Going through hell for a slice of heaven

One of the best instincts in us is that which induces us to have a little piece of earth with a house and garden which is ours.

-- Sir Robert Menzies

The Great Australian Dream, to which Sir Robert referred, is rapidly becoming a nightmare for our kids.

In the early 1980s, the price of the median land and house package in all major Australian cities, except Sydney, was equal to three times median household income.  On top of this the block sizes were large, by international standards and taxes and charges were low.  As a result home ownership in Australia was among the highest in the world.

Since then, but largely since 1996, the price of that "little piece of earth" has moved out of sight of the financial capacity of the average family.

In all of the nation's major cities the ratio of median house price to median income now exceeds 6 with Melbourne being 6.4.

The culprit is land rationing masquerading as "zoning" and State Government taxation.

The National Housing Affordability Conference, held in Canberra this week, highlighted many of the symptoms of runaway housing prices.

Among them was the concern that it locks young people out of the dream altogether or entraps them with horrifically high mortgages or relegates them to dense, high rise living unsuitable to rearing children.

This in turn acts as a disincentive to have children;  care for elderly and save -- things the younger are increasingly being expected to do.

On top of this it absorbs and wastes a large and growing proportion of the nation's wealth.  Housing accounts for just over 58 per cent of the nation's wealth.  This is very high by world standards and has increased sharply over the past few decades.

While investment in housing is both necessary and healthy, a large share of the investment in housing in Australia is illusory.  It reflects in price inflation and regulatory-driven scarcity.

Until the late 1980s state and local governments focused on insuring a large, accessible supply of low cost land.  Then under the misguided pursuit of controlling sprawl, the focus shifted to limiting the supply of land particularly on the city fringe.

The law of supply and demand drove the price of land ever higher.

Governments contributed further to the high prices.  They pushed up taxes on housing by 300 per cent over the past decade.

Don't expect things to change.  Too many people have too much at risk.

This includes many of the leading lights of the Affording Housing Summit who seek to treat the symptoms rather then the cause by seeking to require builders to increase the amount of low cost housing.

Governments are also hooked on the easy money generated by house price inflation.  The banks and developers are locked into the inflated prices and fear for their investments if the regulatory measures underpinning them were removed.

And many thousands of investors are geared to the hilt betting that prices will only rise.

Most significantly the agencies and professions that regulate the housing sector have succumbed to an anti-growth, they-know-best ideology.

In other words, the guardian is committed to destroying the dream.  Pity our children.

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Hand-outs come at a price

If you're willing to spend enough money you can buy almost anything.

This basic rule of thumb applies to both individuals and governments.  But there's an essential difference between spending by individuals and spending by governments.

When individuals buy something they are using their own money.  When governments buy something they are using other people's money.  When individuals buy something they tend to look for value for money and consider the opportunity cost of their purchases.  Governments usually don't.

The financial constraints on individuals that don't apply to governments produce the sort of ills that taxpayers are familiar with.

Governments believe they can buy all sorts of things -- success for the nation's sporting teams, a thriving arts and cultural sector, a program of events and festivals running from January to December.  Once upon a time Australian governments even thought they could buy a viable manufacturing sector.

It is not just governments that refuse to consider the cost of what they are buying.  The lobby groups urging ever greater amounts of government spending are often also reluctant to consider the cost of government purchases.  The last week has provided two examples.

On Monday the ABC's 7.30 Report bemoaned the "lack of support" from government for the wind-power industry that was "driving Australian jobs and know-how offshore".

The next day the Australian Manufacturing Workers Union released a report that called for government to invest $1 billion a year in the manufacturing industry.

The complaint from the wind-power industry is that, if the federal government does not guarantee its market share, further investment is financially unviable and therefore it will move to countries such as China.  (Presumably the wind-power industry has learnt a thing or two from car manufacturers about threats to go offshore if taxpayer assistance is not forthcoming).

The problem for wind-power advocates is that their product (electricity from wind power) is twice the cost of its competitor (electricity from coal).  Wind power can't compete commercially with its alternatives, which is why the industry is using the supposed greenhouse-gas benefits of wind power as a lever for government regulations that guarantee the industry's profitability.  The ethanol industry plays the same sort of game.

In response to the claims of the wind-power industry, Agriculture Minister Peter McGauran captured the point perfectly:  "There are many industries we could keep in Australia with a taxpayer subsidy and, as a result, if those companies decide there are countries in the world that will pay dearly for their services, so be it".

Instead of government directly spending taxpayers' funds to ensure the viability of an industry, the cost of having a domestic industry is borne by consumers who end up paying more for their electricity.  The number of jobs created by the development of a renewable-energy sector will be dwarfed by the resulting job losses in all the other sectors of the economy.

A key sector to suffer from higher power prices will be manufacturing, so there's a neat symmetry in that industry following the lobbyists for renewable energy to Canberra in search of the helping hand of government.

The AMWU has called for the government to change its hands-off approach to manufacturing.  It wants tax concessions and export grants to ensure the survival of the industry.  The stated justification of such spending is that Australia needs manufacturing.  But do we need a manufacturing industry if the cost is the impoverishment of those industries in which the country has a comparative advantage?

At least the AMWU isn't calling (as yet) for the reintroduction of tariffs.  This is not to say, though, that the union has embraced every aspect of reality.  While it seeks high-skilled, well-paid jobs for its members, it also campaigns against free trade.

The best-paid employment for the highly skilled is mainly in those sectors of the economy that are not protected.  In the short run protection and subsidies might slow the loss of jobs, but in the medium run it breeds management lethargy and kills enterprise.  Further, in the long run protection and subsidies are unsustainable.  The tragedy of Australian manufacturing is that, for the past two decades, it has been paying the price for the policy mistakes of a century ago.

Finally, it appears that politicians now appreciate that simply because government can buy something, it doesn't necessarily mean that it should.  Sometimes the price is just too high.

Hopefully one day all of those sectors seeking taxpayer handouts will also realise this truth.  But until then, it seems that tariffs might be dead, but demands for industry protection are alive and well.

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State's energy measures tax credulity

The Victorian Government is seeking to demonstrate its green credentials.  It proposes to introduce an energy tax that will force all electricity users to increase the renewable content of their electricity supply from the present 4 per cent to 10 per cent.  The tax is to be set at $43 per megawatt hour.  This means a doubling of the cost compared with the coal-fired electricity that provides 90 per cent of Victoria's electricity.

In releasing the proposals, Energy Minister Theo Theophanous and Environment Minister John Thwaites claim the cost to households will be a mere $1 a month.  They also say that the measures will create 2200 jobs.  One can only assume that among the contenders for next week's press release are the proposals to turn water to wine and transform lead into gold!

Surely we have advanced beyond notions that regulatory measures come with negligible penalties.  If we can create 2200 jobs at $1 a month per household, why not quadruple the penalty and create 8800 jobs?

The fact is that the proposed measures have been devised in an analytical vacuum.  Far from bringing increased wealth and job growth, the regulatory tax, if passed by Parliament, will gnaw at the state's economic health.  This is all the more likely as the tax imposts and subsequent subsidies are designed to apply until 2030 and the legislation only allows for costs to rise.

The notion that the costs will be trivial is contradicted by the supporting material, scant as it is, that the ministers have released.  This says that the measures will bring an increase in exotic renewables of 385,000 MWh a year.  At the $43 per MWh penalty tax deemed necessary to bring this about, that means an annual cost of $164 million, amounting to more than $2 billion over the course of its life.

Presumably the ministers' estimated monthly cost of $1 per household assumes that the bulk of the charges will be incurred by industry and commerce.  This incorporates the regrettable notion that if we slug business the costs will not be noticed and nobody will be the worse off.  How many governments have run aground on that particular reef?

