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November 30, 2010

The ALP's political malady

One of the current themes in the mainstream media is the ALP's soul search for its lost identity. This mostly comes from the Murdoch press. They says that since becoming a minority government the ALP has lost its way, and it doesn't know what it stands for. Of course, they have plenty of advice: federal Labor needs to shift to the right.

Many in the ALP concur: Labor has lost its basic Labor values. So they have gone off looking for them. Michael Costa, who has been silent of late, amplifies this theme in his Reform the cure for Labor's ills in The Australian Literary Review. He replays the Labor Right's main meme to cure the ALP's supposed identity crisis: federal Labor must confront the Greens to save the Labor Party and stop practising the politics of appeasement with the far-Left.

For Costa The Greens have a pathological antipathy to capitalism and inherent contempt for the principles of sound public finance. Their mantra is that things would be much better if Labor just stopped selling out to the capitalist system and its vested interests. The Greens, along with the rest of the Left, are addicted to describing any policy that doesn't strictly conform to their world view of greater government intervention as being neo-liberal.

The Greens' strategy is to always try to wedge Labor. Costa says:

The Greens need to be confronted rather than appeased. This is precisely why federal Labor's political deal with the Greens is so damaging.Gillard and her advisers have, by formalising a political agreement with the Greens, unnecessarily and irresponsibly legitimised them in the eyes of many ill-informed voters as a credible political force. In short, Gillard has made a damaging political blunder that will haunt the party for many years to come.

He says that most traditional Labor voters are not supporters of the Greens' policies. The Greens' policies on a range of issue, from taxation to law and order, would horrify that base---because the Greens are deemed to be far-Left, extremist, anti-capitalist and anathema to middle Australia. In short, Gillard has made a damaging political blunder that will haunt the party for many years to come.

The ALP, in standing up to The Greens, needs to return to the core economic and social principles that allowed Hawke and Keating to propel the Australian economy along a path of economic and social prosperity and embrace the successful Hawke-Keating model of economic liberalisation and continuous micro-economic reform. What Costa means by reform is economic reform interpreted as smaller government, welfare cuts, deregulated industrial relations and lower taxes. He probably would include a larger population. So speaks the NSW Right.

The core problem with Costa's account is that he ignores--makes no mention of -- the reform attempt by Rudd Labor to shift Australia to a low carbon economy by using market mechanisms to drive change through an emissions trading scheme. The ALP was supported in that by the Greens, until the ALP was captured by the power and coal industry, lowered the targets and price on carbon, and subsidised the polluters.

Costa opposed the shift to a low carbon economy, was a climate change denialist, and was only interested in privatising the NSW power stations. He had no interest in reform in the Murray-Darling Basin, was opposed to investing in urban public transport and could only see the negatives in increasing the energy efficiency of the built environment.

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November 29, 2010

Labor's gone in Victoria

I was in the Qantas Club late this afternoon on my way back to Adelaide when I saw John Brumpy around 5pm concede the inevitable---the Lib-Nat Coalition had won the state election in Victoria. Brumpy Labor had been in denial since Saturday night, with their talk of a hung parliament and implementing their agenda.

That was never going to happen. There was no-one to negotiate with --the ever optimistic Greens had failed to gain any seats in the Legislative Assembly--and Labor would have had to provide a speaker. Both sides would refuse to field a Speaker, and Victorians would be forced back to the polls within three months. It was more likely to be a Lib-Nat Coalition victory of 45-43, which is what happened, due to late voter surge to the Coalition.

Labor defended the seats it has held since 1999 in Geelong, Ballarat and Bendigo only to lose the wide arc of seats extending south of the Yarra along the southern bayside sandbelt (Frankston and Carrum) and those east to the eastern foothills (Prahran, Malvern, Burwood, Oakleigh and Mount Waverley). This part of suburban Melbourne shifted to the Liberals.

Labor was walloped by those in white suburbia not the working class battlers. Labor did not see it coming. They must be shell shocked. They expected to be returned with a reduced majority. They did not expect their liberal middle class base to desert them.

The Nationals, in effect, hold the balance of power in the lower House. Would they vote with Labor to bring down the Liberal government? Hardly. It is unclear whether the under performing Greens retain the balance of power in the Legislative Council or that the Lib-Nat Coalition will hold it by one.

Already we have Labor's right wing narrative from Bill Shorten, Mark Arbib etc: the party forgot its suburban heartland to battle the Greens in the inner city seats. It concentrated on the politics of the inner city urban seats instead of the politics of the endless miles of suburban mortgage belt. Labor's true values are to found in the suburbs that rejected Labor.

This kind of self-serving "analysis" ignores that Brumby Labor had became a creature of corporate power over everyday life --almost a corporate booster party powered by the money flowing from the construction and transport industry--that consolidated the power of the Right in Victorian Labor.

It also ignores that The Greens are Labor's de facto Coalition partner - many Labor MP's are returned on Green preferences and Labor has to work with The Greens in the upper house. It is a potential Coalition because Labor has yet to work out how to effectively work with its left of centre ally.

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November 27, 2010

in Melbourne

I'm in Melbourne for a few days. I will be there for the election, which polling has shown that the ALP is expected to win, through with a reduced majority. Victoria, after all, is a success story, according to Brumpy Labor, and they had been a good government in terms of education, law and order and health. These are the key issues in the election.

I'm in no position to make the judgement call, other than to say that Labor has been in government for a decade or more (three terms)---it's the longest Labor administration in the Victoria's history--- - and that the 'its time' factor must play a significant role. Baggage accumulates.

There is a lot of dissatisfaction with Brumpy Labor --on water, development, public transport--- but I don't know how that will translate into a swing against Labor. That depends on the extent of disillusionment in the electorate.

From what I can gather Labor has built its campaign all around Brumby--just like Kennett did in 1996. They stand or fall with Brumpy and his style of 'strong can do leadership'. That comes across as arrogant--in a kind of get out of my way punk style, which doesn't go down well in some of the outer suburbs of Melbourne confronted by poor public transport.

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November 26, 2010

SA Labor: forced to change?

The uninspiring and sometimes vindicative Rann Government im SA may have won the 2010 election, but it is on the nose after a tough budget that reducedworking conditions for public servants. There is growing unrest in the party with the current leadership with unions calling for generational change in the leadership of the Rann/Foley Labor Government.

The Rann/Foley leadership is coming to an end. Rann's popularity continues to decline, and he will be forced to depart sooner rather than latter. Foley, the Rights preferred choice, is far too unpopular with the public to become the new leader. Foley is becoming unhinged, as he is now taking to attacking a fellow minister on the floor of the parliament.

The challenge of Jay Weatherill from the left for leadership is another indication that the factional system in SA Labor could be starting to break down. Behind the technocratic facade is a neo-liberal mode of governance run by the conservative economists in Treasury in love with austerity economics, and the bankruptcy of ideas amongst the Right faction for a reform agenda beyond boom times are acoming. Boom times means better service delivery according the spin.

Lying behind this lies the decaying flesh of the ALP---exemplified in the history of dirty tricks, corruption allegations, civil rights abuses, deals with developers, secret lobbying and personal scandals. We smell the decay of the old “powerful forces” of the major parties. Change is being forced on SA Labor, which is reluctant to change.

Labor’s base is eroding. Its base used to be the union movement and the salaried public sector. Union membership keeps falling, and many of Labor’s core voters have been alienated by the party’s drift rightwards in the 2000s in pursuit of an ever-more conservative Liberal Party.

Posted by Gary Sauer-Thompson at 11:34 AM | TrackBack

Gillard + Co: an uphill struggle

I've been watching Question Time off and on in the last fortnight in the context of both the anti-Labor bashing by the Murdoch Press' echo chamber (“Labor has no vision” or “Labor stands for nothing”, or "Labor lacks direction") and Australia’s two-party system being over.

I wanted to see how a minority Gillard government is dealing with a situation in which the power of the executive is counterbalanced by the power of Parliament in which members have more power to put different issues on the agenda. The Green did this with gay marriage and euthanasia, and this will become more pronounced when the Greens command the balance of power in the Senate from July next year.

In his 'The leader who needs to get a grip' column in last weekends AFR Geoff Kitney says that the assertion of Green power poses a big problem for the Gillard Government:

The Greens are likely to cause headaches for Gillard by imposing on her issues that appeal to sections of the Labor Party but which risk alienating more conservative traditional labor voters and voters in the uncommitted centre. This presents Gillard with arguably her greatest challenge--to find a way to stop the bleeding of Labor support to the Greens without capitulating to them and losing the vital political middle ground ... But how to deal with the threat posed by by the erosion of Labor support to the Greens is a question that deeply divides federal Labor.

For Wayne Swan, launching All That's Left: What Labor Should Stand For by Nick Dyrenfurth and Tim Soutphommasane, the ALP stands for prosperity and opportunity (meaning economic growth and social mobility) rather than the in fringe issues of the far left. Swan assumes that social mobility is always upwards--everyone gets a better job.

