Consistent Message Needed

During his visit to Australia in early June, Californian professor, Jared Diamond, told a crowd of 850 that included government Ministers, journalists and business bosses, that we should phase out agriculture altogether in Australia.

He said that we are living on the world's most fragile continent and in a period of climate change.

I was part of the audience at Brisbane's Queensland Performing Arts complex, where he has often clapped and cheered during the hour-long address.

I assume the message and mood were similar at the Sydney Writers Festival where Professor Diamond spoke at two closing ceremonies.

Just before Professor Diamond arrived in Australia, NSW Farmers Association organised a 2,000 strong drought rally in Parkes.

The rally generated lots of interest in the metropolitan media and I saw images of the same desperate farmer driving his tractor mindlessly about a dusty paddock on television.

As I watched the image replayed several times on one breakfast television show I thought, "be careful what you wish for".

The farm lobby may have got the television coverage and drought aid it wanted, but I suspect the images mostly just reinforced the perception in metropolitan Australia of farmers as environmental vandals flogging a dry landscape.

I found it most incredible that at the same time NSW Farmers Association President, Mal Peters, was telling metropolitan Australia there was a crisis in the bush, he was floating the idea of a $10 million media campaign to improve the image of rural Australia in the cities in this newspaper (The Land, June 2nd, pg. 7).

Jared Diamond's new book Collapse:  How Societies Choose to Fail or Survive, says Australia's agricultural sector is so weak that we import most of our food.

The recently published Australian Agriculture and Food Sector Stocktake tells a very different story to that of both Mr Peters and Professor Diamond.

Australian agriculture accounted for around a quarter of Australia's merchandise export in 2003-2004 at $26 billion while food and food products imports were valued at $5.6 billion for the same period.

And I kept remembering that it was only two years ago, in 2003-2004, that we had a record wheat harvest at 25 million tonne, worth more than $4 billion dollars, and accounting for roughly two per cent of Australia's total exports.

Agricultural exports will be down this next year because of the drought, but the long term prognosis must be good.

As I outlined on June 2 (Wine to Save Environment, The Land, pg 14) Australian primary producers are by and large the cleanest, greenest and most efficient in the world -- a world that needs to be fed and clothed.

The Metropolitian elite seem as blind to the fact that Australia is a significant provider of clean-green food and fibre, as Australia's agricultural lobby is to the depth of anti-farming sentiment in metropolitian Australia.

Worse, the farm lobby seem oblivious to the fact that a campaign that demands drought aid the year after a record wheat crop is going to do immesurable damage to its credibility, particularly during a visit by Professor Diamond.

There are real issues of economic and environmental sustainability that need to be addressed in rural and regional Australia.

It would be best if these were addressed honestly and quickly.  A sector that uses natural resources and is not seen as viable has no chance of maintaining access to water or getting a better deal on vegetation mangement.

A public relations campaign as advocated by Mr Peters won't help, unless the rural sector and the lobbyist that represent them have honestly determined whether or not Australians farming is sustainable, including during our inevitable and frequent periods of drought.

The image of a farmer mindlessly driving his tractor about dusty fields might kept some farmers afloat in difficult times, but the end result may be that it makes it difficult for really viable farmers to make a living even in good times.

Either Australian farmers are resilient and environmentally responsible, or they aren't.

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Amnesty trapped in the past

The Secretary-General of Amnesty International, Irene Khan, described Guantanamo Bay as the "gulag of our times" in her foreword to the organisation's most recent annual report.

In doing so, she reveals just how pathetic the so-called human rights groups has become.

Just about everyone expected this year's Amnesty report to contain the usual catalogue of predictable attacks on the US and its allies waging the global war against terrorism.

Shrill attacks on the democracies fighting terrorism have become common since September 11 from groups such as Amnesty International and Human Rights Watch.

By anyone's assessment, this was not a stellar year for the US due to the revelations about treatment of prisoners at the Abu Ghraib jail.

The criticism was both inevitable and legitimate.

But in labelling Gunatanamo Bay a gulag, Amnesty and its secretary-general have left themselves open to serious questions about their political motivations and credibility.

Likening Guantanamo Bay, where some of the world's most vicious terrorists are held among the 600-odd detainees, to the Soviet Union's system of forced-labour prison camps where as many as 25 million suffered in the most horrific and brutal of circumstances, really makes you wonder if you can trust anything that Amnesty has to say.

The Wall Street Journal in an editorial called the comparison pro-Al-Qaida propaganda.

Even The Washington Post, a regular critic of Guantanamo Bay, took aim at Amnesty, observing that turning a report on prisoner detention into another excuse for America-bashing undermined Amnesty's legitimate criticisms of US policies.

Not content with this, at the launch of the report, Amnesty's US executive director, William Schulz, went further, suggesting foreign governments should detain and prosecute senior Bush Administration officials;  presumably just like Chilean dictator Augusto Pinochet.

The partisan nature of Schulz's and Amnesty USA's comments should be understood in the context of the revelations by The Washington Times that both gave thousands of dollars to John Kerry's presidential campaign.

So much for impartiality.

Canadian Justice Minister Irwin Cotler has correctly observed that terrorism constitutes a fundamental assault on human rights.

However, groups like Amnesty are trapped in a time warp and continue to view the greatest threat to freedom as the actions of democratic governments.

While September 11 caught democracies around the world unawares, it also caught the human rights industry ill-prepared to confront an environment in which the greatest threats to human rights come not in form of governments but non-state actors such as al-Qaida.

The difference between many governments and the human rights industry since September 11 is that while governments have moved to address this new strategic reality, human rights groups are still in denial.

This was made painfully clear during Khan's last visit to Australia when Lateline's Tony Jones observed that while she claimed human rights were under siege in Western democracies, she never levelled the same charge against terrorists.

In response, Khan amazingly admitted "the reason why we are focusing on governments is because we expect the governments to change and to respect the obligations that they have assumed as political actors on the treaties" and adding that "we cannot have the same expectations of the terrorists".

Amnesty's one-sided approach to human rights and its partisan and ideological commentary may be good for their Left-of-centre funding base but will ultimately diminish what little is left of their reputation and moral authority.

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Nuclear power cost doesn't add up

There has been a sudden outbreak of debate on nuclear power that has brought some unpredicted re-alignments of views.  Leading the charge has been Bob Carr, Australia's most green senior politician and previously an indefatigable opponent of all things nuclear -- even waste repositories for spent medical materials.

Offering sympathy to the NSW Premier is Treasurer Costello and Deputy Prime Minister Anderson.  Ranged against him are Premiers Beattie and Bracks as well as Commonwealth Energy Minister Macfarlane.

Nuclear power is clean and far and away the safest source of electricity.  Even the badly run Soviet nuclear plants have proved to be operationally reliable -- the one disaster at Chernobyl in 1986 resulted in loss of life of some 31 people with around 10 further deaths from thyroid cancer.  As the sole fatal accident this leaves nuclear far ahead of coal and hydro-electricity in its safety record.  Storage of waste is low cost and, absent ill-informed political clamour, sites are easy to find.  In cost terms, nuclear is competitive with other forms of electricity generation in Europe most of Asia and probably North America.

Propelling the current Australian debate is the sudden realisation that the demonisation of coal to which many politicians have conspired threatens some serious repercussions.  For NSW, the need for new electricity generation plant was foreshadowed in the Green Paper the Department of Energy issued earlier this year.

That Paper deflated the notions that solar and other exotic renewals together with "smarter" energy use could provide the answers for NSW.  At the political level this laid open the State's energy vulnerabilities.  Having employed greenmail to undermine new coal fired stations and without access to major local gas reserves, NSW must either increasingly rely on other states for its electricity supply or seek a new solution.

For NSW to rely on inter-state electricity means higher costs than in Queensland and Victoria.  Cheap power in Australia is not only a bonus for the householder, but is a magnet has been the backbone of the nation's manufacturing sector.  It is one of the defining characteristics of the nation's comparative advantage.

Hence Mr Carr's humiliating retreat from an anti-nuclear policy that pandered to the economic vandals within the ALP and among its wider support group.  By the same token, behind the equally loud anti-nuclear protestations of Mr Bracks and Mr Beattie is their states' low power costs that can attract investment from NSW as well as from overseas.

The tensions caused by politicians having cultivated vocal propagandists for greenhouse but also fearing higher power costs are not unique to Australia.  But they are sharper here due to our low cost energy and our energy intensive industry's vulnerability to competition from developing economies that carry no Kyoto greenhouse tax baggage.  Australia, somewhat uniquely, has even cheaper options to nuclear energy with its vast resources of easily recoverable coal.  Queensland with the lowest cost coal reserves in the world has the most to gain and lose.  Victoria is not far behind.

The cheapest source of nuclear power identified in a recent study by the University of Chicago uses a reactor process called Gas Turbine Modular Helium.  This would be 35 per cent more expensive than coal based electricity generated in Victoria.  However if additional greenhouse taxes were to be levied this would change markedly.  The EU already has a limit on emissions which translates into a tax of around $30 per tonne.  If levied in Australia such a charge would increase coal fired generation by 80-90 per cent (and gas by 40 per cent).  This would leave nuclear (which would pay no CO₂ charge) as Australia's cheapest option.

