Public Opinion

« January 2009 | Main | March 2009 »

February 28, 2009

moderation

The Crikey blog stable is gradually becoming an empire. All they need now is a foodie, a gardener and an agony aunt and they'll have the whole universe covered. Maybe their own version of Karl Kruszelnicki could do the universe bit.

And good on them. A lot of people have found their way to blogs through one Crikey gateway or another.

The temporary Pineapple Party blog seems to be doing what it's supposed to, which you'd expect with a pretty straightforward mission.

Pure Poison is a more complicated proposition though, and it's taking a bit longer to settle in. It seems to be developing an interesting dynamic and achieving more than "exposing intellectual dishonesty in the mainstream media", partly because of what commenters are doing with it.

Jeremy said at the start that keeping an eye on Tim Blair and Andrew Bolt is a time sink, which it would be. It would also be as depressing as hanging around Stormfront all day, and should probably attract higher health insurance premiums given the mental health risk.

When they started out they copped a bit of flak for debasing the blogosphere, promoting snark and encouraging blog wars, which struck me as a bit silly really. Most bloggers get stuck into opinion columnists from time to time. And it doesn't make sense to be all democratic and public sphereish about the blogosphere on one hand, and insist on high intellect and polite debate on the other. There's no law saying you have to have a PhD and finishing school diploma to be relevant. There's also no universal code of conduct for blogs, which is one of the reasons they're more interesting than the Queen's Christmas message.

Meanwhile, at Pure Poison and Bolt and Blair's blogs, everyone seems to be thoroughly enjoying themselves. Jeremy, Scott, Tobias and Ant are keeping an eye on the MSM, and their commenters are keeping an eye on MSM commenters with some interesting results.

There's an owner/author-centric view of blogs which concerns itself with what journalists and bloggers are/are not, or what they should/shouldn't be doing, but much less attention focused on commenters. Commenters are publishing too. Moderation and commenting policies are supposed to keep commenters in line, but often they don't. Whether that's a greater concern at MSM sites than others is an interesting question, but in the meantime Pure Poison commenters are doing a fine job of spotting and collecting nasty comments at MSM blogs, and they appear to be having an impact.

Some of them are using an approximation of the Blair winged monkey technique, deliberately leaving contrary comments at MSM sites just to see what will happen. Depending on your point of view, that's either a low blow or completely reasonable, all things considered. But it's the sort of thing that happens when someone like Bolt claims that's how nasty comments have been turning up on his blog, as if it only started yesterday.

It must be driving the moderators crazy, trying to sort the authentically nasty from the pretend. At the end of the day, Pure Poison is forcing them to clean up their act and reduce the volume of hate speech, in a roundabout way achieving the opposite of the result anticipated by the critics.

Posted by Lyn Calcutt at 1:59 PM | Comments (29) | TrackBack

Afghanistan on the brink?

There's a lot being said about Afghanistan these days especially about whether to give up on democracy in favor of counter-terrorism alone, the role of Pakistan in fighting counterinsurgency, and NATO allies not all sharing U.S. priorities.

According to this Centre for Strategic and International Studies (CSIS) report the fundamental problem in Afghanistan is that the Afghan government, the United States, NATO, the United Nations, and other key allies have not agreed on a common strategy for the country.

This is the testimony of Martin Strmecki to the Senate Armed Services Committee Hearing on Strategic Options in Afghanistan and Pakistan.

It gives a good insight into US thinking on Afghanistan. The main point of Marin Strmecki's testimony is that the United States cannot lower its sights in Afghanistan. It must fully resource a counterinsurgency strategy that integrates security, development, and good governance to "harden" the Afghan state, while peeling away the outer layers of the insurgency to isolate the hard core. The US can then increasingly pass that effort off to its Afghan partners over time. That's how the US should define success, and it's an "attainable goal."

Posted by Gary Sauer-Thompson at 1:58 PM | Comments (2) | TrackBack

February 27, 2009

goodbye Sol

So Sol Trujillo departs in June, richer by at least $40 million. Telstra share prices were $5.06 the day Trujillo started and they closed at $3.67 yesterday. He's been pushed out. Is Donald McGauchie next?

Trujillo's master plan to achieve the transformation of Telstra by rolling out high-speed broadband across the country is in tatters. His tenure as CEO of Telstra was marked by war with the Coalition government and the ACCC about regulation of pricing and sharing of infrastructure. Telstra refused to participate in the Rudd Government's national broadband network (FTTN) because it did not receive guarantees that there would be no operational separation, and if Telstra was released from the access rules that would otherwise require it to let competitors use the network. Telstra's strategy was to remain whole and the dominant player--the gorilla in the communications and media market.

Clearly Telstra has decided that it didn't want to fork out the $5 billion needed to build the FTTN network in the capital cities, and it reckons that a hybrid roll-out of different technologies is cheaper and more commercially acceptable to Telstra. Technology has moved on in the past four years. Trujillo's big idea of FTTN has been dumped. The future is wireless.

Posted by Gary Sauer-Thompson at 7:25 AM | Comments (11) | TrackBack

black humour

As Paul Krugman observes in The New York Times we have zombie banks, unable to supply the credit the economy needs. He adds that to end their zombiehood the banks need more capital. But they can’t raise more capital from private investors. So the government has to supply the necessary funds.

Martin Rowson

Krugman adds that what we have now isn’t private enterprise, it’s lemon socialism: banks get the upside but taxpayers bear the risks. And it’s perpetuating zombie banks, blocking economic recovery.

Posted by Gary Sauer-Thompson at 6:42 AM | Comments (1) | TrackBack

February 26, 2009

socks and jocks

The decision by Pacific Brands, the company behind some of Australia’s well known clothing labels (Bonds, Berlei and Holeproof), to lose seven factories, axe more than 1800 jobs, indicates that there is no future for low wage, low skill manufacturing in Australia and shift production to China. The sad reality is that the sacked PacBrands workers are not going to get another low skilled job and the dole, at $255 a week, is not enough.Nor is it likely they will be able to reskill and become skilled workers.

This judgement is in spite of PacBrands having problems of its own making, including a brand portfolio built by acquisitions that is full of duds, a debt repayment profile that has morphed from manageable to threatening since the global crisis erupted and the consumer shift to discount retailers and a decline in consumer spending. Pacific Brands immediate problem is debt, not sales and margin. This is in spite of clothing tariffs being set to drop from 17.5 per cent to 10 per cent next January, and to 5 per cent in January 2015.

Australia is a high wage country and low wage manufacturing is not competitive with low wage manufacturing in China. So closing Pacific Brands’ remaining Australian factories and shifting production offshore by the clothing, textile and footware is a necessary strategy.

The recent Green review of the TFC sector supported financial assistance but emphasised innovation and industry focus on high-end value-added, rather than trying to compete with low-wage countries. Green said:

Evidence to this Review demonstrates that the key success factor for the TCF industries, as for industries more generally, is the development of innovative capability at the level of the enterprise and workplace,which is driven not only by research and technology development but also by an increasing emphasis on business model transformation, market-led organisational changes and the integration of firms into collaborative networks and supply chains.

The Review maintains, contrary to the manufacturing sceptics, that Australia’s TCF industries have a promising future, but this can only be achieved through a concerted effort to differentiate their productshrough uniqueness, product quality and design, branding, quick response and new approaches to supply chain management, with a clear emphasis on corporate social responsibility in the application of labour and environmental standards.

However, though the Rudd Government is happy to spend $6 billion or so of taxpayer dollars to drive innovation in a car industry Australians won’t support when they buy their cars, but will only offer a far smaller version of the same kind of subsidy----- $270m between 2005 and 2015--- to the TCF sector. Strange.

Posted by Gary Sauer-Thompson at 6:21 AM | Comments (10) | TrackBack

February 25, 2009

Qld, the state

In theory, we're about to find out how public awareness of the global economy and its current state plays out in elections. We'll be seeing whether Australians are ready to elect a female Premier, and whether the LNP has legs. All very serious considerations for the seriously inclined.

In practice, this is Queensland, that state that brought you Prime Minister Kevin Rudd, Federal Treasurer Wayne Swan, national treasures Pauline Hanson and Barnaby Joyce, and a lingering affection for Joh Bjelke-Petersen. And we're about to try and inflict Pauline Hanson on the nation again, just in case anyone thought it was safe to write us off as the Ignorable State.

We have the internet thing happening, so everyone can see how technologically savvy we are. This proves that we are the With It State.

We have federally Nationals Senator Barnaby Joyce giving up his weekends to campaign for the state LNP he also belongs to, and anyone else who thinks climate change policy represents an existential threat. We are also the Open Minded About Things State.

We have the incredibly wealthy Clive Palmer suing Premier Anna Bligh for saying his massive donations to the Liberal and National Parties (sometimes they're the LNP, sometimes they're not) have bought him political influence. This says that we are the Transparent State.