Climate change and the shift to a low carbon economy left wing fringe issue? Is water reform in the Murray-Darling basin a left wing fringe issue?

Swan's gospel of getting on offers a rather thin account of social democracy: --social mobility is what characterises a fair society, rather than a particular level of income equality. If social mobility is the way to civilize capitalism, then defining 'fairness' as social mobility (rather than as reduced income inequality) leaves the Greens defending the mainstream social liberal tradition.

Kitney, in his 'The leader who needs to get a grip' column in the AFR goes on to say that the Gillard Government is fighting on another front from a confident and emboldened Abbott and the Coalition:

Abbott and his team are increasingly convinced that Gillard will fail to meet he challenge [of how to assert the authority of prime ministership without the authority of Parliament]--- and are seizing every opportunity presented to them to reinforce the perception that she is a weak leader without a clear vision and a coherent reform agenda. tactically, the opposition is consistently out-thinking and out-manoeuvring the government.

Abbott and the Coalition still stand for three-word slogans: ‘end the waste’, ‘pay back debt’, ‘stop new taxes’ and ‘stop the boats’, but this matters less than the unremitting negativity that attempts to make like so difficult for the minority Gillard Government so that its support provided by the Independents splinters and cracks. They have able to consolidate their base and to convince most right-of-centre voters that Labor is not competent to hold office.

The Coalition still reckons that there is a good chance of this happening next year. I doubt it myself. The self-interest of the Independents is to ensure the stability of the Gillard Government as it provides them with the platform they need to further their agenda for regional Australia---- and that is more than the Coalition's ‘end the waste’, ‘pay back debt’, ‘stop new taxes’ and ‘stop the boats’.

Despite all the pressure applied by the conservatives (ie., the Murdoch Press and Coalition) on the national broadband network no splinters and cracks have appeared and a digital economy is now emerging.

Posted by Gary Sauer-Thompson at 8:25 AM | Comments (2) | TrackBack

November 25, 2010

from Ireland to Europe

As expected the Irish government's austerity budget involves deep spending cuts and tax increases to help pay for its banking crisis and meet the terms of an international rescue deal.The plan includes tens of thousands of public sector job cuts, phased increases in the VAT rate from 2013, social welfare savings, reduced minimum wage.

The result of a process that places private bank losses on to public balance sheets is that it could leave its governments insolvent too.

Steve Bell

Things are going to get much worse for the Irish than they already were. The great hope is that the 12.5% rate of corporation tax – preserved after a fierce fight with the EU – will continue to attract multinationals to Ireland to counter the deflation and stagnation and to provide economic growth to reduce the debt load. Paying down past debts, is nearly impossible through austerity alone.

Ireland will hobble along for years.The bailout (ie., loan) may last about a year because the toxic loan mess is greater than the E85billion bailout. Then the Irish would would be back to the current scenario – broke – with another year of austerity behind them. Given the fundamental unsustainability of the austerity-and-full-repayment strategy, will there be a democratic pushback and a rejection of the bailout and its austerity conditions?

Belgium has joined Portugal, Spain and Italy on the hit list of countries that may be heading for financial crisis, as the international bond investors are viewing them as living on borrowed money and borrowed time. The script in the next few days and weeks in the markets will follow a similar pattern to Greece and Ireland – denial, more denial, EU confusion, market panic and a bailout. Spain is the key.

Will Germany allow the eurozone to collapse? practice, if not in title, there are already two different eurozones: a Germanic, northern one, including Germany, Austria and Finland, and the weaker, threatened peripheral states, such as Greece and Ireland. About all they have in common is a currency, and perhaps not that for ever.

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November 24, 2010

Albrechtson's advice to Gillard: go nuclear

Janet Albrechtson in The Australian is offering free policy advice (free for how long with Murdoch's shift to paywalls?) to the Gillard Government. She says in her PM, blow apart the Greens op-ed that:

Julia Gillard's leadership is flat-lining.....What Gillard really needs is a big idea, one that demonstrably works from the reforming centre...Gillard can take control of a real reform agenda by championing the nuclear option...power as a rational part of the solution to climate change....

Isn't the national broadband network NBN a big idea from the reforming centre? Oh, that doesn't blow apart The Greens.

Albrechtson goes to say that that the political advantage of nuclear opower as a rational part of the solution to climate change is that it splits:

rational climate change voters from the Greens, and driving them back to the ALP. A credible energy policy will drive a wedge between the two strands of Green voters without sacrificing support from the centre. The die-hard anti-nuclear rump of the Greens will limp away into irrelevance, leaving more sensible, realistic Green voters who recognise the need for carbon-free power to vote for "a credible response to the imperative of climate change".The impact for Labor is equally instant. It will signal bold leadership where at present there is only nervous reserve. It will take the sting out of climate change scepticism within the opposition.

This will rebrand modern Labor as a centrist party and do something good for the nation.

Gee, all that toxic radioactive waste, big public subsidy since the private sector is not going to take an unacceptable level of risk. Its corporate welfare for the Big Miners who talk about the need for Australia having its own nuclear energy industry. No mention of the long lead times (10-15 years) or the need for financing guarantees, minimum power prices, and / or government-backed power off-take agreements if the nuclear power stations are to be built for base load power.

Clearly Albrechtson's advice is designed to wedge the right and left factions of the ALP and get the ALP to cannibalize itself. Why so? Because Albrechtson's talk about carbon-free power doesn't make any policy sense given her opposition to human cause global warming.

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November 23, 2010

The Australian: more blah on the NBN

The Australian is having yet another go at the national broadband network (NBN) in its Labor should go back to basics on carbon and NBN. It is more on its standard line---'common sense says that the NBN is flawed and costly'--- and it says little that is new.

In fact, the editorial is so caught up in its own rhetoric that it fails to address the substantive policy issues that are currently being addressed by Parliament. Nor is there any indication in the editorial that they are even interested in these policy issues.

What we can infer from this is that The Australian is about politics not policy, and that it will use anything to attack the NBN as a way of undermining the Gillard Government. It is the publicity machine of the Coalition.

The editorial says:

The unseemly rush to a National Broadband Network says more about the government's political problems than about adding to national value. Indeed, the NBN is being forced through parliament this week not because we necessarily need it but because Julia Gillard does. Australians deserve more open discussion on the NBN and on the other issue preoccupying Canberra, the question of whether we need a cap-and-trade carbon market.Both policies have a common flaw: they offer a 100 per cent "solution" to challenges. The NBN is a Rolls-Royce answer to communication needs when a Holden might do just as well....Even if the NBN delivered a top-of-the-line service rather than becoming an expensive white elephant, as some fear, the government has failed to explain why $43bn should be spent on broadband rather than on schools, hospitals, indigenous housing or other essential infrastructure and services.

The editorial refers to the legislation before the Senate-- the government is going soft on privatisation or trying to cajole the crossbenchers into confidential briefings--but not once does it mention the actual content of the legislation----the structural separation of Telstra's retail and wholesale arms, which even Telstra supports and wants passed as quickly as possible.

Telstra is not even mentioned! The elephant in the room that has bedevilled the telecommunications industry for a decade of more is ignored. The editorial continues:

Good government is about setting the right priorities and making hard-headed decisions about funding, not stubbornly clinging to policies when they patently need review. The government is in a fix over the NBN: it is deeply committed to a project that is already being rolled out and its very existence relies on independents who backed Labor in large part because of the promise of the network. We are not troglodytes on broadband or climate change, but we will continue to challenge policy that is driven by politics rather than the public good.

Well the hard decisions have been made--Telstra's structural separation which the Liberals failed to do when they privatised Telstra---in order to ensure competition in the marketplace. There is nothing in the editorial about the need for increased competition in telecommunications.

The politics is everything and the lack of understanding of the issues around the NBN shown by old white men at The Australian indicates that the paper's default position is a Luddite one---let's smash these newfangled machines and stay with copper. The debate has moved on and the old white media men increasingly sound like a voice in the wilderness.

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November 22, 2010

the warp + weave of a digital economy

Alan Kohler makes an excellent point in his Added value needed for online media survival on the ABC's The Drum with respect to the future of the fourth estate.

His general point is that industries are being disintermediated by the digital economy and are having to reinvent themselves to stay afloat:

The most urgent of these is retailing. For thousands of years we have had to travel to a shop to buy goods because the shopkeepers have controlled their distribution, just as media companies have controlled information.Now we can go direct to the source of the goods, wherever they are in the world. The volume of shopping online is now ballooning and just about everything is now being bought on the internet and delivered to homes in packages - books, shoes, clothing, food, household items.Traditional retailers sitting behind the counters in their stores in shopping malls and strips are now facing huge challenges; many won't survive. Those that do will provide something extra that can't be bought online, some sort of added value or service.

An example. Black and white sheet film for my 8x10 monorail view camera costs $140 a box (of 25 sheets) in Adelaide and $80 from B+ H in New York. Sure, I have to pay the freight, but I can use the internet to place a bulk order for several types of film for several different film cameras, thereby spreading the cost of freight. The film is then stored in the fridge until I need it.