Australia already has several watered down versions of a carbon tax chaotically applied with different impacts in different states.  Victoria has so far resisted pressure for such parochialism.  Recent murmurings from the Prime Minister may foreshadow intensified carbon imposts.  However, there is no prospect of the rapidly growing Asian economies, which are Australia's main competitors, adopting such measures.  And the French and Dutch referenda on the European Constitution will damage the chances of a pro-Kyoto EU seeking to impose severe emission restraint policies on other countries.

Nuclear power stations may have a role in Australia but if economics is the determinant, it would only be a niche role.  Adopting nuclear power here by taxing coal power out of competitiveness would destroy our cost advantage vis-á-vis other nations.  To take up a slogan of the greens, "If nuclear is the answer for Australia, it shouldn't be".

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Let's capitalise on our nuclear assets

It's an irony that Australia, possessing a large proportion of the world's reserves of uranium and making major technical contributions to the disposal and enrichment of uranium, reaps no economic benefit beyond mining.

Theoretically we could benefit from nuclear power directly by using it to generate electricity, but on present costings, and without the benefit of distorting carbon taxes, this is not competitive.

Our best options are to go a couple of steps further than mining.

One kilo of reactor fuel costs $US2400 ($3144) to take through the fuel cycle from birth to death.  The front end of the cycle is mining, at 25 per cent of the total cost, enrichment at 23 per cent and fabrication into fuel rods at 10 per cent.  The back end of the fuel cycle is the reprocessing and disposal of the spent fuel.  This takes up the balance of costs at 42 per cent.

It's clear, looking at the added value through the nuclear fuel cycle, that mining uranium is a substantial part of the fuel cycle.

The further value added entry points for Australia would be uranium enrichment and disposal.

With three uranium mines in operation our current exports are at the annual rate of 11,000 tonnes of yellowcake.  This would yield some 1400 tonnes of enriched uranium and, after use in power plants, a similar amount for disposal.

Australia has the potential for creating an enrichment industry.  A plant with capacity to yield 1400 tonnes of enriched uranium annually would have revenues of $700 million.

The local development of laser enrichment by Silex Systems could be a technical advantage that gives life to this opportunity.  The process has demonstrated technical success and preliminary commercial viability.

In addition there is waste disposal.  The problem of long-term disposal of radioactive waste affects all developed countries that use radioactive isotopes for medical and industrial purposes.

Countries that produce nuclear energy or have research reactors such as Australia have an even greater challenge, as nuclear reactors produce wastes with very high initial levels of radioactivity.  High-level waste takes at least 1000 years before its activity becomes similar to that of a uranium orebody.  Thus wastes need to be safely isolated for extremely long times.

There are two pathways for disposal, reprocessing and disposal of separated wastes or direct disposal of spent nuclear fuel.

Australia has made a major contribution to immobilising separated waste with Synroc, invented by the late professor Ted Ringwood of the ANU and refined by the Australian Nuclear Science and Technology Organisation.  This is under active examination in the UK.

Though processing spent fuel from many countries, the two major European reprocessors do not offer final waste disposal.

Since the 1960s, extensive efforts have been made to identify and characterise suitable disposal sites and to demonstrate their long-term safety.  With few exceptions, the scientists and engineers involved have concluded that the technology exists to safely dispose of nuclear wastes.

Australia may be in a unique position to offer safe, long-term burial of waste given the geology of our continent.  An industry price estimate for disposal is $1 million per tonne of spent fuel.  This price is comparable with the cost of nuclear fuel reprocessing and corresponds to a cost of approximately 0.4 ¢ per kilowatt hour for a nuclear power plant.

Even restricting the waste to Australian-sourced uranium would be a substantial market of 1000 to 2000 tonnes of spent fuel annually.  The repository, which is essentially a deep underground mine, would cost between $1.5 billion and $2.5 billion.

There are very good reasons to host waste from any source.  Australia's twin stabilities, geological and political, offer splendid advantages.  Both Indonesia and Japan lack our geological stability and providing a repository would enable their sensible development of nuclear energy.

The disposal of spent fuel and high level waste in Australia is a major opportunity.  It is not only a significant business but also a major enabling step for the use of nuclear power, an important contribution to nuclear safety, countering proliferation and a major contribution to our region.

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NSW Workplace Deaths Bill 2005: An Unsafe Act

Occasional Paper

1. OVERVIEW

Throughout Australia, under existing criminal law a person can be jailed if his or her criminal actions cause the death of person in a work (or any other) situation.

Since about 2003 the New South Wales government has been seeking to extend Occupational Health and Safety (OHS) legislation so that anyone found guilty of causing the death of someone at work would be sent to prison.  In doing so it is adopting criteria for imprisonment that differ from those that apply under normal criminal law.

• The government first tried the Workplace Fatalities Bill 2004.  It was a badly flawed bill that attracted widespread opposition.  It has been withdrawn.
• The government is now making another attempt by introducing into Parliament on 27 May 2005 the Workplace Deaths Bill 2005.
• It is an improvement on the first attempt.
• But it has major, fundamental flaws that need fixing before it should be allowed to pass.

2. WHAT'S WRONG WITH THE WORKPLACE DEATHS BILL 2005?

The Bill applies different measures of work safety liability and responsibility to different persons for the same offence.  This is unjust and makes workplaces unsafe.  If

• a manager does something that causes a work death, the manager is likely to go to jail;
• an employee does exactly the same thing as a manager that causes a work death, the employee is unlikely to go to jail.

This is wrong.  Everyone –– employees, managers, company directors, supervisors, union officials, politicians, independent contractors, public servants — should be held equally and similarly responsible for their actions.

This paper explains how the Workplace Deaths Bill 2005 creates this injustice and how it needs to be fixed.

3. URGENT CONSIDERATION

The Workplace Deaths Bill 2005 is currently before the NSW parliament for consideration.  It should not be passed in the current session of parliament.  It should at a minimum be subject to extensive scrutiny and review.  It requires significant amendment before being passed.

4. THE WORKPLACE DEATHS BILL IN OHS CONTEXT

In Australia work safety laws are primarily the responsibility of state governments.  However, in March 2005 Australia assumed an obligation to adhere to international OHS principles under an international treaty.

The international obligations are set out in Convention 155 of the International Labour Organisation.  Signatory countries are required to adopt OHS laws that apply liabilities and responsibilities according to what people "control" within what is "reasonably practicable" for them to do.  These guiding principles impose obligations on all parties involved in all aspects of work situations.  No one is exempted.

The Workplace Deaths Bill 2005 is an amendment to the NSW Occupational Health and Safety Act 2000.  The Deaths Bill must be understood as structurally dependent on the 2000 OHS Act.  Both the 2000 OHS Act and the Deaths Bill breach international OHS principles and obligations.

NSW OHS legislation can also be compared with the Victorian OHS Act 2004, which complies with international OHS principles and obligations.  The Victorian OHS Act 2004 is a helpful model for improving NSW OHS legislation.

The Workplace Deaths Bill 2005 complies more closely with international obligations than its parent Act, but still not closely enough.

The key international principle of OHS law that the NSW 2000 OHS Act breaches holds that individuals are to be held responsible and liable for matters and events over which they have reasonable and practical control.  Under the NSW OHS Act, people may be sent to jail for a second offence.  The Deaths Bill provides for the imprisonment of people for first offences relating to matters and events over which they do not and cannot have reasonable and practical control.

This amounts to a breach of natural justice.  It will result in liability denial and transference in the workplace, refusal to make decisions or to be accountable for them, and blame-shifting.  This is a recipe for unsafe work cultures and practices.  Increased workplace injury and death in NSW could be expected as a consequence.

5. HOW THE WORKPLACE DEATHS BILL 2005 BREACHES INTERNATIONAL OHS OBLIGATIONS, CREATES INJUSTICE, AND WILL LEAD TO DYSFUNCTIONAL SAFETY CULTURES IN NSW WORKPLACES

The key to understanding the Bill is section 32A, which states;

(2) A person

1. whose conduct causes the death of another person at any place of work, and
2. who owes a duty under Part 2 (of the 2000 Act) with respect to the health or safety of that person when engaging in that conduct, and
3. who is reckless as to the danger of death or serious injury to any person to whom that duty is owed that arises from that conduct is guilty of an offence. [This means fines and/or jail.]

Duties under Part 2 of the OHS Act 2000 allocate liabilities and responsibilities substantially differently between managers and employees.  Part 2 states:

5.1 MANAGERS AND DIRECTORS

8 (1)An employer must ensure the health, safety and welfare at work of all the employees of the employer.

This breaches international OHS obligations.  This simple sentence omits the words "reasonable", "practical" and "control", which would make the Act consistent with international obligations.  The 2000 Act thus imposes an absolute obligation on the employer:  that is to say, the mere fact that an accident happens, whether or not the employer did anything to cause the accident, makes the employer automatically guilty of an offence under the Act.

