Be careful what you wish for in Egypt

''Bliss was it in that dawn to be alive,'' wrote William Wordsworth of the fall of the Bastille, ''But to be young was very heaven!''

For many Egyptians today, the street protests in Cairo and elsewhere perhaps hold a similar romance.  But just as the French Revolution turned into the Jacobin Terror, so might the widespread unrest on the Arab Street lead to instability and bloodshed in Egypt and the broader Middle East.

Several observers -- from liberal idealists on the Left to neo-conservatives on the Right -- suggest it wrong and churlish to dismiss the wider significance of the week-long uprising to end Hosni Mubarak's 30-year rule.

Writing in The Washington Post, former Bush administration official Elliot Abrams argues:  ''The massive and violent demonstrations underway in Egypt, the smaller ones in Jordan and Yemen, and the recent revolt in Tunisia that inspired those events'' suggest that ''Arab nations, too, yearn to throw off the secret police, to read a newspaper that the Ministry of Information has not censored and to vote in free elections''.  Bush's ''freedom agenda'', he argues, has been vindicated.

But these are early days and there is still treacherous ground to cover.  There are serious reasons to be tentative in one's judgment of the changes taking place not only in the largest Arab state but in the broader Middle East today.  Simply put, democrats the world over should be careful what they wish for.

For years, commentators from the Left -- Robert Fisk, John Pilger, Noam Chomsky -- to neo-conservatives on the Right -- Mark Steyn, Fouad Ajami and Abrams himself -- have cynically scolded successive administrations for propping up Mubarak who has denied democracy to the Egyptian people.

For the Left, Uncle Sam kept in power a corrupt and repressive regime for pragmatic reasons of self interest:  Israel-Palestine, Hamas and Gaza, security for Gulf oil supplies.

For the Right, the US policy to support Cairo on the grounds that it prevented the turmoil of something worse helped give birth to 9/11-style terrorism.  In neo-con-speak, at last we can ''drain the terror swamp'' at its Mideast source, topple a dictator whose illusion of stability gave comfort to Al Qaeda, and make the US and the region safer in the long run.

But many seasoned hands predict a very different scenario:  that if democratic elections were held, they would more than likely represent a landslide for the Muslim Brotherhood.  In other words, far from ushering in a new era of democratic prosperity and a stable peace, an Egyptian revolution could lead to a period of virulent anti-Americanism and Islamic extremism.

That does not mean the US should continue to give unqualified and unconditional support to Mubarak.  It's just that elections are no panacea in a nation or region with little liberal democratic traditions;  that president Obama's cautious wait-and-see approach is more than justified;  and that, if anything, Washington should foster a Mubarak-led transfer of power rather than one led by the street protesters.

As the Iraq experience has shown over the past eight years, removing a dictator is the easy bit;  ensuring people power leads to peace and freedom is far more complicated and fraught with danger.

To work, democracy requires, among other things, a degree of prosperity and order.  And it requires that the losers respect the rights of the winners to rule and the electoral majority respect the rights of the minority to the untrammelled benefits of civil society -- including freedom of speech, organisation, religion, and an impartial judiciary.  That is, a democracy has to embrace the idea of a loyal opposition.

Look at Egypt and it appears that none of these conditions can easily be met anytime soon.  The protestors might be young, but they are not wholly secular and many are unemployed.  Mohammed ElBaradei is touted as an alternative leader, but serious doubts dog his ability to represent any constituency inside Egypt.  The Muslim Brotherhood is the only organised political group, but it is also an extremist outfit that supports Hamas and Tehran, opposes Israel, the US and the 1979 Camp David peace accords, and threatens regional and global counter-terrorism efforts.

Attacks are mounting against president Obama for failing to offer sufficient support to the protestors, with claims that Washington is siding with the 82-year-old dictator against the Egyptian people.  Obama's approach to the crisis, taken together with the annual US financial support to Cairo worth about $US2 billion, is derided as ''realist'' -- typically with quotation marks -- as well as uncaring and even amoral.

These critics on both Left and Right clearly fail to grasp the very real limits imposed on America's power to implement changes in Egypt and anywhere else in the region, for that matter.  As veteran State Department adviser Aaron David Miller points out in The Much Too Promised Land:  America's Elusive Search for Arab-Israeli Peace (2008), the US finds itself ''trapped in a region which it cannot fix and it cannot abandon,'' a region where Washington is ''not liked, not feared and not respected.''

In these circumstances, it's surely simplistic to denounce Cairo for denying democracy to the Egyptian people.  What if elections brought to power jihadists and terrorist supporters such as the Muslim Brotherhood?  What if voters in Saudi Arabia prefer an Islamist zealot in the mould of Osama bin Laden to a moderate reformer such as Crown Prince Abdullah?  What if electors in Yemen replaced Ali Abdullah Saleh, in power for nearly 25 years, with Islamist hardliners and terrorist supporters?

In his book The Arabs:  A History, Eugene Rogan says that in ''any free and fair election in the Arab world today, I believe, the Islamists would win hands down.''  He goes onto say that ''the inconvenient truth about the Arab world today is that, in any free election, those parties most hostile to the United States are likely to win.''

The point here is not to denigrate the US.  It is that because nations such as Egypt are still modernising, they are open to all the disturbing and dislocating ideological forces that this process will unleash.  That is why democracy could degenerate into plebiscites that, far from leading to moderate and sensible governments, would add legitimacy to authoritarianism and extremism.

As it happens, Islamists have a lot of things in their favour to exploit any political chaos:  the talent to develop a compelling ideology, the enthusiasm to create parties and appeal to supporters, the money to spend on election campaigns and the will to intimidate rivals.

History, moreover, shows how the most unsavoury groups can use elections to win power.  Remember a democratic process produced Chancellor Hitler in 1933.  Two decades ago, Muslim fundamentalists had more or less won free and fair elections in Algeria before the French convinced the government to stop the democratic process.  On the eve of Saddam Hussein's toppling in 2003, elections in Turkey brought to power Islamists who denied the US access to its territory for the liberation of Iraq.

To reiterate:  none of this means that Washington should blindly support the Mubarak regime.  But strongly backing the protesters is also risky.  Instead, the Obama administration should proceed cautiously and prudently and without illusion towards its most important Arab ally.  Call on the government and protestors to restrain from using force.  Keep quiet publicly and work behind the scenes to encourage Mubarak to transfer power in a peaceful manner and on terms that save him face.  And don't agitate for radical change which would merely lead to unintended consequences.

Which brings us back to Wordsworth's ironic poem about 1789.  He recognised that the toppling of an authoritarian monarchy had led to more harm than good, that if the fall of the Ancien Régime represented the birth of the Rights of Man, it also marked the beginning of a tyrannical state and a new age of terror.

Today the spectre of Wordsworth haunts Egypt.  For there is a real possibility that the more democratic and revolutionary Cairo and the Middle East become, the more Islamist, authoritarian and anti-American the region will be.  That's in neither the US nor the Arab world's interest.

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Drowning in Gillard's flood levy spin

The Prime Minister first raised the prospect of a flood levy 10 days ago.  Her government wants taxpayers to believe the levy is an unavoidable consequence of the natural disaster in Queensland -- imposing a special tax is regrettable, but out of the government's hands.

Yet the day she signalled the flood levy also happened to be a day when her minister Kim Carr quietly announced the start of the government's Automotive Transformation Scheme.  This scheme packages up $3.4 billion of taxpayers' money and wires it directly to the dilapidated (but very well connected) car industry.

No one begrudges spending to fix Queensland's damaged infrastructure.  The flood reconstruction is not an optional spend.  But the money the Rudd and Gillard governments have pledged to give the car industry over the past few years has been.

All up, the government will spend $5.6 billion on flood reconstruction in Queensland, New South Wales and Victoria;  $1.8 billion of that will be raised by the flood levy.  The rest, certainly, will come from budget cuts.  For instance, Julia Gillard announced she would cut $234 million of automotive subsidies to help pay the Queensland bill.  But that is a paltry sum, considering the rest of the government's car programs will continue.  Especially considering eliminating the balance of these programs would easily cover what the flood levy is intended to raise.  The full New Car Plan for a Greener Future totals $6.2 billion.

Same with the cuts to climate programs.  It may sound like Gillard has made hard decisions cutting $250 million out of carbon-capture research and $160 million from the solar hot-water rebate scheme.  But simply trimming a couple of the most embarrassing programs -- such as the ''cash-for-clunkers'' election promise -- is hardly aggressive budget cutting.  Governments should be congratulated for any cut of wasteful spending.  But there's nothing about Gillard's cuts that makes the levy a necessity.  It is still a very avoidable tax hike, despite the Prime Minister's claims.

She gave the game away at the National Press Club on Thursday, when she said:  ''The great majority of Australians are ready to contribute'' to Queensland's rebuilding.  Special levies are only enacted when the government feels confident taxpayers will fork out with minimal resistance.  The Howard government was comfortable imposing a gun buyback levy in the wake of the Port Arthur massacre because public opinion clearly demanded action on guns.  We are never charged special levies for unpopular things.  There has been no automobile subsidy levy;  no Kevin-Rudd-wants-a-spot-on-the-UN-Security-Council levy.