The only rigorous analysis of the proposal was undertaken by highly regarded independent consultants Access Economics.  This estimated a real net economic loss to the state of $829 million in net present value terms.  Far from anticipating more jobs, Access Economics estimated the regulatory tax would bring at least 1100 job losses.  And, because much of this cost involves a transfer of activity overseas and interstate to avoid the higher regulatory costs the Victorian Government will impose, the overall effect on emissions is small.

Hard on the heels of those proposals, ABARE, the Commonwealth's leading economic research agency, released a report on greenhouse gas emission restraint measures.  That report, prepared for the CSIRO, estimates the tax-equivalent measures necessary to reduce Australia's greenhouse gas emissions by 36-68 per cent of business-as-usual levels.

Naturally this involves much higher taxes than the $43 involved in the Victorian program, which would reduce the state's emissions by, at best, 6 per cent.  And ABARE minces no words about the costs:  it estimates real wage reductions of 4 to 21 per cent, depending on the severity of the emission-reduction program.

Though the proposal's priority is on reducing carbon dioxide emissions, the Victorian renewable energy proposal also sets out to achieve a potpourri of other goals, including regional development and fostering a new industry.

Meaningful gains will be achieved in none of the areas targeted, and the Government knows this.  It confirms its lack of real interest in reducing emission levels by provisions within the proposal to prevent the renewable energy being supplied from outside Victoria.  Such a provision is of doubtful constitutional legitimacy and denies the ability of energy suppliers to meet the goals at the lowest cost.

What the measures really seek is continued funding support from the beneficiaries of the subsidies and electoral appeal to mindless inner-suburban green voters.

This is politics at its most cynical.

The Victorian Government claims it is exercising leadership in the energy debate.  If so, its leadership is demonstrating how to reduce living standards.

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Truth hard to find in new IR

Do the Howard Government's new industrial relations laws let bosses screw workers?  If they do, the Government should be tossed out at the next election.

The unions say this is the case and they keep raising examples claiming they are right.  One example they used was the alleged sacking of 29 meat workers at the Cowra Abattoir in early April.  But the Government says the unions are wrong and the new laws are fair.  What's the truth?

We know the unions hate the Howard Government so we can expect they will always claim the worst.  Unions say the Government loves big business and not the little guy.  However Howard has constantly won elections based on strong worker support.  Why would he let business screw the workers who vote for him?  Wouldn't this cause him to lose the next election?

It's hard to find the truth.  But we now know what happened at Cowra.

It is true that 29 meat workers were sacked with redundancy packages and 20 were offered work on different conditions.  Unions complained and ran a media blitz.  The Government sent in inspectors from their new Office of Workplace Services.  The inspectors recently issued a report.

According to the report, Cowra Abattoirs is in serious financial trouble and could possibly close.  They have unprofitable pig and beef processing lines operating under different industrial agreements.  Business is declining.  They wanted to combine the operations into one line using another industrial agreement.  It was legal to do this even under the old laws.

The unions said the workers were being discriminated against because of their union membership.  The report says that according to the workers, they had not experienced any discrimination by the company.

Cowra Abattoirs put the men back to work under the old arrangements when the media story became hot.  They have now done a deal with the unions on a new workplace agreement covering their pig, beef and mutton lines.  Under the union agreement about six jobs will go.  "Base" pay rates will be maintained.  But it's not clear if the union agreement results in higher, lower or the same take home pay as before.  One thing however is certain;  if the abattoir does not control costs, it risks closing.

Now that most facts seem to be known, what conclusions can be drawn?  Both the old and the new industrial relations laws are complicated.  Like many companies, Cowra Abattoirs has had to choose between one of potentially four industrial agreements, all with different pay and conditions.  And every agreement is legal.  It's confusing.

Further, under the old and new laws companies are legally able to move workers from one agreement to another.  The company did nothing wrong.  Were the workers exploited?  It's hard to say.  It seems that if companies make changes without unions, the unions say the workers are being screwed.  But if unions agree to the changes unions say it's OK.

The main reason unions are angry is that the new laws give them less legal power to control how companies operate.  But does this mean workers are unprotected?  Some say yes.  However the Government has put a lot of money into the new inspection and prosecution service, the OWS.  In the Cowra Abattoirs case the inspectors moved in the day after complaints were known.

In many respects the OWS is designed to do what unions used to do, stop worker exploitation.

A big test for the new laws will be how effective is the new inspection service.  It can be said that the Howard Government has dramatically changed the industrial relations laws.  But it's not fair to say they have created a worker exploitation free-for-all.  Maybe some companies might have thought this could be the case but the new inspection service seems strong.  Ultimately though the main test of the new laws is how well business interests are balanced with worker protections.  If businesses can perform better because of the new laws, more jobs should be created.

About the only thing that appears certain is that we are going to have claims and counter claims for a long time.  For the rest of us we will need to be sceptical of all sides and media hype.  Mostly we will have to judge the new laws on how they affect each of us and our families and friends.  That will be the most important test.

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Urgent reform needed to stop federal flaws

Reform of the federal system is the missing link in the reform agenda.

The system has deep, systemic flaws that are getting worse.

It is undermining our ability to address some of the key challenges facing the nation, including in areas of health and education.  It is undermining the quality of government and wasting scarce funds.

While every political leader at federal and state level over the past 30 years has recognised the flaws of the system and the need for reform, very little real progress has been made.

Bob Hawke gave it the best shot, with his New Federalism Initiative in 1990.  Hawke attempted to directly tackle the main flaws of the existing system which is the excessive overlap and duplication between the states and federal government and the excessive dependence of the states on federal funding.

However, this initiative was shot down by Paul Keating in his successful push for the Lodge.

Keating subsequently introduced his own reforms through the National Competition Policy.

While the NCP process generated substantial benefits early on, it did not address the fundamental flaws in the federal system.

John Howard and Peter Costello contributed to the states via the GST.  While this gave the states access to a large growth tax and a lot more money, it made the flaws of the system -- in particular rising state dependence on federal revenue -- even greater.

Apart from Nick Greiner of NSW and Wayne Goss of Queensland, no state political leader has to date taken up the cudgel of reform in a coherent and thorough manner.

Enter the latest debate about federal reform and yesterday's Council of Australian Governments meeting.

Mr Bracks, to his credit, carried the banner of reform to COAG and he received support from other state leaders and the Prime Minister.

While Bracks' program has many positive aspects, it falls far short of systemic reform.  Stripped of its rhetoric, it is largely about getting more federal money to do more of what the states are already or should be doing.

The Bracks agenda makes no attempt to eliminate systemic flaws.  Instead of attempting to eliminate overlap and duplication it tries to manage it better with a new set of committees.  Instead of pushing for greater responsibility for revenue-raising, it seeks more federal money.

Bracks' advisers have rationalised this as trying to make the best of a poor system and to work within the constraints on them by the Federal Government.  It is a second-best approach, but better than nothing.

Bracks, with the exception for confirmed access to more money, got what he wanted.

COAG has largely adopted his agenda including the renewed focus on human capital formation and co-operative planning and delivery of service.

The challenge now is to make the agenda work and it will not be easy.  The flaws in the system remain and they will work against co-operation and good policy delivery.

One thing is clear, reform of the federal system remains very much on the top of the agenda.

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It's a small price to pay

There's one issue not on the agenda at today's meeting between the Prime Minister and the premiers in Canberra.  But it is the issue that everyone will be thinking about -- and that issue is of course the future of John Howard as prime minister.

What will be on the agenda are initiatives such as Victoria's proposals for improvement to the delivery of health and education services, the implementation of a national approach to business regulation, and a new funding program for indigenous communities.