This is reinforced by the defined responsibility under the 2000 Act that requires employers to "ensure" safety.  The Industrial Relations Commission (IRC), through which prosecutions are conducted, has interpreted the word "ensure" to mean "guarantee, secure, make certain".  The application of this interpretation replaces the international obligation of "reasonable, practical control" with an unreasonable obligation to provide absolute guarantees.

In its present form the Act assigns responsibility and liability to employers for accidents over which they did not have reasonable and practical control.  Employers (directors and managers) continue to be prosecuted and fined under the Act for matters over which they did not have control.

In effect, a manager is declared guilty before a trial occurs.  It is only in attempting to disprove such statutorily predetermined guilt that managers can use in their defence ideas of reasonable and practical control.  This is a distortion of OHS international obligations, not an application of them.

5.2 EMPLOYEES

Compare the duties of an employee, which are set out under Part 2 thus:

20 (1) An employee must, while at work, take reasonable care for the health and safety of people who are at the employees place of work. ...

The insertion of the word "reasonable" creates the wide discrepancy between the ways managers and employees are treated.  The use of the word "reasonable" is in compliance with international OHS obligations and prevents the employee being presumed guilty just because an incident has occurred.  To put it bluntly:  a prosecution against an employee must prove the employee's guilt, whereas a manager must disprove his or her predetermined guilt.

This distinction between the presumed guilt of the manager and the presumed innocence of the employee is a key feature of the OHS Act 2000.  It is carried over into the Workplace Deaths Bill 2005, and as a result a manager is much more likely to be jailed than an employee for exactly the same offence.  This amounts to inequality, unfairness and injustice.

5.3 COMPARISON WITH VICTORIA.

The NSW approach differs strongly from that of Victoria, which complies squarely with international OHS obligations.  The Victorian 2004 OHS Act states;

Clause (21) "An employer must, so far as is reasonably practicable, provide and maintain for employees of the employer a working environment that is safe and without risks to health".

Clause (25) "(1) While at work, an employee must -

1. take reasonable care of his or her own health and safety and
2. take reasonable care for the health and safety of persons who may be affected by the employee's acts or omissions at a workplace".

Under the Victorian Act, employers, employees and all other parties involved in work situations are treated equally.  The Victorian Act consistently allocates responsibilities to all persons in any situation according to what the person can "reasonably" do "... in relation to matters over which the person has management or control".

6. DISCUSSION

OHS laws should be considered as akin to driving laws.

The purpose of driving laws is

• to establish clear and fair guidelines and to educate drivers with a view to creating safe driving cultures and practices in the community;  and
• to prosecute people who break the laws.

Safe driving cultures and practices, along with safe roads and safe cars, are seen as keys to reducing injury and death on the roads.  However, we accept that, even with the safest roads, the safest cars and the best driving cultures and practices, drivers do not have full control at all times, crashes will still occur and people will be injured and killed.  But public policy aims to bring the number of car accidents and deaths down to zero.  This may be a dream, but the community rightly aims to realise it.

So it should be with work safety laws.  Public policy must target a dream of zero deaths and injuries in the work situation.  We must attempt to realise this dream.

As a consequence, we are prepared to jail drivers and people at work who flagrantly break the law.  But in designing and applying road laws we hold every driver to be equally responsible for his or her actions.  We do not make drivers wearing white shirts more or less guilty of an offence than drivers wearing red shirts.  We do not say that drivers from a particular ethnic background or sex are more or less guilty of offences than drivers of another ethnic background or sex.  We know that such discrimination would be unjust and nonsensical.

If driving laws declared that drivers from one ethnic group were less safe drivers that those from other ethnic groups, those deemed "unsafe drivers" would stop driving or claim they belonged to another ethnic group.  Conversely, those deemed "safe drivers" would be encouraged to drive badly, knowing that if they were involved in an accident with an "unsafe driver" the latter would automatically be guilty.  The logic of this is so obvious that no one would remotely contemplate such legislation.

Not so with NSW workplace laws.  These laws are based on the assumption that some people (employers) in the workplace can be deemed legislatively guilty and others (employees) innocent regardless of how an accident occurs.

Victoria considered this approach in 2003/04 when its OHS laws were scrutinised by the Maxwell Review.  The Review strongly rejected it, as did the subsequent 2004 Victorian OHS Act.

In NSW, however, the OHS laws are a discriminatory nonsense that encourage the type of unsafe practices that everyone knows would emerge if the same logic were applied to road laws.  The NSW Deaths Bill envisages jailing managers simply because they are classified as managers.  The same persons, if classified as employees, would not be jailed.

7. WHAT TO DO?

The Workplace Deaths Bill 2005 should not be passed in its current form.  The 2000 OHS Act should be repealed and replaced with law that conforms to international OHS treaty obligations.  The Victorian OHS Act 2004 provides a workable model as a starting point.

Nevertheless, the Deaths Bill has begun to move away from the breaches of international obligations contained in the 2000 Act.

8. HOW THE DEATHS BILL IMPROVES ON THE 2000 ACT

• A right of appeal to the Criminal Court against imprisonment is allowed.  The 2000 OHS Act allows no right of appeal even for jailing on a second offence.
• A defence of "reasonable excuse" is added to the defences allowed under the 2000 Act.  However, this is only a mild improvement compared with the strong defences available to employees presumed innocent.
• The 2000 Act holds directors and managers of corporation to be guilty of the offence of a corporation even if the directors and managers were not involved.  At first glance the Deaths Bill appears to have been removed this provision, but this is subject to legal concern that the apparent removal is a subterfuge.  The wording of the deaths bill needs to be checked closely on this point.
• The 2000 OHS Act gives unions powers of prosecution.  The Deaths Bill removes these powers, but concern exists that the Minister may have the authority to authorise a union to undertake prosecution leading to the jailing of a manager.  The wording of the Deaths Bill needs to be checked closely on this point.
• The 2000 OHS Act provides for appeals against acquittals.  That is, it creates "double jeopardy" by enabling a person to be charged again for the same offence even after being found innocent on the first occasion.  The Deaths Bill removes this provision.

9. OTHER UNDESIRABLE ELEMENTS OF THE BILL

Other parts of the Deaths Bill are defective and should be rejected.  Most of the problems arise because the Deaths Bill has to be considered a creature of the 2000 OHS Act.  Many of the fundamental flaws of the 2000 OHS Act are carried over into the Deaths Bill.

• A right of appeal against imprisonment jailing is allowed but a right of appeal against fines is not.
• Second offences still can lead to jail under the 2000 Act, but none of the improvements made in the Deaths Bill apply to second-offence prosecutions.
• Prosecutions occur under the jurisdiction of the IRC, whose purpose is to manage the alleged culture war between employers and employees.  The IRC is an instrument of industrial politics and is not an appropriate jurisdiction for OHS issues.  The IRC should have no powers over criminal matters and no power to jail.

10. WHY NO COMMUNITY OUTRAGE IN NEW SOUTH WALES?

With bad law, it often takes a little while for people to understand what is happening.  They start doing so only when it begins to affect them personally.

If a law were passed today saying that the earth was flat, people would treat it as nonsense and ignore it.  However, if a government then tried to police such a law and stopped ships sailing further than 100 km from the shore for fear that they would fall off the earth, there would be a popular demand that such nonsensical legislation be repealed.

The 2000 OHS Act is bad law whose effects were not immediately obvious in 2000.  It takes time for accidents to occur and prosecutions under bad law to have an impact.  The impact of the OHS law is limited to a small number of people subject to rorted prosecution processes.  But this small number of people experience personally the full aggression and might of an unjust state.  They become beaten, cowed and usually silent.

However, in NSW enough prosecutions have now occurred for knowledge of the full impact of the Act to begin to seep into community consciousness.  There is a slowly emerging realisation of the injustice the 2000 OHS Act.

The Deaths Bill is designed on similar lines to the 2000 OHS Act, which masks its injustice.  If passed in its present form, it will take some time for the community to realise the extent of injustice in the Act.  Some people will be imprisoned unjustly.  Who serves the jail terms will be determined by luck rather than justice.  Somewhere in the NSW community are some managers and directors whose unhappy fate it is to work in a business where a death may occur.  If this occurs where they work, they will find themselves predetermined as guilty and prosecuted accordingly, find that disproving their guilt under the NSW OHS Act is near-impossible, and spend time in jail.

These individuals will be broken by the full force of an unjust state.  The only question is:  who are these unknown people?

Deconstructing Corporate Social Responsibility

An address to Corporate Social Responsibility in Focus 2005:  Unlocking the Potential of CSR to Improve Stakeholder Engagement & Drive Sustainable Performance
Rydges Hotel, Melbourne, 7-8 June, 2005

OUTLINE

• What is CSR
• Context of CSR
• Who Promotes CSR
• Deconstructing CSR
• Case Studies
• Strategies

WHAT IS CSR

Corporate social responsibility is a political ideology that wants private interests to be subsumed by public interests, narrowly defined.