So the worthier the use of public funds, the more likely the government will charge taxpayers extra for it.  What is funded out of existing revenue and what is funded with a special levy is a political calculation -- made by politicians with a close eye on what the opinion polls will bear -- not a public finance calculation.

This is the context in which we have to understand the flood levy.  But instead we have heard claims that critics of the tax resent helping flood victims.  Or that the spirit of ''mateship'' requires the government to temporarily increase taxes.  These are emotional arguments designed to achieve political goals.

The politics of the flood levy underlines how momentous the government's decision was to flush the economy with stimulus spending during the financial crisis.  You only get one surplus to spend on a national crisis.  Rudd's ''kitchen cabinet'' decided that crisis was the GFC:  $90 billion worth of spending commitments between September 2008 and May 2009 plunged the federal budget into deficit.  We won't ever know how our economy would have fared if it saved the surplus for a later crisis -- such as the floods.

But the Treasury admitted last year there was no statistically significant correlation between the size of an OECD country's stimulus package and its economic recovery.  Some countries -- Japan, for instance -- spent more than us and yet suffered worse than us.

The debate over the stimulus package is well rehearsed.  But the flood levy makes it necessary to revisit.  The federal budget is rich with fat.  Yet Gillard suggests she cannot find spare change to rebuild the country after an unprecedented natural disaster.  If she genuinely can't -- if there are really no government programs left to cut, no funds to spare and no alternatives to a tax hike -- then the decisions taken over the past few years, which have placed the Commonwealth budget in such a dire fiscal situation, need to be scrutinised more than ever.

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A tax by any other name

Because politicians know voters don't like tax increases, Julia Gillard won't be imposing a flood tax.  Instead, as she announced yesterday, there will be a temporary ''levy''.

The fact that voters usually oppose higher taxes hasn't stopped the Prime Minister -- all that has happened is it has forced her to think of a name for the impost that doesn't have the word ''tax'' in it.  As the radical pamphleteer Thomas Paine noted as long ago as 1776, often when ministers are intent on doing something the public might not like, ministers don't change course, they just find a more clever way of doing it.

''For the fate of Charles the First hath only made kings more subtle -- not more just.''

It's not because of the floods that we've got a flood tax.  It's because of the government's spending profligacy that we're now in the situation that the federal government can't afford the estimated $5.6 billion needed for the reconstruction effort.

The flood tax is estimated to raise $1.8 billion.  To put that amount into perspective, Labor's plague-ridden school hall building program cost $16.2 billion.  If the money wasted on the school building program had been saved there would be no need for the flood tax.  The cash bonuses paid during 2009 -- the $950 payment for people to spend in shopping malls -- were worth $12 billion.

Total spending by the federal government for the current financial year is about $355 billion.  And then of course there's the $40 billion for the national broadband network.

Anyone who's going to be paying the flood tax, that is anyone earning more than $50,000 a year, is entitled to ask how hard Gillard and Wayne Swan looked when they searched for alternatives to a flood tax.

Aside from raising the money for flood recovery, there's the matter of how effectively any of this money is going to be spent.  Based on the government's track record, there's no cause for confidence -- $5.6 billion of infrastructure spending provides ministers and departments with 5600 million different ways to squander that money.

One good thing could come out of the flood tax.  People will now be forced to directly face the consequences of the government's financial mismanagement.  Until now debates about the federal budget have been fairly esoteric to most of the electorate.  Voters have been able to leave it to the economists to argue about the impact of the budget deficit on interest rates, and whether the budget should return to surplus in 2012-13.

Now all of that has changed The flood tax is going to directly hit the hip-pockets of tens of thousands of families who regard themselves as middle class.

Some of those working families might start asking some basic questions.  Such as, for example, why it is the federal budget is in deficit in the first place.  It wasn't the global financial crisis that plunged the federal budget from a healthy surplus into a massive deficit -- it was the deliberate policy decisions of the Labor government, urged on by a panicked Treasury Department.

As we know, most of the government's stimulus spending was unnecessary.  And this is not a statement with the benefit of hindsight.  A handful of economists said at the time that the size and kind of stimulus spending was not needed

As Sinclair Davidson identified last year, analysis of the economic performance of the countries in the Group of 20 since the crisis reveals no statistically significant relationship between the size of stimulus packages and economic recovery.  Working families might also ask why taxes are increasing if the Australian economy is as strong as the government says it is.  It was only on Tuesday this week that in response to the World Economic Outlook statement of the International Monetary Fund, the Treasurer talked about his ''confidence in our own economic outlook'' and how ''Australia's strict fiscal discipline'' would place the economy in a better position than those of many other advanced countries.

The same working families paying the flood tax are those already struggling under the weight of higher food prices and bigger power and water bills.  And a ''carbon price'' (to which the Prime Minister is still committed) is yet to come.

It would be a brave and subtle government that attempted to introduce first a flood tax and then a carbon tax.  It wasn't so long ago that the Labor Party made great play with the slogan that it would look after ''working families''.

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Energy sector wilts under government's solar stress

Shortly before Christmas, federal Resources and Energy Minister Martin Ferguson announced seven proposals were being assessed for two spots in the first round of subsidies for large-scale solar power.

Though dwarfed by the waste demonstrated in the $42 billion Building the Education Revolution, the government's Solar Flagship program aims to provide $1.5bn to assist in the creation of intrinsically uneconomic large-scale solar electricity generation.

Infigen, created out of the carcass of Babcock &  Brown, has received preliminary approval from the NSW government for a 100 megawatt capacity solar farm at Nyngan in the northwest of NSW, the cost of which is $300 million.

The simple arithmetic on the investment costs, assuming an 11 per cent return on capital, suggests the project would require its output to be sold at a price of more than $240 per megawatt hour if it were to be viable.  But $240 per MWh is more than eightfold the average spot market price in the 2010-11 year to date.  So how can the proposal be contemplated?

Well, first, it will receive a subsidy of about $80m from the financially beleaguered NSW government.  In a triumph of hope over experience, the Keneally government hopes the project will ''contribute to the development of the utility scale renewable energy industry in NSW''.  An ambitious Victorian solar scheme sponsored by the previous Labor government was to create a new industry and 10,000 jobs, but was mugged by reality and abandoned, with considerable loss to its commercial sponsor.  Second, the Nyngan proposal aims to get another $100m courtesy of the taxpayer from the commonwealth government.  To earn an adequate return on the $120m of private capital invested would still require a wholesale market price for electricity of $100 per MWh, compared with the prevailing $30 to $40 price.  To bridge the gap, there are further subsidies paid by the consumer as a result of government regulations.

The first of these is the renewable energy requirement, which compels energy retailers to incorporate a rising proportion of uneconomic renewable energy into our electricity supply.  Under present legislation this proportion will be 20 per cent by 2020.  To meet the commitment, the retailer has to buy Renewable Energy Certificates, which represent electricity supply that is not derived from any commercial supply source such as large-scale hydro.  The REC price is presently low due to the overfulfilment of rooftop solar systems (another subsidised renewable scam), but if the REC price rises to $55 per MWh, large-scale solar power systems would start to look profitable if they could sell their electricity at $45 per MWh.

This is feasible since, as a result of the government-created risk of a carbon tax, there is precious little investment in new electricity generation from commercial sources.  The upshot is that prices must inevitably rise for electricity as a whole.  If they rise from the present (somewhat depressed) level of $30 per MWh to $60 per MWh, this would provide a cushion and allow a large-scale solar plant to turn a profit.  Hence, to convert a $300m sow's ear that would produce electricity for a cost that is eightfold its value into a silk purse requires four waves of the governmental magic wand:

• A NSW government grant of $80m.
• A commonwealth Solar Flagship grant of $100m.
• The subsidy from the ''20 per cent by 2020 renewable energy'' requirement, which doubles the venture's returns.
• And, bringing home the proposal's bacon, the government-created risk of a carbon tax, which prevents new commercial supplies being built and is likely to increase the ex-generator national electricity price by about 50 per cent ($20 to $30 per MWh).

Government regulations and subsidies therefore leverage an investment with a market value of $30m to one that can be profitable at a cost of $300m.  The Solar Flagships scheme may not be the most extravagant piece of government expenditure, but the ''mere'' $1.5bn it is budgeted to squander in taxpayer resources serves to illustrate just how inured we have all become to misused government spending.  Moreover, combined with other government distortions of the marketplace, the Solar Flagships scheme is destabilising the commerciality of the electricity supply industry.

As such, it is undermining what was arguably the world's most efficient electricity supply industry, bringing adverse consequences directly to the consumer and to industry competitiveness.

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Micromanagement in the regulatory state

Another year, another 6,369 pages of law.  Spread over 150 acts, that was the Commonwealth's total new legislation in 2010.

Not a bad effort considering their usual legislative binge was interrupted by an election.

The received wisdom about Australia's political and economic history over the last few decades is wrong.

