Brown's economic Xenophobia will cost us dearly

For a man who so warmly embraces every foreigner seeking asylum in Australia, Bob Brown is strangely xenophobic when it comes to foreigners who want to lend us money or invest here.

Yesterday, at the National Press Club, Brown did his best to stoke up anger against investors from ''Switzerland, London, Calcutta, Beijing'' and foreigners who, according to a study commissioned by the Greens and released yesterday, own 83 per cent of Australian mining companies.  It was not a pretty sight.

Economic debate in Australia will take a turn for the worse once the Greens hold the balance of power in the Senate.  Brown may have good intentions but he is economically illiterate.  That illiteracy is likely to cost ordinary Australians dearly;  many will lose their jobs and their standard of living is likely to fall.  It is surprising given their well-developed economic policies that the Greens have managed to avoid careful scrutiny of their party platform.  Their industry policy should worry many Australians.

The Greens have long run a campaign against the mining industry and particularly the coal industry.  In fact their stated party policy is no new coalmines and no expansion of existing mines.  They fully intend to close down the Australian coal industry.  Sooner rather than later.

Brown makes two arguments in defence of this policy.  First, that renewables would replace coal.  Second, that the Australian mining industry is largely foreign owned.  Presumably that means the Australian government can destroy foreign investments with impunity.

Economic illiterates make several mistakes in their analysis.  Because of his anti-foreign bias, Brown overlooks the benefits of interaction with foreigners.  Unfortunately, he is not alone in exhibiting ''capital xenophobia''.

Australia has long had to borrow money from the rest of the world to finance our economic prosperity.  The local economy has grown and foreign investors got their money back.  This arrangement has benefited everybody;  Australian savings are simply too small to finance our economic growth and standard of living.  Foreigners invest in those economies with good prospects and low levels of sovereign risk.

Australia has a good reputation as an investment destination.  But Brown is placing that hard-earned reputation at risk.  Suggestions by a major political party, in a formal partnership with government and holding the balance of power in the Senate, that foreign investment can be taxed with impunity, or even shut down, raises perceptions of sovereign risk.  What's worse, he is not alone.  The ill-fated resource super-profits tax also raised serious concerns about sovereign risk.

Remarkably, Brown admits that Australia gets ''jobs, export income, royalties and company tax'' from mining.  But that is not enough;  he wants it all.  He seems to object to foreigners, in return for their loans and investments, getting ''profits, dividends, [and] capital appreciation''.  There is also a bit of double counting going on;  dividends and capital appreciation amount to profits.  Or perhaps Brown doesn't know that.

Brown is worried that foreign investors will earn $265 billion from their Australian investments over the next five years and, of that, $50bn will leave the country and $205bn will be reinvested.

Putting those figures into context, the Australian Taxation Office reports for the 2008-09 financial year that the mining industry paid $13.3bn in corporate tax.  Of that amount coalmining paid nearly $3.6bn.  So the industry paid more in tax in one year than the $10bn Brown suspects will leave the country in dividends each year.

What Brown imagines is that all that money going to foreigners could be diverted into a Norwegian-style sovereign wealth fund.  It's not clear what he thinks will happen to the jobs and export income once foreign investment has been withdrawn because it no longer earns any profits, but Brown imagines that Australia could then be like Norway.  However, unlike the Norwegian government, the Australian government does not hold large ownership stakes in the minerals industry.  So the establishment of a minerals sovereign fund would not mean the diversion of existing government revenue into a fund but rather higher levels of taxation, discouraging work, saving and investment.  After all, why do these things if the government is just going to tax away your money?

Economic illiterates believe that with some tweaking the world can be made a better place.  In Brown's case the existence of a carbon tax and the demise of the coal industry would make the world a much better place.  Yet he has given little thought to how that world would be powered.  It's all very well talking about ''renewables'', but which renewables and how much would they cost?

As the Productivity Commission recently flagged, renewables are expensive;  wind power costs $150-$214 a megawatt hour, solar costs $400-$473 a megawatt hour.  By contrast, coal-fired electricity costs less than $100 a megawatt hour.

A coal-free Australia would be a lot more expensive, with lower standards of living.