Steve Bracks has gone so far as to call the meeting "an historic occasion".  While the description might be a little overdrawn, it is true that the outcomes of the discussions could be very significant.

There's the potential to give real impetus to the next round of national policy reform, and to take the stimulus of competition and consumer choice into new areas they have not previously reached, particularly hospitals and schools.

The possibility that the politics of the Liberal leadership could derail the reform process has been widely lamented.  It will be difficult for the Prime Minister and premiers to strike a deal if the premiers believe that in six months they could be dealing with someone who has a completely different approach to federalism and who has no commitment to any agreement reached by his predecessor.  This is exactly the fear that the premiers have voiced.

The open barracking of the Labor premiers for Howard against Peter Costello has as much to do with the premiers' genuine personal preferences as it has with their desire to perpetuate mayhem against their political opponents.

Business is being directly affected by the Liberals' convulsions.  In the energy sector, for example, several companies are waiting to make investment decisions.  But they can't until the regulatory regime is known, and to finalise the relevant regulations requires the agreement of the federal and state governments.  If federal/state co-operation grinds to a halt, business activities are put at risk.

There have been other events that have dramatically demonstrated the collision between politics and good policy.  The cancellation of the float of Snowy Hydro last month, after 150,000 investors had already registered for a prospectus and just days before the start of the initial public offering road-show, wasn't an example of world's best-practice decision-making.

In this context the call for more policy stability is understandable.  But before we rush to eliminate the politics from policy, we must consider what would happen if we actually succeeded.

With democracy comes politics, and with politics comes uncertainty, and at times instability.  If there is a leadership challenge, the person who becomes prime minister is a decision that will be made in the party room -- comprising MPs and senators, who themselves have been elected through a free vote.  The price we pay for this system is that, as the contenders jostle for the leadership, their attention is diverted from the all-important, long-term national reform agenda.

The rule of law and property rights also come with democracy.  These features of liberal democracies are benefits to individuals and businesses that far outweigh any of the disadvantages of the democratic political process.

When the sale of Snowy Hydro was abandoned last month, the ABC radio program PM reported the comment that the actions of the federal government made "Australia look like a Third-World country".  Hardly.

The majority of Third-World countries are poverty-stricken dictatorships whose governments rule without regard to the will or the benefit of their citizens.  A Third-World country would have carried through with the sale of Snowy Hydro regardless of popular opinion.

The remark was also made that because "the government can flip-flop around on policy on a day-to-day basis" on issues such as Snowy Hydro, it would be more difficult to sell Telstra.  This assessment is accurate, but it doesn't mean, as was asserted, that therefore potential investors will regard Australia as "risky", in the same way as they consider India or Thailand.

Those countries might be preferred as investment destinations, but it's not because they have better legal and political systems than Australia.

A week ago the chances of today's meeting being the "historic occasion" hoped for by Steve Bracks were no better than 50/50.  The events of the past week have reduced those odds even further.

If the meeting collapses, politics will be blamed for the failure.  That would be true -- but if we want to enjoy the benefits of freedom there's no alternative to politics.

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"Poowoomba" on the right track

Toowoomba, Australia's largest inland regional city, is situated at the headwaters of the Murray Darling Basin on the edge of the Great Dividing Range and is running out of water.

There was much talk during the weekend about the referendum to be held at the end of this month when the residents of Toowoomba get to vote on whether to begin recycling sewage as drinking water -- or not.

If a majority of residents vote yes, it will be a first for Australia.

The technology is already in place overseas and providing drinking water for Singapore, Atlanta (Georgia, USA) and Windhoek (Namibia).

London is an example of what's called "unplanned potable reuse", with 360 waste water treatment plants discharging into the Thames River upstream of London.

The Toowoomba City Council has been hoping to follow Singapore's lead for some time, but has been waiting on funding from the National Water Initiative.

The decision on funding should have been made by the Prime Minister at the end of last year.

Instead, Federal Member for Wentworth and Parliamentary Secretary to the Prime Minister, Malcolm Turnbull, announced that the federal government would let the people of Toowoomba decide.

If a majority vote yes on the 29th July, the Federal Government will provide $23 million for the water treatment plant.  The Queensland government will match this amount, but not publicly support the plan.

Citizens Against Drinking Sewage (CADS) formed over a year ago and they've lobbied hard against recycling claiming their city will become know as "Poowoomba".

They claim no-one should have to drink excreta.

But, hang-on there, many people have been drinking "Toowoomba's poo" for a long time.

Toowoomba's treated sewerage is currently discharged into Gowrie Creek which empties into Oakey Creek which empties into the Condamine River.

The town of Dalby draws its water from the Condamine.

It's also interesting to ponder that some of the treated sewerage from Canberra will probably find its way to Wagga Wagga, Griffith, Hay, Balranald and, eventually, Adelaide.

In fact, cities throughout the world discharge treated and untreated sewerage to rivers and streams that supply downstream users with drinking water.

In the referendum at the end of the month, I would definitely vote yes.

There's no point in being precious when it comes to securing a water supply.

City councils should be able to use different options including the reuse of sewerage.

In fact, I would feel less guilty drinking my third cup of tea in the morning, if it was officially recycled water.

I could perhaps claim I was doing my bit for the environment -- sipping the recycled sewerage.

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Twisting the facts is not the answer

Prime Minister John Howard called for a national debate on nuclear power.  But first he wanted the facts.

Some time back, that wise senator from New York state, Daniel Patrick Moynihan, said:  "Everyone is entitled to their own opinion, but not their own facts".

The Prime Minister has got it right and no more so than in assessing Helen Caldicott's contribution with her latest book on nuclear power, Nuclear Power is Not the Answer to Global Warming or Anything Else.

This is a shrill, cantankerous and ranting work.  In it, Caldicott plays the family great aunt cackling interminably over the personality failures of her lively nephews and nieces.

Caldicott's method is to kick off with a spectacular but completely wrong attempt at a knock-out blow on each phase of the nuclear cycle.

On mining, for instance, Caldicott makes the amazing assertion that to extract low-grade uranium ore much more energy is used in winning the yellowcake than burning it.

Evidence?  She provides the example of mining granite that yields four grams of uranium per tonne of rock and requires 30 times the energy to mine and mill than it ultimately yields from a reactor.

But a quick look at the energy input and output at Ranger, where grades are 2000 grams per tonne of rock shows the energy output is a return of 1000 times the mining and milling energy and 60 times more than the energy input including all processes before and after burning the fuel in a reactor.

On power generation she quotes the real cost of nuclear power at US$0.14 per kilowatt-hour from the New Scientist magazine.  But the Australian Nuclear Science and Technology Organisation report Introducing Nuclear Power to Australia might get to half that value.  It is only when reactor plant life is 15 years, as opposed to 30 or more years and the discount rate has moved to 15 per cent that Caldicott's quoted electricity cost emerges.

On nuclear disasters, she says that the plaintiffs in the Three Mile Island suits against the plant owner settled when they could no longer afford to continue.

In fact, in June 1996 District Court judge Sylvia Rambo dismissed the lawsuit granting summary judgement in favour of the defendants.

Finally, in presenting renewable energy as the answer, she shows how much wind energy is available on the planet but shows no understanding of the impact of its intermittent behaviour when wind farms generate electricity.

How the book will be received by the public and how it might influence opinion is uncertain.  For those with some knowledge of the subject it will be assessed on its merits.  But, worringly like the treatment of literature and language in secondary schools, teachers might take the book as an important and unquestioned text.

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Paternalist gimmicks won't help parents, teachers or children

How can parents be encouraged to care about their child's education?