Think we've been living in an era of deregulation?  In an era of small, timid, ''neo-liberal'' government?

The data suggests otherwise.

The Australian Government has been massively, overwhelmingly, and comprehensively expanding its intervention into all aspects of the economy.

Compare 2010's 6,369 pages to the 1980s, when the parliament only passed around 2,000 pages of law every year.  Twenty years before that parliament would pass even less:  just 500.

The first few Commonwealth parliaments were lucky to pass more than 100 pages a year.  In 1907 the Governor-General ticked off on a paltry 17 pages of new law.

It took just a few hundred pages of legislation to set up the Commonwealth.  But 110 years later it apparently takes more than 6,000 new pages to just keep it running.

Admittedly, these figures come with a lot of caveats.  In 2010, Australians didn't have to obey 150 more laws:  some legislation is passed to alter or repeal existing legislation.  Not all of it, by any means, but some.

And the figures don't factor in the immense volumes of statutory legislation implemented by the Commonwealth last year, usually hovering around 2,500 to 3,000 pages.  Or the pages of legislation passed by state governments, which varies between 1,000 and 4,000 depending where you live.  The states implement statutory legislation too.

Yet with all its caveats, looking at the number of pages of law passed each year illustrates two things.

First:  the more laws a government passes, the busier it is.  We have increasingly busy governments.  Australia's legal and regulatory system is being continuously shuffled around.  Continuous change has its consequences.  To take one of the more prominent examples, in the last few years businesses have had to get up to speed with niceties of Workplace Agreements, then the complexities of WorkChoices, and now the nuances of Fair Work.

Second:  the regulatory framework which governs the economy is increasingly complex.  Longer laws are more complex laws.  The WorkChoices act was 762 pages.  The Fair Work act was 651.  People (not just lawyers) have to read and understand those tomes.

Regulation spawns more regulation.  Not all regulation works to achieve its goals, so regulators and politicians just pile more and more rules on top.  And a great deal of regulation is imposed just for its symbolic benefit -- the need to ''do something'' in response to public demand.  The OECD calls all this ''regulatory inflation''.

Condemning the ''volume and complexity of federal laws'', the Chief Justice of the Federal Court of Australia Patrick Keane told the Australian Financial Review Friday that ''opening the tax act is like entering the door to a parallel universe''.

This growth in government control over the economy is hard to reconcile with Kevin Rudd's view that a ''particular brand of free-market fundamentalism, extreme capitalism and excessive greed'' has dominated the last decades.

Take the now-orthodox view the global financial crisis was caused by a lack of regulation.  This view seems to ignore the abundance of regulation governing the banking and finance sector in the United States, and, indeed, globally.

Certainly, in the aftermath of the crisis, a batch of new international banking regulations have been implemented, most notably the Basel III accords.  But rarely is it pointed out there was a Basel I and a Basel II.  Each were substantial regulatory frameworks themselves.

Indeed, the perverse incentives created by Basel II's capital requirements (which encouraged banks to hoard AAA-rated mortgage backed securities) were one of the major causes of the crisis in the first place.

Other regulations administered by the American Securities and Exchange Commission protected the private ratings agencies -- which granted the AAA grades -- from competition.  It gets worse.  Jeffrey Friedman convincingly argued in Cato Policy Journal last year that not even the SEC knew about this latter regulation, which it itself had imposed in 1975.

If there are too many regulations for even the regulators to keep track, then our problem isn't too little regulation.

The expansion of regulation is a bipartisan project.  The Howard government was just as enthusiastic about regulating as the Rudd and Gillard Government has been.

With 6,369 pages of legislation, 2010 was unfortunately an unexceptional year.

So it's time we recognised our political system for what it is.  It's not neoliberal.  Nor is it social democratic.  Australia is a regulatory state -- one in which three levels of government have wrapped society with a complex and confused mesh of rules and laws which micromanage everything we do.

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Myth of economic rent tax

Proposals to tax ''economic rents'' should be viewed with the utmost suspicion -- the tax system is complicated enough with easy-to-understand tax bases.

Everything has a cost and very decision a consequence.  In recent times, the idea of a free lunch in taxation has become quite popular.  This is the notion of taxing rents.

John Passant has proposed that taxing rent could give rise to revenue while penalising monopoly capitalism (''Economic rent ripe for tax'', AFR, January 12).  It is not enough to simply point to the discredited Marxist idea of monopoly capitalism, the idea of economic rent as a basis for taxation itself needs to be confronted.

Economic rent is usually defined as being a return over and above some minimum return necessary to keep a factor of production working.  Economists refer to this as economic profit or super-normal return.  In classical economic theory rent was designated as being the return to land, one of the three factors of production;  the other two being capital and labour.  Land was defined as the bounty of nature.  In that framework taxing a bounty had no consequence -- if you acquire something free it shouldn't worry you to lose it to the tax man.

But nature doesn't surrender its bounties free.  Value is created through the application of capital, labour and entrepreneurial insight.

The classical economists didn't understand value -- they thought it was created by labour inputs or costs.  They quickly ran into the problem whereby some apparently homogeneous assets -- farm land in particular -- were more valuable than others despite labour inputs.  This differential they called ''rent''.

Economists now better understand value.  We understand the value of any resource is determined by an entrepreneur's ability to employ it to create a good or service that can be profitably sold in the market.  Taxing rent is a tax on entrepreneurship and innovation -- something the classical economists didn't understand well.  Modern economic theory does recognise the notion of a quasi-rent -- a temporary source of super-normal profit.  But we know capitalism is characterised by creative destruction and temporary tax bases would be a very poor basis for funding the long-term needs of the modern welfare state.

Taxation is an intensely practical matter.  The government seeks secure and stable revenue while taxpayers seek clear definitions and certainty.  Economic rent does not meet any of those considerations.  This is the great lesson of the bruising mining tax debate.  The government could not define the actual tax base, nor explain what it was doing, and had no idea how much revenue it would raise.  The new mining tax is no different.

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Why greedy Gerry and his mates will win in the end

Gerry Harvey is not Australia's most popular man right now.  It would have taken a hell of a campaign to convince Australians that imposing GST on internet retail purchases under $1000 was not just good policy, but the only fair thing to do.

It's hard to feel bad for the retailers' coalition, which includes Myer, David Jones and Target as well as Harvey Norman, because it seems like they're trying to divert attention from higher prices in their shops, which have nothing to do with the GST at all.  Hence the popular backlash.

But despite their tone deafness, the retailers have identified an issue that will be huge in the future.  For better or worse, the government will eventually be forced to close the GST-free loophole.  The alternative is to admit an efficient consumption tax is impossible in a world of global commerce.

Sure, in 2010, only a tiny percentage of retail sales were online.  But there is no reason to believe Australians' engagement with online retail and services has peaked.  After all, it took some time to get where we are today:  people had to get comfortable with buying goods, sight-unseen, from a website or auction seller.

There's a generation gap too:  82 per cent of Australians aged 25 to 34 reported purchasing goods online, compared to 38 per cent of those above 65.

And the cost of international shipping is becoming trivial.

The UK-based site, Book Depository, is somehow able to beat almost all Australian retailers on price and ship its products across the world for free.  It's a volume game:  the more they ship, the cheaper the shipping for each individual item becomes.  The courier discounts the site has negotiated mean many Australian books are cheaper to ship from the UK than to buy at a bricks-and-mortar store here.

Sites like Book Depository use air freight.  The savings are even more substantial when you ship.

The rise of the shipping container since the 1960s has reshaped and propelled globalisation more than any other innovation.  Where earlier goods would be stowed haphazardly on pallets in small cargo ships, they are now shoved into metal boxes of uniform size, which has changed international commerce to the extent that transport costs are becoming irrelevant.

That's two disruptive changes working in concert.  Driving one side of retail, the revolution of the internet has been proclaimed far and wide.  But the revolution on the other side, in international transport, is just as significant yet largely unnoticed.

The waves of change in retail and industry are immense and, of course, welcome.  Right now, Gerry Harvey may seem like a rent-seeking whinger.  But it is a virtual certainty his campaign is just the first skirmish in a long war between government and consumers who are comfortable circumventing domestic taxes.

As long as the loophole remains, we can expect retailers to try to blur the distinction between overseas and domestic retail.  As a pre-Christmas gambit, Myer announced it was considering building a Myer-branded website in Shenzhen, China, to exploit the GST-free loophole.

A transparently political announcement, but not a stupid idea.  If there's a competitive advantage to be gained from restructuring a business to avoid paying local tax, someone (not necessarily Myer, but someone) will try.

The retailers haven't quite made their case.  At the moment, the logistical hurdles to imposing the GST at the border are insurmountable.  And there's obviously no way to get every online retailer around the world to comply with Australian tax law.

Julia Gillard said last week that levying GST on international purchases under $1000 may cost more than it would raise.  (Customs ain't free.)  That's as good a reason as any to rebuff the retailers.  Yet it's at best a temporary reprieve.  As online commerce inevitably grows, the arithmetic will change.  No government will tolerate watching its revenue hollowed out by changing consumer preferences.