Brown quoted the UN statistic that for every year of delay on climate change $1 trillion of costs will be incurred.  What he hasn't explained is how undermining the Australian economy would reduce that cost and why Australians should bear that cost when the UN hasn't managed to convince its members to act in concert on climate change.

The biggest problem Brown faces is that you can't intervene in the economy on the scale he desires without a massive reduction in our economic wellbeing.  The problem Australia faces is that Brown doesn't understand that point.

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Conservatives court the same-sex marriage lobby

New York now joins Massachusetts, New Hampshire, Iowa, Connecticut, Vermont and Washington DC in having legalised gay marriage.  Internationally, the club also includes Argentina, Belgium, Canada, Iceland, the Netherlands, Norway, Portugal, South Africa, Spain, and Sweden.

So we should not pretend the decision of the New York legislature is ground-breaking.  Once implemented in a jurisdiction, gay marriage fades into the background.  While its introduction is controversial, its existence is mundane.

Yet there's still a lot to learn from the New York decision for supporters of same-sex marriage reform.

One reason the New York decision is interesting has been the muted reaction of the conservative movement -- varying from resigned acceptance to warm support.  Nowhere was this clearer than on the website of the National Review.

The National Review is the rock on which the American intellectual conservative movement was built.  Unambiguously conservative, its founder, William F Buckley, nevertheless described himself as a libertarian -- his magazine can take large credit for melding the post-war conservative fusion between anti-communists, libertarians, and social conservatives.

The first thing the National Review published after the New York decision was an article which can only be described as warm and congratulatory.  The columnist Michael Potemra wrote about the ''sweetness of a symbolic victory''.

Certainly, Potemra's wasn't the only piece published on National Review Online immediately after the decision.  A moderately hostile one -- although focusing more on process than policy -- was written by William C Duncan, chief of the Marriage Law Foundation, an anti-gay marriage lobby group.

Yet the comments on those articles are running about 50/50 for and against.  That is itself a pretty big deal, considering the National Review's position in the conservative world.  It's a sign the intellectual case against gay marriage is looking flimsier by the year.

If gay marriage is destined to undermine traditional marriage, there's no evidence it has done so yet.  In none of the jurisdictions which have made this change have key social indicators slid backwards.

As the conservative David Frum wrote on CNN.com on Monday:  ''The case against same-sex marriage has been tested against reality.  The case has not passed its test.''

Frum was a prominent opponent of gay marriage in the 1990s.  The energy has gone from the anti-gay marriage movement.

Of course, one can still have an objection to gay marriage on the grounds of religious faith.  But without evidence that such a reform could harm society, there's no reason for the non-religious (or those whose religious beliefs do not preclude same-sex marriage) to share that objection.

Well, except for one thing.

The critical issue for New York Republicans was ensuring those who have religious objections to gay marriage would not be penalised for refusing to marry a same-sex couple.  After all, it would hardly be a step forward if an expansion of freedom for gay people required a reduction in religious freedom.

The final bill protected religious organisations from lawsuits or the withdrawal of state funding if they declined to participate in same-sex marriage ceremonies.

It proved to be a surmountable barrier in New York, but this religious freedom proviso should remind us that our wealth of anti-discrimination law could hold back liberal and progressive reform.

Supporters of gay marriage who do not sufficiently account for religious freedom do their cause a disservice.  It's likely anti-discrimination laws will be -- deserve to be -- a major sticking point when an Australian parliament inevitably deals with gay marriage legislation.

American states have the power to decide whether to extend marriage.  Australian states do not.  The New York decision has shown how vital this difference is.  Reform-minded states can do things a federal government can not.

Federalism has allowed American states to test and observe the effects of gay marriage, and roll it out in stages across the country.  And federalism has prevented this reform being foisted on more conservative states against their wishes.

It's indicative that Barack Obama has rejected gay marriage, because he held the opposite view while campaigning for State Senator back in 1995.  Now on a national stage, politically Obama feels he cannot proclaim the views he held when his stage was smaller.

In Australia, marriage is a Commonwealth responsibility.  This is a bad thing if you want marriage equality.  Those on the left hostile to federalism and devolution of power might want to rethink their position because, as in the United States, Australian conservative opposition to this policy is less determined than it has been in the past.