We have the Leader of the Opposition pointing out that the global financial crisis is peripheral to the state of the mining royalties-dependent Queensland economy:

With regards to this global financial crisis, it is again the triumph of salesmanship over substance in Queensland where the Government is trying to align an issue which is external, which is only peripheral to what’s happening in Queensland

So we are, in fact, the Economically Independent State.

Peter Garrett, along with others who are not members of parliament, will be taking part in a two-state singalong to raise money for us, because we are also the Partially Flooded State.

Our moisture problems have nothing to do with the Murray Darling thingo, by the way, so nobody should be tempted to think of us as the Water Sharing State.

And we merit a temporary Crikey blog keeping everyone informed of developments on all of this, because we are the Temporarily Interesting and Experimental State.

Posted by Lyn Calcutt at 12:38 PM | Comments (15) | TrackBack

Queensland election + populism

A Queensland election has been called in the midst of an economic crisis in the global economy now impacting heavily in Queensland. The Bligh Government goes early to the polls to head off the worsening regional recession, a projected budget deficit and loss of the state's triple A credit rating. Queensland is beset by serious infrastructure deficiencies in water, health and transport infrastructure, whilst the economic recession has resulted in Labor hoping that voters will back the incumbent government whose strategy is to spend big on infrastructure.

Opportunity beckons for the LNP opposition and the Murdoch Press with its “the LNP is gaining on Bligh” meme is doing it's bit to soften up Labor by targeting the Bligh Government's economic management credentials about the rise in government debt. However, Brian Costar says that the weight of the political history on the present will play a large part in shaping the election outcome.

I heard Lawrence Springborg, the leader of the LNP, on Radio National Breakfast yesterday morning. I wondered how that populist mixture of an emotional rant about debt, the politics of fear, and authoritarian social conservatism would ever appeal those in the urban and suburban seats of Brisbane. They need to secure a swing of 8.3 per cent and gain 22 urban and suburban seats. The LNP currently only 2 of the 34 seats in and around Brisbane, and the election will be won and lost in Brisbane.

The aggressive populist rhetoric of a wind-up political machine built around confected outrage--- “The Borg”----will certainly not appeal to the disgruntled social liberal ex-Liberal members, or persuade them to put aside their discontent and hit the streets as volunteers to campaign for LNP candidates. Springborg, from what I heard, is not capable of presenting a moderate image--compassionate conservatism--- that would attract voters in Queensland and the Gold Coast. His rightwing populism--you could the "death penalty for hoons" resonating in the background--- appeals to the conservative base, not the middle ground.

On Radio National Breakfast The Borg maintained his populism with a straight face as he stated that the global financial and economic crisis is only peripheral to what’s happening in Queensland! Great economic advice he's been getting there about the nature of, and changes to, the world economy his LNP Queensland populism appears to be barely economic literate, and more concerned to tap a source of anger, alienation, and anxiety boiling beneath the surface of Queensland politics by using debt, whilst avoiding talk about Queensland's reliance on (declining) Japanese demand for exports and foreign capital.

And so the die is cast. A tired, reinvented Labor Government with fat electoral margins will be returned with a reduced majority. The LNP will turn on itself after the Nationals/Liberals lose yet again. The reverberations from the loss will be felt in Canberra. It is there that the Queensland Nationals (Bowell and Joyce) rant and rage about climate change being a fiction and beat up as they endeavour to ensure that populism is conservatism's weapon against the Australian left.

Update
The Borg's conservative populist rhetoric faces the general problem of finding a program that speaks to business-oriented suburbanites, culturally outraged Christian conservatives, and the economically anxious Anglo-Australian Howard battlers? His populist rhetoric has to paper over the contradiction at the heart of this coalition. The Borg marries conservatism with anti-elitism whilst making government bureaucrats a focus of populist fury.

Pauline Hanson and One Nation once spoke for this group, but no more. The economic and political terrain has shifted in the last decade, due to John Howard's populist conservatism and the global economic crisis. However, Howard's 9/11, or the war on terrorism populism, which craves strong leaders, simple answers and ruthless force to defend the nation when danger is near, has faded. Public fear is declining and Australians are less willing to sacrifice civil liberties in the name of national security.The war on terrorism's use of Afghanistan no longer rallies the right-wing base.

So the LNP badly needs an issue that can mobilize its conservative base. Hostility toward cultural and political elites, which used to do that, has lost its oomph, in spite of the Murdoch's presses' attempts to reeve up the culture war at a low ebb and make the Afghan war into a big national security issue in the war of terror.

Posted by Gary Sauer-Thompson at 6:00 AM | Comments (6) | TrackBack

February 24, 2009

Afghanistan

It is time to say that the conflict in Afghanistan is about a civil war and to drop the fiction, that the Taliban threaten Sydney or Melbourne, and that all that the invading NATO forces have achieved is to prop up the corrupt and inept Karzai Government. It is a civil war because the Taliban want to replace the Karzai Government with their own, and set up a fundamentalist theocracy.

The effects of the US's "war on terror" has been to destablize Pakistan. Presumably, that is collateral damage from the increased US military intervention in Afghanistan as part of a geopolitical agenda to contain Iran and Moscow. The US is also thrusting into the Russian backyard in the Caucasus and Central Asia by pushing for new military bases in Kazakhstan and Uzbekistan. So we have the geopolitics of the Afghan war. Does that include containment of China as well?

Australia has become caught up in the US's great game and its establishment of a military presence there because Australian troops on the ground as part of the US military presence is the price that Australia needs to pay to continue to be an ally of the empire's and its New American century project.

The western military presence is widely viewed in Afghanistan as a foreign occupation that serves to stimulate violent opposition. The US's Afghan troop surge will only reinforce this opposition. However, as M K Bhadrakumar observes:

the "war on terror" is providing a convenient rubric under which the US is incrementally securing for itself a permanent abode in the highlands of the Hindu Kush and the Pamirs, Central Asian steppes and the Caucasus that form the strategic hub overlooking Russia, China, India and Iran.

So it is not just a matter of shutting the Taliban down. Increased Nato support in Afghanistan will probably come only in the form of civil aid and assistance with police and army training.

The conflict in Afghanistan cannot be separated from developments in western Pakistan since the effects of the US's "war on terror" has been to destablize Pakistan. Presumably, that is collateral damage from the US military intervention in Afghanistan.

Posted by Gary Sauer-Thompson at 6:04 AM | Comments (3) | TrackBack

February 23, 2009

Canberra watch

It sure looks as if the Rudd Government is going weak in its knees around its proposed emissions trading scheme, despite its rhetoric that only Labor is keenly committed to doing the right thing environmentally. Inquiries are announced into the merits of a cap and trade emission trading schemes (ETS) as a policy mechanism against regulatory responses, carbon taxes etc, then quickly pulled within days.

Why such an inquiry by the House of Representatives Economics Committee when the Senate has an inquiry, and the report was to be released after the Rudd Government's legislation for its ETS had gone through the Senate? It sounds like this was designed by the Rudd Government to be a politicized inquiry.

Moir Or does this event also signify the dead of the NSW Right and its opposition to reducing greenhouse emissions? Does it signify that the global economic crisis that other ways of dealing with greenhouse gas abatements need to be looked at---eg., a carbon tax. Are there increasing doubts about what is the best policy option?

I don't know the answers. Nor am I clear about the carbon strategy. I sense wobbles as unions and business raise the spectre of job losses, businesses going offshore and capital flight as they wage their politics of fear to block the shift to a low carbon economy.

My interpretation is that the barest minimum will be donevto reduce greenhouse emissions----the Rudd Government will offer to the emergency summit in Copenhagen next month a 5 per cent reduction in emissions by 2020 from 2000 levels. The promise is that the Rudd Government will do a lot more after 2020, but until then, industries need "assistance measures that support Australian jobs". So says Penny Wong.

The implication that can be drawn from the policy assemblage of the low emissions target, the handouts for the biggest polluters, and the likely initial low cost of carbon, is that the ETS will provide no incentives or price signals for Australia’s heaviest industries to do anything other than continue business as usual. So the Rudd Government's actual policy is to preserve a heavy-emitting, fossil fuel-based economy because of its fears of a big backlash from polluter industries and the unions of the people who work in them.

Posted by Gary Sauer-Thompson at 7:44 AM | Comments (9) | TrackBack

an auto-industrial society

An interesting article on the auto-industry by Emma Rothschild in the New York Review of Books Is the bailout an indication of the decline of this industry in the context of the shift to a low-carbon economy? Rothschild says, in relation to the US, that

the auto-industrial society, with its distinctive organization of American space, cities, highways, social entitlement, and energy use, has continued to flourish. Some 90 percent of Americans drove to work in 2007, 76 percent of them alone. Less than 5 percent went to work by public transportation. The people who used public transportation were much more likely than other Americans to be black or poor; they were more likely to be women than men; most of them lived in New York, Washington, D.C., and Chicago. The states in which population has increased most rapidly—Utah, Arizona, Texas, Nevada —have low population densities, and low rates of public transportation use.