The reaction to the retailers' campaign has been intense, a reminder Australians don't like paying tax very much.  Less tax is better than more tax;  better again is no tax at all.

Yet whether now or in 20 years, the government will have to face the fact that globalisation makes it easier and easier for individuals to get cheap deals.  This includes seeking the lowest tax liability.

Policy makers and bureaucrats designing tax systems have long struggled with the fact that globalisation makes it hard to impose heavy taxes.  We've seen this in the mining tax debate, where miners have threatened to take investment money overseas.

So as we now avoid tax by shopping online, perhaps we might rethink our moralising about those miners or, indeed, the wealthy individuals who protect their earnings in tax havens.

With the internet, tax avoidance is no longer just for the rich.

I think that's a welcome development.  Politicians with big spending dreams will disagree.  Gerry Harvey mightn't be popular, but eventually a government will do his bidding.

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Who's afraid of the big bad GM?

Unlike their American and Asian competitors, Australian farmers face major barriers if they want to grow genetically modified (GM) foods.

GM uses the laboratory rather than trial and error cross-breeding to develop improved seeds.

These provide benefits like higher plant yields, resistance to pests or herbicides and reduced water requirements.

Most farmers are eager adopters of improved technology.  But they and the seed suppliers face hostility to GM technology from activists including consumerist organisations and organic farmers.

Opponents have concocted concerns that the products from GM plants might harm consumers or that the crops might cross-breed with other crops.

Such claims are nonsense.  No serious scientist argues that the technology can be harmful.  But, spooked by the fuss, Australian governments have adopted extremely conservative approaches to approving GM products.

Around the world, approved GM crop varieties have been readily accepted by farmers wherever the seed companies are able to demonstrate cost-effective productivity improvements.

Monsanto's GM soyabean improves yields by 5 per cent and lowers production costs by 20 per cent.

Other companies like Aventis, Dow, Syngentia and Pioneer also offer competitive seed products.

GM crop varieties are now responsible for 70 per cent of US corn and 80 per cent of soy production.  And you can bet your life that the US's notorious litigiousness would have uncovered any problems had they been present.

Due to international trade, almost every consumer in Australia and the rest of the world has been eating GM products for a decade or more, without any adverse effects.

The former Victorian Government opposed most GM farming applications claiming they would harm our image and bring adverse sales effects in key markets.

The groundless nature of such fears is demonstrated by Canadian farmers, whose GM canola dominates the product's international trade.

Under international agreements, Australian regulators must authorise GM foods as long as they are ''as safe for human consumption as food derived from conventional varieties''.  As a result, Australia approves GM canola, soy, corn, sugarbeet, and rice for food consumption.

However, multiple regulatory barriers prevent most of these approved varieties from being actually grown in Australia.

Even when products have been approved for Australian consumption, a successful application to grow them in Australia, at best, takes many years before commercial use is permitted.

The nation is a clear loser when the regulatory barriers prevent better seeds being used.  And even if approval is eventually granted the costly and lengthy trials demanded by Australian regulations impose expenses that the farmer and consumer ultimately must pay.

Australia's regime of regulatory overkill in GM seeds in denying productivity gains to our farmers not only disadvantages growers competing in world markets but also reduces the international competitiveness of agricultural processing businesses and brings higher consumer prices.

Australian agriculture has a proven record of efficiently producing crops in spite of the variability of our climate.

We should build on this and avoid shackling the industry with regulatory restraints, especially when our overseas rivals, including the US, are adopting a more liberal approach to new technology.

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Palin & Co much too easy target

It wasn't long after the Arizona shooting rampage that the airwaves and blogosphere began filling with conjecture about who might be responsible and why.

The answer embraced by much of the media, both in America and abroad, is that the weekend carnage, which left six people dead and 14 wounded, is somehow linked to what leading US left-wing columnist Paul Krugman says is a ''climate of hate'' peddled by ''right-wing extremism''.

Is this really true?  Was 22-year-old Jared Loughner inspired to violence by the likes of Republican firebrand Sarah Palin and the low-tax, low-spending Tea Party movement, which has tapped into the economic anxiety of voters?

In fact, all the available evidence indicates the Arizona atrocity was the act of a psychologically unhinged young man whose bizarre internet ravings put him beyond any ideological pigeon hole.

Democratic partisans and media commentators insist American politics might well benefit by trying to restore civility to public discourse.

They have a point:  some right-wing radio hosts all too often exploit divisive issues, pitting one group against another.

But left-wing pundits can also be vile and vicious in their denunciations of ideological opponents.  Who can forget the many hateful things said about George W. Bush?  Now, the focus of liberal ire is Sarah Palin.

A year ago, the former Alaskan governor posted a map online with crosshair targets representing many Democratic lawmakers, including critically injured congresswoman Gabrielle Giffords, whom she singled out for defeat after they voted for President Barack Obama's healthcare plan.

Palin has also used shooting metaphors such as ''lock and load'' on the campaign trail.

All true.  But, again, the charge goes both ways:  at least one left-wing site also put Giffords on a ''target'' list for primary challenges because her conservative voting record, most notably on border protection, went against the Democratic Party line.

Even Barack Obama is far from immune from this form of politics.  In 2008, he told a Democratic rally:  ''If they (the Republicans) bring a knife to the fight, we (Democrats) bring a gun.''

Clearly, both sides of politics have invoked a weapons metaphor on the campaign trail.  It may be provocative and it may be temperamentally unsuitable for Australian tastes.  But it is hardly evidence of incitement to violence.

Ironically, whereas much of the media have rushed to judgment in the Arizona shooting, the Fourth Estate was far more restrained a year ago in identifying the motivations behind another lone mass murderer.

Recall Major Nidal Hasan, who massacred 13 fellow Americans at a troop training centre in Fort Hood, Texas.  Much of the media cautioned that the public not jump to conclusions about his motivations.

Never mind the ample evidence that showed his shootings were an act of Islamic extremism.

The media obsession with blaming Palin and the US ''culture of hate'' for last weekend's bloodshed has overshadowed the widespread sympathy for the victims of this heinous crime.

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National Curriculum gets our history badly wrong

Julia Gillard began the development and implementation of the national curriculum as minister for education in the somewhat happier days of the Rudd government.  It hasn't gone well.  The curriculum's implementation problems keep piling up.  It's not at all ready to be taught.

The plan was to have the curriculum rolled out in the 2011 school year, but only the ACT will meet that deadline.

New South Wales and Western Australia have decided to delay the curriculum to 2013.  The Victorian government announced recently it would do the same.  But there are problems with what's in the curriculum too.

Take, for example, the history syllabus.  After a full quota of compulsory schooling, Australian students will be none the wiser about the origins and central tenets of liberalism:  the basics of individual rights, representative democracy and the market economy, and the importance of civil society.

Not to put too fine a point on it, but these are the absolute fundamentals of Western civilisation.  And they are missing from the national curriculum.

One need look no further than how the curriculum purports to teach ''struggles for freedom and rights'', a ''depth study'' for year 10 students.

The struggle for liberty against tyranny is one of the most important themes of the history of the past 500 years.  From the English Civil War to the American and French revolutions, the proclamation of the rights of individuals has given us a rich inheritance of liberalism and civil liberties.  That, at least, is how you'd think it would be taught.

But according to the national curriculum, the struggle for individual liberty started in 1945.  Because that's when the United Nations was founded.

To hinge the next generation's understanding of individual rights on such a discredited institution is inexcusable.  And it says a lot about the ideology of the curriculum's compilers:  as if individual rights were given to us by bureaucrats devising international treaties in committee.

Do we owe our liberties to centuries of effort by moral philosophers and revolutionaries opposed to repressive governments?  Or do we owe our liberties to the UN International Covenant on Civil and Political Rights, devised by governments, and which only took force in 1976?  The curriculum implies the latter.

Students go on to study the fight for freedom in the developing world and battles for rights of developed-world minorities.  Worthy topics.  But oppressed minorities were seeking the same rights held by the majority.  Aboriginal Australians wanted full political rights.  Black Americans wanted an end to discriminatory Jim Crow laws.  To teach the struggle for minority rights without mentioning how the idea of universally applicable rights came into being is to distort history.

We could dismiss this distortion as an accident if not for the strong impression it would give students -- that the history of Western civilisation is primarily characterised by the oppression of minorities, not the long, slow, spluttering development and expansion of political freedom, liberalism and prosperity.

Rights denied to racial minorities is a stain on our past, but it is not the sole attribute of our history.  If the struggle for individual rights against the tyranny of government is one pillar of the history of Western civilisation, the other crucial pillar is the boom in wealth and well-being over the past two centuries.

Here too the national curriculum is distinctly lacking.  The year 9 study of the Industrial Revolution includes weeks pondering ''the 19th-century concept of progress'' -- insinuating that a belief in progress is anachronistic.  The syllabus keeps students' attention on labour conditions, social problems and the slave trade.  Again:  worthy topics.  But it is an accepted historical truth the Industrial Revolution was the bed on which our affluence was born.  Hopefully that can be squeezed in between discussions on dark satanic mills, machine-breaking and limits to growth.