In 2011, you're more likely to hear a conservative or right-leaning commentator support same-sex marriage than oppose it.  If only they had the power, now would be a great opportunity for an enterprising state or territory to introduce same-sex marriage.

Of course, a libertarian would insist the government get out of the marriage business altogether.  But conservatives and libertarians should welcome the further expansion of legally-recognised same-sex marriage.  For as long as the government has the power over marriage it is obligated to adjust that power to changing social circumstances.

And, clearly, gay marriage is a reform whose time has come.

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One hack of a crime wave, or so they say

Keep calm and carry on:  cyber crime is not the threat it's made out to be.  There is no better fodder for naked fearmongering than crime conducted online.  You've about heard them all:  Nigerian scams, 410 scams, and phishing scams.  Banking fraud, credit card fraud, hackers, viruses and keystroke loggers.  And there's spam, zombies, malware, spoofing, scareware, worms, etc.

And there are the biggies:  cyber crime, cyber terrorism, and full-blown cyber war.  Typically these threats are all merged into each other, blurred by fearmongers to create a picture of a risky Wild West online.  They feed into a fear that technology has somehow got out of control, a fear that our lives have become more dangerous as we've been sucked online.

On Tuesday, ABC's 7.30 cited the usual mix, warning of everything from petty identity theft to the ''cyber crime underworld''.  The show claimed proceeds of cyber crime were now more than proceeds from illicit drugs.  The next day, the federal government announced it would sign the Council of Europe convention on cyber crime -- a treaty for international co-operation.

The size of any illegal industry is hard to estimate.  But the claim that cyber crime is now a bigger concern than the drug trade relies entirely on an off-the-cuff remark made by a consultant to the US Treasury Department in 2005:  ''Last year was the first year that proceeds from cyber crime were greater than proceeds from the sale of illegal drugs, and that was, I believe, over $US105 billion.''

Last week's 7.30 interviewed a US defence contractor saying cyber crime was now $US3 trillion.  At that price, cyber crime is the fifth-biggest economy in the world, slightly below Germany.  It doesn't ring true.  Cyber crime would be the biggest crime wave in human history -- hackers stealing an entire German economy every single year.  Of course, we mostly hear these gargantuan numbers from consultants (drumming up business from law enforcement) and internet security companies (trying to sell software).

A new paper by researchers from Microsoft -- Sex, Lies, and Cyber crime Surveys -- explains why estimates of cyber crime have become so absurdly large.  The authors, Dinei Florencio and Cormac Herley, point out that the bulk of what we know comes from tiny surveys.  The authors found at least 75 per cent of losses were extrapolated from just one or two unverified, cases.

In other words, one bloke falls for the old ''I'm a prince from Nigeria'' scam, and it is reported that cyber crime is a $3 trillion industry.  This is not to deny that criminals use the internet.

But crime is crime, whether it's online or not.  Many cyber crimes are just digital variations of old cons.  The Nigerian scam was originally conducted by post.

And much cyber crime is just vandalism, hard to police, but not hard to protect against.  Lock your gate, use complicated and varied passwords, make backups.  Don't trust foreign princes or popups.  Accept the updates for your anti-virus software.  Make sure internet companies you deal with are responsible.

These are all pretty simple, and they will protect you from 90 per cent of the danger.  Education is more necessary here than legislation.  The majority of online transactions are safe.  And certainly no reason to give government a blank cheque for any new law it wants.

Some of the proposals to deal with the cyber crime ''epidemic'' have serious civil liberties issues.  The treaty the federal government intends to sign may mean Australian internet service providers have to store records of every website we visit, and every person we email, just in case the police need it later.

We like to complain about privacy and Facebook, but that will be nothing compared with the massive amount of data compulsorily stored by our internet provider.  Apart from the privacy implications, that requirement itself could increase online risk.  There's little more attractive to criminals than large banks of data stored in one place.

All the hype about cyber crime is nothing compared with the noises made by defence contractors and American military commanders who have been stoking fears of ''cyber war'' and ''cyber terrorism''.  But even the most famous instances of cyber war -- like the StuxNet virus, which damaged Iran's nuclear program in 2010 -- are more hype than reality.  StuxNet was trotted into an Iranian enrichment facility on a USB stick.  It was plain, old espionage.  So, next time you read of the dangers online, consider:  the seriousness of the threat is inversely proportional to the number of uses of the word ''cyber''.  There are risks online.  But they are manageable.