So why would I buy from the local camera shop withe outrageous markups charged by the importers? I would only visit them if they provided added value--ie;, to help me solve the problems I'm encountering with cameras (repairs) and photography.

Journalists working in the mainstream or corporate media are no different. Their model is one person speaking to many in a digital world of Web 2. that provides the mass ability to communicate with each other, without having to go through a traditional intermediary. As Kohler points out:

It is now possible for anyone to find out almost anything. Someone sitting at home can now read any press release, watch any press conference, or read its transcript, and examine any document anywhere in the world.The lowest paid jobs in society are those that anyone can do, but can't be bothered or don't have the time, like cleaning or driving. The danger for plain reporting is that it will be increasingly seen in that light - as a service that anyone can do but can't be bothered or haven't the time. No-one is going to pay much for that, if anything, and advertisers have already discovered that they are in the driver's seat with online media because there is a glut of inventory and it's all measurable and accountable, unlike newspaper advertising.

The digital revolution shifts us from the traditional transmission model to a communication model in an open space of publicly available information with the emergence of greater convergence of text, data and moving pictures.

Kohler's solution rejects both Murdoch's paywalls for transmission and the Guardian's free, open and collaborative journalism that loses money that Alan Rusbridger outlined in the 2010 Andrew Olle Media lecture. Kolher says that in order to survive in both cases journalism must add value - "specifically it must impart meaning. It must do what its customers cannot do themselves, which is to explain what events mean, not just report them."

Well, good bloggers in a post-Gutenberg world are already explaining what events mean ---isn't that the point of commentary? What was one a passive audience has become critics, commentators and photographers. So journalists in the corporate media have competitors and people will only read them if they have something valuable and worthwhile to say.

Posted by Gary Sauer-Thompson at 6:43 AM | Comments (8) | TrackBack

November 21, 2010

poor Ireland

The bubbly Irish Celtic tiger on the European periphery is no more, if it ever was. Dublin house prices have fallen by 25% and the properties are unsaleable because banks cannot lend to buyers. The country's budget deficit is forecast to reach 32 per cent next year and it faces E30 billion cuts to state expenditure.

The suits from the International Monetary Fund will arrive in Dublin next week to clean up the mess from the fat cats economic model that provided growth based on a great deal of debt (casino capitalism?) and to bail out the Irish state with emergency funding from the collapse of the vast property bubble. Ireland will eventually seek and get a package of financial support from the EU and the IMF.

Like Greece more public debt is piled onto a nation that is probably already insolvent. The response to the global financial crisis has been to bail out the bank creditors while foisting the burden of adjustment on taxpayers. The Irish government had, for no good reason, nationalized the debts of its failing private banks, passing on the burden to its increasingly poor citizens. One reason is that banks became too large relative to the Irish economy and along the way, they captured their regulators.

Steve Bell

As the authors of Baseline Scenario argue if the state takes on too large a debt in response to the global financial crisis, then sovereign default is the natural outcome. Greece and Ireland need debt relief---a reduction of the public debt.

That is the most realistic scenario since, as it is highly unlikely that Ireland will experience strong economic growth miracle, the debt numbers are stacked too high against Ireland--Simon Johnson and Peter Boone point out at Project Syndicate that for Ireland (as for Greece) , sovereign debt, including bridge financing, will rise close to 150% of GNP by 2014, and is mostly external.

Once social spending is cut and taxes are raised in order to shift as much of the costs from the Irish banking fat cat elite to ordinary citizens, then the axe shifts to the European bankers who funded the Irish banks. So Ireland's problem is an EU problem -- no doubt the big German and French banks are pointing out to their governments that when Ireland defaults, they will face big losses too. Will they take a haircut? Or will the EU bail them out?

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November 20, 2010

Will Hutton: 'fairness'

Will Hutton was among those who argued for a coalition between Labour and the Liberal Democrats in the days following the 2010 election. He has adopted a critical stand to the neo-liberal mode of governance in which only the market could determine priorities rationally – the role of the state was to provide a “level playing field” for market forces to work optimally.

His picture of Britain since the 1980s is that of a society dominated by the City of London, whose inflated wealth is unmerited by the value of its contribution. He paints a picture of the City run wild, with politicians incapable of providing the leadership to challenge its dominance.

In an extract in The Observer from his Them and Us: Changing Britain – Why We Need a Fair Society Hutton says:

The British are a lost tribe – disoriented, brooding and suspicious. They have lived through the biggest bank bail-out in history and the deepest recession since the 1930s, and they are now being warned that they face a decade of unparalleled public and private austerity. Yet only a few years earlier their political and business leaders were congratulating themselves on creating a new economic alchemy of unbroken growth based on financial services, open markets and a seemingly unending credit and property boom. As we know now, that was a false prospectus. All that had been created was a bubble economy and society.

He adds that most of the working population do not deserve the degree of austerity and lost opportunity that lies ahead of them. It was not their behaviour that created the biggest peacetime public deficit in history, the credit crunch and the business models built on the fiction that it could all continue for ever. Yet while they suffer, those who did cause the crisis have got away largely scot-free.

The moral concept of fairness is then bought into play as Hutton's intention is to make fairness the measure of all political and economic relations. His key argument in his analysis of the financial crisis is that Big finance was economically inefficient, dysfunctional and socially destructive. Above all, it was unfair. And it still is. So we must reassert politics and justice over markets. Hutton says:

All three principal parties have begun to search for a moral voice, and "fairness" crops up increasingly in the language of all of them. Nick Clegg wants to hard-wire it into Britain's DNA. The coalition agreement purports to promote it. Labour campaigned for a future that is "fair for all". The political class has read the runes: fairness is the new moral mantra. So, at a minimum, we now need our economies and our societies to be fair. But what do we even mean by fairness?

Hutton places himself between the neoliberal right ' understanding of fairness as market based inequality and the left's idea of fairness with equality or social justice. For him it has to do with just desert, and his critique of modern capitalism is based on the argument that capitalism allocates deserts unjustly.

The principle of "just deserts" is a key part of our culture. We are not flat-earth egalitarians. But nor do we share the view held by the private-equity or hedge-fund partner in Mayfair that wealth is a signifier of personal worth in its own right. We believe it has to be earned, and we believe the rewards should be commensurate with the discretionary effort. Proportionality is a key value. Its trashing by those at the top of the financial and business community risks an angry populist backlash fuelled not by envy, as they airily claim, but by a visceral human instinct.

Fairness (ie., justice) as a matter of desert, is different from Rawls's view of it as an outcome of just institutions.

Hutton draws on psychology and anthropological research in his attempt to show that our notion of fairness is biologically grounded, if not innate. We have a tendency to accept the allocation of resources according to what is deserved and proportional. "Desert and proportionality," he writes, "are part of our warp and weft."

We can dump the fairness is innate and take Hutton's philosophical moral principle to be that reward must be proportionate to effort, skill and contribution to the collective, and separated from sheer luck. His is a desert-based conception of justice in which Individuals that are more deserving should have outcomes that are more valuable.

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November 19, 2010

NBN: a turning point

The Gillard Government hasn't lost its way on the national broadband network (NBN). It's strategy is perfectly clear: a future of trying to regulate Telstra as the operator of an effective and national fibre network with open access was unrealistic. The option of creating a public natural monopoly was a better one. This is what the Coalition opposed.

I agree with Rob Burgess' argument in The NBN is in Xenophon's hands in Business Spectator that the Coalitions' attempt to prevent this has failed.

Yesterday, November 18, was a crucial moment in the long push by first the Rudd government, now the Gillard government, for the structural separation of Telstra and the rebuild of Australia's fixed line communications network. It was, in effect, the last stand of the opposition in trying to prevent the rollout of the most expensive infrastructure project in Australia's history – and they knew it...Malcolm Turnbull['s]... private member's bill [for a Productivity Commission analysis of the NBN that] he hoped would force the government to subject its NBN project to a full cost-benefit analysis... was narrowly defeated.

Conroy's Telstra-splitting bill, which ends the long policy battle over the structural separation of Telstra, will be passed by the Senate probably at the price of Xenophon forcing some kind of cost-benefit-analysis on Labor in the name of transparency and accountability.

Update
The political drama is happening in the Senate. The bill to be voted on by the Senate next week is not to enable the NBN, but to separate Telstra's wholesale assets from its retail arm.

The Communications Minister Stephen Conroy survived a gag order in the Senate that would have halted any consideration of NBN-related matters - and stopped the Minister even addressing the issue - until he tabled a series of documents related to the fibre roll-out.

The Greens, Family First's Steve Fielding and South Australian independent Nick Xenophon voted with Government to defeat a motion brought by Coalition leader in the Senate Eric Abetz, which would have stymied any chance of the Senate considering the crucial Testra structural separation bill that is expected to be debated next week. The Abetz motion was defeated 36 -34.

The Greens and the two Independent Senators are unhappy that they are being forced to consider the reform legislation in the absence of an NBN business plan, and they are frustrated at the drip-feed of information on the NBN roll-out being put into the public domain.Senator Xenophon says that he strongly supports the separation while feeling annoyed at not seeing the business case yet. Fielding, Xenophon and the Greens will be getting a private briefing on the contents of the business case next week, with Xenophon saying that he wouldn't sign a non-disclosure agreement.