And the Industrial Revolution was the period in which slavery was ended.  Slavery has been a constant throughout history.  Its elimination is humanity's greatest achievement.  But introducing slavery in the Industrial Revolution unit suggests something else:  that the invention of modern capitalism was somehow to blame for this ancient crime.

The entrepreneurial spirit of the Industrial Revolution is one we should encourage in students.

Yet the word ''entrepreneur'' appears nowhere in the curriculum.  And when the curriculum talks about ''wealth'', it only refers to the distribution of wealth, not the creation of wealth.

Sure, the ideological assumptions in the national curriculum are subtle.  But they're pernicious.

Students will not be taught the origins of their world.  They'll learn only of Western civilisation's mistakes, while staying ignorant about its extraordinary achievements.

So Canberra's inability to implement the national curriculum may be for the better.

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Howard's Way

Lazarus Rising
By John Howard
(HarperCollins, 2010, 572 pages)

John Winston Howard is Australia's second longest serving Prime Minister and the twelfth longest serving member of the House of Representatives.

Lauded by his admirers as a ''conviction politician'', Howard has arguably had more bile and abuse thrown at him by the Left, the media and at times even by members of his own tribe, than anyone in the history of our polity.  But rather than achieve its intended purpose of forcing him to go away, the abuse only served to strengthen his resolve.

Lazarus Rising is a predictably considered account of his life.  I say life because it is impossible to distinguish his public life from his private life.  I say predictable because it was his opponent's constant underestimation of him that was always one of their greatest mistakes.

The 650-page autobiography takes a helicopter view of his upbringing, his pre-political career, the Fraser government, the opposition years and then his time as prime minister.  Howard recalls the advice he was given by his Evidence lecturer, Len Badham, at Sydney University Law School in 1960 -- ''human recollection is inherently frail, the more so with the distance of time''.  It was a principle which Howard relied on for much of his career.

John Howard's love of family is well known and well documented in Lazarus.  He was brought up in what he describes as a ''stable, lower-middle class home'' as the youngest of four boys.  He describes the influence of discussions of political matters as a ''source'' of the decision to dedicate his life to public service.  The book leaves you with the unmistakable impression that the influence of his mother, Mona, was very powerful in the formative years.

Lazarus also chronicles that Howard, the self-described ''cricket-tragic'', was also ''enthralled'' by boxing and as a young fan he could ''recite, in order, all of the heavyweight champions of the world from James J. Corbett onwards''.  John Howard and boxing is not a combination that jumps readily to mind but maybe this is where he learnt the value of a tenacious spirit.

In John Howard's account, his family were typical of the aspirational Australia that as Prime Minister he sought to develop.  He describes his parents as members of the ''Greatest Generation'':  they gave everything so that the lives of their children would be better than their own.

Quite obviously the death of a parent at a relative young age can have a major impact on the life of the children and this is indeed the case with John Howard.  The death of his father not only saddened him but also, as he was youngest, brought him closer to his mother, who remained a dominant influence on his early years in politics.

University for John Howard was harder than for most.  His poor hearing that plagued his youth made studying in university lecture theatres that much more difficult.  Again the story relayed in Lazarus demonstrates just how singularly determined his personality is.

Following university John Howard moved into the legal profession and found a great influence from lawyer Myer Rosenblum.  This was the beginning of his strong association with the Australian Jewish community.  Far from the Labor myth about John Howard's early career in the law, he was much more than a ''suburban solicitor''.  In fact he partnered a city based firm, but his growing love of policies took over.

It was at this time that he started to take the first steps into serious Liberal Party activities.  It was also at this time that he made contact with his great political mentor John Carrick who was to be a long lasting influence on his career.  Howard says Carrick always ''realised that politics was a battle of ideas -- a philosophical contest -- and not merely a public relations competition''.  Amen to that.

Howard threw himself into the organisational arm of the Liberal Party, becoming President of the NSW Young Liberals and giving him his first exposure to Sir Robert Menzies during a cocktail party at the Lodge, where he says Menzies ''demonstrated his reputed passion for martinis by mixing some for his guests.''

These experiences drove Howard to seek Liberal preselection, initially for the state seat of Drummoyne, and then later the federal seat of Berowra.  He failed on both occasions but his attempts did enhance his standing within the Party.  His early activity in the Party also led to the beginning of his greatest and most enduring partnership of all.  Howard met Janette Parker in 1970 and their relationship was to have a profound influence not just on his personal life, but also his political career.  Howard describes their relationship and its impact on his career in the following way:

''Janette's support and counsel throughout my career has been invaluable.  To share a common interest in one's vocation with one's life partner is a real blessing.''

It was soon after this that John Howard was preselected as the Liberal candidate for Bennelong;  an endorsement he would hold for another 33 years.

Howard entered parliament in 1973 and Lazarus deals with his amazingly rapid rise through the ranks.  He became an early supporter of Malcolm Fraser and backed him in both ballots to topple Billy Snedden.  Howard describes how he was drawn to Fraser's strength, despite criticisms from colleagues that Fraser was far too conservative and thus as a divisive figure.  Some things change, some do not.

Howard's early backing of Fraser was a wise decision for the new and ambitious backbencher.  He was quickly promoted to the new Fraser Ministry as the Minister for Business and Consumer Affairs.  This is where his intense commitment to workplace reform began.  It was John Howard as minister who first applied the secondary boycott provisions to trade unions in the Trade Practices Act -- a decision that provoked a typically understated ACTU President Bob Hawke to say ''if this goes through there will be blood on the streets.''

In a remarkably short period, Howard was appointed Treasurer and it was during this period that he began to develop his understanding of the need for economic reforms to build the Australian economy.  Howard commissioned the Campbell Report into the Australian Finance System but it was current events that rung the bell in Howard's mind about the desperate need for Australia to modernise its economy.  He became intellectually interested in proposals for an indirect tax and initiated the small steps to the debate that would take another 20 years to eventually win.  This understanding of the need for reform ensured that in opposition he would reject the easy political path of opposing reform and support some of the Labor Government's most contentious economic reforms.

The pain of the long years in opposition, the ups and downs of the battle with Andrew Peacock, the destructive and ill-fated ''Joh for Canberra'' push and his utter frustration with being overlooked for Leader by the younger generation in the early 1990s, led John Howard to believe his time had passed.

Working for John Howard, it was my observation that he had a willingness to learn from mistakes, internalise and improve.  He was a student of politics.  If he made a mistake he would rarely make the same mistake a second time.  Throughout Lazarus, Howard quite readily admits to making mistakes in his first stint as Leader, mistakes he resolved he would not make again.

Another great Howard characteristic was his courtesy.  Even in difficult times, and in his office in 2007 there were many of them, Howard was unfailingly polite.

An often unnoticed aspect of the Opposition years was the intense level of policy development that the Coalition went through.  Both Future Directions and Fightback! were developed in this period guiding the agenda of the eventual Howard Government.  It's a lesson of history that should be a reminder to those of us who currently occupy the opposition benches.

When John Howard was elected Prime Minister in 1996, he came to office having served a significant apprenticeship -- 23 years in parliament, including time as a minister, Treasurer and Opposition Leader.  It's a stark contrast when compared to the two most recent prime minister's, Kevin Rudd and Julia Gillard, who both came to office with around nine and eleven years parliamentary experience respectively.

Howard says he ''did not come to office resolved to turn the nation on its head'' and that he ''was not so arrogant as to presume that I should inflict on the Australian people a new vision for the nation''.  Rather he wanted the changes he wished to bring ''would more directly echo the instincts of the Australian people''.

This instinct guided the way he sought to govern.  Shortly after retaking the Liberal leadership in January 1995 he said:

I've always believed in an Australia built on reward for individual effort, with a special place of honour for small business as the engine room of our economy.  I've always believed in a safety net for those amongst us who don't make it.  I've always believed in the family as the stabilising and coherent unit of our society.  And, I believe passionately in an Australia drawn from the four corners of the earth, but united behind a common set of Australian values.

On 24 November 2007, after 11 years in government, the Howard Government was defeated.

Howard accepted the decision with grace and described Australia as ''stronger, prouder and more prosperous'' than it was at the beginning of his term in 1996.

The journey from March 1996 and November 2007 and all of its difficult decisions and debates remind us just how significant the Howard Government was and just how underwhelming its successors have been.  It makes you wonder why Julia Gillard hasn't learnt the lesson that if you don't drive the agenda, your government will be eaten up by events.

Unsurprisingly, Lazarus details at some length the achievements of the Howard government.  At the forefront of those achievements are Peter Costello's 1996 budget, which Howard describes as the ''most important of all the budgets delivered'', bringing Australia back to surplus and setting the foundations for the years ahead.

It also provides an account of John Howard and Peter Costello's introduction of tax reform against unrelenting Labor opposition, a reform that now seems to have nearly universal agreement.

The Howard and Costello partnership was arguably the finest in Australia's history.  Like most enduring and successful relationships, it had its ups and downs.  And no autobiographical account would have been complete without recalling those ups and downs.  Howard lauds Peter Costello as Australia's best ever Treasurer but he also writes about the tension in their relationship over the leadership of the Liberal Parry.