Subsidising solar power is just plain crazy

A 100-megawatt solar power station is planned for Mildura.  And last weekend Energy Minister Martin Ferguson announced funding for two new projects, a 150-megawatt solar plant for NSW and a 250-megawatt facility for Queensland.

All these plants are relatively small compared with conventional plants such as TRUenergy's 1500-megawatt brown coal power station in the Latrobe Valley.

Solar generators concentrate sunlight through the use of lenses and reflectors.  This produces electricity in the same way as conventional coal or gas power stations.

Solar power has the superficial attraction of being free.  And Australia is well endowed with sunshine.  So the line touted by some politicians and their advisers is that we should gradually replace all our fossil fuel power stations with solar power.

To support their case, advocates of solar draw on impressive-looking documents, including the latest report by the Intergovernmental Panel on Climate Change (IPCC).  This argues solar power could easily produce 80 per cent of the world's electricity.

Government propagandists say IPCC reports are produced and vetted by 4000 of the world's top scientists.  However, it turns out that the part of the report on solar power was written by a Greenpeace activist who used made-up data.

In fact, solar plants are exorbitantly expensive electricity producers.

Victoria's Auditor-General estimated the costs of large-scale solar facilities at almost six times those of the brown coal power stations that provide almost all of Victoria's electricity.  Coal power stations also have the advantage of being able to operate whenever they are needed.  Solar plant is available on average only 22 per cent of the time.

There is little prospect of solar power's costs and availability markedly improving.

THE only way solar generators can be built is if governments use taxpayers' and consumers' money to subsidise them.

The Mildura plant will receive a subsidy from Canberra of $75 million and a state grant of $50 million.  Those grants comprise 30 per cent of the costs.  Subsidies to the Queensland and NSW plants are even more lavish.

In addition, electricity retailers are forced to use solar and wind power within their total supplies, at a cost of four times that of conventional electricity.  That share will grow to 20 per cent by 2020.

Compelling retailers to include high-cost electricity in the total supply means the subsidy is hidden.

And it is not some faceless ''big polluter'' businesses that get slugged with these costs.  As a result of hidden subsidies to solar and wind power, electricity prices are rising and will increase further even without a carbon tax.  The effect is already evident in electricity bills.  But even greater costs are embedded in the goods and services that consumers and businesses buy.

The craziness of subsidising solar power is illustrated by considering the costs of using it to replace all existing generators.  For the power plants alone the outlays would exceed a year's national income.

And all this for a form of electricity that is intrinsically unreliable.

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New Republicans swap their neo-cons for doves

Perhaps one of the most striking attributes of the current Republican field is their dovishness.

Last week's forum for presidential candidates made clear scepticism about foreign interventionism isn't limited to the libertarians Ron Paul and Gary Johnson.

On Afghanistan, frontrunner Mitt Romney said, ''I also think we've learned that our troops shouldn't go off and try and fight a war of independence for another nation''.  On the Middle East, Newt Gingrich opined that, ''we need to think fundamentally about reassessing our entire strategy in the region''.

Michele Bachmann cited the US defence secretary's view that America had no vital national interest in Libya, and Jon Huntsman -- not at the forum, but now a candidate -- also said that boots on foreign soil was not a necessary part of America's national security.

Mitt Romney has backed away from his position somewhat, presumably under the theory that a frontrunner must not hold unambiguous views.

And some of this newfound shyness in foreign policy is, obviously, based more on who is in the White House than the merits of military action.  Partisans will be partisans.

But the shyness is not limited to Libya and Afghanistan, two conflicts which Barack Obama now owns.  A forum at the Cato Institute last year revealed that the overwhelming majority of Republicans in Congress (''everyone'') now think invading Iraq in 2003 was a mistake.  You cannot chalk that up to simple hostility about a Democrat president.

So on Sunday John McCain attacked what he saw as the ''isolation strand'' of the Republican Party which had taken centre stage at the forum.

It's not fair to call this new attitude ''isolationism'', but if it was, it'd be an isolationism driven by bitter experience rather than principle.