WA, Queensland and Northern Territory come to mind in Australia. Rothschild adds that

an enduring bailout, or a new deal for Detroit, would be different. It would be an investment in ending the auto-industrial society of the late twentieth century. This would involve innovation in public transportation, and in the infrastructure that would enable people to work at home or close to home. It would engage the information industries in making public transport more convenient, more enticing, and more secure.

What we have in Australia are subsidies for a green car ie.,to Toyota to assemble hybrid Camry's) and little attempt to address the viability of the local industry, let alone the dysfunctionality of the mode of life of the auto-industrial society.

What we don't have is a deal in which the bailout of the automobile industry was one component of a program of investment in the transformation of the auto-industrial society would connect economic, environmental, and energy policies. It would involve innovation in public transportation, and in the infrastructure that would enable people to work at home or close to home.

Posted by Gary Sauer-Thompson at 6:17 AM | Comments (3) | TrackBack

February 21, 2009

souless globalization

So Starbucks turns to instant coffee as a way out of its economic woes in a bust global economy.

Martin Rowson

Neo-classical economic orthodoxy assumes rational optimising behaviour by economic agents and is reluctant to contemplate more than minor deviations from that axiomatic presupposition even though we know that the economy is also driven by irrationality and animal spirits. Think Las Vegas (or Crown Casino), housing bubbles, Greenspan's over-exuberance and excesses, the gloom and despondence of an economic depression or all the talk about confidence being the key to getting the economy back on track.

Thsi introduces the possibility that the Rudd Government's stimulus package may not be enough to stabilize the economy, since it fails to take into account the downward spiral of animal spirits that is underway and may continue to worsen. Some background here.

The term "animal spirits," popularized by John Maynard Keynes in his 1936 book The General Theory of Employment, Interest and Money, is related to consumer or business confidence, but it means more than that. It refers also to the sense of trust we have in each other, our sense of fairness in economic dealings, and our sense of the extent of corruption and bad faith. When animal spirits are on ebb, consumers do not want to spend and businesses do not want to make capital expenditures or hire people.

Posted by Gary Sauer-Thompson at 3:38 PM | Comments (2) | TrackBack

February 20, 2009

it's just a matter of excess

The Liberals, as an opposition, have trouble selling their message above the cartoon level. Joe Hockey's core message during the meltdown of financial capitalism and global economic depression is that the Rudd Government is doing too much regulating! How that is squared with the hedge funds being outside the regulation of financial institutions is left unsaid.

The Liberals appear to be more adept at the ritual of factional stabbing. So John Howard comes to their rescue in his recent speech at the Menzies Research Centre. He argues that in 1980 our nation needed five great reforms. We needed to deregulate our financial system, fundamentally change our taxation system, make our labour markets freer, reduce excessively high tariffs and rid the government of ownership of commercial enterprises that would be better run privately. By 2007 these five great reforms had been achieved.

On the cause of the global financial crisis Howard says:

The subprime debacle originated in the United States, where the regulations about the making of loans were far too lax. It was a laudable social goal to spread home ownership as widely as possible, but the method involved the distortion of the financial system. Failures of regulation have contributed to the severe economic circumstances we now face. I do not seek to defend the excesses on Wall Street and elsewhere. However, these failures and the challenges we face do not represent a systemic failure of capitalism or indeed of the market system.

So there we have it. The collapse of Wall Street----Howard actually calls it a global financial meltdown--- is one of excess, and not the systematic failure of financial markets. The financial crisis was actually the result of distortions to the financial system by well-meaning but ill-advised government tampering with the financial system.

Moir

Howard, in short, attributes the blame for the financial crisis to government intervention. There is no need for a government bailout of Wall Street as the excess-- presumably, Greenspan's irrational exuberance --- has gone. As Howard puts it, the notion, gaining traction because of the world's financial turmoil, that in some way markets need extensive re-regulation, is based on a false reading of what has happened to the world economy in the past year.

Really? Why so? All we have from Howard is assertion, not argument about why it is a false interpretation. Why is government intervention the cause as opposed to the economy taking on so much debt that it will ultimately fall into a debt-induced crisis -- which is where we are now.

Posted by Gary Sauer-Thompson at 5:49 AM | Comments (6) | TrackBack

February 19, 2009

A Healthier Future for all Australians: key proposals

The National Heath and Hospitals Reform Commission's interim report---A Healthier Future for all Australians is the first major cut at reforming the heath system; a reform process that has been consistently opposed by the AMA and the private insurance industry. Reforming and refocusing health-care systems is difficult, and new ideas provoke stakeholders' prejudices and vested interests.

The key proposals of the interim report are:

- Commonwealth takeover of primary care
- Universal dental scheme, called Denticare Australia, funded by an increase in the Medicare levy
- Accommodation bonds be permitted for high care residents in aged care facilities
- Nurse practitioners and other health professionals in remote and rural areas to be able to provide services covered by Medicare and prescriptions covered by the Pharmaceutical Benefits Scheme
- Creation of a patient-controlled e-health record, which could be accessed, with the patient's agreement, by multiple health professionals
- Delivery of wellness and health promotion programs by employers and private health insurers
- A youth-friendly community-based service to provide information on sexual health and mental disorders to be rolled out nationally
- A share of commonwealth hospital funding to the states to be tied to meeting or improving progress performance targets, payable as a bonus
-Three options were suggested relating to the structure of the health system. The most radical option is a commonwealth takeover of the system, with compulsory social insurance

This is a first cut since it does not integrate physical health and mentally health and avoids the opportunity costs implicit in the $4 billion spent annually on private health insurance rebates. The centre piece of the National Heath and Hospitals Reform Commission's reform is oral health-----bringing it into Medicare in the face of opposition from the dentists. Denticare is universal dental insurance that is funded by increasing the Medicare levy by 0.75 per cent.

The Australian Dental Association argues that the Government should target the 35 per cent of the community who could not access or afford proper dental care and said it would be fiscally irresponsible to introduce a universal scheme for dentistry.The Association for the Promotion of Oral Health argued that the Denticare scheme would create a two-tiered system, whereby federal funding would be simply given to the private system.

Update
Alan Fels in The Age makes some good points about workforce issues. He says:

For too long, the health industry has relied on 19th and 20th century financing models and rigid professional roles to deliver 21st century care. The Prime Minister went to the last election promising real reform. But the real issues go well beyond resolution of federal and state responsibilities.The lesson from the 1980s and 1990s in other non-responsive industries was that real increases in productivity and improvements in quality were hard to achieve without genuine workforce reform....Sadly, our Medicare system pays top dollar for single practitioners to work on their own and see the same people each time they come back for care. The system actually penalises those who spend real time with those in trouble and those who work with other health professionals.

Australia is stuck in a mode of service delivery based on historic professional roles in which health professionals have jealously guarded their roles for a long time. As with all industries, there comes a time for a fundamental rethink of the way human resources are deployed, roles, responsibilities and reimbursement.

Posted by Gary Sauer-Thompson at 5:53 AM | Comments (1) | TrackBack

February 18, 2009

Hockey's economic message

In the context of the collapse of Wall Street and the subsequent global recession, Joe Hockey, the new shadow Treasurer, stands firm in defence of the free market at a time when General Motors told the US federal government on Tuesday that it needed to increase its loan request to $30 billion, $12 billion more than it had initially sought, to avoid a bankruptcy filing and Japan's export engine stalled due to its dependence on the US.

Hockey's message is simple. It is to let global financial flows flow:

We believe in free enterprise. We believe that if the market can fix it, that is the starting point with an appropriate safety net.There will be market failures but the challenge is not to overreact with more regulations which end up placing handcuffs on capitalism. The market has made everyday Australians richer than they have ever been -- even with this economic downturn.

An economic downturn? Isn't the main point about the collapse of Wall Street that the market could not fix it? Wall Street had to be, and continues to be, bailed out. Obviously, Hockey is just a bit lax on the detail of what has happened. The market is not working. Hence the government bailouts for Wall Street and the auto companies. For Hockey bailing out firms--ie., placing them on life support--- is placing "handcuffs on capitalism!

Hockey's other economic message is that the Rudd Government is being panicked by the global recession into wanting to stifle business with needless over-regulation, and that it is deliberately slowing down the Australian economy. This is music to The Australian's ears, even though it requires big subsidies to print the Australian Literary Review. I would have thought that the Australian economy was in recession due to the decreased demand for Australian goods and raw materials as a result of the Chinese and Japanese economies taking savage hits. The subsequent collapse in growth and consumer demand, not increased regulation, means that small businesses are set to hit the wall this year.

Hockey also overlooks the global pressures on the banks in the US and the UK, whose collapse indicates the need for full-scale nationalisation. Despite the bailouts the banks are failing to resume lending to businesses and the so-called masters of the universe have no idea what to do.

By nationalisation is meant some kind of a global debt for equity swap---socialising the losses---and then slowly selling all the government controlled assets back into the private market in the future at a profit. Hockey fails to say what he would do when faced with this kind of market failure. He gives little indication that he even understands it.