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November 18, 2010

The Greens' momentum halted?

Paul Austin in The Age argues that The Greens electoral surge has been halted due to the Liberal Party's decision to put the Greens last on its how-to-vote cards. He says:

The message is that if you want to play with the big boys, you'll have to survive on primary votes, not just preferences.This will hurt the Greens, big time...And the danger for the Greens is that the Victorian Liberals' decision will become a model in other states and federally - and for other parties.Don't rule out Labor doing something similar in future....It mightn't prove hard for Labor in future to prefer the Liberals to the Greens.

Austin's assumption is that The Greens deserved what they got.They are arrogant: 'too cocky as they took the major parties - and their preferences - for granted.'

Austin's argument can be questioned. First, the shift to The Greens in the inner city seats of the capital cities will continue, due to the ALP's turn away from its progressive values as a result of the domination of the NSW Right. It is just going to take longer to win the seats off the ALP without Liberal preferences.

Secondly, the Liberal decision probably means the return of a majority Labor government, rather than a weakened minority Labor Government with Green support that would allow the Liberals the political space in Parliament to work withe Greens to get legislation up. This is what is happening in federal Parliament.

Thirdly, Austin doesn't see the implication of his argument--the emergence of Lib/Lab with only minor differences between the two. It is The Greens who stand in opposition to the Lib/Lab neo-liberal business-as-usual growth model; an economic and political order that is profoundly opposed to breaking the umbilical cord that ties our civilisation to fossil-fuel consumption. The Lib/Lab political order is not going to challenge the power of multinational energy and mining companies in Australia. They support and defend it. Hence the Green's grass-roots momentum in inner city Melbourne.

Fourthly, Austin gives little indication that he is aware that the coal industry upon which Victoria's demand for electricity depends is heading for a crash. He hasn't read the International Energy Agency (IEA) just released annual World Energy Outlook (WEO), with forecasts for the structure of the energy market through to 2035. This compares coal and oil’s current 46 per cent share of global electricity generation to what it would be in 2030 under the 2°C degree scenario. The answer is just 22 per cent. The difference would be picked up by low CO2 energy, nuclear and renewables, with the latter seeing massive growth.

The Lib/Lab power bloc assumes that coal is destined to stay cheap for decades to come. This assumption supports investment in 'clean-coal' technology and trumps serious efforts to increase energy conservation and develop alternative energy sources.

Will coal stay cheap as assumed? Not with carbon capture (CCS) technology it won't, and that is the only way that coal can survive in a low carbon world. If coal prices rise, as they will, then renewables will become cheaper than coal with CCS.

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November 17, 2010

Murray-Darling Basin: nothing changes

I have to agree with Brian Toohey's argument in his Rethinking the Murray–Darling buybacks at Inside Story that what happens with irrigation water in the Murray-Darling Basin is one of the great public policy failures of recent Australian history. This failure is not just the past--it is also being continued by the Gillard Government.

His argument is that despite COAG agreeing in the 1990s that full cost recovery would apply to “all rural surface and groundwater based systems” except for some small community services that meet social and public health obligations, the Australian Government has no intention that the $5.8 billion public investment to upgrade commercial irrigation infrastructure will not be recovered.

In line with Rudd’s approach, Gillard has no intention of recovering a cent of this public spending from the irrigators who benefit. The $5.8 billion is meant to “save” water by reducing leaks and seepage from canals and pipes, with half the savings going to irrigators and half retained for the rivers. Much of the savings, however, would have found their way back to the rivers and groundwater systems as part of the basin’s normal hydrological processes.Apart from large-scale spending on off-farm engineering works of direct benefit to farmers, at least $720 million has been allocated to upgrade on-farm irrigation infrastructure. This spending gives an even bigger boost to the value of these farmers’ properties without any of the costs being returned to the public purse.

Toohey adds that the water minister, Tony Burke, proposes to spend more money on infrastructure, this time to create extra water for irrigators by diverting it from wetlands and other environmental assets intimately linked to the basin’s rivers. Again, farmers won’t pay a cent for the extra water.

It is a policy failure because it amount to a gigantic public subsidy for the irrigation industry, which regards the water flowing into the nation’s rivers or underground aquifers as belonging to them. They erroneously consider a water access entitlement as giving the irrigator the right to a guaranteed amount of water; and a right without any responsibility to use this water in a way that ensures the sustainability of the Murray-Darling Basin.

We still have the state subsidising water development, standing behind Big AG, and ensuring that the irrigation gets its water at the expense of the wetlands. So it is a surprise to find Graeme Batten in his A response to the Guide to the proposed Murray-Darling Basin Plan at Online Opinionthat a simple and rapid reduction in water allocations to irrigation communities is not acceptable unless the effects are countered by measures that lead to improved water delivery and utilization efficiencies.

Batten's argument that Irrigators deserve recognition for the gains in the more efficient use of water they have made already is fair enough, but his argument that an increase in the efficient utilization of the water available through public investment in infrastructure upgrades and funding research and development of water-efficient irrigation carefully avoids COAG's user-pays principle that was endorsed by the 2004 National Water Initiative.

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November 16, 2010

a 'post-peak' world?

What will define the 21st century? Is it the end of cheap oil?

The concept of 'peak oil’ holds that the peak occurs when world oil production reaches its maximum level at the point when half the world’s reserves of cheap oil have been depleted, after which it becomes geophysically increasingly difficult to extract it. This means that passed the half-way point, world production can never reach its maximum level again, and thus continuously declines until reserves are depleted.

Has this point been reached? It is not a sensible question for neo-classical economics, which the obvious reality of the embeddedness of the economy in the natural environment. Sure, they understand that for the economy to grow requires increasing inputs of energy, obtained from exploitation of natural resources – currently, for the most part, fossil fuels such as oil, gas and coal.

Orthodox, neo-classical economists generally argue that capitalism can solve the energy-dependence problem by maximizing efficiency, so that the greater the economic growth, the more efficient the use of resources, and thus the less actual energy is required. This sort of argument underpins government support for the oxymoron of ‘high growth, low carbon’ societies.

It does appear that we are entering into a post peak period characterized by a gradual but increasing decline in production. The IEA concludes its World Energy Outlook 2010 with the judgement that that total growth in liquid fuels from other unconventional sources - such as tar sands, oil shale and natural gas liquids - will continue to make-up for the short-fall in crude until around 2035.

While this means there will be no imminent fuel shortages as such, it also means, that the age of cheap oil is over. In previous years, the IEA had predicted that crude oil production would continue to rise for at least another couple of decades. The report says that though oil production might rise marginally under the "business-as-usual" scenario (without efforts to cut fossil fuel pollution) supplies would be short enough to send oil prices soaring to double today’s level.

The neoliberal doctrine of unlimited growth, which overlooks the finite reality of the earth’s resources, ignores that the traditional resource-base for continued exponential industrial growth simply no longer exists.

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November 15, 2010

Victoria: Lib/Lab

In a couple of paragraphs in The Age Kenneth Davidson describes the form of government in Victoria as a form of corporatism.

Davidson says:

Since the election of the Kennett government, Victoria has mutated into a corporatist state. Real decisions are taken well away from the Parliament by executive government working in a closed loop with powerful, rent-seeking vested interests - most notably property developers, the roads lobby and the private schools lobby.Changing the government won't shatter the corporatist state. Victoria's rent-seeking class have shown they can move seamlessly from one government to the next. The only way decision-making can be brought back into the parliamentary arena where it belongs is through a minority government.

He says that the arrogance and secrecy that characterise the Brumby government began in earnest after they won the 2003 election in their own right.

A state election approaches and there won't be a minority government in Victoria with Lib-Lab, now that the Victorian Liberals have decided to give their preferences to the ALP rather than the Greens. So a neo-liberal form of corporatism is being entrenched.

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OECD Economic Survey of Australia 2010

I cannot find the OCED's Economic Survey on Australia 2010 online apart from this brief chapter summaries. Behind it sits this overview which, surprisingly says little about the national broadband network (NBN). The Australian interpreted it as a critique of the NBN---as a rejection of Labor's broadband monopoly.

So what does the OECD say? Unfortunately, the overview doesn't say that much. It says:

In the telecommunication sector, the government’s project of building a new fibre network, the National Broadband Network (NBN), holds the promise of delivering potentially large benefits. However, as the cost amounts to 31⁄4 per cent of GDP, it also entails substantial financial uncertainties. The authorities’ strategy will improve Internet services for the entire population and promote a fairer competition between private firms on retail services. Part of the plan is to shut down the existing copper network and the country’s main cable network. While establishing a monopoly in this way would protect the viability of the government’s investment project, it may not be optimal for cost efficiency and innovation. Empirical studies have stressed the value of competition between technological platforms for the dissemination of broadband services. It would therefore be preferable to maintain competition between technologies in the broadband sector and, within each technology, between Internet service providers.