Nevertheless, isolationism is a cheap slight thrown at the Republicans who want simply to raise the minimum threshold for military intervention.  After all, the biggest right-wing critics of America's recent wars have been libertarians.  And their support for expanding free trade and immigration is hardly ''isolationist''.

It's a peculiar mindset that characterises opposition to invading foreign countries as a complete withdrawal from the world -- as if there was no middle ground between bombing nations on the one hand, and cancelling trade and diplomatic relations with everybody on the other.

The absurdity of this view is even more obvious when you consider that one of those who has been most tarnished with the ''isolationist'' label is Jon Huntsman -- who also happens to be a former ambassador to China.  Not a homebody.

So as Washington Examiner columnist Timothy Carney wrote last week:  ''what can 'isolationism' mean here other than 'opposition to war against Muslim nations'?''

At the very least, neo-conservatism -- which has held sway over Republican thinking for the last decade in both its crude and intellectual forms -- no longer has a clear champion.

Neo-conservatives reasonably argued that morality does not stop at the border.  The United States could not pretend to be neutral on questions of tyranny and democracy even if favouring the former met a specific American geopolitical interest.

Nevertheless, nearly a decade of military involvement in Afghanistan and almost as long in Iraq has exposed the very real limits of neo-conservative thinking.  One may be able to imagine a grand role for the United States exporting liberal democracy across the globe, but that role will hit the wall once the uncomfortable reality of protracted conflict is realised.

Many commentators have attributed the Republicans' foreign policy shift as simply a response to the cost of war;  implying that military adventurism is still desirable, but a luxury for when the economy is doing well.

Nevertheless the new Republican dovishness suits the times in other ways too.

More than two years after the global financial crisis began, the competence and capacity of government action is under serious examination.

The program of bailouts and stimulus has been a dreary failure.  The federal debt is crippling the recovery.  America seems to be contemplating an era of decline, driven by a moribund economy and an ineffective government.

No surprise that anti-government sentiment has splashed over into foreign policy thinking.  The Tea Party flirted with opposition to defence spending -- an area of government which was supposed to be off-limits.  In June 2011, the Tea Party may be in decline, but its scepticism about all government activity has penetrated the Republican mainstream.  56 per cent of registered Republicans now support reducing overseas military commitments, according to a Pew survey this year.

Across the political spectrum, support for the proposition that the United States should ''mind its own business'' has never been higher, and appears to be on a long term trend further upwards.

Yes, George W Bush came into office rejecting nation building.  The new crop of Republicans urging modesty in international affairs could backflip just as spectacularly in office.

But the political environment in 2000 is vastly different to the political environment today.  Ten years of continuous war has shaped Republican attitudes to conflict.

The Republican candidates are finally matching their desire for modesty in government with a desire for modesty in foreign affairs.  Next time a president -- of left or right -- pushes for a new war, it would do them well to remember why.

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Australia's emission levels are overstated

In a chapter of a recentIy published Anthology, ''Energy, Sustainability and the Environment'' edited by F.P. Sioshansi, I observed that ''International trade means countries that export energy intensive products incur emissions on behalf of other countries.  This tends to reduce the national emission levels of many developed countries, while exaggerating those of some developing countries and resource rich countnes like Australia.''

Recently released UN data confirms and quantifies this.  It shows that about 11 percent of the US's carbon dioxide emissions are outsourced -- that is they are incorporated within imports.  In Japan it is 18 per cent and for Switzerland over 50 per cent.

AUSTRALIA'S EMISSION LEVELS ARE OVERSTATED

By the same token Australia's emission levels are overstated because we are a net exporter of goods that incorporate carbon dioxide.  While on the basis of production, our carbon dioxide emission levels are 16 tonnes per capita, on the basis of consumption they are only 13.3 tonnes.  This means that Australia's per capita emissions are lower than those in nine of the 35 developed world countries

MARKEDLY CHANGES THE COMPARISON

The vastness of Australia is one reason why we use more energy -- and hence have higher carbon dioxide emissions -- than many other countries.  But Australia's sheer size also means the continent is a significant natural sink for carbon dioxide emissions.  If Australia is credited with these natural sequestrations this markedly changes the comparison with other countries.  Australia's land mass naturally absorbs around 137 million tonnes of carbon dioxide per annum.  If this is subtracted from the 550 million tonnes of carbon dioxide (or its equivalent) that is actually emitted, Australia would be average among the developed countries.