This is at the heart of the proposal from the Victorian Association of State Secondary Principals that parents be required to sign a "contract" with their child's school.  The agreement would cover matters such as parents guaranteeing to attend parent-teacher interviews, ensuring that their child's homework is completed, and committing to take an "active interest in their children's learning".

Parent "contracts" are already in place in some state government and private schools, and the Liberal Party may include the suggestion in its education policy for the next election.  The proposal is an understandable reaction from school principals.  Their job is getting increasingly difficult as families, either deliberately or not, shift the task of parenting on to teachers.

The education function of schools is being replaced by a welfare function.  Having parents acknowledge their role in their child's education is one way of putting responsibility for bringing up children back onto families.

The question is whether contracts between schools and parents are the best way of achieving this.  And the answer is no -- for three reasons.

Firstly, the parents at whom this initiative is aimed are unlikely to have their behaviour influenced by being forced to sign a contract.  Certainly there will be some parents who may be encouraged to act differently, but they will be relatively few.  As Principals Association president Andrew Blair said:  "We are seeing more and more kids in a terrible state of repair turning up to school".  Parents sending children to a school in this state are likely to be known to the school and to welfare agencies and will probably already be receiving help and counselling.

For a variety of reasons, some of those parents will simply be incapable of providing their children with the sort of support required under an education contract.  Parents who fail to help their child's learning are likely to fail their children in many other ways.

Secondly, there's the matter of consequences when the contract is broken.  The most serious sanction is expulsion, and a student from a disadvantaged background is only going to be punished further if he or she must change schools because a parent has breached the contract.  And it would be unfair to penalise a student if a parent refused to sign a contract.

It would also be a mistake to think of contracts as being one-way.  If schools do not fulfil their side of the bargain, it is unclear what sort of redress parents would have.

If, for example, by the end of primary school, a child was unable to read and write, who should be held accountable -- the school or the parents?  In theory, there's no reason why contracts shouldn't be available to all parents at a school.  This potential for an administrative and legal nightmare leads to the third argument against contracts in this context.

A successful educational experience for a child is the result of a partnership between the child, the family and the school.  This partnership is based on shared assumptions and understandings, and fundamentally it centres on trust.  Parents trust teachers to apply their professional judgement and skills in the classroom, and teachers trust that parents will ensure that when children arrive at school they are able and ready to learn.  This trust can't be captured in a contract.

Regulating social relationships, whether by contract as in this case, or through government legislation in other situations, is rarely the solution.  The application of bureaucratic and legalistic rules to relationships has as much chance of destroying relationships as it has of strengthening them.

At first glance it might appear that a contract between a parent and a school would help clarify the expectations of each to the other.  However, no piece of paper can cover every possible contingency and, regardless of what is written, ultimately the parties are going to have to rely on common sense.

If parents came to believe that their obligation to their child's education started and ended with what was contained in the contract with their school, the cause of encouraging parents to undertake greater responsibility might even be set back.

Contracts and regulation are the easy way out to the problem of what to do when parents can't or won't care for their child's education.  Principals and teachers are confronted daily with the consequences of dysfunctional families, and most of the time principals and teachers are left to fend for themselves.

The real challenge is to change the attitude and behaviour of parents -- and this is not the role of schools.

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Regulator should butt out on fibre-optic broadband

It is unfortunate for consumers and businesses that Telstra's potential $3 billion-plus investment in a large-scale fibre-optic network and the coming T3 sale have coincided.

The debate over the two have rarely been separated, but at stake are two very separate issues, with very separate stakeholders.  Treasury officials are concerned with maximising the price of Telstra's sale, but consumers and businesses should be concerned about the circumstances in which we allow infrastructure investment in this country.

As Australian Competition and Consumer Commission chairman Graeme Samuel has correctly noted, Telstra's fibre-optic plan is "not the only game in town".  A consortium of Telstra's competitors, including Optus, Macquarie Telecom, Primus and Internode, have proposed an open-access network.  Tellingly, all their proposals would require heavy investment from Telstra.

Telstra's competitors are merely following Telstra chief executive Sol Trujillo's lead and conducting regulatory negotiations through press statements.

Unfortunately for the regulator, the obstinate Telstra refuses to sign up to its competitors' plans.  Telstra has the money to do so, but, under the current regulatory framework, no desire.  And why should it?  The ACCC has argued that any investment by the carrier would be subject to a "fair" return.  But it is not the ACCC embarking on this risky business venture -- Telstra is a company that at least in theory should be aiming to maximise its financial returns.  If a company, or individual for that matter, makes an investment in the market, they should be subject to their own judgement of what constitutes a fair return, not what a national regulator considers one to be.

But such thinking is largely alien to the ACCC, which has long believed itself to be the patriarch of large infrastructure investment in Australia.

The classic justification for the imposition by a regulator of shared access does not apply to Telstra's fibre-to-the-node (FTTN) proposal.

The carrier built its copper-wire network under a government-imposed monopoly.  It used taxpayers' funds to do so.  Under these circumstances, it was perhaps reasonable to have a regulator open the network up to ensure at least the vestiges of competition.  But there are very real problems with such a regulatory regime.

Access-based competition encourages service providers, initially leeching off the monopoly provider's network, to step up the "ladder of investment" -- slowly investing more and more in the existing infrastructure.  This has its advantages in a marketplace with little innovation.

But having now invested a great deal in the existing network, these carriers are faced with the prospect of being abandoned by Telstra as it jumps into a largely separate new network.

The ACCC's framework has encouraged the growth of small, fly-by-night internet service providers, whose business model is nothing more than a reliance on the ACCC-determined access prices.  Country-wide, there are more than 250 of these ISPs, encouraged not by the whim of the free market, but by the decrees of the regulator.  Given their perilous profitability, they are ill-equipped to withstand the rapid technological change of the sector.

Access sharing does nothing to encourage true, facilities-based competition.  And there are few other industries where facilities-based competition, and the innovation which propels it, are of such paramount importance.  Given the ever-increasing range of technology by which high-speed broadband can be delivered to the home -- and to the mobile phone -- we cannot afford to discourage entrepreneurs from experimenting with new business models and products.

And, not least, access sharing constitutes a massive taking of property rights.  This may not have been of much concern to regulators a decade ago, when they were faced with the taxpayer-supported Telecom, but with a nominally private company whose investments are subject to free will, this should be of great concern.

The communications market has been liberalised for the past decade and subject to a radical shift in emphasis.  It is important to remember that consumer demand has moved from the basic telephone service to mobile telephones, to video-playing iPods.  There are now large numbers of telecommunications providers, many of which are justly proud of their investments in infrastructure across the country.

But Telstra's competitors and the ACCC want to migrate the access-sharing framework, developed a decade ago for a monopoly network provider, onto a fibre-optic network developed by an entrepreneurial company with private capital.  The FTTN network is highly speculative.  Given the current state of technological innovation, it is a risky investment.  Telstra must bear this risk alone.

The FTTN network will not be the last investment Australian firms make in telecommunications infrastructure.  Rapid technological change makes it a certainty that every few years significant upgrades will be made to our national communications networks.  But if regulators are given a right of reply to every investment and pricing adjustment, Australian broadband will lag well behind what a wealthy, prosperous nation should have.

Improve federalism by cutting duplicity

Federal Treasurer Peter Costello is both right and wrong in his desire for the federal Government taking over the economic functions of the states.

He is right that the states have squandered their substantial reform bonus.  Since the introduction of the goods and services tax in 2000 the states have received about 20 per cent more than expected, equalling $70 billion in unanticipated revenue.

Instead of using their windfall to continue the process of reform and sustain the good economic times, they have expanded the size of government and increased the numbers and salaries of public servants.