I find this glib. There will be competition between Internet service providers (ISP) in terms of them selling consumers retail services from an wholesale network that they can openly access. Just like the national electricity grid.

Secondly, there is competition between technological platforms for the dissemination of broadband services---between fibre, wireless and satellite.

On the monopoly question that is raised by the OECD the national electricity grid is a monopoly just like the NBN--but there is no argument that we should have two national electricity grids competing against one another. We have competing national highways. So why do we need competing national broadband networks?

Apparently in the 160 pages of the 2010 Economic Survey (not online) there is more detail on the NBN. According to Alan Kohler at Business Spectator:

Essentially the Paris-based organisation is concerned that an NBN monopoly “could forestall the development of, as yet unknown, superior technological alternatives”. It complains that the agreement with Telstra removes competition between the new fibre network and the existing copper and cable networks, calling it a “picking-the-winner strategy”, and says it would be better to maintain competition between technologies.

This is confused. The assumption is that the copper network — if we just give it a few nips and tucks — is good enough to keep us basking in 12Mbps glory for many years to come.

The copper network will be closed down over the next 8 years because it has reached its limits. It will be replaced a fibre network which consumers can choose to use or to rely on wireless or utilize both. Secondly, the hybrid-fibre coaxial network (a good historical example of telecommunications market failure) only covers a small and carefully defined part of Australia's geography. Their networks are closed to competitors, under-subscribed and hardly at risk of being upgraded after they haven't been voluntarily extended in the past 10 years.

Presumably, replacing the old copper network and the hybrid-fibre coaxial network will not prevent further technological developments in both fibre and wireless.

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November 14, 2010

G20: Seoul

The communique of the G20 Seoul Summit said that g they had agree to “get the global economy back on the path of recovery.” Good oh.Unfortunately the specifics were lacking as to how they would do this , apart from phrases stressing the importance of “rebalancing” the global economy, “coordinating” policies, and refraining from “competitive devaluations.”

There there was no mention of Ireland, which may need a European ballout. Financial markets were unmoved by the bland promises to deal with imbalances and they now have Portugal in their sights.

There was no substantive progress on anything to do with exchange rates; little substance on the "regulation” of the global megabanks; and few steps on the reform to the governance of the IMF. There was no confronting the power of Wall Street head on, which means breaking up the big banks and imposing hard limits on bank size so they can’t reassemble themselves.

Posted by Gary Sauer-Thompson at 10:33 AM | Comments (2) | TrackBack

November 13, 2010

UK: austerity economics

The function of the Conservative Party in the UK, like that of the Liberal Party in Australia, is to defend inequality: to make acceptable the social and economic unfairness inherent in a predominantly capitalist economy; to preserve the interests and privileges of social elites. They have had recourse to many specious slogans or rhetoric in the defence of inequality.

Martin Rowson

In Nothing to do with the economy in The London Review of Books Ross McKibbin argues that the Conservatives large spending cuts don't have very much to do with the economy. He says:

The importance of the cuts is not economic but political and ideological. First, they restore an apparently coherent, specifically Conservative and politically useful identity to the Conservative Party, distinguishing it from Labour...The cuts have to be big in order to confirm the Conservative explanation of what happened. That they saved the country from the brink, from disaster, from national bankruptcy – in other words from Labour’s incompetence and profligacy – is a line the Conservatives use well and often.

That is the first reason for the austerity measures.

This is the same kind of rhetoric that the Liberals use in Australia. The cuts are justified on the grounds that the state should conduct its own finances in the manner of a prudent household, and this has always been thought plain common sense by many voters.

McKibbin's second reason is that:

the crisis allowed the Conservatives to transform a crisis of the banks into a crisis of the welfare state. This, they hope, will enable them to restructure government and ‘shrink’ the state and its welfare systems once and for all, something they have been trying to do for the last 30 years. As the state moves out the Big Society moves in. But welfare states are hard to reshape, as Thatcher found.

Politically, it is hard to cut welfare benefits significantly and it would be surprising if the cuts turn out to be as severe as advertised. In practice it is also very difficult for the voluntary sector to fill the state’s shoes: it has neither the expertise nor the funding. He adds that the reducing funding to local government band the capping of the council tax conform to a pattern of persistent Conservative attacks on the scope and autonomy of local government.

He says that the big cuts are unquestionably a strategy that has worked politically in the past: the electorate seems to agree that there have to be cuts and is apparently willing to blame the Labour Party for them. However, the outcome of the cuts will not be a ‘fairer and more liberal society’, and that does not bode well for the LIberal Democrats

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November 12, 2010

NSW Right flexes its muscle

What is up with the NSW Right these days? The mates are stirring. Are they uncomfortable with a critical light being shone on them? Do they dislike the critical light of public reason? Or are they into destablising mode?

The right wing unionist Paul Howes--the one opposed to climate change---is busily reinventing himself as a genuinely sensitive soul and a progressive at heart; albeit one manning the barricades against the Green hordes. He's even talking about re-education camps for young Laborites. And Mark Arbib? He is also reinventing himself as he is all for gay marriage these days, even though that is a Green policy?

Meanwhile Karl Bita, the national secretary , is busy denying political reality about the recent election campaign and the ALP's continual slide in the opinion polls---its the ghost of Mark Latham that's haunting the ALP apparently. Oh, and Kevin Rudd of course. Can't forget him, can we. He was the bearer of hope and unfilled expectations. Bita is trying salvage his reputation.

And Graham Richardson? Well, he's flexing the NSW Right's muscles in The Australian, where he is launching a direct attack on Gillard.

He says:

The attack on Labor's vote by the Greens has to be addressed. The government (and Gillard has to take responsibility for this) has become so concerned about adopting any policy that may be unpopular and require a dialogue with the Australian people to convince them the ideas are good that a kind of policy paralysis is developing.

Gee I didn't know that the NSW Right was into good policy as opposed to focus group politics selected from western Sydney, which is deemed to be the heart of the nation. You know the 'aspirationals' and the 'tradies' who hate asylum seekers.

Richardson is quite pointed in his attack:

During the campaign and since she got the job there have been serious errors.The announcement of the East Timor detention centre, which the government is clinging to despite it becoming increasingly ridiculous, springs to mind. The notorious citizens' assembly, which was supposed to cover the lack of policy substance on climate change, was truly pathetic. The "real Julia" announcement was just politically dumb.These errors indicate Gillard's political antenna sometimes doesn't pick up dangerous signs on its radar.b Those mistakes should have been picked up by her staff and discarded before they hit her desk...There are real faults in the Gillard office that need to be fixed, and soon.

Oh dear, the NSW is not happy. Has that to do with them being held to be responsible for the ALP's slide in popularity starting from them forcing Rudd to dump the emissions trading scheme? Or the ALP turning away from its social democratic roots to become a right of centre party (one based in the suburbs and regional towns) defending the interests of corporate Australia?

Surely the faceless men of the NSW Right are not beginning to recycle their old Sussex strategy--if there is a problem with declining popularity, then its dump the leader time. Are they? Don't tell it is not.....'and so it begins'....

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November 11, 2010

Australian conservatism: Gary Johns

I always wondered about Gary Johns, as a conservative being both at home in The Australian and being a member of the ALP. Then I recalled that the ALP has been in the process of shedding its progressive base and becoming more mainstream for quite some time. It is now being outflanked by The Greens permanently.

John's deep conservatism around indigenous issues is troubling. He appears to have returned to, and to speak from, the Australia of the 1930s. 'Troubling' means that it is a still a shock to this kind of voice in 2010.

In his Referendum must not be used to settle old scores in The Australian he writes:

The Gillard government's intention to discuss the wording of a constitutional amendment to recognise Australians of Aboriginal origin provides the opportunity to ask where we are headed in Aboriginal affairs.Should this amendment be seen by activists as a chance to settle old scores, they had better think again. The long-run trajectory for Aborigines in Australia is integration. The experiment with separate development in the past 40 years has been a dismal failure.To appreciate the nihilism of Aboriginal Australians sitting on their land being fed by the Whiteman, just watch the film Samson & Delilah. Two black kids sitting on their land eating from tins, drinking bore water and staring into space is not much fun.That does not mean there has not been a flowering of the talents of people of Aboriginal descent, but do these people warrant a special mention in the Constitution?

That rhetorical question ---do these people warrant a special mention in the Constitution?---jars. "These people" are Australian citizens entitled to their individual freedoms.

Johns has argued that the underlying cause of Indigenous disadvantage in the Northern Territory and elsewhere in Australia is the result of ‘bad policy’ of ‘self-determination’. He argues that Indigenous disadvantage can only be solved by changing the system of government support and infrastructure so that people face the true costs of their decision to stay in remote communities — that is, to encourage mobility to more buoyant labour markets where jobs are available.