CSR views corporations as a forum to resolve societal problems. ⁽¹⁾  If every problem is your corporation's problem, then you have a problem!

CSR is a construct of non-owner, non-contract and non-government interests to regulate corporations.  CSR suggests that a corporation is not only responsible to the law, its investors, customers and employees, but also to "society".  CSR does not, however, solve the problem of knowing what interests constitute society.

Knowing the weight and obligations that attach to each interest has been the very stuff of statute and common law.  For example, there are three concepts of fairness -- equality, meritocratic, and liberal or market based.  These are in conflict, indeed for a corporation to suggest a single concept as being solely its measure of fairness would be disastrous.  Choosing the right balance in the mix of the three has been the task of government for a very long time.  Choosing the mix for a corporation is difficult and a never ending job.  At best, CSR provides no guide as to how to achieve the right balance, at worst it provides a biased guide.

The principle division in the law has been between the interests of those with a contractual relationship and those without.  The law can provide standards for both the performance of the contractual relations (the conditions to fulfil a valid contract) and the standard of non-contractual or public obligations such as taxation, emission standards and the like.  Both sets of rules and standards, but especially public obligations, are established by consensus through the democratic process and the courts.

CONTEXT

CSR works on private dealing between corporations and NGOs to bypass the public consensus position.  The NGO seeks to extend its agenda and influence, and the corporation seeks to manage the risk to its reputation. ⁽²⁾

Those who promote CSR operate as if there is no human rights, environment, or social justice law, or means of enforcing them.  On the contrary, "rights" by other names have been progressively established for decades.  For example, workers' compensation & occupational health and safety to protect workers, building safety codes to protect patrons, privacy law to protect consumers, anti-discrimination to protect minorities, planning codes to safeguard community amenity, contracts to protect individual property rights, taxation to make a "social" contribution, and a thousand more.  Invoking broad UN conventions on rights insults the work of thousands who have gone before to flesh out the meaning of these concepts.

Similarly, the "sustainability" and "social justice" mantra are an insult to the entire fabric of the environment protection legislation and infrastructure and welfare state, established decades ago and immeasurably stronger now.

It is a difficult time to govern.  The same governance problems arise for corporations.

It is clear that voters [stakeholders] have, over time, become better informed about their governments' [corporations'] performance.  Voters [shareholders] expect more of government [corporations] and their expectations are more divergent, consequently it becomes more difficult for government [corporations] to "identify any feasible set of policies that would satisfy its constituents". ⁽³⁾

The information society has caused a "creative destruction ... disrupt[ing] existing social patterns.  This in turn creates anxiety and dissatisfaction in large parts of the public".  Changes in social and cultural attitudes have caused a "change in the balance between the individual and the community", which has led to a long-term trend toward the individual, a trend which "undercuts the authority of institutions". ⁽⁴⁾

The political manifestation is a broad movement to participatory democracy, which has implications for governance. ⁽⁵⁾

WHO PROMOTES CSR

Into the institutional authority gap has stepped NGOs not only as political actors, but also as governance institutions in their own right.

"Widespread disenchantment with conventional institutions has created an opening for new, alternative forms of authority". ⁽⁶⁾  Mistrust is not confined to government and officialdom but extends towards other members of the public.  "Encouraging people to fear, mistrust, complain and litigate is seen as a socially responsible act.  Consequently, consumer advocates do not merely reflect the existing state of mistrust:  they play an active role in educating people to believe the worst in most circumstances." ⁽⁷⁾

NGOs ARE POLICY COMMUNITIES

Not all are constituency based.  For example, WWF, Australian Consumers Association and Greenpeace are not membership based organisations.  They are supporter based, and have a self-perpetuating leadership.  The Australian Council of Social Services is a federation of state and territory COSSs, whose membership consists of policy professionals (e.g. social workers).  It is a union of professionals lobbying on behalf of their clients, the "disadvantaged" who are not members.

EDUCATION AND POLITICAL PARTICIPATION IN AUSTRALIA 2003

Graph is based on a sample of over 4000 adults derived from the Australian Survey of Social Attitudes for 2003.  It displays the percentage of those from different educational backgrounds -- low, middle and high -- who participate in different forms of political activity.  The activities are arranged approximately in descending order of participation.  Only in the most basic form of political participation -- voting in an election -- is there an equivalent participation between people of differing educational background.  To the question, "did you vote in the Federal election 2001", the answer was "yes" for between 97 per cent and 99 per cent of respondents in each category, which means that there is no statistically significant inequality between education categories. ⁽⁸⁾

The category, campaign activity, consists of those people who were working with people of the same concern, or boycotted or bought a product as a form of political statement, or contacted a politician or government official. ⁽⁹⁾ The data showed that such activity was overall less common than voting and highly unequal, ranging between 45 per cent of the least educated population and 60 per cent of the most educated population.  The data also contained questions relating to membership of non-government organisations.  These were divided into two classes, service NGO and policy NGO. ⁽¹⁰⁾ Service NGOs consist of those people who joined a self-help/consumer health, special needs, neighbourhood or community-based group.  Participation was low for all and unequal, ranging between 11 per cent of the least educated and 17 per cent of the most educated.  The demonstration category ⁽¹¹⁾ -- protest, march or demonstration -- showed very low levels of participation and high inequality in participation, ranging between 7 per cent of the least educated to 18 per cent of the most educated. ⁽¹²⁾  Policy NGOs consists of those people who were a member of a political party, or a lobby group to change specific government policies, or a group working to improve the environment, or an environmental or aid organisation, or a group that promotes rights.  These groups showed the lowest level of participation of all activities and a high degree of inequality in participation, ranging between 5 per cent of the least educated and 9 per cent of the most educated. ⁽¹³⁾

Overall, the Australian data show that as the requirements of greater commitment on the part of the citizen increase, the overall level of participation declines, and the inequality in participation rises in favour of the more highly educated.  These results place in doubt claims of NGOs to represent civil society and clearly show that advocacy or participatory democracy suffers from the problem of very unequal use.  It also seems to suggest that increased public access to political activity places greater demands on citizens.  Clearly, there are limits to the extent to which citizens can participate in ruling themselves.  When these limits are reached, as they are in activity more extensive than voting or seeking out the help of a politician or a local group, questions arise about the representative nature of those prepared to make the sacrifices required for higher order participation.  A recent study of the internal democracy of a selection of advocacy NGOs, for example, found that "in most [NGOs] policy is initiated by a small group that includes CEOs and some board members, including the chairperson". ⁽¹⁴⁾  NGOs are policy communities, people who share a viewpoint.  Whether their viewpoint should be granted privileges above others is an essential question for government and corporate managers who wish to engage with these communities.

DECONSTRUCTING CSR

CSR is in practice a mixture of philanthropy, business development, and reputation risk management, but little in the way of the theoretical public policy elements such as "social justice", "environmental sustainability" or "human rights".  Those corporations that attempt CSR in a comprehensive way -- The Body Shop, Starbucks -- invariably have the same niche market for goods and services as does Oxfam and WWF.

The dangers of corporations involving themselves in full-blown CSR are that they may begin to play the role of government, either in service provision or deciding public priorities, thereby weakening government, or that they are distracted from their core responsibility and therefore lose value for their real stakeholders, that is, owners, workers and customers.  If a corporation engages CSR for strategic purposes, for example, to forestall further regulation, it may nevertheless be hastening regulation by giving credence to the concept.

CSR diverts the corporation from its purpose, and places it, inappropriately, in the role of government.

In the long run the dominant company will be the one that can afford to be socially responsible and managerially correct ... "Corporate chief executives are being distracted by the demands of management experts and government officials to do 'what's right' rather than what good business sense suggests is best". ⁽¹⁵⁾

"The distinguished industrialist, the late Lord Hanson once explained how he chose his next target for a takeover.  He said it was easy.  'We just look at which firms are active in the Confederation of British Industry (CBI).  We know they are not on the ball.'  For CBI today he might well substitute CSR." ⁽¹⁶⁾

MULTIPLEX

Multiplex is having trouble completing Wembley stadium for 2006 FA Cup.  This is a serious problem!  The scheduled completion date was December 2005, it is now expected by the end of March 2006, in time for the FA Cup Final to be played in May 2006.  That is cutting it fine!

The major problem occurred in a dispute with one of two major sub-contractors for the steelwork.  The sub-contractor had a cap on the price and has withdrawn claiming to be owed by Multiplex.  Multiplex now have to rely on a second sub-contractor who has non-capped prices.  Hence, prices to Multiplex will blow out, and with only one contractor, less will be achieved in a given timeframe.

What interests are at stake? ⁽¹⁷⁾

• If Arsenal makes the final (and Thierry Henri is fit), there will be a riot if the stadium is not ready!
• Multiplex and its shareholders stand to lose $109 million.  Share prices have slid from over $6 at the start of the year to just over $3 in May.
• The principal owners, the Roberts family will lose their $50 million indemnity.
• Third parties claims will cost millions.