A measure of the premiers' profligacy is that despite the windfall of the GST three states, including NSW, are now running deficits.

While the premiers have talked the talk of reform, they have failed to walk the walk.  The only reason there has been any reform at all at the state level is because the premiers are the recipients of financial bribes from the federal Government via the National Competition Policy.

For example, efforts to remove transport infrastructure bottlenecks -- essential if our export performance is to be maintained -- are caught up in endless meetings of federal-state committees.  The Coalition's efforts at improving workforce productivity through Work Choices have been opposed by Labor premiers campaigning hand-in-glove with the ACTU.

It's no wonder that the Treasurer is frustrated.  He has signalled that he refuses to sit on his hands and watch a once-in-a-generation opportunity wasted;  even if taking this opportunity means fundamentally altering the balances in our system of government.  He's correct when he acknowledges that Australian federalism is a mess wracked with overlap and duplication, opaque lines of responsibility and petty power plays.

But the answer is not to junk federalism and turn the states into little more than glorified local councils, as Costello has implied.  No level of government has all of the answers.  The reform record of the federal Government can be as bad as that of the states.

For example, our media laws, which are in the exclusive control of Canberra, are a mishmash of confusions and half-baked compromises.

The task ahead is to strike a balance and recognise that the point of federalism is to limit the power of government and make it accountable.  That is why the concept of federalism was once a central tenet of the Liberal Party, because the Liberal Party had a belief in small government.  On the other hand, the Labor Party, believing in the power of unlimited government has always been implacably opposed to federalism.

Certainly, federalism can be improved by cutting back on overlap and duplication and ensuring clear lines of responsibility, and this is part of what the Treasurer has suggested.

A single approach to regulating infrastructure is appropriate, but the objective should not be just to pass control over to the Commonwealth.  The aim must be to shift ownership of infrastructure as much as possible into the more competitive private sector.

Public ownership of utilities and much of our infrastructure is inefficient and unnecessary, regardless of whether that ownership is in the hands of federal or state governments.  State governments have long used utilities as de facto taxing agents, stripped them of cash and used the funds to prop their own state budgets.  States could probably relinquish their decision-making authority over key infrastructure without doing too much damage to federalism.

But the Treasurer is wrong on tax.  His idea that the federal Government should assume all taxing powers would only succeed in making the system worse.  The real problem is not that the federal Government doesn't have enough financial power, the problem is that it has too much.

In its long history the High Court has made some contentious decisions, nearly all of them in favour of the Commonwealth at the expense of the states, but even a court with Lionel Murphy as chief justice would baulk at forbidding the states from using their constitutionally enshrined taxing powers.  So the first issue the Treasurer would have with his plan is one of practicality.

The more fundamental question is:  what would the elimination of state taxes do to the accountability of state governments?  The states now get nearly half of their funds from the Commonwealth, with the rest coming from taxes and charges that are hidden from most taxpayers.  Premiers have precious little pressure on them to ensure they get value for money.  Making the states entirely dependent on the Commonwealth would only make the states even less responsible.

If only the federal Government levied taxes, then states would have no capacity to compete between themselves in relation to their tax rates.  And in the 1980s it was competition between the states, particularly between NSW and Victoria, that led to many of the key reforms of the period.

That the Treasurer has flagged the federal Government should exit some areas of service delivery is an important acknowledgment that he appreciates reform of federalism is not a one-way street.  In recent decades megalomania has encouraged federal ministers to meddle in the legitimate activities of state governments.  The national interest is best served by having diversity in our education, health and welfare systems.

Maybe coming out of the debate about federalism will be a simple recognition that just because something is in the national interest doesn't mean it should be run from Canberra.

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The reformist's decade

The Longest Decade
by George Megalogenis
(Scribe, 2006, 352 pages)

This book is an engaging and refreshing analysis of two of the most influential Australian politicians in Australia's economic reform and modernisation.  It is refreshing that, in the words of its author, "it plays the policies, not the man".  Given that so much political analysis in this country plays on personality, many commentators have already expressed surprise that Paul Keating and John Howard could indeed have anything in common.  One can only assume that the surprise is because so much of the media is biased by an ideology that it is largely incapable of saying much of an intelligent or objective nature, especially about the incumbent Prime Minister.

The central theme of the book is about how Paul Keating as Teasurer under the Hawke Government started the radical reform process of Australia's economy which Howard, as Prime Minister, continued to build on, giving this country over 15 years of continuous growth -- the longest decade.  It gives a detailed account of this economic transformation and a colourful account of the political events that surrounded each step along the way.  While bringing to light the similarities in these two men's respective economic credentials, it also fills out their very marked differences upon non-economic issues.

The book's blurb touts it as being "non-partisan" and although it gives both points of view throughout, with quotes in extenso from lengthy interviews conducted with both men, one gets the feeling that Megalogenis has a covert admiration for Keating, the smart-arse bully boy of parliament who got the whole reform process going, in contrast to his impression of a duplicitous, unfeeling Howard, with his overly harsh border-protection policies, and the present more selfish, divided Australia.  In spite of this subtle yet discernible preference, Megalogenis does, nevertheless, manage to give a fair voice to both men, and this does give the book depth.  Indeed, both protagonists have agreed to launch the book, albeit in separated cities and at different times.

Reading the two men in their own words certainly confirms or clarifies any views one may have of them.  Keating, from his own mouth, appears as a swaggering, insufferably self-satisfied egomaniac, while Howard appears to be a modest, self-effacing gentleman who understands the mood of the electorate better than Keating ever did.  Compare these two quotations:

I invented talkback radio for politicians.  And I always talked up to the community.  I think the great mistake of Howard is to always talk down to people:  you know, let them eat cake, the Marie Antoinette view of the world.  I tried to include them into the problem, to try and explain it to them.

I always felt comfortable and at home with [the Australian public].  I feel I understand them, and my respect for them has been very high and it grows.  The Australian electorate is very bright.  Hawke, as distinct from Keating, did respect the electorate.  I think, on occasions, Keating didn't.  It is a fatal mistake for a politician to think that he is brighter than the electorate.

It brings to mind that wonderful Nicholson cartoon on the day after the Howard victory in 1996.  There we see Keating carting off an enormous, ostentatious, gilt-framed oil painting while Howard is quietly moving in with a small miniature tucked under his arm.

Some have challenged the book's lack of discussion about Hawke's contribution to economic deregulation.  Megalogenis admits that he did not have the space to talk in detail about him -- he does give the impression that it was all Keating -- and concedes that Hawke, especially in the first couple of years after 1983, launched and set the ball in motion on reform.  But after this start, it was essentially Keating who did the heavy pushing, while Hawke managed the politics of it.

And of course, importantly at the time, both Hawke and Keating had substantial support for the reform process from the opposition of the time.

Despite its relative lack of attention in the media, conservatives do remember and understand that the Hawke/ Keating reform agenda was very much aided by a co-operative bipartisan approach that made possible so much of what happened.  Megalogenis recounts just how well these two men got on, and how Keating saw Howard very much as an ally in those early years.  He tells the story of how, at one point, Keating invited Howard, then deputy opposition leader, into his office and handed him a copy of his white paper on tax reform, containing the so-called Option C for a consumption tax.  He told him "Hang on to it for an hour, I haven't handed it to some of my colleagues yet".  In Howard's words, we were "working together".  It is to Howard's credit and Labor's shame that there is no longer the same bipartisan effort for reform.

Megalogenis is right to state boldly that "both men agreed on deregulation".  He paints a concise picture of the complementary views of the two men.  He reveals how Howard demonised, and Keating deplored, the old protectionist trade union culture.  Keating now attacks present-day Labor for this very same thing, for going back to "the old anvil", a sort of protectionist, blue-collar instinct of the past.