More generally, Johns argues for a policy of ‘economic integration’, on the grounds that the modernisation project is (necessarily) inconsistent with cultural maintenance. His position is that the right way ahead for the welfare of Aborigines is not as a separatist, self-governing society, but as an identifiable and individualistic part of the wider Australian community where, already, many Aborigines have made significant contributions. The former pathway, that of a separatist, self-governing society, is equivalent to shunning white society to live on welfare. It is the myth of escape; a myth because self-determination has failed too many Aboriginal people. The solution is economic integration.

The core problem that I have with John's argument is that aboriginal people have found a way to live in remote communities, become economically independent through their painting, and are able to keep their culture. Why cannot indigenous people own and run their pastoral stations? The white way is not the only way. Nor is it an either/or as Johns assumes.

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November 10, 2010

G20: skating on the surface

The G20 meets in Seoul, South Korea, this month. The continuing agenda is global recovery, rebalancing growth, financial regulatory reform and governance reform at the International Monetary Fund—plus the two new issues added by the Korean hosts: financial safety nets and closing the development gap. The agenda is whether a new international order can be created that would move from the framework established after World War II in which the Group of Seven advanced economies managed the world economy.

The reality is that the G20 is a self-appointed body that has little legitimacy, has achieved precious little since it started holding two yearly summits two years ago, and it provides a better forum for the powerful to pursue their own agenda.

The conflicts over achieving a strong, balanced and sustained world recovery will surface at the G20 in the form of the "currency wars":

The background is multilayered:

(1) The political background is visceral public anger towards banks, the activities of which severely damaged the real economy to the extent that full recovery will take years.
(2) The US is juggling the agenda to support US economic growth and job creation through US dollar depreciation at the expense of East Asian economies and oil and commodity exporters.
(3) The economic background is that the core of the world’s financial system has become unstable, and reckless risk-taking will once again lead to great collateral damage.
(4) The secular decline in economic growth rates and the long-run increase of financial fragility and instability.
(5) Financialization, or the shift in the center of gravity of the capitalist economy from production to finance, is a compensatory mechanism to a long term decline in growth that has helped to lift the economic system under these circumstances, but at the expense of increased fragility.
(6) a rapidly growing industrial base in emerging markets is being hard-wired to intensive use of coal. This, coupled with the reliance on cheap local coal in the US and Australia, will make it exceedingly difficult to reverse the trend in the future.

My view is that the US's trajectory of slow growth means that it will be forced to curtail its international commitments. This will create space for rising powers like China, but it will also expose the world to a period of heightened geopolitical uncertainty.

The trajectory is one of decline for the US because its political elite is failing to develop a coherent policy response to the global financial crisis as it is being forced to choose between job creation, which requires a more competitive exchange rate, and cheap financing of its external and fiscal deficits.

This is a political failure in that its political parties, rather than working together to address pressing economic problems, remained at each other’s throats. The country is turning inward, and its politics is becoming more fractious, its policies more erratic, and its finances increasingly unstable.

Update
Martin Wolfe at the Financial Times says that the Federal Reserve's attempts to reflate the American economy through low interest rates and pumping more money into the economy will encourage capital to flow into countries with less expansionary monetary policies (such as Switzerland) or higher returns (such as emerging economies or Australia). He adds:

Recipients of the capital inflow, be they advanced or emerging countries, face uncomfortable choices: let the exchange rate appreciate, so impairing external competitiveness; intervene in currency markets, so accumulating unwanted dollars, threatening domestic monetary stability and impairing external competitiveness; or curb the capital inflow, via taxes and controls. Historically, governments have chosen combinations of all three. That will be the case this time, too.

The US, one way or the other: it will either inflate the rest of the world or force their nominal exchange rates up against the dollar.

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November 9, 2010

Australia in the world

Did anyone doubt that Australia would align itself ever more deeply with the US as the latter increases its security presence in the Asia Pacific region? That increased US presence is designed to counter China's increasing economic political influence in the region and Australia has decided to strengthen its network of alliances with the US. China's rise is radically shifting Asia's strategic balance.

China's rise presents the US with a serious challenge to its leadership of Asia for the first time in decades and raises the possibility of direct strategic confrontation between the US and China.

The problem for Australia, of course, is that China is Australia's main trading partner. Our economic prosperity in the near future now depends on us being a quarry to provide the raw materials for China's ongoing economic transformation.

In the Sydney Morning Herald Peter Hartcher poses the problem thus:

So Australia's income from China is booming exactly as its strategic commitment to America is strengthening. We are giving ever-deepening loyalty to the world's sole superpower yet taking ever more of our national livelihood from the potential superpower. Will the strain tear us apart?

Hugh White in Striking a new balance in The Age works through the implications of this either/or. He says:

The US can only retain its old leadership by forcing the Chinese to continue to accept the subordinate position that they have accepted until now. The more their power grows, the less willing the Chinese will be to accept that the harder they will push back, the more unstable Asia will become.On the other hand, unless the US is there to constrain it, China may throw its weight around in ways that harm its neighbours, including Australia. It is possible that China will try to do this anyway, but that is far from inevitable, and whether it does or not will depend a lot on how the US and others respond to its rise. The more the rest of us try to constrain China, the more disruptive it will become.

Kevin Rudd doesn't accept this either or. He argues for Australia to work with China to build a new kind of collective leadership that reflects the new distribution of power in Asia.

If so, then Australia, in throwing its hand in with the Americans, means that it is now up to the Americans to treat China as an equal. This will be hard for Americans to do, because the US has never before seen itself this way in relation to other global powers. It sees itself is the world's sole superpower and it has always acted since 1945 to contain any challenge to it that power. Barry R Posen in The case for Restraint at the American Interest Online describes it thus:

The United States must remain the strongest military power in the world by a wide margin. It should be willing to use force—even preventively, if need be—on a range of issues. The United States should directly manage regional security relationships in any corner of the world that matters strategically, which seems increasingly to be every corner of the world. The risk that nuclear weapons could fall into the hands of violent non-state actors is so great that the United States should be willing to take extraordinary measures to keep suspicious countries possibly or even potentially in league with such actors from acquiring these weapons. Beyond uses of force, the United States should endeavor to change other societies so that they look more like ours. A world of democracies would be the safest for us, and we should be willing to pay considerable costs to produce such a world.

However, the US is now an weakened superpower: it is economically weakened with a weakened presidency. It is hard to run the world when you owe lots of people money and your debts keep piling up and you're stuck in costly wars.

Does it have the ability to transform its economy and international relations to meet the challenges of a new century? The US, from all accounts, is going to act to contain China. The United States is working to shore up existing alliances in Asia (Australia + Indonesia) and to forge some new ones (India). Is this an example of a shift to conceive of ways to shape rather than to control international politics?

Is this the emergence of the U.S. strategy of restraint that includes a coherent, integrated and patient effort to encourage its long-time allies to look after themselves? If others do more, this will not only save U.S. resources, it will increase the political salience of other countries in the often bitter discourse over globalization.

Are the liberal interventionists in the Obama administration shifting to conceiving the US security interests narrowly, using its military power stingily, pursue its enemies quietly but persistently, sharing responsibilities and costs more equitably, and watching and waiting more patiently.

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November 8, 2010

break up the banks?

If the global financial crisis proved that Australia’s bank regulation, and the Australian Prudential Regulatory Authority (APRA) itself, is in pretty good shape, then the aftermath of that crisis indicates that the government's support for the big four banks (a fee structure for the bank guarantee for an oligopoly), has been, and continues to be, is at the expense of competition in the financial system.

As Milind Sathye points out at Online Opinion

The four major banks - the ANZ, Commonwealth, NAB and Westpac - dominate the banking system. They hold 77 per cent of total banking assets, 82 per cent of deposits, 83 per cent of total loans and 88 per cent of home loans. In other words, Australian banking is significantly concentrated.

Australia's concentrated banking market is at the heart of the issues raised by the critics of the banks.

If the oligopoly cannot be broken up--ie., a demerger of Westpac and St George and of Commonwealth and BankWest---then there needs to be increased competition in a market economy--ie to provide incentives to consumers of the major banks (eg., small exit fees) to switch to smaller banks or credit unions and building societies.

Criticism of the banking oligopoly is not just populism or bank bashing. As Milind Sathye points out in The Age:

The major banks consolidated their market power due to the crisis. The government policy in the crisis actually helped the big banks consolidate market power. The fee structure for the bank guarantee put in place by the government helped banks make record profits at the cost of the taxpayer. It also discriminated against community institutions such as credit unions.

It is the structure of the financial system that is flawed. Secondly, if Australian taxpayers are, in effect, going to stand behind the banks, strengthening the sector’s credibility in the marketplace, they should be compensated for doing so. Let's put a levy on the bank's assets to trim some of their fat.

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November 7, 2010

Tea Party: take the country back

Ronald Dworkin in his Americans Against Themselves post in the New York Review of Books blog has a go at interpreting what the Tea Party--a rightwing populist movement--- are saying with their slogans “Save America.” “Take the country back.” “Armed and dangerous.” “Lock and load.”

These populists not only reject Obama administration policies, and political liberalism in general, but also cast their rejection in questing, confrontational language as an epic battle for the soul of American democracy, which they accuse liberalism of defiling.