EMISSION LEVELS ARE SWOLLEN

There are further reasons why Australia's emission levels are swollen relative to those of other countries.  Among these is the relative saturation of hydro power availability (though additional capacity would be available in Tasmania if the ALP-Green alliance lifted its veto).  Similarly we have no nuclear power, again in part because of politics.  These two emission free power sources account for nearly 20 per cent of the electricity generated by developed countries but less than five per cent for Australia.

In reality, all these numbers are simply propaganda tools.  Every country emits carbon dioxide levels consistent with its stage of development, costs of different energy and raw material sources and economic structures.  And, though some countries have more aggressively introduced regulations that force reductions in carbon dioxide emissions, aside from the EU, Australia appears to have been as willing as any other country to impose the costs these entail.

On 13 April, Climate Minister Greg Combet's spin for a carbon tax pushed new frontiers.  In the art of being economical with the truth.  He said, ''Australia ... release(s) more pollution per person than any other country in the developed world -- more than the US ... we were not pulling our weight.''

To craft evidence for this, he decided to prejudge the Productivity Commission report his Government commissioned to obtain information on different countries' effective carbon tax rates.  Instead he drew from material assembled by London based Vivid Economics, which though he did not acknowledge it, his department commissioned.  And, as Gary Johns showed in The Australian of 28 April (''Dodgy figures, wrong questions plague debate''), the material contains some howlers.

ELECTRICITY MARKET REFORM

Among these was a claim that China has a carbon price of $8 per tonne.  This was arrived at by assigning, as a carbon tax, China's policy of ceasing to favour small (and carbon intensive) electricity producers.  Australia implemented that measure with the electricity market reform introduced by the Victorian Kennett Government and supported by the Keating Commonwealth Government's competition policy reforms.  Needless to say, nobody here claims this to be a form of carbon tax.

Mr Combet also used the Vivid Economics report to falsely claim that the US and India were acting to introduce such taxes and that, based on the report, we were delinquent in our own levels of carbon tax.  But for Australia, the Vivid Economics material failed to acknowledge the Commonwealth's requirement that 20 per cent of electricity by 2020 must be sourced from exotic forms of renewable energy.  This scheme is L.A.W. law.  It Imposes high cost wind and solar on the consumer and has a carbon price effect which grows year by year, reaching $13 per tonne by 2020.  The proposed Commonwealth's carbon tax at $20-30 per tonne would be on top of this.

CREATING NEW TRADING MARKETS

Laughably, Mr Combet added that acting to introduce a tax was also in our national interest.  What we are in fact finding is that some businesses think it is in their interest to introduce a ''carbon price'' with all the potential this offers them for creating new trading markets.

Many other businesses think it is a good idea as long as they are immune.

These include the motor industry, many miners (recently joined by BHP, a former proponent of the tax), several banks (as long as the measure provides tradeable financial instruments rather than a tax) and some agricultural interests (as long as they can profit from becoming carbon sinks).  There are also businesses which realise there can be no winners and courageously say so in spite of government pressures on them.

GOVERNMENT IMPOSED COSTS

More significantly, opinion polls show a rising majority of people do not think it is in our national interest to introduce a carbon tax.

Very few people would actually be prepared to pay the tax necessary (at least $1,000 per annum).  Recognising this, the Government refers to ''big polluters'' who will pay but neglects to say that the ''big polluters'', if that is what they are, are ordinary Australians.

Firms can be stung for government imposed costs initially but they very quickly pass those costs onto the consumer or just as quickly go out of business.

Freedom of Speech in Australia

In most public libraries you can get to read the most controversial things ... and no one bats an eyelid.  In fact you don't even have to visit a library to access the most evil of tracts, such as Mein Kampf or the Protocols of the Elders of Zion -- just jump on to Google and you'll be able to download the entire texts.

You can wander into many bookshops to get some weirdo ideas from the Moonies, to the Mormons, or the early novels of L. Ron Hubbard.  Or listen to preachers of hate like the Reverend Fred Nile who tells us that homosexuals will burn a billion years in hell.

Or take in the words of Danny Nalliah of the Catch the Fire Ministries and his ravings and ranting about Muslims and Atheists.