Multiplex has to expend all of its energies to complete an ambitious engineering task, within contract, within the laws that govern the standards expected by the UK government, especially safety standards for the workforce and the patrons, impact on the environment and satisfy returns to investors who had many other choices for a return on their capital.

What gives "implied stakeholders" the right to interfere with any of this?

I cannot find any reference to CSR in the Multiplex annual reports, but if the FA Cup is back in England in May (FA Cups have played in Wales), Multiplex will be, in my view and in the view of millions of soccer fans in England, not only socially responsible, but heroes.

BANKS

Major Australian banks are dabbling in corporate social responsibility, some are making considerable efforts in ensuring that they gain top marks in CSR indexes devised by various parties such as Reputex.  However, just last month, the Reserve Bank warned the banks that mortgage lenders have allowed householders to take on larger debt burdens than was prudent only a few years ago.  What is the "good" in a bank turning out its lights early or using both sides of its photocopy paper in order to rate well on an NGO formulated CSR index if it lowers its credit standards for housing finance?  The real business of banking is not easily measured, to the extent that it is:  well-resourced and experienced regulators, such as the Reserve Bank, are well placed to report to shareholders on the main game.

TILL DEBT DO US PART ⁽¹⁸⁾

A husband uses a joint account to "trade" in foreign currencies and loses over $1 million of the family savings.  The bank and the husband fail to keep the other signatory, the wife, informed.  The matter was settled out of court after years of litigation.  The banks responsibility was to its customers, the husband and the wife, whom they failed.  This real irresponsibility and no amount of faux CSR can replace it.

IAG

Companies that are applauded for entering the public debate over climate change.  The impact of man-made greenhouse gas on climate is not certain, even less so is the correct response to the phenomenon.  Undaunted, last year's winner of the Ethical Investor Sustainable Company of the Year Award, Insurance Australia Group (IAG), argues that there is a very strong relationship between rising global sea temperatures and the ferocity and frequency of storm events.  It has said that "the link between insurance and environmental risk is even clearer when considering that 19 out 20 of Australia's major insurance payouts have been related to weather events".  However, no empirical relationship has yet been observed between modest temperature changes of a degree or so and the frequency or intensity of such events.  With great respect, the evidence that increases in atmospheric greenhouse gases have warmed the seas or caused wild weather is very tenuous.

An insurance company cannot, especially using a poor policy instrument such as the Kyoto Protocol (UN Framework Convention on Climate Change), change the climate, but it can change the climate for customers!  IAG is using the data to scare people to take out insurance.  In other words, it is doing what it normally does, drum up business, but in this instance iusing the cover of the Greenhouse issue.  IAG is indulging in public policy debate in order to win customers, but has it made the right choice?  The Kyoto policy is being used as a "dog-whistle" on climate change to have people take out insurance on weather damage to their properties.  Good for business, bad for public policy.

STRATEGIES

Should NGOs approach your corporation with good ideas or complaints about the actions of your business, thank them for their information, and show them the door.

Never strengthen the NGO by supporting it.

Then test the validity of the information, subject it to cost/benefit analysis and decide whether or how to act.

The present enthusiasm for CSR will wain as it becomes clear that CSR carries the risks of inducing rather than forestalling further regulation and that while there are some business advantages in being an innovator in CSR these will decline as others either comply or feign compliance, or the costs of compliance rise.

---

ENDNOTES

1.  Parker C (2002) The Open Corporation:  Effective Self-Regulation and Democracy.  Cambridge University Press.

2.  Two critiques of CSR are;  Henderson D (2004) The Role of Business in the Modern World:  Progress, Pressures and Prospects for the Market Economy.  The Institute of Economic Affairs, London.  Wolf M (2004) "Corporate Social Responsibility".  New Zealand Business Roundtable, Wellington.

3.  Pharr S, Putnam R and R Dalton (2000) "A Quarter Century of Declining Confidence", Journal of Democracy, 11(2):  20.

4.  Nye J and P Zelikow (1997) "Reflections, Conjectures and Puzzles", in Nye J, P Zelikow and D King (eds) Why People Don't Trust Government, Harvard University Press, Mass, 271.

5.  For a critique see, Wood R (2005) "Participatory Democracy:  Cracks in the Façade".  Backgrounder (Forthcoming).

6.  Furedi F (2002) Culture of Fear:  Risk-Taking and the Morality of Low Expectation, Continuum, London, 184.

7.  Furedi 2002, 185.

8.  In the Australian system of compulsory voting five per cent of the eligible voters fail to enrol, and a further five per cent fail to turnout on the day, which suggests that either the sample is slightly more "active" than the norm, or some respondents are giving the answer expected of them!

9.  The question was, "In the past two years have you ..."

10.  Members included, "members", "active members" and "office-holders".  The latter two categories were in all cases less than 1 per cent.

11.  The question was, "In the past two years have you ..."

12.  A question was asked about participation in a strike or industrial action.  It is arguable that such activity is political activity, and the comparable results are 5, 8 and 9 per cent respectively for each educational category.  The inclusion of industrial activity would therefore lower the overall level of participation but render it less unequal.

13.  A question was asked about membership of a trade union.  It is arguable that membership of a trade union is a political activity.  If the argument was accepted, however, the same would hold, for example, for membership of a professional association.  The inclusion of trade union membership would increase the overall level of participation and render it less unequal, but the inclusion of membership of a professional association would lower the overall level of participation and render it more unequal.

14.  Dalton B and Lyons M (2005) "Representing the Disadvantaged in Australian Politics".  For the Democratic Audit of Australia, The Australian National University, Report No. 5, 38.

15.  George Stalk, Boston Consulting Group, Australian Financial Review 19-20 Feb 2005

16.  John Blundell "Companies exist only to trade -- nothing else".  25 May 2005 http://www.iea.org.uk

17.  Multiplex Group (MXG) May 2005 Market Guidance.

18.  Greenwood A. and C. McKimm 2005.  Till Debt Do Us Part.  Bantam, Sydney.

"We Cannot Have the Same Expectations of the Terrorists ..."

Irene Khan, Secretary General of Amnesty International, has labelled Guantanamo Bay the "gulag of our times", in her foreword to the most recent Amnesty International Annual Report.  This illustrates how the world's most famous human rights non-government organisation (NGO) has become rotten to the core.

This year criticism of the United States was both inevitable and justified, in the wake of the Abu Ghraib scandal.  However, labelling Guantanamo Bay -- home to some of the world's most fearsome terrorists -- a "gulag", has raised more than a few eyebrows, and raised serious questions about Amnesty's political motivations and credibility.  For anyone to liken Guantanamo Bay to the Soviet Union's system of forced labour prison camps, where millions perished in the most horrific and brutal of circumstances, is absurd.

But this incident is not the only instance which should give one reason to question Amnesty's trajectory and moral compass.  The human rights industry actions were called into question following a widely-read and withering broadside fired against the conduct of human rights NGOs such as Amnesty and Human Rights Watch since September 11 entitled "The human rights lobby meets terrorism", originally published in Commentary magazine, which catalogued its flawed approach to dealing with terrorism, this being particularly evident in its politically slanted commentary on Israel.

What made this critique so compelling was that its authors were Arch Puddington and Adrian Karatnycky, from the human rights NGO Freedom House.  Khan's recent comments illustrate that the message didn't get through and that there is an accountability deficit within the human rights industry.

While it has often been discussed how September 11 caught democracies around the world unawares, it also caught the human rights NGOs ill-prepared to confront an environment where some of the greatest challenges to human rights would come not in the form of governments but in the form of terrorist organisations such as Al-Qaeda, which some have called the "the ultimate NGO."

The difference between many governments and the human rights industry is that while governments have moved to address this new strategic reality, human rights NGOs like Amnesty are still in a state denial.

This was made painfully clear during Khan's last visit to Australia when, during an television interview, the interviewer -- after listening Khan's familiar diatribe about how human rights are under siege by democracies like the United States -- observed that "you're not making the same claims about the terrorists." Khan amazingly admitted that "the reason why we are focusing on governments is because we expect the governments to change and to respect the obligations that they have assumed as political actors on the treaties" and adding that "we cannot have the same expectations of the terrorists ..."

In other words, because the United States and other democracies have signed human rights treaties, Amnesty will hold them to one standard and not expect the terrorists to do the same.

There are a number of problems with this approach.  First, it's an intellectually feeble response to the threat posed by terrorism.  Second, by expecting only one side to act like human beings in the war on terror, Amnesty makes a lie of the claim on its website to be an "impartial" organisation.  Third, what this approach also reveals is that groups like Amnesty are not strong on human rights but just soft on terrorism.  And fourth, given their approach it is little surprise that democratic governments are taking Amnesty less and less seriously.

As Thomas Risse has noted in an essay on human rights in the book The Third Force edited by Ann M. Florini, "the influence of transnational civil society in the human rights area stems from the power of moral authority ..."