Posted by Gary Sauer-Thompson at 5:36 AM | Comments (14) | TrackBack

February 17, 2009

peri-urban development + bushfires

Michael Buxton, an associate professor environment and planning at RMIT, says in The Australian that governments have been in denial over the issue of increased fire risk and higher populations is emerging on the periphery of many Australian cities and regional centres.

M Smith

The peri-urban regions are at the cross- roads of significant change. In many of many of these "peri-urban" municipalities increasing numbers of Australians are building houses on small rural lots in some of the most fire-prone land in the world. Many of these new houses cannot be defended against fire. Can we have sustainable peri-urban landscapes in the regions of our capital cities in the medium to long term, given that the peri-urbanisation process will continue?

Buxton says:

Doing nothing is no longer an option. Conditions will worsen. Change will happen. We must anticipate it, prevent its worst impacts by facing hard decisions. This needs far-sighted planning, not people who visit the costs of their denial on to others....The most important task for the Government is to buy out people from fire-prone areas that cannot be defended and prevent further people from moving into those areas. Bushfires will always be with us. But we can dramatically reduce the number of fatalities by not allowing people to build their homes in harm's way.

This implies a comprehensive re-assessment of the way we Australians relate with one another, with our unique biophysical heritage and the ecological communities we are a part of. A new land ethic, if you like, with good urban planning to shape market forces and peri-urban development.

Currently existing statutory planning attempts to prevent this continued fragmentation will not be sufficient to address future peri-urbanisation resulting from the sale and split up of multi-titled farms comprised of a number of small lots. Research shows that we have spatial fragmentation and land use intensification and an assemblage of temporary mixes of urban and rural activities and functions.

This peri-urban region is often characterised by conflicting values and social disharmony and is a situation of constant change that is usually irreversible.

Posted by Gary Sauer-Thompson at 7:33 AM | Comments (3) | TrackBack

after the intervention

A year on after the apology the Rudd Government has moved slowly on aboriginal reform to raise life standards for indigenous communities whilst the emergency intervention looks more and more permanent. The need for spending in the indigenous realm remains as great as ever: the need for boarding schools, dedicated regional rehabs, all-weather sealed road networks, machine shops for communities, permanent staff accommodation -- all the basic infrastructure so gravely neglected for decades by the Northern Territory and Commonwealth governments.

In The Australian Nicolas Rothwell says that:

The reasons for the breakdown in the reform agenda for Aboriginal Australia are multiple, but at their heart lie basic failures by Rudd and his ministers, failures both of sympathy and of analytic understanding. Some core measures of the first intervention program remain in force: the strengthened police presence is still in place across the remote Territory, the 50-odd exorbitantly paid government business managers too. The most controversial constraint -- income quarantining -- has not only been kept, it has been extended into other regions of Aboriginal Australia and is embraced by Rudd and Macklin as a key means of social control over the behaviour of indigenous welfare recipients.

Rothwell argues that Aboriginal societies and communities are far from solely responsible for their plight. As we see with hindsight, it is the policies put in place over the past generation that are very largely to blame: in education, in training, and, above all, in governance and welfare delivery.

He adds:

The key institutions involved in management of the Aboriginal domain have also failed, or become superannuated: the land councils, the policy research centres, the government departments. And yet policy is still in the hands of the same small networks of individuals, whether indigenous leaders or mainstream bureaucrats: those who "fail upwards". The conceptual break from past policies that Brough was trying to engender has been swiftly reversed. But without a frank intellectual critique of past policy fiascos, new approaches cannot begin. In short, Rudd and Macklin effected a restoration: not for them the ardent fervour of the Noel Pearson analysis, which Brough came to endorse. They have welcomed back the familiar old guard, both in the Aboriginal leadership and in the advisory nebulas that steer inner governmental debate.

Rudd's $42 billion including $6.6 billion for new houses but only tossed the NT a mere $200 million for its infrastructure projects.

Posted by Gary Sauer-Thompson at 5:45 AM | Comments (4) | TrackBack

February 16, 2009

Rio Tinto on the ropes?

Rio Tinto is on the ropes due to the credit crisis and its rejection of merger talks with BHP Billiton. It is heavily indebted ($US38 billion in debt,) due to its acquisition of Canadian aluminum giant Alcan in 2007. With the global recession Rio Tinto is slashing jobs, written down US$8.4 million of losses, is selling assets to raise the cash to pay off the debt and getting into bed with the Chinese-- Chinalco, the state owned aluminum group ---to avoid sailing alone in the sea of debt with the birds of prey circling overhead.

Chinalco's $US 12.3 billion minority equity in Rio Tinto which will allow the Chinese aluminum company to increase its stake in Rio to 18%. The stake is designed as an attempt by the Chinese steel mills to screw BHP, as it would to allow Australia's largest iron ore customer into the citadel of the Pilbara with the stated intention of breaking the Rio Tinto/BHP duopoly. When the mining boom comes Rio Tinto Australian iron ore expansion plan will get Chinese support over the BHP Billiton one and Rio Tinto will emerge as the dominant world player in iron ore and BHP Billiton is in danger of becoming a poor second.

I have little sympathy for Rio Tinto's fate. This is the mob that talked in terms of the eternal boom, has consistently downplayed the very rapid fall in commodity prices in the second half of 2009, thinks global warning is a fiction, and, as part of the Minerals Council of Australia, is deeply and stridently opposed to the cap and trade approach to reduce greenhouse gases. It sees Australia's future primarily as a quarry not as an information society.

This is a company whose record is one strategic blunders.

Posted by Gary Sauer-Thompson at 7:46 AM | Comments (4) | TrackBack

health reform

The National Health and Hospitals Reform Commission will release a 400-page interim report today containing proposals for a shake-up in health which will be refined in its final report to the Government in the middle of the year.

Media reports say that the Reform Commission is calling for a radical revamp of Australia's public health services and a bigger federal role in community-based health care, dental services and aged care. It proposes the establishment of "comprehensive primary health care centres" - a larger-scale version of the Government's plans for 31 GP super clinics - to provide one-stop-shops for care by GPs, nurses, diagnostic services, family and child health and other professionals such as physiotherapists, psychologists and podiatrists.

The emphasis is on more intergrated and comprehensive care within a coherent national policy with identified goals and strategies supported by adequate funding. No doubt this will be opposed by the AMA, who have opposed the first steps in this direction with the formation of the GP Plus centres.

Posted by Gary Sauer-Thompson at 6:05 AM | Comments (2) | TrackBack

February 15, 2009

more coal fired power stations for Australia?

If it is a contest between carbon austerity and fossil-fuel energy then the latter will win hands down under Rudd Labor. More coal-fired stations will be built in Queensland, NSW and Victoria, even though the climate is nearing a tipping point. The rhetoric will be that emissions will be reduced, there will be soothing words new carbon capture and storage (CCS) facilities, the new coal-fired power stations will be retrofited when technology become available.

Matt Golding , True, a realistic green vision of future energy consumption would need to include coal in some capacity, and so a method must be found to render it less toxic by reducing greenhouse gas emissions. The spin from the Rudd Government---others such as the UK + the US--- is that they are working on "clean coal" or that they will build power plants that are "capture-ready" in case technology is ever developed to capture all pollutants. The reality is that the Australian government only pretends to be green because coal interests have great power in Australia, as in the US.

Coal provides nearly 80 per cent of Australia's electricity need and the emissions from coal-dominated electricity generation rose 50 per cent between 1990 and 2004 and they have continued to rise since. with most of thencrease in emissions from coal-fired generators Geosequestration technology is the great hope for the coal industry, even though it cannot be fitted to existing coal power stations, only new ones.

Although geosequestration technology for coal power should be pursued in the longer term, without generating more power from natural gas and renewable sources there is no hope of reducing greenhouse gas emissions in the coming decades.

Posted by Gary Sauer-Thompson at 3:57 PM | Comments (4) | TrackBack

February 14, 2009

The Australian's conservatism

The Australian's continual and unrelenting attacks on environmentalists and the Greens in the name of conservatism indicates a particular political viewpoint. But what does Australian conservatism stand for? It sure isn't Burke's organic unity that replenishes and fortifies civil society by adjusting to changing conditions.

Though the conservatives grouped around The Australian do acknowledge that land use, agriculture, fishing, tourism, health, forestry, environment, infrastructure and climate change are linked, they remain deeply opposed to an integrated policy in these areas and is not willing to make a realistic adjustment to the changed conditions. Or more accurately, though the conservatives around The Australian do acknowledge the interconnections, or relationships, between the natural world (its resources and its health) and people (their social needs and health) and economic activity (its sustainability), they consistently place the economic interest (reduced to the short-term profit-seeking economic interest) above the social and environmental.

Economics in the form of wealth creation rules over the wellbeing of the population. This gives rise to an understanding of policy making which assumes that the social, environmental and economic are competitive with one another, if not in opposition.