People often forget that our Westminster system actively encourages competitive tension, bringing out the best in the participants involved.  The fact is that for the period of their partnership Howard and Costello never let this competitive tension get in the way of governing to the best of their ability.

In my assessment, it is not important whether Howard and Costello can find an agreed version of historical events, but rather it is the fact that they are both political giants who did great things for our country that matters.  The fact is they could not have done it without each other.

Lazarus gives a thorough and detailed account of the difficulty of gun reform and the subsequent issue of Pauline Hanson.  It is not surprising to those who know him that he lists gun reform as one of his finest achievements in office.

The Howard Government reformed our outdated workplace laws and took on the militant maritime unions on the waterfront.  Peter Reith's changes ensured that Australia's waterfront productivity is now globally competitive.

Indigenous policy is an area John Howard spends much time working through, which may seem odd to some.  But I believe that John Howard and the reasonable elements of the indigenous leadership undertook a journey from mistrust to a mutual respect of each others ideas.  In his final months in office John Howard took a very courageous but necessary and overdue step in taking direct action on the shocking situation in the Northern Territory.  Many will argue he took too long to do this, and maybe that is right, but I believe the book explains his journey towards understanding the stakes better than he did when he first took office.  This was not about symbols, it was about reality.  I will never forget the anger that he showed on the day the Little Children Are Sacred report was released.  This to me marked just how far he had come.

In several chapters he deals with his Government's major foreign policy decisions.  Paul Keating famously said before the 1996 election that Asian leaders wouldn't deal with John Howard.  It proved to be another Keating con.  During the stewardship of John Howard and Alexander Downer, Australia grew closer than ever to our Asian neighbours in both trade and security, while at the same time continuing to strengthen our friendships with the United States and Britain.

No account of the Howard Government would be complete without detailing the introduction of WorkChoices.  ''Billy gets a job but who cares?'' is the title of chapter that deals with this period.  If readers of the book expect Howard to offer a mea culpa and claim that the decision to implement these changes was wrong, then they misunderstand John Howard.  The title of the chapter describes exactly why John Howard sought to reform our workplace laws.  Not because of some hatred of the union movement, as many want to believe, but because he wanted to make it easier for people to work.  Howard does acknowledge that politically the reforms damaged the government but he stands by them as good policy.  He also stands by the need for ongoing economic reform and he criticises the Rudd/Gillard government for their re-regulation of the labour market.  Howard reminds us that the human dividend of a well managed economy was an unemployment rate of 3.9 per cent and faster growing real wages.

Lazarus Rising is an important read for anyone who is interested in Australian political history.  We will not see another John Howard -- he is one of a kind.  In the modern political era his tenacity and unwillingness to concede is second to none.  He is not without imperfections, but Howard is a patriot, a conservative, and a believer.

John Howard's contribution to Australian public life was outstanding and arguably will never be matched.  His government was one of political giants, with him the biggest of all.  He describes his government in the following terms to finish the book:

Long years in government -- which had been our good fortune -- are of little avail unless the power and opportunity it brings are put to good purpose.  Over almost 12 years we had done that in every area of Commonwealth Government responsibility.  Australia was indeed a stronger, prouder and more prosperous nation than it had been in March 1996.  That undisputed legacy was to gather strength over the ensuring few years.

He uses the book to stand up for his beliefs, for his friends and for his contribution.  He deserves to sit with Sir Robert Menzies in the upper ranks of our leaders.

This book is an important addition to that legacy.

Socialism: Not just for Europeans anymore

The New Road to Serfdom
By Daniel Hannan
(HarperCollins, 2010, 200 pages)

It is a bold decision to name your book from one of the most influential books in liberal thinking.  But Daniel Hannan's The New Road to Serfdom is not some second-rate spinoff of Friedrich Hayek's classic.  Instead, it applies the messages and the warnings of The Road to Serfdom to the United States of today.  Of all people, Hannan has real-world experience with the growth of a powerful ''super-state'', having been a Member of the European Parliament since 1999.  This period has been a time of intense centralisation, in both political and regulatory terms.

Hannan's main argument is that America has usually been sufficiently decentralised;  that the problems associated with a federal government in such a populated area are diminished when decisions are made close to the people that are affected by them.  The constitutional and cultural reverence of decentralisation in America results in greater outcomes for efficiency, and indeed for liberty.  Yet under the Obama administration, both efficiency and liberty are threatened by the rapid trend towards centralisation -- from local to state, state to federal, legislature to executive, national to supra-national, from citizen to authority.

In 1812, Thomas Jefferson wrote of America that ''Our country is too large to have all its affairs directed by a single government'' and that a centralised state ''... will invite the public agents to corruption, plunder, and waste''.  This was at a time when the population of America was under 8 million.  At present, the population under the European Union is over half a billion people, and the trend is moving towards centralisation rather than away from it.

And such a transformation has been occurring for many years.  While easily ridiculed for its often-absurd standardisation policies (think the Euro-sausage in Yes Minister), the reality of the EU's power is far more sinister.  The 2008-09 ratification of the Lisbon Treaty (despite its primary rejection in Ireland and no other countries holding referendums) resulted in the formation of a formal constitution (and thus, the creation of a single legal personality), and made EU legislation legally binding.  It is a telling indictment of Europe, says Hannan, rhat 84% of British law is made in Brussels.

The European Commission is probably the most damning example of the EU's faceless power.  Despite having a monopoly on the initiation of legislation, it has no democratic accountability.  England's delegate to the EC is Baroness Ashton of Upholland, who was not only not elected to that position, but has never been elected to public office at all.  Now, she is the High Representative of the Union for Foreign Affairs and Security Policy and Vice-President of the European Union.

It is this transformarion from ''mild'' planning full control to that Hayek warned of in The Road to Serfdom in 1944.  Hayek's argument was that central economic planning can not exist, in more than a transient sense, in a nation that is not by common definitions tyrannical.  Planning requires enforcement, enforcement requires strength of government, and strength of government is tyrannical, or has the potential to be used for the purpose of tyranny.  The EC has already implemented financial regulation, instituted bail-outs, banned incandescent light globes and is now looking at banning smoking in all public places.  It is no surprise that the EU has seen a consistent decrease in their share of world GDP since 1970.

While Europe has been marching down this road to serfdom for several decades now, the US is threatened with a similar situation.  The Obama administration is centralising and growing power on a domestic level:  see Obamacare, cap-and-trade, increasing the government's role in welfare, government ownership of automotive companies and banks, labour market regulation and increased spending.  Furthermore, President Obama has called for engagement with the International Criminal Court, undermining territorial jurisdiction and national sovereignty.  All of these actions take power further away from the people affected by it.

Hannan's message, however, is not specific to America.  While primarily using American and European narratives, the underlying theme of decentralisation is applicable worldwide.  In particular, Hannan pays great tribute to American institutions such as open primaries, direct election of local officials, recall mechanisms and term limits -- proposals which could be adopted in any country.  While these are fairly modest proposals, his suggestions for EU states are essentially equivalent to secession and nullification -- considered radical in the US setting.  Sadly, these concepts would be difficult to apply in an Australian setting.

Australia does, however, face a similar challenge to Europe and the US.  While true competitive federalism has been undermined for a long time, recent developments seem to have accentuated this trend.  The Rudd/Gillard reforms of healthcare funding, the ''Education Revolution'' and the signing of the Kyoto Protocol have all empowered authority at the expense of individuals.

The New Road to Serfdom does not have the erudite, scholarly tone of Hannan's speeches, or even of The Road to Serfdom itself.  Rather than being pitched at ''the socialists of all parties'', it is aimed at Middle America.  It is not concerned with detailed policy analysis but broad ptinciples of liberalism.  And sadly, it is these broad principles, abandoned in Europe, that are slipping away from America.

Bowling in the dark

Disconnected
By Andrew Leigh
(New South, 2010, 208 pages)

Back around the turn of the century, social capital was the hottest idea in the social sciences.  Popularised by Professor Robert Putnam of Harvard University in his book Bowling Alone, politicians, academics and commentators were entranced with the idea of a link between economic prosperity and how connected a community is socially.

Prodigious amounts of research later, and the evidence is in:  the more connected a person is to their community and the broader society, the greater their economic opportunities, the healthier they are and the more prosperous the entire community.  High stocks of social capital help not only the socially connected but also others in the community.  A fact borne out every term when small groups of parents do all the fundraising, sport coaching and excursion supervision yet every child in the school benefits from these efforts.

Yet social capital never lived up to its public policy promise and is now regarded as somewhat old hat.  A good idea in search of a policy ''fix''.  Academic (and political) ideas are fickle and while the decline of social capital can be plotted across a wide range of indicators, the public policy bandwagon has moved on.