Amnesty's rather one-sided approach to commenting on human rights in the war against terror will ultimately come at the cost of further diminishing what's left of their reputation and moral authority.

Save the forests: Support evidence-based environmentalism

Yesterday was World Environment Day, a time to perhaps reflect on what the environmental movement has achieved and where it is heading.  It has been my contention for some years that modern environmentalism has lost its way;  that if we really care about the environment we would take a more evidence-based, as opposed to faith-based, approach to environmental protection.  The recent decision by the New South Wales' Government to ban logging in the Pilliga-Goonoo forests in north-west NSW is a case in point.

Writing about environmentalism from an anthropologist's perspective, Tanya Luhrmann remarks:

The religious power of the natural world is in the range of the experience it can symbolize and has always symbolized.  We ascribe emotions to the natural world as readily as we use nature to describe our own ... The turn of the seasons -- a world in which vegetation sprouts, blooms, seeds and dies, the tension of the hunter and the hunted -- provides the materials for a dense narrative web.  So too does the Bible, but few liberal intellectuals read the text these days.  The natural world is immediately accessible.  Its narratization proceeds on a foundation that all people know.

Luhrmann is writing about the worship of nature, not the study of nature.  Environmental protection requires not only that we care deeply about something, but that we know how to care for it.  It requires that we have some understanding of component parts, how they function and what they need.

Many environmental groups claim to be science-driven, but they generally subscribe to a romantic notion of nature -- it is almost nature worship.  They advocate a "hands off" approach and within this paradigm man is often considered to be "sinning" whenever he attempts to modify or control the landscape, this includes the felling of trees.  Activists campaign to remove timber workers, bee keepers and horse-riders from forests, as though this will result in the protection of these forests:  that in this way they can revert to their natural, pristine, idyllic state.

But there was no original pristine state.  The work of Charles Darwin has shown that competition, adaptation and natural selection, sometimes against a backdrop of catastrophic climate change, have driven the evolution of life on earth.

We live in a secular society and value evidence.  Yet it is the naive and romantic concept of nature that very often underpins public policy decision making on environmental issues in Australia.  For example, when the NSW government announced a ban on logging in the Pilliga-Goonoo forests it described the decision as achieving "permanent conservation" of these iconic forests.  In reality without active management there can be no conservation of these forests.  The forests are less than 150-years-old and have grown-up with a timber industry that has tended the cypress and Eucalyptus creating tall trees and also habitat for iconic species such as koalas and barking owls.

When European explorers first saw the country in the 1820s it was grassland and open woodlands.  Pastoral leases followed and by the early 1870s it was estimated that 25,000 sheep and 30,000 cattle were grazing where today there is forest.  Then severe drought resulted in stock deaths and the abandonment of the leases before flooding rains in the early 1880s triggered a massive germination of cypress and Eucalyptus.  Timber communities established and the timber workers thinned the cypress.  So instead of dense acacia, thick, tall trees grew.  They also managed fuel loads within the forest, lest the forest and its wildlife be destroyed by wild fires.

The timber communities began losing access to their forests in 1967 when 80,239 hectares of State Forest became the new Pilliga Nature Reserve.  In 1986, under a new management regime, the annual rate of cypress pine sawlog production was reduced to 53,000 cubic metres (the annual forest growth rate is estimated to be 70,000 cubic metres).  In 1999 there was a push to convert more state forest to national park.  A decision was due in 2002 but it was only last month that the timber industry, until recently generating $38.4 million and employing 420 people, was told that it finally had to go.

Rather than working from a basis of evidence, and recognising the value of forestry practices, including in reducing the potential for destructive wild fires, the NSW government gave in to naïve campaigning.  Campaigning that ignored the history of the forests.

In 1860, when the Pilliga was open grazing land, Thomas Huxley wrote, "A religious idea can not be subject to scientific proof ... science and her methods are independent of authority and tradition".  The late 1800s was a period when there was much public debate about the role of science versus church:  knowledge versus faith.  One hundred and forty-five years later, I sense that there needs to be another reckoning.

I don't doubt that many environment groups have achieved a lot for the environment.  They have instilled a deep awareness within western culture of the beauty of the natural world.  They have fought hard and often successfully against uncontrolled development and for controls on pollution.  But it is now time to reassess the situation.  While these groups know how to have land locked up in national parks and conservation reserves, they don't know how to manage areas once they are locked up.

There is a need for a new approach to environmentalism.  It is time we stopped making decisions on an outdated, romantic notion of how ecosystems operate.  If we really care about the environment it is time that we, as a nation, started gathering basic information on the condition of our national parks, conservation reserves and state forests.  It is also time we started asking some of the hard questions.  Such an approach, amongst other things would including testing my hypothesis that there are more iconic species such as koalas and barking owls in state forests that are logged, than in national parks where environmental disturbance is theoretically minimised and ask the question -- what are we actually saving and what should we really be saving.

If we really care about biological diversity and putting in place management regimes that work, we will not be frightened of the answers.

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Union demands are madness

If you need any evidence that a dysfunctional culture is alive in the Victoria union movement, take look at the campaign against Kemalex.

Kemalex is a small family-run and owned business which makes plastic extrusions for the car industry.

As such it is a typical Australian manufacturer.  It is also a business highly exposed to competition from the world's new car manufacturing powerhouse -- China.

For decades Kemalex has run a successful plant in South Australia using, in part, contractors.

Earlier this decade it purchased a plant in Victoria which was in receivership.

In 2003 it signed an enterprise-based agreement (EBA) with the National Union of Workers that included the right to use self-employed contractors on the site.

It hired additional staff, all as contractors.  It kept existing staff as unionised employees.  In total the Kemalex purchase created or saved 82 full-time jobs.

The Melbourne plant, however, remained uncompetitive.  The EBA prohibited the plant from operating 24 hours a day, five days a week, as the SA plant did.  It also required employees to be paid for 38 hours a week for 35.5 hours work.

When the EBA came due for renewal, Kemalex offered a substantial wage increase on the condition that hours paid equalled hours worked and 24-hour operations be allowed.

The NUW declined the wage increase and the requests for changes to pay and shifts.

It also demanded that all contractors be removed and be replaced by unionised employees.

On April 27 this year, the union called strike at the Kemalex's Melbourne plant.

Two employees resigned from the union in protest.  They and another 13 employees crossed the picket to help contractors keep the plant going.

Then the full force and resources of the union movement descended on Kemalex.  The MUA, CFMEU and AMWA joined the NUW and ACTU in the action.

The main accusation against the firm has been that it was attempting to exploit people by forcing them onto contract with loss of benefits and the burden of red tape.  In truth, there was no attempt to induce existing employees to become contractors.

Contractor rates of pay are generally 45 per cent higher than comparable employees, to compensate for loss of paid holiday and other entitlements.

Moreover, all contractors are hired through agents who handle PAYG, BAS, superannuation, insurance, and other legal requirements.

As a result, a small firm struggling against fierce international competition has the full force of the union movement trying to shut it down.  This is madness.

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Back to basics at the bank

This week marked the end of Australian-born James D. Wolfensohn's tumultuous presidency of the World Bank.  Former US deputy secretary of defence Paul Wolfowitz will replace him.  So what is the Wolfensohn legacy and what are the challenges facing his successor?

Putting it charitably, Wolfensohn leaves the World Bank with a mixed legacy.  There's no question that he did some things right.  His focus on corruption was an important step forward.  Under Wolfensohn, corruption was identified and confronted as a significant obstacle to development and economic growth in the developing world.

Another positive was his decision to decentralise the World Bank.  Before his time, everyone and everything came from headquarters in Washington;  even country directors were ensconced there.  He decentralised staff away from Washington, particularly to recipient countries.

Wolfensohn also was responsible for getting the bank to upgrade its technology to bring it into the internet age and link it with client states more effectively.

On the negative side, perhaps the main criticism of Wolfensohn's reign is that it has left the bank without a clear focus.

As Georgetown University's Theodore Moran notes in the latest issue of Foreign Policy:  "The criticism that the World Bank does not have any priorities is misplaced.  The real problem is that every country director and country strategy team at the bank have 20 No. 1 priorities."

Much of this can be attributed to Wolfensohn's tendency to jump on the latest fad and to please every powerbroker.

Wolfowitz's main challenge will be to cull these priorities and resist calls to widen the World Bank's mission.

Another criticism of Wolfensohn's tenure has centred on his lack of emphasis on economic growth.  As former World Bank economist William Easterly commented recently:  "Somehow in the (past) few years it became kind of politically incorrect to talk about growth in the bank and one could only talk about poverty reduction."

This has been confirmed in the past few weeks with the release of a report by the World Bank's internal watchdog unit, the operations evaluation department, which found that the bank "paid insufficient attention to issues of growth".

During Wolfensohn's time at the helm, financing for infrastructure such as dams, roads, bridges, pipelines, irrigation, rural electrification -- which had been its focus for decades -- was cut dramatically.  Project lending by the bank declined by 40 per cent during his reign.