Megalogenis puts it this way:  "Keating had a very un-Labor love of private enterprise ... Howard has a very un-Liberal love of blue-collar Australians".  He observes that both Keating and Howard were critical of Fraser and Whitlam -- the last of the Old Guard.  Keating complains about the present direction of the Labor party:  "It's walked away from financial innovation, from the opening up of the economy and the whole meritocracy model of widening its own appeal to single traders, to sole operators of business, small business".

Megalogenis seems to come unstuck when talking about social issues and the culture wars.  He claims that "Paul Keating tried to change Australia:  John Howard returned it to what it was".  He claims that "Australia under Howard is demonstrably more unified than it had been under Keating", yet says that "the boom of the past 15 years has not secured social cohesion" and has "increased the distance between people".  He further blames Howard's framing of public debate to single issues as inevitably diminishing "the public conversation", and that the rest of the time "we engage in the monologue of materialism".  He starts to sound a tad like the culture wars harpy David Williamson, or the ABC, or the Fairfax press at this point.

While covering some fascinating detail and comments from both leaders on Hansonism, border protection, republicanism and reconciliation, his own policy positions come to the fore, and the analysis and conclusions are therefore less satisfying.  On native title he states that "“Moral” is a big word, and I don't like using it because it denies the other side of the argument.  But it applies here".  Precisely.

Megalogenis accuses Howard of running the government "as a frequent-flyer program, with rewards based on loyalty, not need", but seems to forget the obsequious fawning of the arts industry under the largesse of the Sun King's prime-ministerial "Keatings".

Interestingly, the author downplays the issue of media culpability of "playing the policies, not the man" when challenged in public about its entrenched anti-Howard stance.  He is after all one of them, but he does, to his credit, raise the issue:

On a good day, even if the number were bad, journalists would compete like schoolroom pets for the teacher's affection.  The questions to Keating were soaked in jargon.  The tone was often reverential, even conspiratorial.  At the end of the 70 minute session, some of the most respected pontificators in the nation would float out of the room like teenyboppers heading for the exit sign after a rock concert. ... When the same group had finished grilling John Howard the heads would be shaking "that man will never be prime minister".

As David Barnett commented on the rise of Latham last year, and is quoted in The Longest Decade:  "[Latham] was immediately embraced by the media as the next prime minister, as if nothing good had come from the Coalition government".  The press's attitude towards star Labor candidates hasn't changed all that much.

This is an excellent history bursting with policy and personal detail.  Megalogenis' political preferences are discernible, but it does not hinder the enjoyment of a brilliant exposé.

The classless Cobbett

The Life and Adventures of William Cobbett
by Richard Ingrams
(HarperCollins, 2005, 456 pages)

"Every now and then someone asks as a sort of parlour game, 'Who do you think is the greatest Englishman?'  I have never been at a loss for an answer.  Samuel Johnson of course ... Johnson was profound.  He was moral.  Above all he was human ... still I have a qualm.  There comes to my mind not perhaps the greatest Englishman but certainly the runner-up.  This is William Cobbett".

Richard Ingrams's recent biography of "one of the most extraordinary characters in English history", begins fittingly with the foregoing quotation of A.J.P. Taylor's.  History tends to prefer prolific leaders to eccentric journalists, though the story of Cobbett still remains a remarkable tale.

Picture a 20-year-old farmer's son, off to the Guildford Fair on the sixth of May 1783, only to spot a London stage coach rolling towards him.  Possibly on impulse, he decides to jump on and ride to London instead.  It was a decision that would be the symbolic first step to the remarkable career of a man who Ingrams describes as "the most effective, most savage and most satirical political journalist of his or any other age".  It is an amusing anecdote that aptly encompasses the adventure of Cobbett's life, and indeed, Ingram does well in making it read like one.

But what exactly were the politics of the greatest political journalist?  Why is his life still worth reading about?

It is clear that the contemporary Right/ Left labels simply do not fit Cobbett's politics.  Like the great free trader Richard Cobden, Cobbett was fiercely against the Corn Laws, but like the Utopian socialist Thomas Spence, Cobbett would go on to advocate public ownership of land.  Rural labourers were in a constant struggle to compete with the oncoming industrial revolution, but Cobbett was never a supporter of violence, or to the smashing up of machinery, of which he himself saw the benefits.

Cobbett, rather, is the great apostle of the democratic idea.  He was classless in a society completely divided by class.  Plato would famously argue the need for Philosopher Kings, but it was Cobbett who would argue that "the nature and quality of all living things are known to country boys better than to philosophers".  He was the leading advocate of the reform movement at a time when many politicians saw the purpose of government (which Cobbett labelled "The Thing") as the maintenance of the status quo.  He detested the term "lower orders" to describe his beloved labourers, noting that "Genius is as likely to come out of the cottage as out of the splendid mansion".  The British will argue that William Cobbett was quintessentially English, but I would argue that Cobbett's spirit was quintessentially Australian.

Cobbett would found the Political Register, a journal which sought to expose the incompetence of government leaders and the neglect that was shown towards the common people.  His most lasting legacy, however, was the printing of Cobbett's Parliamentary Debates, which would come to be known as Hansard (after the man to whom Cobbett later sold his business).  Cobbett was of the belief that anyone could achieve a level of education and intellect if allowed access to the right resources, and it was this that made Cobbett such a prolific writer.  Books on English grammar, speaking French, economics, history -- every topic known to man was approached at least once by Cobbett.  Rural Rides remains his most enduring work, a kind of travel diary of the English countryside that gives readers the best look into an England on the brink of the Industrial Revolution.

Ingrams has chosen a good time to bring William Cobbett back to public view.  Corruption still remains rife in the developing world, but with very little public attention given to it, we are stuck wearing coloured wrist-bands and supporting trivial development projects such as "fair trade".  A William Cobbett today would be much welcomed, exposing the injustices of tyranny and the poverty caused by corrupt leaders and incompetent bureaucracies.  The spirit of individualism is often associated with the American pioneer, but no better has it been demonstrated than by the British ploughboy who made it to parliament.

You are what you chose to eat

It is a tribute to Australia's prosperity that people in poverty are more likely to be overweight than underweight.  But rather than a celebration of the achievements of economic growth, this has instead led to cries of an "obesity epidemic".

For instance, Ross Gittins argued (Opinion, 28/6) that this is a case of market failure that we need the government to remedy.

It is clear that the average weight of Australians is increasing.  But obesity is a complicated area, and health advocates would do better to analyse the long-term causes and effects before rushing into calls for government regulation.

Using the standard measure of obesity, the body mass index (which, in simple terms, compares weight with height), obesity is on the rise.  At present, 21 per cent of Australians are classed as "obese".

However, the medical literature is highly sceptical of the validity of this measure that takes no account of body composition, such as muscle or bone.  It may be that many people now classified as obese are, in fact, "big-boned".

Our consumption habits also tell a complex story.  OECD data shows that daily energy consumption per Australian has actually decreased since the early 1960s by about 125 kilojoules.  Similarly, our sugar consumption has also gone down.  Many nations, including the United States, have seen increases along these lines, but these figures indicate that Australian consumption is getting more, rather than less, healthy.

Even more surprising:  a study from the Centres for Disease Control in the United States found that "overweight" people had a lower risk of death than those of normal weight.  Not only that, but this lower risk partly cancelled out the increased deaths from obesity.

But we are getting heavier.  Part of this is to do with the composition of our diet.

As the millions of supporters of the Atkins diet will argue, what we eat now is radically different from what our ancestors ate 50 or 100 years ago.  But it is also true that what those ancestors ate is radically different from what their ancestors ate.  Food consumption has been one of the biggest changes brought about by our centuries-long process of globalisation.

