfunction and crisis.

There are also rich professional ecosystems in which governments play a major role as funders, regulators and/or service deliverers in health, education and legal and other human services. Has reform improved performance here? It’s pretty unclear. And in areas like regulation and reducing red tape things seem to have deteriorated, notwithstanding three decades of ‘regulation review’. It’s unsurprising in such circumstances that the public’s faith in the governing classes continues its long slide.

Then there’s finance, which in many ways is a special case. Warming to his theme that the financial system is a “pyramid of promises”, here’s a purple passage from Financial Times correspondent, Martin Wolf:

“[T]he purchasers of promises will know that the sellers normally know much more than they do about their prospects. The name for this is “asymmetric information.” They will also know that those who have no intention of keeping their word will always make more attractive promises than those who do. This is “adverse selection.” They will know that even those who are inclined to be honest may be tempted … not to keep their promises. The source of this is “moral hazard.” The answer to adverse selection and moral hazard … is to collect more information. But this too has a drawback: “free-riding”… [T]hose who have made no investment in collecting [information] can benefit from the costly efforts of those who have.

“…That will, in turn, reduce the incentive to invest in such information, thereby making markets subject to the vagaries of “rational ignorance.” If the ignorant follow those they deem to be better informed, there will be “herding.” Finally, where uncertainty is pervasive and inescapable — who, for example, knows the chances of nuclear terrorism or the economic impact of the internet? — the herds are likely both to blow and ultimately to burst “bubbles”.”1

This brief tour de force continues with a new paragraph beginning “Finance is a jungle inhabited by wild beasts.” Are you feeling lucky?

In such circumstances, crude favouritism for the private or the public sector has been what one might have expected — a recipe for failure. We should assume more humbly, that our task is to evolve institutions of the mixed economy in which the public and private, the competitive and the collaborative, play to their strengths and bolster the others’ weaknesses to address the myriad issues they encounter more fully on their merits. Continue reading

Posted in Best From Elsewhere, Cultural Critique, Economics and public policy, History, Innovation, Political theory, Politics - national | 4 Comments

Mike Pepperday – Time to Go: Should we begin the great task of our species – colonising space?

We are accustomed to the concept of colonising the solar system and populating the universe. We think of it as a project for the distant future but perhaps we should be getting on with it. I offer three reasons, any of which might suffice, for us to begin space colonisation:

  • material necessity,
  • psychological need,
  • destiny.

First I argue that limited resources will not allow humans to live on Earth forever. Then I argue we lack purpose and must move on. Lastly I argue that space colonisation is an imperative of the universe itself.

Material necessity. Our technological culture uses the planet’s non-renewable raw materials and pollutes its ecosystems. Eventually capacities will run down. They may be running down already: our attempts to limit population and recycle resources indicate we are not as rich as we used to think. Total recycling is impossible so conservation postpones, rather than solves, the resources and pollution problems. At some stage we have to leave Earth if we are to maintain our technological civilisation.

We may have reached that stage. After hundreds of thousands of years of starvation, war and disease, modern “developed” societies reached the approximate human potential of health, comfort, security and liberty. This has been achieved for twenty percent of mankind for half a century and the Earth—land, sea and air—is indicating it can’t cope. Can it support this standard of living, expanded to the other eighty percent, for centuries?

Earth’s dwindling resources might be supplemented with imports of material and energy from space but one-way transfers would further stress the environment. Apparently, the surface of a planet is not a suitable habitat for a technological civilisation. Though some people will always live on Earth and some may live on other planet surfaces, if our species is to flourish and expand to trillions, it must mostly live in space. This would allow Earth to be renovated and restored.

If Earth-based economic resources have peaked and are running down, we should be treating them as investment capital. They should not be dissipated propping up a few more generations of Earth’s wealthy but should be invested in space colonisation which offers prosperity forever and hope of prosperity to everyone. If we have outgrown the planet our priority should be to leave it. Leaving will be expensive and if we wait till resources are exhausted we won’t be able to afford it.

In space, the supply of material and energy is infinite and artificial nuclear energy may be safely employed. The prospect is of boundless wealth. In space there are no limits to growth.

The outlay to establish the first space cities would be a substantial fraction of our civilisation’s current assets. It may exceed the expenditure on the twentieth century wars and arms races. The cost arises because the technology and biology have to be lifted against Earth’s gravity. Actual construction materials could mostly come from the moon. The mine on the moon might itself cost more than any previous construction project but the cost of launching material from the moon would be lower than from Earth. The first cities could be built at the “Lagrange points” (places where gravity balances out) synchronous with the moon’s orbit around the Earth. They would have to be wheel- or cylinder-shaped vessels rotating to simulate gravity. We should expect it to take a generation or two for the first colonies to become economically viable and possibly centuries before they become substantially independent of Earth-based infrastructure.