Instead, the bank spent big on social projects ranging from health to education and on more exotic issues such as climate change and "empowering the poor".

The reality is these projects were, in the main, sanctioned for political reasons rather than because of their effectiveness, let alone because of the desires of the bank's developing-country clients.

Writing in the Financial Times, development economist Jagdish Bhagwati observed that the approach legitimised Wolfensohn throwing money around, like Eva Peron, on peripherals such as culture projects, thereby enabling him to extend his patronage to all and sundry.

The questionable nature of these projects is evident in the recent internal report that found the World Bank's health and education programs had "fallen short of bringing about qualitative and sustainable improvements in human development outcomes such as better learning achievement and improved health status".

Wolfowits's challenge will be to refocus the bank on economic growth and pull back from some of the irrelevant social programs.  This won't be easy because under Wolfensohn the World Bank adopted cumbersome environmental and social safeguards or red tape on the projects it financed, so much so that the Wolfensohn era is arguably best known for the high-profile projects that it scuttled due to pressure from Western activists rather those it funded;  all of which is covered superbly in Sebastian Mallaby's book The World's Banker.

The high compliance costs, the slow pace of decision-making and tendency of the bank to cave in to pressure from Western activists and non-government organisations resulted in many of the bank's best developing-world client countries such as China, India and Brazil abandoning the bank in favour of private capital markets.

Though there have been signs of a change in the past few months, Wolfowitz is going to have to seriously evaluate his relationship with NGOs and other activists.

Precisely how Wolfowits will run the bank is difficult to say.  Though his leading role as an architect of the war in Iraq has led him to be portrayed as a hardline conservative hawk, this is little more than a useless caricature.  Wolfowitz is a far more complex character than this.

While Wolfensohn has been described as a "force of nature" by Mallaby and is renowned for his drive, energy and charisma (an image Wolfensohn likes to cultivate), Wolfowitz is more academic and thoughtful.

Whereas Wolfensohn was known for his rather chaotic and erratic management style and temper, Wolfowitz is a competent administrator, having been Donald Rumsfeld's deputy at the Pentagon, and is more than adept at managing a large and unwieldy bureaucracy, which the World Bank is.

To succeed, Wolfowitz, in part, will have to turn back the clock to a time before Wolfensohn became head of the bank.

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Report 6: Industrial Awards

Capacity to Manage Index

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While You Were Asleep

The World Is Flat:  A Brief History of the Twenty-first Century
by Thomas L. Friedman
(Farrer, Straus and Giroux, NY, 2005, 488 pages)

Apart from his columns in The New York Times, Thomas L. Friedman is particularly known for his redefining the nature of modern globalisation in the book The Lexus and the Olive Tree.  In this new and startling book, he shows us just how fast globalisation is moving, thanks to the Internet revolution.

Reading the book is at the same time exciting and somewhat daunting.  We are all quite familiar with the impact of computers, but with the rise of the Internet, the diffusion of the Windows operating system, the establishment of global fibre-optic networks, and the creation of interoperable software applications, most of us do not quite realise to what extent these innovations make it easy for people from anywhere in the world, not simply to communicate, but to work alongside us.  Forget the physical immigration of highly trained workers.  As Friedman points out, they appear to be in the office next door, but in fact can now stay, for one major example, in India close to their families and still eat curry and rice.  This book reveals to us the extent to which this is happening and the profound effects that these innovations are having on both the non-Western world and, subsequently, ourselves.

Just to warm the reader up, digest this.  In 2003, around 25,000 individual tax returns were outsourced from US tax accountancies to India.  In 2004, the number was 100,000.  By 2005, according to Friedman, it will be around 400,000.  In India, there are 70,000 new accounting graduates coming out each year with starting salaries at around $100 per week.  Already there a quarter of a million Indians working in telephone call centres, servicing calls from all over the world, solving enquiries about your bills, booking tickets for the latest show in your town, helping travellers with lost baggage at airports.  They are the pick of the local crop in educational attainment, with an excellent command of English.  Want a personal remote executive assistant for some overnight research and to rustle up a PowerPoint presentation for tomorrow?  You can get it in India from a pool of Indian college graduates.  There are 89,000 MBAs produced each year, and a total of 2.5 million fresh university graduates.  This pool of talent can access the globe instantaneously and sell their intellectual wares and talents.  Physical distance is now irrelevant and we have, according to Friedman, created the ultimate level playing field.  The world is flat, he declares.

Broadly, Friedman argues for three stages of globalisation.  Globalisation 1.0 lasted from 1492 -- when Columbus set sail from the Old to the New world -- until around 1800.  It shrank the world from a large size to a medium size.  It was about countries and muscles;  how much horsepower, wind power or later, steam power a country had and how it could develop it.  The second great era, Globalisation 2.0, lasted roughly from 1800 to 2000, shrinking the world from a "medium size" to small.  The key agents of change were multinational companies.  These went global for markets and labour;  in the first half fuelled by falling transportation costs and in the second half by a fall in communications costs.  This was the birth of a truly global economy.  Friedman reminds us that when Bill Clinton was elected President in 1992, virtually no-one outside of government and the academy had e-mail.  Globalisation 3.0 is a whole new era when the world went from a small size to a tiny size, its unique character being in a new-found power for individuals to collaborate and compete globally.  The new lever was not horsepower or hardware, but software and global fibre-optics.  This allows new players from non-Western countries to get in and "plug and play".  Friedman explains,

I was in Bangalore, India, the Silicon Valley of India, when I realised that the world was flat.  After 60 hours of interviews with Indian entrepreneurs who wanted to write my software from Bangalore, do my taxes from Bangalore, trace my lost luggage from Bangalore, read my X-rays from Bangalore, and draw my Disney cartoons from Bangalore, I realised that something big had happened -- that the world had been flattened -- and I needed to write about it.

The author discusses in some detail the power of new technology to create "just in time" manufacturing, ordering and stocking.  WalMart in America is the biggest retailer in the world, and for those readers who have only a vague idea of what it is about, the detail and the extent of efficiency gains is truly mind-boggling.  Just two facts on Walmart:  the central distribution centre in Bentonville, Arkansas, at 120,000 square metres, has more than 20 kilometres of computer-guided conveyor belts, sorting and distributing 2.3 billion general merchandise cartons a year down its supply chain into stores.  If it were considered to be an individual economy, it would rank as China's eighth largest trading partner, ahead of Russia, Australia and Canada.

Friedman tells the detailed story of his own order for a personalised Dell computer, from the initial phone order to the gathering of parts sourced from a huge number of countries from every part of the globe, assembled in Kuala Lumpur and shipped to the US along with 110 tonnes of other computers in a once-a-week chartered 747 from China Air.  His was one of 140,000–150,000 computers sold by Dell every day.  Whilst this sort of "just in time" organisation is in itself some sort of tour de force, it is only possible in a flat word.  He goes on to theorise that no two countries who are both links in this dynamic, profitable, wealth- and job-creating global supply chain can henceforth begin to think about going to war.  The cost would simply be too high.  He coins this his "Dell Theory for Conflict Prevention".  He gives a case study of India and Pakistan, with their recent war of words over border territory and threat of nuclear escalation.  The IT industry in India reminded the government of exactly what was at stake with the increasing uncertainties developing over the dispute.  The government looked around and "realised that the vast majority of India's billion people were saying, 'I want a better future, not more territory' ".  He believes that his Dell Theory will work with China and Taiwan.  The same reality will apply to the present chest-puffing between China and Japan.

Although bad comes with good -- he discusses the globalisation of terrorism that uses the very same technological advances, and the inevitable displacement, restructuring and impact on workers and society in First World countries -- the book is a timely reminder of just how fast things are moving.  His advice to his two daughters is "Girls, finish your homework -- people in India and China are starving for your jobs".

The sub-title, A Brief History of the Twenty-first Century, is amusing but close to the truth, such is the speed of change.  Friedman collects telling anecdotes from a range of people from many countries by asking them when it was, precisely, that they came to the realisation that the world was flat.  When did you?

Why do drug dealers live with their mums?

Freakonomics:  A Rogue Economist Explores the Hidden Side of Everything
By Steven D. Levitt and Stephen J. Dubner.
(William Morrow, NY, 2005, 242 pages)

One day in 1989, at the behest of his graduate advisor, Sudhir Vankatesh, a young PhD student, strolled into a housing project on the shore of Lake Michigan carrying a multiple choice, seventy-question survey.  The first question on the survey was:

How do you feel about being black and poor?

a.  Very bad
b.  Bad
c.  Neither bad nor good
d.  Somewhat good
e.  Very good

The lifts didn't work, so he took the stairs.  On his way up he stumbled across what turned out to be a gang of junior-level crack dealers, who were using a stairwell as a base for operations in an ongoing gang war.  After a long period trying to convince them that he wasn't a threat, he attempted to read out his questionnaire.  As he would later tell his University of Chicago colleagues, the test should have looked like this instead:

a.  Very bad
b.  Bad
c.  Neither bad nor good
d.  Somewhat good
e.  Very good
f.  F--- you

After this inauspicious start, Vankatesh befriended the gang, and eventually its leader, J.T.  After two years of unfettered access to all the gang's activities, he emerged with a stack of well-worn spiral notebooks -- a complete record of the gang's financial transactions over a period of four years.  Wages, sales, dues, death benefits paid out to the families of murdered members, everything.  With such priceless documents, Vankatesh quickly came into contact with Steven Levitt, a young Chicago economist.