Dworkin says:

We must take seriously what so many of them actually say: that they feel they are losing their country, that they are desperate to take it back. What could they mean? There are two plausible answers, both of them frightening. They might mean, first, that their new government is not theirs because it is not remotely of their kind or culture; it is not representative of them. Most who think that would have in mind, of course, their president; they think him not one of them because he is so different. It seems likely that the most evident difference, for them, is his race—a race a great many Americans continue to think alien. They feel, viscerally, that a black man cannot speak for them.

The Tea Party want to take their country back by taking its presidency back, by making its leader more like them.

The other interpretation of what the Tea Party mean is that they want a strong America. Dworkin says

All their lives they have assumed that their country is the most powerful, most prosperous, most democratic, economically and culturally the most influential—altogether the most envied and wonderful country in the world. They are coming slowly and painfully to realize that that is no longer true; they are angry and they want someone to blame...For many Americans losing America’s preeminence means losing the country they know. They want America to stand alone on top again; they want politicians to tell them that it can, that God has chosen us but false leaders have betrayed us.

Unfortunately the American empire is in decline, weakened by a structural economic crisis that has resulted in 15 million unemployed American workers.Since the Democrat arm of the political class will not turn against Wall Street and the entrenched corporate globalization doctrine, it may well be an America-first movement coming out of an increasingly radicalized “nativist” Republican base.

In Real Americans in the Boston Review William Hogeland in his review of the history of American populism's shift from left (economic fairness) to right (cultural conservatism) says:

Then as now, the hottest blast of populist rhetoric was directed less at specific policies than at elites’ dismissal of ordinary people’s judgments, determinations, and desires; at what populists saw as the undemocratic, un-American claim to superior expertise; at forestalling decisive action through discussion and debate.

What we have is populism’s war on liberalism. Populism equates goodness with the ordinary, working-class, democratic values that it declares fundamentally American and in protecting those values, it announces itself ready to fight to the death the arrogant social superiority that it views as institutionalized in liberal thought. Hogeland argues that:

history suggests that American populists’ rejection of liberalism is a matter of principle, not of interest. Liberalism has long defined itself from a position of expertise and wisdom that it justifies as meritocracy, and for which it keeps reflexively congratulating itself...liberal claims to a monopoly on knowledge may be even more undemocratic than conservatives’ policies for distributing wealth upward.

What populists see in liberalism's privileged expertise is dismissal, mockery, and disdain, an assumption of superiority not found even in pro-business conservatism.

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November 6, 2010

NBN: a "magic pudding"

Jennifer Hewitt in her Fibre to the bootstraps: how Labor shackled its future to broadband in The Australian is at it again. Hewitt has long been an opponent of the national broadband, as has News Ltd. The latter's opposition is defence of its Foxtel pay TV interests from competition, as more and more TV and other rich interactive services come online.

I know that the debate on the NBN has become boring and tedious, but we need to be clear about the implications of the position Hewitt is defending in the guise of a big picture article that puts recent history into perspective. She says:

The $43bn promise also would prove to voters -- and to Telstra -- that the government really was serious. And just to make sure of that, Canberra threatened Telstra with all sorts of punishments such as forcing it out of Foxtel and cutting off access to wireless spectrum if it didn't co-operate.The political strategy worked brilliantly. The voters were dazzled by the digital future and the magic pudding promise it wouldn't really cost them because there would be a commercial return to government.

We have a "magic pudding" and voters being dazzled rather than an enabling technology in which informed consumers can see diverse opportunities in an information economy.

Hewitt's position is this: many people in cities already have "high-speed broadband" that is adequate for their needs, even if others in outer urban and rural areas are frustrated; that public policy should try to overcome problem areas and leaving the market and competition to sort out the rest; that there will be breakthroughs in alternative technologies such as wireless and cable to overcome the current spectrum limits.

Hewitt's implied judgement is that the national broadband network is not commercially viable as most households will initially take the lower cost package of 20Mbps (wholesale price of about $30 to $35 a month plus retail margins) rather than the more expensive of 100Mbps (wholesale price of about $80 a month plus retail margins).That claim ignores that the NBN is a utility - analogous to baseload electricity infrastructure with pricing based on regulated rates.

Hewitt is basically arguing on behalf of the Coalition's position in its attempts to "kill off" the national broadband network. The Coalition's position, as stated by Malcolm Turnbull, is that nobody needs more than 12Mbps. Turnbull says:

You tell me, what are the great productivity enhancing applications that cannot be accessed by 12Mbps broadband? The only thing that will drive high speeds for residential usage... is going to be bigger and bigger files. And that can really only be higher and higher-definition video. You've then got to ask yourself, should the taxpayer be spending $43 billion when we know there are so many infrastructure demands where there is a screaming need now.

The Coalition's position basically the status quo refined. David Braue response is this:

From one perspective, Turnbull is correct: no one user currently really requires over 12Mbps downstream. But what he is not talking about is the upstream speed, or the massive logjam that would occur if two people in a house with a 12Mbps connection tried to use 12Mbps services at the same time. Or if someone in that house is watching HDTV over their new FetchTV service. Or if, heaven forbid, two people are watching different channels at the same time. Or if — as is the case in one third of all Australian households — the home is hosting a small business with real business requirements and expectations.

Turnbull, in arguing for the status quo, would leave us with woeful upload speeds that limit home and business users' participation in emerging online information economies. The Coalition is quite happy with this state of affairs.

Posted by Gary Sauer-Thompson at 10:13 AM | Comments (6) | TrackBack

November 5, 2010

a 'Tea Party' in Australia?

Angry white Americans make good media copy, especially when they are fronted by suburban housewives with the attitude of Mama grizzlies, and backed by big Republican money. The angry Americans are the majorities of white men and women, suburbanites and older Americans whose nostalgia is for a lost America, and whose often cynical and fearful view of the future is coloured by this sense of loss.

Martin Rowson

Martin Kettle in his Boris Johnson could be the Sarah Palin of a British Tea Party in The Guardian says that the Tea Party:

stands for individualism, libertarianism, low taxes and small government. It is nationalistic, overwhelmingly white and not interested in the rest of the world, which it views as a hostile force. An insurrectionary party of that kind – stripped of the distinctively American aspects like guns, capital punishment and cultural conservatism – is surely at least conceivable in a British and European context. In fact, such parties exist in most European countries already, albeit on the margins. In this country Ukip comes quite close to this template, and it shares a lot of ground with parts of the Tory party.

And is surely conceivable in Australia. The nationalistic, overwhelmingly white strand is most obvious in those opposed, to and deeply hostile towards, refugees and to they two new asylum seeker detention facilities in Western Australia and South Australia. They advocate Fortress Australia in their desire to restore a lost Australia.

Kettle adds that if we imagine a British Tea Party as an off-the-peg American franchise we are asking the wrong question. The cultures are too different. Similarly with Australia. However, the roots are there in older Australia in the form of right wing populism, that is socially conservative, is hostile to an out-of-touch and corrupt Canberra elite, and is backed by the strong media presence and support of News Ltd.

These conservative populists---ethnic whites and older and working class men and women-- dislike unwelcome change and desire restoration, are susceptible to the Coalition's opposition to the process of transformation, which they see as being driven The Greens (the enemy within). The Coalition is doing its best to stir them up.

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November 4, 2010

Obama's got problems

The Obama administration has some problems on its hands after the Republicans gained control of the House in the historic mid-term elections. It faces a hostile opposition, and even if the Republicans do not have the power to move the Republican agenda forward, they will be determined to stop the Obama administration from doing some of the things it wants to do.

Will the Democrats tack to the right? Will they stand and fight for Barack Obama's liberal agenda, including health reform? Or will they declare that liberalism, American style, is dead as the Blue Dog (conservative) Democrats want them to: ie. legislation serving corporate interests in order to perpetuate their own power. No doubt the corporate media's questions directed at the administration will become essentially Republican talking points reshaped as questions.

Will there be a "do-nothing Congress" engaged in "partisan bickering"? You bet. The compromise, common ground and working together talk will hit the wall of the unforgiving rhetoric and masculist aggression of movement conservatism that says it expresses the will of the people. No doubt the Democrats would have seen this Republican wave coming for a year or more and have prepared for it. Have they?

A gridlocked Congress isn't going to help address the America that has a sick economy, a looming lost decade, millions of people out of work and millions more fighting to keep their home. American infrastructure is crumbling and the nation lags in education and innovation. The normal course of action for a country in the position of the US (chronic current account deficits, high debt levels) is to depreciate the currency and/or increase import barriers, and renegotiate and restructure debt. The economy is going to dominate the next two years and the Presidential elections.

To survive Obama has to turn the economy around whilst fighting the Republicans. Can he do it, with an expansionary fiscal policy out the window ? I cannot see the economy had come roaring back to life as it did under Clinton in 1996. Unemployment will decline, although it might take decades because firms will have to start investing again when a lot of their current capital will have depreciated.