In attacking different forms of policy making in the name of the culture wars, this movement conservatism largely defines itself by what it seeks to destroy:----- "statist" social programs; "socialized medicine" or public health care ; "big labor"; "activist" High Court Judges , the " liberal left bias of the media elite"; "tenured radicals" on university faculties; "experts" in and out of government; and the new class. This populist attack is rooted in cultural hostility, it is conducted in terms of a civil war and its language is that of "friends" and "enemies." This civil warfare conducted by movement conservatism undermines rather than replenishes civil society.

Though it is clear what Australian conservatism is against is clear, it is not clear what it stands for apart from the blind faith in a deregulated, Wall Street-centric market. The core positive appears to be the free market, by which is meant undoing the welfare state and returning to pre-1930 market liberalism. It stands for a return to the past; a counterrevolution, since welfare state capitalism has been the bipartisan basis for governing Australia for over 50 years.

Posted by Gary Sauer-Thompson at 12:00 PM | Comments (18) | TrackBack

February 13, 2009

Xenophon stands his ground

So Nick Xenophon stood firm on Rudd's the Nation Building and Jobs Plan in the Senate. His reason was that there was not enough money for the communities in the Murray-Darling Basin, and no commitment on the fast-tracking of billions of dollars for water buybacks and irrigation projects in the Basin. Xenophon wanted $2 billion extra to help regional communities adjust to farming reductions and the acceleration of a $5 billion infrastructure and buyback plan to help the Murray-Darling river system.

Swan and Rudd were only willing to bring forward $400 million to fast-track water buybacks.They were not that interested in stimulating economic activity in the basin, despite their rhetoric about the need for creating jobs and ensuring sustainability. Yet "saving" the Murray-Darling Basin belongs in the stimulus plan just as much as a community-building project.

Xenophon is right that governments have ignored the Murray-Darling Basin for far too long. If this resistance is what it takes to get some action, then so be it, despite the usual mutterings and flak from the peak bodies of business and unions about loss of confidence and jobs. They talk as if the Murray-Darling Basin is not about business and jobs. Consequently, the wrangling over the Rudd Government's $42 billion economic stimulus package will continue today.

Update
Senator Xenophon met with Treasurer Wayne Swan and Water Minister Senator Penny Wong this morning, where he secured more than $1 billion worth of funding, to be brought forward, for infrastructure and water buy-backs for the Murray Darling Basin: it included $500 million for water buybacks, $200 million in funding for local governments for re-engineering works and $200 million for stormwater recycling. Finally some action.

Much more investment is needed for water buybacks and stormwater recycling in SA ----especially in the Riverland. It should be $2 billion for water recycling as a starting point.

Posted by Gary Sauer-Thompson at 5:18 AM | Comments (23) | TrackBack

end of an era?

A lot of recent economic commentary raises the spectre of the rise of protectionism in response to the global economic recession. This commentary states that trade amongst nations is part of the solution, not the problem, that nations need to keep exporting, and politicians need to work towards liberalizing trade to ensure economic growth.

Simon Crean, the Australian Trade Minister, is a strong advocate of this position in the context of a huge economic crisis and an overheated planet in the pages of the Australian Financial Review.

The rationale is that globalization is good. It lifts poor nations out of poverty etc. Maybe we are not experiencing an economic downturn, but are living through the end of an era of export-oriented industrialization. The trade liberalization model has built-in contradictions and the era of growth may be coming to an end.

Export-oriented industrialization is where Japanese--and U.S companies---tapped into the platforms of export processing zones, where foreign capital could be married to cheap (usually female) labor using them to re-export goods back to Japan, the U.S., and elsewhere. China perfected the strategy.

Walden Bello at the Foreign Policy in Focus think tank highlights the limitations of the export growth model:

This process depended on the U.S. market. As long as U.S. consumers splurged, the export economies of East Asia could continue in high gear. The low U.S. savings rate was no barrier since credit was available on a grand scale. China and other Asian countries snapped up U.S. treasury bills and loaned massively to U.S. financial institutions, which in turn loaned to consumers and homebuyers. But now the U.S. credit economy has imploded, and the U.S. market is unlikely to serve as the same dynamic source of demand for a long time to come. As a result, Asia's export economies have been marooned.

End of an era. The sheer size of China--and the rapidity with which exports platforms were built, without any regard to dangerous imbalances--simply crashed this simple model of globalization

Posted by Gary Sauer-Thompson at 3:09 AM | Comments (3) | TrackBack

February 12, 2009

bailing out Wall Street

US Treasury Secretary Geithner's big plan to sort the Wall Street problem. Trouble is no one really knows what Geithner is up to with his bailout for bunglers as it looks to be more a plan to come up with a plan to spend a lot of money to help banks clean up their balance sheets. Though the Federal Reserve has already committed over $2.5 trillion to the financial system, in order to get credit markets moving again-- with limited results so far--the public doesn't trust Wall Street and has big doubts about Treasury's playing nice with banks and their shareholders.

The hard choice facing the Obama administration is between partially nationalising the banks, or leaving them in private hands but nationalising their toxic assets. How tough is the administration willing to be on the people who control the country’s large banks? According to the New York Times Treasury administration officials are committed to flood the financial system with as much as $2.5 trillion — $350 billion of that coming from the bailout fund and the rest from private investors and the Federal Reserve, making use of its ability to print money.

The basic idea of Geithner's plan is to lend government money (US Federal Reserve) or guarantee borrowings (Federal Deposit Insurance Corporation) at a suitable spread to anyone- e.g., hedge funds and pension funds - who wants to buy toxic assets from the banks. The plan has three components:

---- a bad bank(s) that would rely on taxpayer and private money to purchase and hold banks’ bad assets;
----a bailout that would enable the government to become involved in the management of markets and banks;
----give banks new helpings of capital with which to lend.

Basic questions about how the various parts of the program would work, especially those involving the unsellable mortgages that banks are holding and preventing home foreclosures, were left for another day. Should the US government once again bail out the very banks whose mistakes contributed to the loss of more than three million jobs and caused acute financial pain? Are they paying the banks inflated prices for poison assets or subsidizing investors to pay the banks for poison assets? is the Obama administration rolling over for the banker lobby because the banks are too big to fail?

The emphasis is on providing credit to private investors who are willing to buy the banks toxic assets. Loan losses on a total of $12.37 trillion unsecuritized loans are expected to reach $1.6 trillion. Of these, U.S. banks and brokers are expected to incur $1.1 trillion. The US financial sector’s losses are close to its equity capital.

But who are investors who will buy the banks' toxic assets (with guarantees from the Treasury and loans from the Fed limiting the investors' downside risks)? The hedge funds? From investors in China or Japan? Why would they commit even more money to the United States when they're already nervous about their US loans and investments, and when their own economies are under more and more stress? The trouble is that the market price of the bad assets is well below what the banks are willing to sell them for.

Doesn't fully escaping the grip of the financial crisis really mean breaking the power of the banks that created the crisis? As Simon Johnson at Baseline Scenario usefully points out:

Our unsustainable debt-fuelled boom, in other words, produced both the conditions for a major global financial disaster, and a political strengthening of the people who benefited most from the risk-taking and associated compensation packages that made this disaster possible. Ending the financial crisis is relatively straightforward - a forced recapitalization and change of ownership/management in the banking system - although this will not immediately lead to an economic recovery.... But seen in deeper political terms, decisive action to restructure large banks is almost impossible. Such action would require overcoming perhaps the single strongest interest group in the United States today. How can you do it? The answer must be by splitting this powerful interest group into competing factions, and taking them on one by one.

I cannot see that happening, even if it should.

Posted by Gary Sauer-Thompson at 4:53 AM | Comments (4) | TrackBack

February 11, 2009

Israel: election

Israel votes today for a new government in elections in which the Palestinian issue dominated. A coalition of the Right formed around Likud and Avigdor Lieberman's Israel Our Homeland party (Yisrael Beiteinu), which could well overtake the Labour party by coming third in the polls, is a real possibility.

Will Tzipi Livni's Kadima be able to muster the 61-seat coalition needed to lead the country--they need to win the most seats, so as to be given the first opportunity to form a coalition? Unfortunately, Labour is now no longer of sufficient size for Kadima to put together a coalition with it.

The Right talks about security and opposes the evacuation of even the smallest settlement. A governing triumvirate of the Right would reject the two-state solution which is based on the liberal notion that the other side has the right to a normal life, to an independent state, in which life is free, liberated from the chains of occupation. Lieberman as minister of defense in a right/religious government would represent a nightmare scenario.

Lieberman's campaign slogan is "No citizenship without loyalty" and he promises a new bill requiring all Palestinians with Israeli passports to swear loyalty to the Jewish state or lose their citizenship. When they did not do this, Lieberman would carve out the Arab villages of Northern Galilee and hand them over to the Palestinian Authority, an idea that has caused outrage among Israeli Arabs. Israel is a Jewish state and Lieberman's message is thinly veiled one of racism and xenophobia.