Andrew Leigh's slim new book Disconnected suffers from this waning of interest in social capital.  Professor Leigh displays a long-term interest in social capital and has published widely about it in the past.  And it is true that the data needed to write a more substantial book is lacking.  He has made the best of what limited data exists.  But this book reads as if he was interrupted part way through a long-term project.  Unlike much of his more considered work, much is left hanging and too many of the conclusions and suggestions at the end of the book have no link to the data he presents at the beginning.

Given Professor Leigh's recent election to federal parliament as the Labor MP for Fraser it is difficult to erase the feeling that this book was rushed out before it was ready, in a clearing of the decks from his old life as an economics professor at ANU.

Everyone agrees that more social capital is a good thing.  Sure, there are squabbles about the kind of social capital that delivers the benefits.  It seems we need both bonding capital -- a few tight knit relationships with people of like minds and interests, and bridging capital -- many looser relationships that bring together people who perhaps only have one thing in common.  But overall, we agree that benefits flow to individuals when we have communities where people look out for each other, trust strangers, volunteer and join associations.

Hence the concern over the apparent decline in social capital since the halcyon days of the 1960s when many more of us were members of political, service, religious, sporting and other organisation.  Professor Leigh draws together what limited data there is to remind us of the marked declines in associational membership -- we are much less likely to belong to a union, go to church or join a political party than fifty years ago.

The data shows associational membership peaked in the 1960s when a third of Australians were active members of a community organisation.  Today, the membership rate is one fifth of what it was.  Moreover, the nature of associational membership has changed -- more project based than the regular monthly meetings of Rotary, a Liberal Party branch or Masonic Lodge.

Associational membership is particularly important for social capital because associations often bring together people from different backgrounds.  Whether that is different social classes, different ethnicities or different religions, joining a group is a great way to get to know people and break down stereotypes that lead to hatred and bigotry.  As fewer Australians learn to interact with others outside their social circle, they never develop the skills necessary to trust strangers and behave with civility.  Professor Leigh makes the clever point that in experiments of public politeness across many countries, New Yorkers score very highly and they do so because they are used to dealing with strangers all day long.  (By contrast, Sydney came 24th out of 35).  Getting on with people we don't know is a skill that needs practice, joining a voluntary association can be one method of practicing.

One of the most interesting sections of Disconnected is the religion chapter.  It is well known that fewer people profess religion than in the past and that the weekly pews of the established religions are emptying out.  With only an estimated 14 per cent of Australians now attending church weekly, down from about 40 per cent in the 1950s, but 70 per cent still professing belief, Australia has moved to a largely nominal relationship with religion.  The organised churches, despite their regular election-time pontificating, no longer have personal access to the vast blocks of voles they could once claim to command.

Professor Leigh dcmonstrates that the rise in unbelief only accounts for a third of the drop in church attendance.  Many more people have just stopped going to church.  And those who do go are old, and getting proportionately older than the community -- quite simply, younger people don't attend church much.  The big change in church-going is due to women.  As women have entered the workforce they have reduced their church going.  In the 1960s 60 per cent of female Catholics went to mass weekly while only 42 per cent of male Catholics did.  By the 1980s the proportions were similar -- "36 per cent of women and 32 per cent of men''.  Without the women to create the church community the non-church service parts of organised religion fall away and being a parishioner collapses down to passively attending church for an hour on a Sunday morning.  Yet church attendance is clearly a builder of social capital.  As Professor Leigh notes, ''those who attend church regularly are more likely to know someone who could help them out of financial difficulty, and to have a friend of a different social class.''

Trust and reciprocity are at the heart of social capital.  How likely we are to trust each other and how much we think other people in the community trust each other are strong indications of positive behaviours and high stocks of social capital.  Interestingly Professor Leigh makes the point that the more someone thinks people in general can be trusted, the more they themselves are trustworthy.  So next time you need to do a business deal with someone you don't know, the right question to ask is ''Do you think most people are trustworthy?'' rather than ''Can I trust you?''

Across society, levels of trust have important and measurable effects.  Trust is fundamental to social and business interactions.  And lack of trust in strangers is often a clear warning sign of subsequent anti-social and hoon behaviour.  If everyone is out to get us then perhaps we should get them first -- a common response from alienated youth who cause so much of the vandalism, street violence and intimidation.

Disconnected offers up ten ideas to boost social capital, from hosting a street party to volunteering.  It is all very much in the ''think global, act local'' mindset seen in consumer programs to make an environmental difference.  You too can improve social capital by dobbing your neighbour in for parking on the footpath just as you can save the planet by saying no to plastic bags.  This is by far the most disappointing part of the book.  For a person who has given up academia to enter parliament there should have been at least some acknowledgement that government policy has a chilling effect on many of the ten ideas Professor Leigh is urging us to undertake.

The number one suggestion is to hold a street party and we're told:  ''can I let you into a secret?  It's almost no work to organise''.  Clearly, Professor Leigh has never tried to do so in Victoria where councils now provide ''street party kits'' to help hapless residents navigate the labyrinth of rules and regulations.  From street closure permission (six week wait) to written food handling instructions to be distribution to anyone helping serve up, it's all enough to put off even the friendliest neighbour.  In January 2008 I calculated it would have cost a citizen in the City of Whitehorse over $1,000 to hold a street party -- and that's not including the food and drink.

Another suggestion in Disconnected is to give time, to volunteer in some way.  Again, a worthy individual proposal but there is no thought about the barriers put in front of volunteering.  Whether it is mandatory skills training irrespective of prior experience, police checks to make sandwiches at bush fires, or bans on unlicensed cake stalls, the list of barriers to both formal and ad hoc volunteering are growing.

Disconnected makes a useful contribution to the social capital by drawing together what limited data there is.  Andrew Leigh understands, far better than other Australian social capital writers on the Left, that free markets and lower levels of regulation are positives for social capital.  Through repeated commercial interactions, trust is built.  As Professor Leigh notes, it is the one-time commercial transactions, such a buying a used car, where things are likely to go pear-shaped.  But the book is too light on analysis of the role government has played in the rise and fall of social capital.  The rise of nanny-state regulation, restricting us in every area of associational membership, volunteering and trust, has been inimical to sustaining social capital.  As a new MP Andrew Leigh is well-placed to attack this head-on.  In Disconnected he has missed his chance.

In the footsteps of Keith Hancock

A Three-Cornered Life:  The Historian WK Hancock
By Jim Davidson
(UNSW Press, 2010, 624 pages)

Keith Hancock's stature as an historian is emphasised by a quote from Stuart Macintyre, prominently cited on the dust jacket of this new biography, that ''if there were a Nobel Prize for History, Hancock surely would have won it.''

Hancock is generally regarded as one of the big three Australian historians of the twentieth century, along with Manning Clark and Geoffrey Blainey.  However, where their reputations were largely built by writing about their own country, Hancock's came from writing about other places.  Major focuses in his career included the ltalian Risorgimento, the British Commonwealth, the British war effort during World War Two (he was its official historian), and South African politician, Jan Smuts.

While pursuing these subjects he was based at the universities of Oxford, Birmingham and London and, as he captured in the title of his own memoir Country and Calling, he believed that to pursue his calling, he had to be away from his own country.  Author of this weighty new biography, Jim Davidson, turns this duality into an aspect of a three-cornered life by pointing out that there were also lengthy periods when a third country was seminal to Hancock's work -- Italy earlier in his career and South Africa later -- indeed, ''he wrote far more on South Africa than he did on his homeland''.

Yet, despite the majority of his work being produced offshore and being about overseas subjects, in his home country Hancock's reputation still in large measure hangs off the book he wrote in his early thirties, during a short and generally unhappy stint at Adelaide University.  Published in 1930, Australia has remained the benchmark by which other short histories of the nation are judged.  As Andrew Kemp wrote in 100 Great Books of Liberty ''it is essential reading for the Australian liberal primarily for Hancock's eloquent criticism of the counter-intuitive policies of "state socialism" and protection, and the connection of those policies with Australia's democratic ethos.''

Hancock was never particularly proud of the book, not seeing it as forming a continuum with the rest of his opus, regarding it as "off the main highroad that I was trying to follow in my teaching and thinking'' and thought his next major work ''800% better''.  In 1968, he reflected on the book in the Review and found ''its style showy and its pronouncements sweeping'' and thought he had been ''too fond of ticking off his fellow countrymen''.  The view Hancock held at the time of writing Australia that, in Davidson's words, ''some return to classical liberalism was essential'' bore the influence of time spent lecturing in Perth under the guidance of Edward Shann.  However, over the years, Hancock became less sympathetic to free-market economics.

Late in life, he became a passionate environmentalist, an interest reflected in his pioneering environmental study of the Monaro region of NSW, Discovering Monaro, and even more so in his campaign against the building of the telecommunications tower atop Black Mountain in Canberra.  He also adopted various other left-wing stances, such as opposing Australia's alliance with the United States, although on matters of etiquette he remained a conservative, insisting that younger academics wear ties for formal occasions.

Oddly, the work Hancock partially disowned has probably stood the test of time better than those of which he was more proud.  The British Commonwealth has nowhere near the significance that Hancock foresaw for it.  Jan Smuts was undoubtedly a major figure of the twentieth century and, in many ways, worthy of the inordinate amount of time Hancock invested in producing four volumes of documents and a two volume biography.  However, even by the time Hancock had finished the work, the tidal wave of support for black majority rule amongst the Western intelligentsia had rendered the nuances of the different strands of white South African politics somewhat esoteric.