More recently, technological change and supply-line innovation in food manufacturing has drastically reduced the cost in time and money of food preparation.  It is arguably a wise economic decision to eat out rather than in, especially when factoring in the time of shopping and cooking a meal.

As the quality and variety of manufactured food has gone up, its price has gone down.

But most of the recent growth in weight is not directly attributable to our food.

A study by the economists Darius Lakdawala and Tomas Philipson found that only 40 per cent of weight gain since the 1970s is due to changes in diet.  Rather, the large part of our weight increase can be attributable to changes in lifestyle and work practices.

Contrary to what Gittins has argued, this is not an opportunity for government to intervene.

First, government regulation doesn't seem to work.  Sweden has every program on the book to combat childhood obesity.  Advertising aimed at children under 12 is banned.  Sports programs are heavily subsidised.  Healthy cooking is part of the curriculum.  But the number of overweight Swedish children has tripled in the past 15 years.

The market is remarkably good at educating people on the negative consequences of their decisions.  Balancing against the advertising for high-sugar snacks, television programmers have provided shows like What's Good for You and The Biggest Loser.

All of these programs have been produced not by government, but by corporations eager to maximise their ratings, and therefore their profits.

In fact, data from the United States indicates that the number of food and restaurant commercials viewed by children has actually declined over the last decade.

Consumers are becoming more aware of the consequences of fatty and unhealthy food.  This change in demand goes far past the salads at McDonald's.  Juice bars, wheatgrass shots, bioengineered food and even sushi were unheard of to Australians 50 years ago.

The notion of a government regulating to protect people against obesity used to be unthinkable, used as a parody of anti-tobacco legislation.  Unfortunately, it shows us how far the political debate has moved from personal responsibility to government responsibility.

But is there a clearer area in which individual responsibility must take the fore than when choosing what we eat?  Government regulation is not the solution to the obesity crisis.

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AWAs unlock West's mining wealth

Kim Beazley's recent commitment to eliminate all Australian workplace agreements is tantamount to killing the goose that lays the nation's golden egg.

Eliminating the AWA would undermine the profitability and productivity of the nation's main wealth creating sector -- the mining sector of Western Australia.

The WA mining sector moved en masse to individual agreements in the mid 1990s under reforms introduced by the Court Government.

At the time, the mining sector was encumbered by a huge number of inefficiencies built up over decades of capitulating to bloody-minded union demands.  The sector also had on offer riches from the rise of China if the largest country in the world got its act together, became efficient and built the needed capacity and related infrastructure.

While labour was not a major cost, it was the major impediment to improving productivity and reaping the riches on offer.

The challenge was to get the workforce committed to gaining the prize and individual agreements achieved this largely by providing wage increases in the order of 30 to 50 per cent in exchange for organisational change.

In 2001, the industry faced a major hurdle when the Gallop Government, like Beazley now threatens to do, capitulated to its union paymasters and eliminated state-based individual agreements.  Luckily, there was an alternative in the form of the Federal AWA and the sector shifted en masse.

The shift was not easy.  AWAs are costly to administer and negotiate and the mining sector had to once more convince its workers individually to agree to make the move.  Because the gains to workers and the firms were so large and clear-cut, the move was achieved in full and in a remarkably short period of time.

There is now no alternative to the AWAs.  Moreover, a shift back to collective agreements, as envisaged by Beazley, would necessarily result in reduced operating flexibility, lost productivity and lower wages and profitability.  The impact would spread to us all.

All Australians share in the profits earned by the WA mining sector, directly through taxation and indirectly through economic growth.  Indeed, the large tax cuts now benefiting most households are in the main being funded from profits from the WA mining sector.  If the profits go, the tax cuts will follow suit.

Beazley rationalises his commitment as an effort to defend the little guy from exploitative bosses.  However, in the mining sector there is no little guy or exploitation.  The mining sector workforce is highly skilled, highly paid and in a strong bargaining position.  Moreover, the mining sector workforce has twice agreed unanimously to adopt individual agreements.

If Beazley's concern lay in protecting workers, he would not ban AWAs but place restrictions on their terms and conditions.  He certain would not ban them in the mining sector.

One can only conclude that his aim is not to protect workers but to force them back to the union fold irrespective of the consequences for them and the nation as a whole.

This is how low the formerly reformist ALP has sunk.

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Orwell’s Curse

Privacy without Principle:  The Use and Abuse of Privacy in Australian Law and Public Policy
by Brett Mason
(Australian Scholarly Publishing, 2006, 228 pages)

Privacy is a strange concept.  Few debates over new technologies, changes in social structure or security measures are free from appeals to the right of citizens to conduct their affairs without surveillance, from either the corporate or the political sector.

As Brett Mason argues in Privacy without Principle:  The Use and Abuse of Privacy in Australian Law and Public Policy, privacy has become a term of convenience for advocates of one or another political position.

The term itself has little conceptual core.  Mason traces the variety of methods by which legislators, judiciaries and commentators have attempted to define the core of privacy -- what is it that we are trying to protect?  Privacy could be control of information regarding oneself, or deeply personal information that one may not wish to be made public.  Privacy could be a manifestation of the autonomous individual, or could be the protection of intimacy.

In order to make consistent public policy decisions which respect the notion of privacy, legislators need an unambiguous and comprehensive definition.  But none of the answers listed above, Mason argues, are conceptually clear, and provide little guidance for practical policy decisions.

How, then, is the concept of privacy used in Australian politics?  Mason singles out two debates within the last few decades -- the 1994 Human Rights (Sexual Privacy) Act and the 1986 Australia Card Bill.  Both of these debates exhibit the critical flaws in privacy discourse.

For example, why was privacy the vehicle upon which to legitimate homosexuality?  While not always consistent with a liberal society, from a historical perspective, the state has always had an interest, or at least believed it had an interest, in the sexuality, sexual acts and reproductive habits of its citizens.  The Human Rights (Sexual Privacy) Act sought to remove homosexuality from the interests of the state, but by hanging the act upon the concept of privacy, it did gay rights movement’s cause a great disservice.

The 1994 legislation posited that homosexuality was acceptable, as long as it was a private or intimate matter.  If privacy is the foundation of the state’s interest in homosexuality, homosexual "legitimacy" is premised on a staying in, rather than out, of the closet.

Mason also raises some other, challenging questions.  For instance, if privacy determines the state’s interest in individual sexuality, does it follow that all (non-coercive) sexual acts are also legitimised?  Such a formula would seem to legitimise acts which policy-makers may prefer not to condone, for instance, incest.

It is unfortunate that the debate over the government’s interest in homosexuality in Australia led to a debate over what distinguishes homosexuality from incest.  Advocates of gay rights are not well served by such appeals to privacy.

The Australia Card debate, and indeed, subsequent debates about national identification cards, have similarly used the concept of privacy loosely, often to their detriment.

In this sense, George Orwell has done civilisation a great disservice.  Both sides of politics ask a great deal of contemporary governments.  Government services need to be efficient.  The terms of property have to be clearly defined.  Laws need to be uniformly and rigorously enforced.  Citizens need to be secure and, argue many from the progressive side of politics, they also need to be protected against their own choices.

Privacy is an inadequate focus of the debate over the relationship between the state and its citizens.  That relationship, particularly in a time when social regulation and legislative paternalism are on the rise, needs to be closely examined.

But the doctrine of privacy against all else -- undefined and unchallenged -- does such a debate a great disservice.