This neo-Zionist political program aims to strengthen the “Jewish state”, strengthen “Jewish connections” to Zionism , strengthen “Jewish education” and thus cohesiveness around the political program. Its agenda includes strengthening “Jewish” institutions to defend “Jewish” values/interests (does Zionism represent Jews or Jewish interests?).

To sustain a Jewish state requires an endless effort to fend off the majority of the population in that area who are not Jewish, since Israel as a state was founded by expelling and killing the indigenous native inhabitants of the land; the Palestinian people. The objective is the establishment of a Greater Israel that includes the occupied Palestinian Territories.That is the end of the two state solution.

As Andrew Sullivan has realized US neo-neoconservatism has in large part, been about supporting and enabling the most irredentist elements in Israel and sustaining a permanent war against anyone or any country who disagrees with the Israeli right. It has also been about squashing Iran's challenge to US hegemony in the region.

The possibility is an Israeli government that is in favour of more aggression--- Israel's destruction of huge parts of Gaza "did not go far enough"----and more internal repression of its own ethnic and religious minorities.

Posted by Gary Sauer-Thompson at 7:36 AM | Comments (9) | TrackBack

living with fire

Stephen Pyne is the author of The Still-Burning Bush. In that book, which builds on his earlier Burning Bush: Fire History of Australia, he argued the following narrative.

Australia's landscape was shaped by Aboriginal fire-stick farming; colonisers sought to suppress fire but eventually were forced to adapt to it; the resulting fire-stick forestry was a singular achievement of science and administration; new environmentalism has unraveled fire-stick forestry; active burning needs to be at the centre of the new approach based on the twin pillars of fire-stick ecology and risk management.

Pyne has an op-ed in The Australian in which he says that Australia seems to have gotten the basics of fighting bush fires right:

It developed many key concepts of fire ecology and models of bushfire behaviour. It pioneered landscape-scale prescribed burning as a method of bushfire management. It devised the protocol for structure protection in the bush, especially the ingenious stratagem of leaving early or staying, preparing and defending. In recent decades it has beefed up active suppression capabilities and emergency services.

Despite this, Pyne says, Australia keeps enduring the same Sisyphean cycle of calamitous conflagrations in the same places because it isn't translating what it knows into its practices. So what needs to be done?

Alas Pyne disappoints. He says:

With or without global warming or arson, damaging fires will come, spread as the landscape allows and inflict damage as structures permit. And it is there - with how Australians live on the land - that reform must go. Australia will have fire, and it will recycle the conditions that can leverage small flames into holocausts. The choice is whether skilled people should backburn or leave fire-starting to lightning, clumsies and crazies.

If it is not possible to remake the burning bush into an unburnt Oz as Pyne argues, then those who live in the bush (including the treechangers) will have to build houses that provide a much greater defence against bush fire: more firebreaks, concrete bunkers, and much higher building codes.This is where the states--SA, Victoria, ACT and NSW---are to be found wanting.

The states have have been very slow in moving towards more realistic building codes because of the extra expense and the resistance of the building industry. So we have the common practice of building flammable houses in fire-prone bush. Wooden framed houses in the bush should be a no no. Brrumby's longstanding opposition to any changes that would make housing more expensive is not persuasive.

Posted by Gary Sauer-Thompson at 6:29 AM | Comments (5) | TrackBack

February 10, 2009

racist laws

The starting point for any attempt to close the gap between indigenous and white Australia is that any intervention to address the poverty, sexual abuse and other problems that afflict Aboriginal people and their children in the Northern Territory cannot be remedied by laws and programs that are themselves racially discriminatory. Australia accepted this principle when it signed the Convention for the Elimination of All Forms of Racial Discrimination.

The problem, as George Williams points out in The Australian, is that the Howard government's intervention laws were passed in August 2007 to exclude the Racial Discrimination Act. The reason was clear. Parts of the intervention are racially discriminatory. For example, it quarantines 50 per cent of welfare income to be used for food and other essentials only for people living in Aboriginal communities. There is no exception even for people who can demonstrate they are responsible spenders of their income.

So these Australian citizens don't have rights.

The Rudd Government has acknowledged the racism in the legislation, as it It has said it will revise aspects of the intervention such as income quarantining and will restore the Racial Discrimination Act. But it has been slow to act, with no sign yet of the laws needed to bring these changes about.

The Rudd Government has failed to report little if anything on actual outcomes on closing the gap between white and black Australians. The Close the Gap campaign is based on the idea that it would take a generation to bring about serious changes in the outcomes, and that a decade of investment would be needed to simply achieve equality of opportunities before the outcomes really started to shift.

Posted by Gary Sauer-Thompson at 6:02 AM | Comments (6) | TrackBack

February 9, 2009

Obama's sugar hit

Despite the political theatre an agreement has been reached in the US Senate on the modifications to Obama's stimulus package. The modifications include cutting $40 billion in state aid, another $20 billion in school construction, $2 billion for rural broadband access in favor of $30 billion in tax rebates for people who buy homes and cars. All in all the Republicans cut $100 billion from the stimulus package.

Kal

The Republicans basic argument is that Democrats are trying to spending and borrow their way to prosperity (borrow and spend). However, the historical role of a stimulus is to kick things off, to grease the wheels of credit, to get things "moving again." But the effect ends when the stimulus does, when the "sugar hit" wears off. Those who believe that an economic stimulus package will simply restore growth and get it up to its previous level are engaged in wishful thinking.What is also needed are recovery policies that will continue for years.

Another US banking bailout package is on the cards; one to buy the contaminating assets that wiped out the capital of many banks.The condition of severe stagnation following a stupendous financial crash (a dynamic which first resurfaced in the Japanese stagnation of the 1990s) is the situation in which we currently find ourselves.

Is there a limit to civilian government spending in the sense of a a political rather than an economic barrier? That is beyond some minimal level, real estate interests oppose public housing; private health care interests and medical professionals oppose public health care; insurance companies oppose public insurance programs; private education interests oppose public education; and so on.

In A New New Deal under Obama? John Bellamy Foster and Robert W. McChesney argue in Monthly Review that:

Given that a political ceiling on U.S. civilian government purchases as a percentage of GDP has persisted for more than seven decades, it is unlikely that this will change without a massive, indeed social-transformative, struggle, despite a relatively progressive administration and the worst economic crisis since the Great Depression. Even the greatest environmental crisis in the history of civilization, threatening life throughout the planet, is unlikely to result in a sufficiently massive response by government without the U.S. system first being turned upside down.

Consequently, civilian government spending increases in response to this crisis will:

initially, be dedicated primarily to salvage or bailout operations. These salvage efforts, so crucial to capital, will be legitimated by smaller public works programs directed at the underlying population. Government spending increases as a whole will in the main be conceived as temporary, pump-priming measures rather than permanent increases in the level of government. Although federal spending increases are likely to loom large in budgetary terms, they are unlikely to come anywhere near compensating for the declines in consumption, investment, and state and local government spending.

A return to the kind of social programs associated with the real or second New Deal can be expected to come, if at all, only later, after the initial salvage effort.

Posted by Gary Sauer-Thompson at 6:18 AM | Comments (4) | TrackBack

February 8, 2009

Victoria: bush fires

South Australia was fortunate to escape from the bush fires as a result of the heat wave and hot north winds this last fortnight. Victoria was not so lucky:homes and towns have been devastated whilst 25-40 people (more are expected) have died. The fires were driven by hot winds of more than 100km/h, and record temperatures that peaked in the afternoon at 46.4 degrees in Melbourne and 47.9 degrees in the paddocks around Avalon.

At this stage the fire events look to be much worse that either Ash Wednesday (1983) and Black Friday (1939). If so, the fire fighters have an inferno on their hands.

Fire raging in the Bunyip State Park, south Gippsland, photo: Jason South

Most of the confirmed deaths were in towns northeast of Melbourne---Kinglake and Marysville, which have been wiped out. Hundreds of Victorians are returning to towns to find their homes razed by the fast moving bushfires on Saturday.

Update: 9 February
The bush fire was much worse than feared. Even though the hectares burned is much less, confirmed deaths are 126 and rising (it could double), and around 700-750 houses destroyed, with 550 of those in Kinglake, north of Melbourne. People had very little warning and many died trying to protect their homes or trying to escape the raging fires. The intense heat means some victims have been effectively cremated.

Vehicles on the Yea road near Kinglake came to grief during the firestorm. Photo: John Woudstra

The wind change from the north to the strong southerly in the late afternoon changed the direction of the fires outside Melbourne, pusing the flames east onto the Kinglake area, Marysville and St Andrews. In east Gippsland, the fires in the Bunyip forest burst through containment lines. In both cases there was little the firefighters could do.

It is Australia's worst natural disaster in 110 years. (In 1899, Cyclone Mahina struck Australia's northern Cape York, killing more than 400). Federal parliament has been suspended. Since arsonists are suspected all fire-devastated areas are to be treated as crime scenes to determine if arson was involved. There are still 31 active fires across Victoria as of 7.20am this morning , with five - -- at Beechworth, Churchill, Murrindindi, the Kinglake complex and Bunyip ---- causing the most concern.