Steven Levitt has made a career of asking peculiar questions.  Which is more dangerous -- a gun or a swimming pool?  Do black children's names hurt their career prospects?  Do parents really matter?  With Vankatesh's spiral notebooks, he posed the question -- why do drug dealers still live with their mothers?

The book, which he wrote with New York Times journalist Stephen J. Dubner, is an anarchic, disorganised, and immensely entertaining survey of Levitt's research.  As the authors enthusiastically proclaim, the book has no "unifying theme", but is, instead, a exploration of the hidden side of conventional wisdom.

Often, the topics for analysis seem mundane.  They spend a chapter studying what conclusions can be drawn from children's names.  For instance, the parents of a child named Angel have, on average, 11.38 years of education, compared with Lucienne's parents, who have 16.6 years.  Similarly, how a name is spelt can be an indicator of parents' education levels -- Jasmyn's parents have, on average, one more year of schooling than Jassmin, and nearly two more years than Jasmine.

But their left-field analysis isn't restricted to the mundane.  Levitt gained an enormous amount of publicity from a 1999 study which concluded that rather than innovative policing strategies or police numbers, tougher gun controls or a booming economy, the single most important factor in the massive reduction in crime over the last decade had been legalised abortion.

His logic is simple.  Women who are most likely to seek an abortion -- poor, single, often minorities, and young -- are also the most likely to be those whose children would grow up to be criminals.

The controversial nature of this conclusion, if it wasn't lost on Levitt when he completed the study, was certainly reinforced after the publication of his 1999 paper.  He was called, by both sides of politics, an ideologue, a eugenicist, and a racist.

As a "rogue economist", Levitt has done remarkably well.  He has been offered jobs by both Bill Clinton and George W. Bush.  His undergraduate paper, which asked "Do more police translate into less crime?", is still cited as the rebuttal to the liberalised punishment system of the 1960s and '70s.

Freakonomics is a controversial and a provocative book.  Levitt's only real message is to encourage confrontational questions, and this is certain to secure him a permanent following.

It should be noted that the authors have a blog dedicated to expanding and defending the arguments in the book -- it is available at http://www.freakonomics.com/blog.php

Bordering on Overkill

Today a small group of Liberal backbenchers will take to the Coalition party room a plan contained within two private members Bills to substantially change mandatory detention, but calls for a radical re-think need to be resisted.

It is easy to understand why some politicians would share the concerns of segments of the community who are uncomfortable with mandatory detention.

As Prime Minister John Howard himself concedes, children in detention is a difficult issue.

The first Bill essentially would see most of those in detention released immediately while their applications are processed, and result in refugees on temporary protection visas getting permanent residency, as would asylum seekers who can not be removed from Australia three years after the final determination of their applications for protection.

The second Bill, according to my understanding, would change mandatory detention by requiring future asylum seekers who don't have a visa to be detained only on specified grounds, such as to verify identity and to protect public safety.

The Government initially would be only able to detain people for up to 90 days and would be required to go back to court every 90 days to get a further extension.  In addition, all refugees would be given permanent residency status immediately.

The proponents of the Bills argue that the changes would not undermine border security and would be more compassionate.  This is debatable.

The Bills would weaken border security by removing deterrence.

At first blush, the proposals amount to effectively gutting mandatory detention, which would exist in name only.

While there is no question that applications need to be processed as quickly as possible, such a system would greatly reward legal stalling tactics and unco-operative behaviour.

While the changes may be more compassionate in the short term, if the changes were to once again encourage people to place their lives in the hands of unscrupulous people smugglers then they are neither compassionate nor humane.

There are two additional things of which proponents of the Bills need to be conscious.

First, while there are many noisy interest groups that would like to see a virtual open door policy, a strong mandatory detention regime enjoys broad public support.  This matters in a democracy.

Second, a strong border protection regime is important to maintaining public confidence in Australia's immigration program.

But in order to maintain confidence in the current program, it is essential that it is the Australian Government which determines the size, composition and timing of our migration intake.  This requires mandatory detention.

To be in favour of mandatory detention is certainly not to be anti-immigration or even racist, as some interest groups would have us believe.

While it is difficult to comment on some of the cases that have appeared in the media recently without knowing all facts, what is clear is that it is totally unacceptable for an Australian resident to be deported from this country.

No one in the Government from the Prime Minister to Immigration Minister Senator Amanda Vanstone disputes this.

Although the results of the Palmer inquiry yet are to be delivered, on the face of it, there already appears to be a case for a greater flexibility and safeguards within the system to protect those who are unable to protect themselves adequately;  something already flagged by Vanstone.

But arguing for more safeguards and greater flexibility within the system for the vulnerable is a far cry from the effective dismantling of mandatory detention which is what some are arguing for.

In spite of its faults, the current border protection regime has proved remarkably effective in terms of stemming the tide of unauthorised arrivals on our shores.

One might even argue that the current system may be a victim of its own success, with some believing that the policy is no longer necessary.

That would be a mistake.

Australia's border protection policy, which is centred on mandatory detention, has been in the news for all the wrong reasons of late but it needs fine tuning, not an extreme makeover.

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Costello's budget prepares for the future

The response to the 2005-06 federal budget illustrated the extent to which economists are stuck in policies of the Keating era.

The dominant critique of the budget was that its centrepiece, the tax cut and tax-threshold increase, was irresponsible in the extreme;  that they would add demand pressure to an already supply-constrained economy and thereby force the Reserve Bank of Australia to increase interest rates;  that they would give permanent tax cuts with temporary revenue, thereby putting pressure on future budgets;  and that they failed to save for the future demands of an ageing population.

This is unreconstructed Keynesian economics, much beloved by Keating, which was based on the belief that governments can and need to use fiscal policy as an active tool to micro-manage the pace of the economy.  It also assumes that government should and can be responsible for increasing savings and for funding us in our old age.

Even a cursory look back over data from the Keating years shows the flaws of this approach.  The growth path of the economy matched that of a roller-coaster.  Fiscal policy accentuated the volatility of the economy.  Admittedly they were exciting times for economists, particularly those with the task of predicting the pace of the economy, but investors and savers do not want excitement or volatility.

The simple fact is:  governments do not save, only people do.  Governments spend.  Governments take funds via taxation from people.  The act of extracting money through taxation, particularly in Australia with its high rates of tax on savings, diminishes savings.  It encourages immediate consumption rather than savings.

As for coping with an ageing population, the government's main role must be to ensure that its many programs from welfare to industrial relations to taxation, do not inhibit people from taking care of themselves.

Treasurer Peter Costello from his first budget rejected the Keating approach and adopted a stance of fiscal stability biased towards savings.  The states have done the same, at least up to this year.  That is, since Keating, governments have maintained small, stable budget surpluses with surpluses and the proceeds of asset sales used to reduce debt.  Money left over after a surplus is achieved has been used to fund tax cuts and/ or additional spending.  This stance has added to the stability of the economy and has allowed governments to reduce net debt by $136 billion, thereby improving their ability to meet the demands of an ageing population.

The 2005-06 federal budget continued the Costello steady-as-you-go fiscal stance even during a period of plenty.  The budget forecasts a large boost in revenue of about $65 billion over the 2004-2008 period, generated by economic growth, particularly in the mining sector.  It allocates nearly 40 per cent of this windfall to savings in the form of the Future Fund to repay its debt to public servants, and eliminating the superannuation surcharge.  It allocates about 30 per cent of the additional revenue to spending, most notably on its welfare-to-work program.  And it allocates another one third or about $19 billion (excluding superannuation tax cuts) to reduce across the board the burden of income tax.

Many economists argued against tax cuts, claiming that the boost in tax revenue is temporary.  This is highly speculative and improbable.  The increase in tax revenue is being driven in the main by the rise in demand from China and there is no reason to expect this to be a temporary phenomenon.

They criticised the tax cuts as dangerously expansionary, despite the economy clearly slowing and larger budget surpluses now forecast for the next four years.

They criticised the budget as undermining savings by giving funds back rather than retaining them with government.  The idea that nearly the full $65 billion should be stacked away in a leaky government vault to pay for the retirement of baby boomers is absurd and inequitable.

Costello has done the right thing.  He has shifted the focus of fiscal policy from the short term to the long term and shifted the focus of government spending, from enabling the government to help people to enabling individuals to take care for themselves.

The change in fiscal stance has been one of the seminal reforms of recent years and a major reason for the Australian economy's continuing success.  It has helped place us in a better position to address the future than just about any comparable country.

It's time economic commentators got real.

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