Against Scientific Nationalism

The Australian Miracle
by Thomas Barlow
(Picador Australia, 2006, 288 pages)

One of the canards of Australian industry policy that survived the dismantling of the protectionist policies of the mid-twentieth century is that if the Government gives scientists buckets of money, they will cause us all to become rich.  Broadly, this is the Barry Jones or "Science Club" view of the world and it has led State and Federal Governments to support high-risk emerging technologies and start-up companies that investors are generally too smart to go near.  Despite the hundreds of millions that go into Government support for R&D, the ongoing failure of this policy is rarely subjected to proper policy analysis.  In the main, economists and Treasury departments pretend it never happens and still prefer to leave the discussion to the professional doom-sayers.

So it's a pleasant surprise to see somebody emerge from the Government side who talks about the basic flaws in the language employed by Governments and professional and industrial rent-seekers alike.

Thomas Barlow, a former science adviser to Brendan Nelson when Minister for Education, Science and Training, has written The Australian Miracle, which suggests that governments and their supporters in the science club have got it wrong in presenting a dismal past contribution from science and innovation to economic development.  This may be a useful primer for the Productivity Commission as it considers government support for science and innovation.

The central theme of the received wisdom is codified by Barlow in "ten myths".  Briefly put, these myths argue that Australians are innately inventive but no good at making money from their inventions.  Not enough is invested in research and development and, when invested, is badly targeted to scientists who won't work together.  As a consequence, the best ideas and scientists leave Australia and the country remains a farm and a quarry.  Australians are not interested in science and are condemned to be second rate.  These criticisms have become familiar to us through the likes of Barry Jones, Donald Horne, John Dawkins and through countless "Innovation Summits" and "Future Forums".

Barlow comprehensively debunks these "myths".  As an example, take the perennial favourite of our low national R&D activity.  The accounting does not include mineral or petroleum exploration.  Consequently, at least a billion dollars and some high-tech activities are ignored.  The "myths" are a consequence of a mismatch between aspirations and reality, but by holding to them, rent-seekers can persuade governments to support fashionable technology developments.  It is the equivalent of a middle-ranking state of the United States wanting all the industries of California.

Barlow considers the history of government-targeted research initiatives.  He uses the example of the German Government's biotechnology initiative, involving half a billion Deutschmarks, that has made little impression on the local pharmaceutical industry.  There are many other Ozymandias-like objects in the research landscape -- the super-computer policies of MITI in Japan, the Alvey computer initiative in the UK, and the recent French initiative to develop a uniquely Franco-German Google -- they all show how hard it is to follow on and catch up.  Local State premiers should reflect on this as they fund their biotechnology initiatives.

Barlow makes some excellent points about inefficiencies being important for invention.  While he is correct in stating that decisions on direction should be left to researchers, this does not void the need for justification to the policymakers and the paymasters.  He also worries that research into the "unknown" will not be welcomed, even though, over time, this approach has led to some of the great scientific discoveries.

The most important point Barlow makes is the unpredictability of the consequences of research.  The same point can also be made for the processes of innovation.  For instance, the incorporation of text messaging was not seen as much more than a minor added function to mobile phones, yet it has grown and blossomed into an essential teenage mode of communication, an advertising medium and a source of information.

The remainder of the book covers the past development and use of technology in Australia and, sadly for those of us who remember, Barry Jones's fondness for futurism, suggests ways of finding our future.  Even Barlow seems not to have completely removed the absurdities of modern industry policy from his system.  One is tempted to wonder whether we are, in fact, analysing any real public policy problems at all.

Perhaps this is because nobody knows how to address the core question:  What is the magnitude of the direct contribution made by scientific researchers to economic development?  If the contribution is minor, then the language of national science or development priorities should be rejected.

The answer is that if Australia is like other developed economies, business is the dominant source of innovation.  Universities and government laboratories contribute a few per cent of innovations.

This does not mean that there is no contribution from science.  On the contrary, it is a much deeper and wider contribution through education and research.  Education provides graduates who make innovative contributions from within the companies that employ them, or in some cases, from the companies they establish.  Research in science and engineering supplies understanding of methods and techniques that enable the realisation of novel products and processes.

This book is the first considered analysis expressing a contrary view to the received wisdom.  It is a powerful statement and a warning to those in the scientific community who have offered to rebuild Australia, an undertaking they will not be able to keep.  Experience and measurement elsewhere shows that they will not deliver.  In the words of one scientific organisation, what is now needed is a mid-course correction.  At the very least, Barlow could have another go -- perhaps suggesting what we might usefully do with the dismembered parts of the CSIRO that would inevitably follow a serious rethink of industry policy.

Myth of serving the public

On Monday, NSW Premier Morris Iemma announced that "NSW needs a plan".  He promised to develop a plan to provide direction for the government and set benchmarks in the delivery of health, education, transport and police services.

In his nine-page speech, Iemma variously described the plan as a "road map", a "blueprint", a "game plan" and "a guiding document for the entire public sector".  Even better, he said the plan would be "holistic".

The obvious question to ask is what has the NSW Labor government been doing for the past decade?  Without a plan how has the NSW government, with its budget of $40 billion and a staff of 300,000, been able to operate?  And in the absence of any performance standards, how can the success or otherwise of the government's activities be determined?

Iemma's comments raise the issue of whether Labor in NSW even knows what its purpose is anymore -- or is it the case that his government is aiming only at power for its own sake.

This assessment of state politics might be depressing, but it is hardly surprising.  What is surprising is that in the course of his announcement Iemma expressed his bewilderment that in the bureaucracy there did not exist a strong "culture of public service" and that government departments did not necessarily put "the customer first".

He lamented that this situation persisted despite the fact that public servants (and politicians) had "honourable motivations" to "do good and make a difference".

Either Iemma is hopelessly naive, or he is ignorant of "public choice" economics, or both.  The assumption that bureaucrats always act altruistically and selflessly and only ever out of a desire to provide for the greater good is perhaps one of the greatest frauds ever perpetrated on an unsuspecting public.

It is a myth that dates back to the beginnings of a professional civil service in Britain in the 1840s, and it serves to enshrine bureaucratic and government power.

By the end of the 1950s, after decades of the growth of government, evidence had mounted that this myth, like all other myths, had little connection to the real world.  "Government failure" was as big an issue as was "market failure".  In 1962, two economists -- James Buchanan (the winner of the Nobel Prize for economics in 1986) and Gordon Tullock -- published the classic work of public-choice economics, The Calculus of Consent.  Its argument was simple -- public servants and politicians can be as self-interested as the rest of us.

Public choice applies the lessons of economics, especially as they relate to incentives to public policy.

Like any other individuals in any other sort of employment, public servants and politicians can behave in the way idolised by Iemma -- but often they don't.  This insight is at the core of public-choice theory.

A public servant whose task it is to alleviate a particular social ill certainly might wish to have that problem solved for the benefit of the community.

But if that public servant succeeded in solving the problem it might result in the budget they managed being reduced, their employment classification being downgraded and ultimately them losing their job.  Therefore there are also strong personal reasons as to why that public servant would not want to solve the problem.  Worse, that public servant has an incentive to actually exaggerate the scale of the problem in order to get more funding and so improve job security.

This might appear to be a cynical explanation for the behaviour of the public service, but it is realistic.  In addition, it helps explain the origin of the endless warnings of environmental and social "crisis" from taxpayer-funded researchers and scientists.

Inevitably, according to these researchers and scientists, the best way to overcome a crisis is to spend more taxpayer funds.

Public-choice theory reveals that the policy choices made on behalf of the public by government, supposedly for the benefit of the public, can sometimes be the self-interested private choices of politicians and public servants.

There's little or no accountability for the quality of public services because it is not in the interests of the public servants managing those services to be accountable to their ministers, to the electorate, or to anyone else.

Until Iemma recognises this, any "plan for NSW" will fail.

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