What we have is the mega-fire ---several fires covering an area converging---and once they get going they cannot be stopped due to the heat intensity generated by the fire. Traditional methods of fire management---- fuel-reduction measures in the bush, big clearances around the house, stay and fight with solid defences or leave early, early warnings---were inadequate. That will not stop The Australian from using the fires to fight the culture wars against the Greens and environmentalists.

Posted by Gary Sauer-Thompson at 5:29 AM | Comments (23) | TrackBack

February 7, 2009

through a distorted lens

According to Dennis Shanahan in The Australian the Liberal decision to reject the Rudd Government's second stimulus package has:

has blind-sided the Government over the $42 billion stimulus package... left Kevin Rudd politically flat-footed and frustrated...and given the Opposition an early advantage....Caught off balance and unprepared, Rudd is cranking up his depiction of Turnbull as being uncaring, out of touch and irresponsible, as the Labor leader tries to claw back Turnbull's initial break and gain ground in the longer term.

Shanahan talks in terms of the Liberal's Senate blockage of the $42 billion stimulus whereas the political reality at this stage is that the legislation will pass the Senate next week in modified form due to the Greens and the 2 Independents.

Spooner

Is Rudd, looking unprepared and wrong footed, as Shanahan claims? Surely it is the Liberals who are looking isolated as business groups back Rudd's state intervention? The policy reality is that it is Rudd who has sharpened the ideological differences, pushed the Liberals to the right and put in place a strategy to keep the Liberals out of office by locking in Middle Australia behind Labor.

Posted by Gary Sauer-Thompson at 9:51 AM | Comments (22) | TrackBack

February 6, 2009

Israel's right turn?

As Gaza slowly emerges from the rubble Israel's election process indicates that it has swung to the right. It looks as if Benjamin Netanyahu may well be Israel's next prime minister with a coalition of Likud-Lieberman-Shas-National Union and Habayit Hayehudi. That means Israel will stand for occupation, more settlements, the destruction of Hamas, opposition to the peace process, no two state solution and confrontation with a fanatical Iran. No compromise.

Stavro

That would place a rightwing Israel on a collision course with the Obama administration, which has said that it wants to make progress on the Israel-Palestine conflict, and he also wants to pursue a diplomatic engagement with Iran. Will the Obama administration get tough with Israel's colonial expansion that has made the two-state solution increasingly impossible.

Posted by Gary Sauer-Thompson at 5:47 AM | Comments (11) | TrackBack

February 5, 2009

heat wave

In Adelaide the plain trees are already shedding their leaves, the bodies of dead possums litter the parklands, and the death toll of human beings is around 75. As in Melbourne, there have been crippling blackouts due to the failure of the $780 million Basslink interconnector cable linking Victoria and Tasmania, which is unable to operate when temperatures in Launceston Tasmania pass 35C.

NEMMCO continues to talk in terms of the national electricity market having sufficient capacity to deliver reliable supply. Politicians explain the disconnect between assurance and reality by talking in terms of the heatwave being one-in-100-year event, rather than this being an indication of southern Australia's future. Yet there have been a series of rolling blackouts over the past years due to supply falling short of increasing demand --hence the frequent load shedding that causes the blackouts during a heatwave.

A warmed up world means hotter conditions in cities, towns and the regions since long hot, dry summers are becoming the norm. Shouldn't we see the blackouts as a timely warning about a rundown energy system with its old industrial technology utilizing fossil fuels? This is an electricity grid that has seen little new investment in the last decade.

Richard Dennis at the Australia Institute puts his finger on the core issue. He says:

we need to think beyond how to fix up the grid to prevent blackouts and start to think about what kind of electricity system we will need in 20 years' time to cope with a much bigger population but also with households using significantly less energy.

There has been no shift to energy efficient building to reduce demand on the central grid, little to foster on-site cogenerational or trigenerational systems, and little in the way of investment in transmission wires.

In SA, as in Victoria, the state government owns very little, since privatization has meant the separation of the people who own the power stations, the people who own the wires, and the people who have contact with customers. The government has little say managing a network that has no built-in drivers to reduce greenhouse emissions. None of the energy companies have shown much interest in shifting to a low carbon energy system.

Posted by Gary Sauer-Thompson at 7:35 AM | Comments (12) | TrackBack

an urban lead recovery?

The news from corporate Australia is bad profits are slumping and job cuts deepening. It's a battening down the hatches as they struggle to address their debt burden during a credit squeeze and slow global growth. The economic reality is that a small open economy with low savings cannot grow faster than its trading partners. Another economic reality is that the global economic recession is beyond the ability of central n banks and national governments to fix.

Eric Johnston in The Age says:

For business, the speed of the downturn underscores the limited ability of regulators to insulate Australia from a global crisis that is rapidly spreading beyond the banking system and is starting to take hold across almost every sector of the economy.

It's not a question of insulating Australia with its open economy in a global world. It's more a cushioning of the national economy from the negative effects of the international crisis:

Calling it an economic 'downtown', as some commentators do, fails to acknowledge that this is no ordinary business cycle recession. The storm-tossed seas of current global recession may well give rise to a deep and lasting global depression. It is to the US that the world looks for a solution, however unrealistic that hope may be----the crisis is a product of the global economy and it cannot be cured by the US alone.

So why not use the crisis to start doing something about our choked up, unhealthy cities with their ever expanding suburbs? Start redesigning them for the new times ahead. John Whitelegg, from Eco-logico, indicates in the Canberra Times the issues that need to be addressed. He says:

A clear metropolitan strategy that will reduce fossil fuel use and greenhouse gases. This would cover transport, renewable energy and energy use in buildings.

A clear transport plan that focuses on active travel and the greatest possible increase in walking and cycling. A minimum of 500km of segregated cycle paths is needed in each city.

A thorough re-engineering of urban space so that pedestrian pavements are widened and pedestrian journeys rewarded with waiting times at crossing points reduced by at least half.

A comprehensive organisational re-engineering of rail, bus and ferry systems so that total integration of all kinds is hard-wired into the system.

A large-scale local food project based on no more loss of agricultural land, the doubling of food production by 2012 and de-coupling food-growing from oil dependence.

We don't think in terms of making our cities better ( in a social justice + sustainability sense) as a response to a global crisis. They are seen as containers in which things happen. The container itself is not addressed. Nor are the creative industries seen as a way of creating employment in hard times in a digital world.

Posted by Gary Sauer-Thompson at 4:58 AM | Comments (8) | TrackBack

February 4, 2009

The $42billion Nation Building and Jobs Plan

Will the $42 billion stimulus package---the Nation Building and Jobs Plan--- do its job? Will it give the desired boost to economic growth in a vulnerable economy, and help ease the rise in unemployment? Will this kind of timely support soften the pain? Can this question be explored whilst avoiding the toxic, partisan polemics of a Janet Albrechtsen about neo-socialism downunder?

Stephen Kirchner, a research fellow at the Centre for Independent Studies, suggests that it is possible to avoid polemics. His argument is that activist fiscal policy doesn’t work. He outlines it thus:

Historical experience with fiscal stimulus packages in Australia and abroad is far from encouraging. Japan, for example, rolled out one stimulus package after another for the better part of a decade during the 1990s, to little effect. Why is activist fiscal policy generally ineffective in stimulating economic growth? The failure of discretionary stimulus measures reflects a basic reality that governments cannot create economic activity, they can only redistribute the income and wealth created by the private sector.

Why so? Helping the unemployed to retrain is a good idea. So is money for public housing and helping people to make their houses more energy efficient given the climate change scenarios of increased temperatures. Who could argue against refurbishing school infrastructure, more money for maintenance and increased investment in new infrastructure (eg.,libraries for primary schools and laboratories for secondary schools). These measures were temporary as well as timely.

What then are the reasons for the failure of countercyclical discretionary fiscal policy? It's more than being the measures could have been better targeted, or the states tightening their budgets in a recession. Kirchner says:

The problem for all governments is that these unfunded fiscal stimulus measures ultimately have to be paid for out of future taxes. An unfunded fiscal stimulus package of $42billion is thus equivalent to announcing a $42billion future tax increase......The danger with activist fiscal policy is that governments relax the criteria for good policy for the sake of pushing money out the door. By throwing out the constraint that new policy measures should be fully funded, they abandon the fiscal discipline that would otherwise force the government to choose carefully between competing alternatives.

What then is the answer, given that Kirchner says that doing nothing is not an option and no mention is made of market failure?

Kirchner says that the correct focus for fiscal policy is the structural and supply-side measures that will deliver sustainable gains in future prosperity. His argument is that budget balance could be expected to swing into deficit as a result of the operation of the so-called "automatic stabilisers", those components of government spending and revenue most closely tied to the level of economic activity. The automatic stabilisers have the very desirable effect of cushioning the economy from the downturn.