The Republicans want to reduce the government deficit and extend the Bush tax cuts that are due to expire on 31 December and will increase the deficit. They will duck the real business of cutting spending, having ring-fenced huge departments such as Defence; and they will oppose any high deficit job creation scheme in the name of downsizing big government and reducing the deficit. Republicans will try to paint Obama as a big-government liberal out of touch with America, who’s responsible for the continuing bad economy.

They Republicans don’t believe in stimulating economies. They think markets eventually clear — once the pain is sufficient.Their proposed austerity measures will put the US into a deflationary spiral.

Update
With fiscal policy out, there are the weapons in the Federal Reserves limited arsenal.The QE2 package (the Fed will purchase $600 billion in Treasury securities through the end of the second quarter of 2011) may be modestly helpful in terms of making credit more available to small businesses, encouraging a little more refinancing to enable more spending, encouraging net exports, and breaking the deflationary psychology that may have been a factor in so much cash sitting idle.

With no strong sponsors for stimulus in Washington, the likelihood that the American economy will muddle along at high unemployment rates is now great. Quantitative easing by the Fed won’t do the trick alone. Lower rates are only one side of the equation, demand for loans and investment in a growing economy is the critical other side. However, that’s Keynesianism. ..and the deficit hawks are circling.

As Robert Reich puts it:

We know that when the private sector is unwilling or unable to spend and when consumers are under a huge debt load, government is the last remaining spender, at least in the short term. Long term deficits do have to be reduced, but unless we get the economy growing in the short term through government spending, we're all going to be experiencing a much longer and more painful so called recovery.

The Republicans will try to ensure that Obama wears the blame for the long slow painful recovery.

Posted by Gary Sauer-Thompson at 8:46 AM | Comments (10) | TrackBack

November 3, 2010

Victoria: Labor squeezed?

The state election in Victoria is underway, with Victorians voting on November 27. It looks as if the Brumby Government will be returned with a reduced majority. The Brumby government has a thumping majority - 55 of the lower house's 88 seats, compared to the Coalition's 32 - and the opposition would need to attract a landslide swing of about 6.5 per cent to snatch victory in its own right.

The real interest is how many inner city seats in Melbourne will the ALP lose to the Greens? Some say up to 4 (Melbourne, Richmond, Brunswick and Northcote). The Greens are the new third force and public transport is a hot issue in Melbourne's inner city seats. Labor now fights permanently on two fronts, the Greens on the Left and the Coalition on the Right.

It does look as if the ALP is increasingly being pushed to the centre as the progressive vote with its concern for equity, social justice and compassion)shifts to the Greens, and right wing Labor is increasingly willing to bash the Greens (the “attack the Greens at all costs” approach) and run smear campaigns --as they did in Tasmania.

Labor is not prepared to rule out preferencing the Greens. Nor will Brumby rule out striking a Gillard-style alliance with the Greens after the election in the event of a hung state parliament.

Brumby's spin is to use Victoria as "the engine room of the nation" to stamp himself as the face of the future. The ALP is the party of innovation whilst the Liberals are the party of conservatism. The spin is undercut by WA being the engine room of the nation and the Greens being the progressive party.

Climate change is going to hurt Brumby Labor given Victoria's historic dependence on brown coal and the symbolic significance of Hazelwood. Failure to act on climate change sunk federal Labor as a progressive party and its going to hurt Brumby Labor in Victoria.

Posted by Gary Sauer-Thompson at 7:25 AM | Comments (5) | TrackBack

November 2, 2010

Robert Reich on the US's economic woes

In this review of Robert Reich's After Shock: The Next Economy and America’s Future in the New York Times Sebastian Mallaby summarizes Rich's main argument about the stagnation of middle-class incomes and exploding inequality in the USA in the context of the global financial crisis.

Reich addresses the wide, glaring disparity of income between the rich and the middle and working classes and the way that Wall Street blames a reckless, overspending working class (and the poor) for bringing on the recession. His is a Keynesian narrative.

Mallaby says:

Caught between rising aspirations and stagnant wages, Reich says, middle-class Americans have gone through a series of coping mechanisms. First, women joined the workforce, giving families a second income. Then husbands and wives put in longer shifts, creating a species of family called DINS — “double income, no sex.” Finally, families went into debt. In this sense, inequality helped to stoke the credit bubble. Now that the bubble has burst, these coping mechanisms are exhausted...

As a consequence:

Americans will “face a necessity they have managed to avoid for decades: They have to make do with less.”The belt-tightening is not likely to be popular, and Reich goes so far as to suggest that it could trigger a political convulsion. People are very likely to resent material losses bitterly if these are not broadly and fairly shared. And in the wake of the financial crisis, fairness has gone by the wayside: millions of Americans have lost jobs, but the financial sector has bounced back; eye-popping bonuses have returned;

The Great Recession that started at the end of 2007 has seen the Obama administration step in quickly with enough money to contain the downward slide.

However, little has been done to reduce the underlying, cumulative problem of widening inequality. Reich argues that:

After the stimulus and loose money wear off, therefore, it is unlikely that growth can be sustained. . . . . . This will constitute the Great Recession’s aftershock. From it will emerge either a political backlash—against trade, immigration, foreign investment, big business, Wall Street, and government itself—or large-scale reforms that reverse the underlying trend.

So the fundamental problem is that too much money has ended up in the hands of too few people. Therefore, Americans no longer have the purchasing power to buy what the U.S. economy is capable of producing. The nativist Tea Party movement is the political backlash to this growing inequality.

The political violence and its various hatreds is being drummed up now is coming from the astroturf groups funded by big business, the Republican leadership itself and from right-wing hate-talk radio. These are people who understand full well what they're doing and just don't care about the repercussions.

Reich's proposal is to face head-on the currently existing inequities and to remedy them through legislative and executive action to restore the bargain that working and middle-class Americans would share with the wealthy in the prosperity created by their own increases in productivity and profits.

Reich's nine steps to do this are:

(1) a reverse income tax. Instead of money being withheld from workers paychecks to pay taxes to the government, money would be added to their paychecks by the government, according to a graduated or progressive formula;
(2) a carbon tax;
(3) higher marginal tax rates on the wealthy—up to 55%--and elimination of the capital gains exemption;
(4) a reemployment system rather than an unemployment system, including wage insurance;
(5) school vouchers based on family income;
(6) college loans linked to subsequent earnings, to be repaid during the first ten years of a student’s gainful employment;
(7) Medicare for all;
(8) a sizeable increase in public goods such as transportation, public parks, recreational facilities, public museums and libraries, with free public transportation, including high speed rail; and,
(9) the removal of money from politics.

I cannot see this kind of social democrat reform happening in the US, which is rapidly becoming a plutocracy. It is more likely that working and middle-class Americans will be squeezed further.

Posted by Gary Sauer-Thompson at 10:59 AM | TrackBack

November 1, 2010

US: Republican politics

Frank Rich in The Grand Old Plot Against the Tea Party in the New York Times argues that the Tea Party movement, despite its 'take back America' campaign supported by Fox News, is going to hit the wall of political power in The Republican party after the mid-term elections.

Mike Thompson

Rich says:

the Republican elites found the Tea Party invaluable on the way to this Election Day. And not merely, as Huckabee has it, because they wanted its foot soldiers. What made the Tea Party most useful was that its loud populist message gave the G.O.P. just the cover it needed both to camouflage its corporate patrons and to rebrand itself as a party miraculously antithetical to the despised G.O.P. that gave us George W. Bush and record deficits only yesterday.Rupert Murdoch’s Fox News and Wall Street Journal have been arduous in promoting and inflating Tea Party events and celebrities to this propagandistic end. The more the Tea Party looks as if it’s calling the shots in the G.O.P., the easier it is to distract attention from those who are actually calling them — namely, those who’ve cashed in and cashed out as ordinary Americans lost their jobs, homes and 401(k)’s [retirement savings plans].

The ordinary Americans in this movement lack the numbers and financial clout to muscle their way into the back rooms of Republican power no matter how well their candidates perform.The backrooms of those of corporate America where Wall Street money flows freely to cut taxes and regulation of their favored industries.

Environmental regulation will be rolled back through aggressive investigations from the incoming Republican majority. So there will be gridlock on climate change for the next two years, given the Republicans mantra of 'No compromise' and saying no to everything. Gridlock is wonderful when the Republicans are doing it. Whatever gets Republicans elected is just fantastic no matter how much harm it does to the country or the economy.

Behind this politics sits the global financial crisis, which has been followed by a protracted period of very high unemployment. In a contracting economy people are scared of losing their jobs, not being able to pay their mortgage or being foreclosed and falling sick from a major illness. And as, Paul Krugman points out, we have the failed economic policies of the Obama administration.

What is sad is the capitulation concerning any real financial reform by the Democrats, who proved themselves only loyal to Wall Street and the big banks. You would think that it would be good politics for the Obama administration, which has a hard time establishing credibility with ordinary people, to bring the foreclosures to a halt---a foreclosure moratorium, by temporarily halting the flood of foreclosed houses onto the market--given all the fraud involved.

The Obama administration appears to be protecting the big banks again.

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