If his historical interests were different from Clark and Blainey, Hancock shared with them the characteristic of being the son of a minister of religion, in his case an Anglican one.  Born in 1898, his childhood was divided between Bairnsdale in east Gippsland and the Melbourne suburb of Moonee Ponds.  He attended Melbourne Grammar, Melbourne University and, after a short spell in Perth, won a Rhodes Scholarship which saw him initially at Balliol, before securing a fellowship at All Souls, a college described by Davidson as ''perhaps the most exclusive club in England ... then at the peak of its influence''.  It was to have a profound influence on Hancock not just in a positive practical sense, helping secure future appointments, but also because ''just as his native country had become centred in his mind on a mythical Bairnsdale, so Oxford and even England became essentialised in All Souls.''

Other than the short spell in Adelaide, Hancock did not return to Australia to live until he went to the ANU when he was almost 60.  His on-again, off-again attitude towards whether he should take up a position in Canberra is shown to be consistent with many other periods of his life.  Davidson opines that it seemed that ''in order to function properly, Hancock seemed to need a well-developed option on standby,'' also noting other aspects of his personality such as having ''a streak of pedantry in him''.  Sometimes Hancock seemed to struggle for self-awareness.  For instance, soon after he was knighted, Hancock was ''mortified'' to discover that his new status had scared away an old Australian friend who was visiting London, and was surprised that others found him ''rather pleased with himself.''

However, it needs to be noted that Hancock was certainly not an academic detached from real life.  During the Second World War, he not only spent his days studying the economics of the war effort, he spent long nights during the Blitz acting as a fire-spotter, sometimes at St Paul's Cathedral.  The following decade, one of the more unusual episodes in his career, was being sent by the British Government to Uganda in 1954 as a constitutional expert to try to negotiate the future of the province of Buganda after its leader had been expelled.

A tricky aspect of writing this biography for Davidson was deciding how to treat Hancock's marriage to his first wife, Theaden.  His source material was limited by the fact that, not only did Hancock scarcely mention his wife in his own auto-biographical writing, he also destroyed all their personal correspondence soon after she died.  Davidson places her in her own chapter to avoid random appearances in the narrative based solely on the availability of a scrap of evidence.

The chapter begins by noting that ''if people know anything about Keith Hancock beyond his writings and his academic career, it is that he had a difficult marriage''.  Probably most of his colleagues regarded her as ''difficult'', but it is clear that this label could equally be applied to Hancock.  However despite many difficulties in their married life, there was still obviously a strong bond between them, which saw them become particularly close during Theaden's final illness.

The Hancocks were unable to have children and this is one of a number of disappointments that lend a streak of sadness to the book.  This is certainly present from the death of Hancock's brother Jim on the Western Fronr in 1916 onwards, or perhaps, given the way he reflected on it, even from the time he left his idyllic early childhood in the Victorian countryside.

While there are aspects of this book, such as the insights into personal life, which probably would not be to its subject's tastes, overall it is a biography that lives up to Hancock's three watchwords as a historian -- attachment, justice, span.  And thanks to an eye-watering list of research grants, Davidson has been able to travel the globe in the footsteps of his subject, confirming Hancock's oft-used quote from Tawney that ''historians need not only documents, but boots.''

Davidson has produced a substantial biography of an important Australian.  It is also worth noting that this is a magnificent looking book.  UNSW Press are to be congratulated for demonstrating what is obvious to any bibliophile, but sometimes obscure to others, that there is more to the reading experience than just words on a screen.

The Power of One

On The Record:  Politics, Politicians and Power
By Laurie Oakes
(Hatchette Australia, 2010, 400 pages)

The Canberra press gallery has over 150 journalists.  All of them are very competitive, seeking to break that story that will propel them to national fame, or add the suffix ''-gate'' to some scandal they have uncovered.  Australians would struggle to name a handful of these journalists, just as they would probably struggle to name more than a handful of politicians.

But there is one political journalist most Australians could most likely name -- Laurie Oakes.  He has been reporting politics from Canberra for over four decades.  He has broken the stories that have dominated national headlines -- from the 1980 Federal Budget that he obtained before its release, revealing the secret Kirribilli agreement between Hawke and Keating and the impending challenge;  and, most recently, the cabinet leaks before and during the 2010 federal election campaign.

When national politics is the centre of attention, it is Laurie to whom people turn their television dials.  Even more interestingly Laurie has over 19,000 followers on Twitter -- illustrating that in the age of competing and new media, reputation and credibility remain important attributes when people want news.

It is also Laurie to whom journalists and politicians turn, as his coverage inevitably sets the tone of the next media cycle.  It is Laurie to whom leaders turn when they want to ''get out a message'' or lance a political boil through his regular Sunday morning interview, for they know it can set the media agenda for the day and coming week.  It doesn't always work out that way, though -- as more than one political leader has seen an interview with Laurie represent the end of their aspirations.

Laurie's longevity in the press gallery is extraordinary, as far as I can tell second only to the legendary Alan Reid (who served in rhe gallery for just under 50 years) in the mainstream media.  The first prime minister Laurie covered was John Gorton.  Gough Whitlam had recently been elected leader of the opposition.

I emphasise this point as it is important to understand this length of time when considering this book.  The longest serving current MP is Philip Ruddock, first elected in 1973, by which time Laurie had already seen several election campaigns.  There is virtually nothing that Laurie hasn't seen.  Whether it be political coups (he has seen 11 leaders toppled), struggling governments, scandals, debates over Australia going to war or relations with the United States and China (both of them!) Laurie has seen these debates evolve over more than anyone currently in Canberra.

But this book is also different to the others so often released about politics.  It is not a retrospective analysis of an era or series of events.  It is a collation of pieces written and published at the time, along with an analytical introduction, covering major events over more than forty years.

To students of politics this is of real value.  While books such as Kelly's The End of Certainty are valuable studies of a period, they are not primary sources -- whereas this book is just that.  To read the article on the Iraqi Loans Affair is to read what was published in the now-defunct Sun News-Pictorial at the time, and to gain a better understanding of the political frame and mindset ot that period.

What this book does is illustrate how some challenges in politics are constant -- a handy lesson for new politicians, journalists and commentators who might think they have discovered something new or profound.  For example, the following passage could have been written at many times over the past four decades.

It seems especially middle-class Australians who make up the bulk of the population, are feeling remarkably insecure and vulnerable.  They're alarmed at the rapid pace of social and political change, bewildered by it and deeply pessimistic about the future.

And while in recent months there has been a great deal of discussion about the role and impact of new media on political debate, why do we think these concerns are new?

The handlers of all the candidates fear gaffes and awkward questions.  They prefer their candidates to be seen on evening news shows making public appearances they can more closely control, and to spend millions of dollars on TV commercials, where without challenge they can hammer home simplistic themes.

The first excerpt was written in 1988, the second a quote from a Time article that Laurie wrote about in 1984.

Another excerpt, written in 1992, is particularly predictive about the impact of the ''town hall'' style of community forum debates we saw for the first time during the 2010 campaign.  Writing about the impending 1993 election between Keating and Hewson:

It would be instructive to watch Keating and Hewson dealing with questions from people outside the political club -- either a cross section of Australians or a group of undecided voters ... this format would not only result in more substance in the debate, but also reduce name-calling and personal attacks because community disapproval of that kind of behavior would quickly become apparent in a town-meeting context.

The new element of this book, apart from the introductory sections to each chapter, is the new material about the extraordinary political execution of Kevin Rudd in June 2010.  Laurie is able to outline just how extraordinary this coup was, having seen leadership ''transitions'' on both sides.

When Laurie attended Julia Gillard's address to the National Press Club just prior to her calling the 2010 election, those who knew Laurie also knew to stay tuned.  As he outlines, Laurie rarely attends the Press Club.  When he does, something is brewing, and it is not usually good news for the speaker.

On this occasion Laurie simply asked Julia a question about that topic she was so keen to avoid, her role in the execution of Rudd.  The look on the new Prime Minister's face said it all -- shock, bewilderment and a little fear.  It set the scene for further revelations during the campaign that did so much damage to the Labor campaign.

It also illustrated the value of journalism in its most pure form.  In a Lateline interview with Leigh Sales upon the release of this book, Laurie was passionate about this most basic element of journalism, and this undoubtedly explains his longevity in this role as well as his standing:

... I think my job as a journalist is to try and find out what's happening, get as much information as I can.  But what I learn I should make public, it's what I'm paid for, what the public trusts me to do ... I don't think we can't keep secrets because we think that we know better than the voter.  We can't protect the voter from information.  That's anti-journalism.

In politics, too often we think we have discovered something new.  Staffers, politicians and journalists who think there is a new way to do things would do well to read this book.  The truth is that in reality very little is genuinely new in politics, and a lack of knowledge of history can be a very dangerous thing.