This cyclical deterioration in the budget balance is ultimately self-correcting. When the economy recovers, the cyclical component of the budget balance can be expected to improve, without the Government having to make explicit policy decisions other than to allow the automatic stabilisers to do their work.

I presume that "supply side" measures refer to tax cuts but what does "structural" measures refer to? Reducing public spending to address the issue of big government (Leviathan?). Does that mean cutting back on the welfare state? Does it mean tcutting back on the middle class welfare of the Howard years? Does it also include tax reform? The basic CIS position is to empower individuals to meet their own needs and reduce their future dependence on government. Does that mean in the current situation encouraging increased savings?

Kirchner's argument is premised on his assumption that markets are self-correcting. Thus

in credit and other financial markets, the present crisis can be interpreted as a global re-pricing of risk following an extended period in which risk was incorrectly priced. Again, no government or regulatory intervention was required to set in train this market correction. We may not like the price signals generated by markets in the context of the credit crisis, but that does not mean the market is not working or the price signals are wrong.

That misses the main point. Government intervention was necessary to prevent the financial and credit markets from self-destructiing. The judgment was that Wall Street had to be saved to prevent the collapse of the financial system.

Posted by Gary Sauer-Thompson at 6:02 AM | Comments (26) | TrackBack

February 3, 2009

Rudd on the global financial crisis

An extract of Kevin Rudd article in The Monthly on the global financial crisis is online. He rightly sees it as an event of seismic significance, an event that marks a turning point between one epoch and the next, when one orthodoxy is overthrown and another takes its place. The Prime Minister of Australia says:

In the space of just 18 months, this crisis has become one of the greatest assaults on global economic stability to have occurred in three-quarters of a century. As others have written, it "reflects the greatest regulatory failure in modern history". It is not simply a crisis facing the world's largest private financial institutions - systemically serious as that is in its own right. It is more than a crisis in credit markets, debt markets, derivatives markets, property markets and equity markets - notwithstanding the importance of each of these.

The PM is right to suggest that a turning point between one epoch and the next is taking place, when economic and political governance is up for grabs. He continues:

This is a crisis spreading across a broad front: it is a financial crisis which has become a general economic crisis; which is becoming an employment crisis; and which has in many countries produced a social crisis and in turn a political crisis. Indeed, accounts are already beginning to emerge of the long-term geo-political implications of the implosion on Wall Street - its impact on the future strategic leverage of the West in general and the United States in particular.

Rudd positions his government in the classical tradition of social democrats acting to save capitalism from itself; use the state to reconstitute properly regulated markets and to rebuild domestic and global demand whilst avoiding protectionism; and developing a practical policy response to the crisis that rebuilds shattered economic growth while also devising a new regulatory regime for the financial markets of the future.

It's hard to disagree with that account.

Rudd then asks: How was this allowed to happen? What ideology, what policy, what abuses made this possible? Were there any warnings? And if so, why were they ignored? Judging from the online extract, which ends there, the answers is in terms of neo-liberalism, which he understands as free-market fundamentalism. His concern is with the ideology of the Chicago school economic liberal, and their narrative of the retreat of the state and a greater role for markets in allocating resources.

The argument in the online extract does have an affinity with the account by Dean Baker at American Prospect:

The most infuriating aspect of this disaster is that it was completely preventable. The basics of the housing bubble were straightforward. House prices began soaring in the mid-1990s, hugely outpacing the overall rate of inflation. This followed a 100-year-long trend in which nationwide house prices had just kept even with the rate of inflation......Not only did Federal Reserve Board Chairman Alan Greenspan and the other leading lights of the economic profession fail to see the $8 trillion housing bubble, they somehow failed to recognize the explosion of risky mortgages and the highly leveraged chain of finances built on top of these mortgages.

Baker adds that it it is difficult to believe that top US economists could be so incompetent, but among economic policy makers, blindly following the conventional wisdom seems to be a job requirement. Even if this policy leads to yet another disaster, those responsible are unlikely to face any serious consequences. The taxpayers, homeowners, and job losers are the ones who pay the price of the economists' mistakes.

Update
For an account that steps behind ideology and the blindness of economists to an explanation try this speech that argues that proposals for regulatory change are grounded in analysis of what happened – why this crisis occurred. It is an account that argues in terms of the dynamics of the global financial/economic system:

At the core of the crisis was an interplay between macroeconomic imbalances [large surpluses and deficits] which have become particularly prevalent over the last 10-15 years, and financial market developments which have been going on for 30 years but which accelerated over the last ten under the influence of the macro imbalances....A cycle therefore of irrational boom and then bust; and therefore in some ways no different from other cycles which we have seen in markets in the past: in equities, in property, in South Sea project participations, in tulips. But what makes this one different – and potentially more economically destructive to the real economy – is that it is the first major global boom and bust of securitised credit instruments. Because at the core of this story is the development of a new model for delivering credit intermediation – the originate and distribute model of securitised credit.

It is argued that the far big failure – shared by bankers, regulators, central banks, finance ministers and academics across the world – was the failure to identify that the whole system was fraught with market-wide, systemic risk. They failed to piece together the jigsaw puzzle of a large current account deficit, rapid credit extension and house price rises, the purchase of mortgage-backed securities by institutions in the US performing a new form of maturity transformation, and the potential for irrational exuberance in the market price of credit. They failed to realize that there was an increase in total system risk to which financial regulators overall – authorities, central banks and fiscal authorities – needed to respond.

Posted by Gary Sauer-Thompson at 5:39 AM | Comments (15) | TrackBack

February 2, 2009

Australia's recession

Ross Gittens hits the nail on the head with respect to the current global recession now working its way through the Australian economy and society. He says in the Sydney Morning Herald that:

This recession is different. The recession on Main Street has been precipitated by a global financial crisis emanating from Wall Street. And the crisis has not yet been resolved. It retains the potential to wreak a lot more damage to the real economy, mainly through the denial of credit to perfectly sound businesses, big and small.That's why the actions of governments this time have fallen into two distinct categories: measures aimed at repairing the financial side of the economy and more conventional measures aimed at stimulating demand on the real side.

It is premature to conclude that the global financial crisis is now ‘over’, or even that the end is in sight, in that the upturn is inevitable. It is more realistic to say that the crisis has moved into a new phase.

Gittens rightly says that the "RuddBank" is a measure aimed at shoring up the financial side of the economy and keeping credit flowing (not at "supporting jobs" by budgetary stimulus as the spin has it). It is a contingency measure put in place in case it's ever needed---- to provide reassurance to the industry with the likely flight of the foreign banks out of Australia. This is all about keeping to lubricate the flow of credit in the economy.

The next--forthcoming--- government stimulus to support economic growth and jobs is a different kind of package. Hopefully the emphasis will be on public spending as this promotes employment more powerfully than tax cuts; secondly, that the investment does so by avoiding embracing protectionism; thirdly the public investment facilitates Australia's shift to a low carbon economy.

Generally speaking, the Australian focus is on the US recession and the economic wreckage ----the collapse of the housing and stock-market bubbles that wiped out $6 trillion and counting of housing wealth and $8 trillion of stock-market wealth.

The House of Representatives has just passed Obama's big $800bn-plus stimulus package to address the deepening recession without Republican support. Apparently, the Democratic majority in the Senate, which now takes up the legislation, is too small to assure passage without Republican votes.Meanwhile Wall Street is in its frantic search for the next new thing -- a bubble to replace the ones that burst.

There is little focus on the effects of the crash in the exports of the economies of south East Asia---Japan, Taiwan, South Korea, Hong Kong and Singapore--- for Australia. These--Japan and South Korea--- are Australia's first and third largest export markets.

Posted by Gary Sauer-Thompson at 7:43 AM | Comments (14) | TrackBack

February 1, 2009

a solar future for Australia?

Muriel Watt and Iain MacGill speak truth to power in The Age when they observe that Australian Governments have been and are far more focused on trying to retain and expand Australia's fossil-fuel energy industries than on supporting the sustainable energy industries of the future:

We have huge solar energy potential, our coal-dominated electricity industry is among the most greenhouse intensive in the world, yet we are half-hearted about adopting the former and spend a great deal of effort bolstering up the latter.In an increasing number of other countries, solar technologies provide power for homes, offices, farms and factories.The rest of the world is embracing the very solar inventions stemming from Australian research to enable them to secure 21st-century industries and jobs, while Australia clings to its fossil-fuel past.

The global PV industry has been growing at 30-50 per cent a year in the past decade. Billions of dollars are being invested in solar technologies internationally with hundreds of manufacturing facilities being established in countries as diverse as Norway, Germany, Spain, Japan, the US, China, Taiwan, Korea, Malaysia and Singapore. These plants are employing hundreds of thousands of people, and helping deliver a more sustainable energy future.

This is what Australia has turned its back on.

Posted by Gary Sauer-Thompson at 9:13 PM | Comments (6) | TrackBack