The difficulties of arranging for millions to migrate and live in space are daunting but have to be faced. In the end, there is no alternative. If humanity as a whole is maintaining its wealth or becoming wealthier, then we can afford to put it off but if we are now getting poorer in overall terms then we must start the departure. If we don’t act while we are rich, we won’t succeed. If we don’t succeed, the drawn-out death convulsions of our civilisation will not only reduce humans to wretchedness but will also destroy Earth’s ecology and exterminate many animals and plants. If we succeed, the biological potential is unlimited.

Psychological need. Material limits are not the only pressure. In addition to resource shortage and ecosystem stress, we face psychological pressure. Humans are not content just to be born, to exist, and to die. We differ from other social animals in that we seek some purpose to life other than status advancement and procreation.

What do people dream of? What engages them and demands commitment? The days of the explorers and frontier settlers are long gone. The various experimental utopias are now historical curiosities. The old universal incentives of serving gods and ensuring life after death have vanished. Government which relies on a minority coercing the majority is neither stable nor competitive. Tribalism is a dead end and the ideological alternatives of fascism and communism have been seen to fail. So secular democracy the only workable system of government. In it soldiering is in disrepute (there being no cultural threat to guard against) and nationalism conflicts with free trade. Static populations, economic stagnation and wealth itself have made “nation-building” sound quaint. There is nowhere to go.

Nowhere to go except to decay. The developed countries are marking time. Their development stopped over a generation ago. They have little potential for improvement and much potential for trouble: unemployment, depression, dysfunctional families, addiction, suicide, crime, political extremism, terrorism. What is there to look forward to? A better shopping experience? Exciting food and fashions? Fancier phones? Our societies live from year to year with no vision and no plan except to react to the next problem. We no longer expect children will live better than their parents. Despite an unprecedented range of entertainments, modern society is predictable and dull. Where is purpose, ambition, adventure and excitement? In commerce? In an occupation? There can be dignity in making a living but that which actually distinguishes humans from other creatures—wonder, exaltation, glory—has nothing to do with providing food and shelter. The only echo of that nowadays is in extreme sports.

But departure from Earth is more than a way to save us from boredom; it is the ultimate test of Darwinian fitness. Can the species bequeath its descendants the opportunity of worth-while lives, children without limit, and inexhaustible wealth and power? As a human enterprise, space colonisation would fuel dreams forever.

Destiny. Moving into space has implications transcending our resources, our dreams, our species. After four billion years of evolving life, this is the first chance to escape which Earth’s progeny have had; humans would not go alone: thousands, or millions, of other organisms would accompany us.

As far as we know it is also the universe’s first chance. Unless intelligent life arises elsewhere, it will be the universe’s only chance. In that case, if our technological culture is in decline, then this moment—a few decades—is the only opportunity the universe has to become conscious. A few decades among the unimaginable billions of past and future years. This may be a pivotal moment, not just for humanity and for Earth, but for the cosmos.

Although we evolved on Earth we do not necessarily belong to it. We can distinguish three great events, or advents, in our origins: time, life and mind. Fourteen billion years ago time began; matter and energy came into existence and the universe blazed and cooled, smelting chemical elements in accordance with the laws of physics. The second event occurred four billion years ago when circumstances on one planet gave rise to self-replicating carbon molecules. Life—complex, energy-driven interactions of the chemical elements—occupied and moulded the surface of the Earth. Recently—a mere million years ago—life gave rise to mind, a mysterious new power operating within the old laws of carbon life and of physics. With mind the universe began to understand itself and in the last two hundred years mind has become, via technology, a significant force on Earth’s surface.

Whether or not life and mind spread through the universe is up to us. It could be that intelligence has flowered and withered on other planets, perhaps with wistful inhabitants impotent before insoluble engineering problems. The technical feasibility of escaping the home planet depends on circumstances. Our departure is facilitated by the modest size of Earth, by its dense atmosphere, and by the lucky size and position of our moon which provides stable Lagrange points as stepping stones. We have no insurmountable physical obstacles.

If we fail it will be our own fault. The obstacle is politics. The start capital is far beyond private initiative. The USA, which might have the strength, appears to be getting poorer and to have lost interest in space. The United Nations has no relevant charter. It seems we would need a new supranational organisation with unprecedented authority. Humanity’s greatest task confronts us; if we live ten billion years and spread to the ends of creation, we will never face another mission so crucial. Yet—how many politicians have even heard of it?

The human species, carrier of the intelligence of the universe, may have already arrived at the fork in the road. We must pay a toll to take the high road but it leads to unbounded prosperity. The low road is easier but leads ultimately to oblivion. The danger is that by the time it becomes obvious that the shadows are deepening, turning around might be impossible.

The outlook for the Earth’s teeming humans is sombre: increasing social and material struggle in the wealthy countries and elsewhere billions in poverty. Is that also the long-term outlook? If it is, and if we don’t start our departure soon, we will condemn our species to acrimonious extinction—and to the bitter realisation that we had our chance and missed it and lost everything.

If we succeed in leaving we will have galaxies at our disposal and we will never die.

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