So you can say a lot of things in our democracy, and you can watch a lot of things -- violence, pornography, cattle being clumsily slaughtered, and you can read ... Well almost anything.

Increasingly it seem the ''well almost anything'' may involve two names -- ''Andrew'' and ''Bolt''.

Now as you might suspect I actually disagree with many, if not most, things Andrew Bolt says ... and writes.

But I am concerned that people in some of the circles I mix, on my side of politics, increasingly seem to think that they should write, or invoke, or resurrect, laws that will shut Andrew Bolt up.

A democracy is -- at the very least -- a free marketplace of ideas, and a free marketplace of arguments against those ideas.  But it is never, never, a stifling or a suffocation of ideas.

Ideas will out, they cannot be contained.  They are our better, or our worse, angels -- and they will be heard.  Now I do vehemently disagree with what Andrew says, and often says, about certain people being insufficiently black.

There really is a silly idea here, of how black or white applicants should be for certain prizes and scholarships.

Andrew grabs an idea and often follows his logic to wherever it may lead him -- God help those who stand in his way!

Now while I really can't accept some of this stuff I will -- unsurprisingly -- defend to the death his right to run a hot-headed, half-cocked argument ... where he says he is now putting into his cross-hairs all sorts of political, academic and media grandees.

It is the Voltaire in me that says I don't like what you're saying -- or about to say -- but sure as hell I reckon you have the right, in our democracy, to run that argument.

Sometimes I hear about Andrew Bolt's latest outrageous challenge to orthodoxy, and groan, and wonder if he truly believes the words he has written.  Or whether he merely loves the controversy and the headlines it creates.

But despite all the bombs he regularly throws over the parapet at some of my mates in Canberra I have to own up to liking Andrew Bolt.  I have done media battle with him plenty of times and I know that there is a real decency there, which I would be proud to attest to in any court.

So I am sorry to see him now dragged through the courts for possibly breaching -- if he did -- a law that, probably, should not be there;  stretching out its fingers into the realm of what Orwell might have called a Thought Crime;  because he impertinently asked the wrong questions, when all the right answers have been handed down from above -- in tablets of stone -- long ago.

This is not a cast of mine that I applaud.

It smacks of the 16th century when Tyndale was strangled to death while tied at a stake and then his body burned, all for translating the Bible into English.

Or the 17th century when Galileo was put in danger of the same fate for saying the Earth moved around The Sun.

And the 20th century when books were burned in the public square for being not quite the way a dictator preferred a book to be.

In each case a Thought Crime is said to have been Committed, it comes from an elite, keen to assert its casting vote on what was reality, and who should decide what ideas were allowed, and in what circumstances they can be promoted.

So we need to be very, very careful when we define vilification and what, by contrast, dissent is or what can or cannot be accepted as a contrarian view.

I sometimes feel we are getting a bit too vigilant over words and ideas when many really vile deeds go unpunished.

I suspect I will always disagree with Andrew.  On most things.

I will always fear his persuasive powers as an advocate of ideas that I will never agree with;  But I will always be ready to meet him in vigorous debate over things that shape our country's future.

And I will always defend his democratic right, as a member of a free society, to say what he will, to exercise that privilege of dissent which has defined, since Federation, the Australia we all belong to, and all, with varying shades of caveat, believe in, and remain proud of, a free Australia.

Our freedom of speech should remain unmitigated by this new quavering cowardice that some would impose.

I thank you.

---

Distinguished guests, one and all.  President Ronald Reagan once said of the American Conservative William F Buckley Jr., that ''Bill Buckley is perhaps the most influential journalist and intellectual in our era.  He changed our country, indeed, our century.''  Buckley of course founded the National Review in 1955 and then served as its editor in chief for 35 years.

In Andrew's case, he is just a few years into a critically influential role in the Australian media.  Andrew Bolt recovered from an early career set-back when he worked for the Hawke Labor Government.  Imagine how bad it would have been Andrew if your CV had read, ''previously worked for the Rudd Labor Government'', to establish himself as someone with an unparalleled position of influence within the Australian media.

I must say that I am as I am sure we all are deeply inspired by Andrew Bolt's courage and his passion, his purpose and his honour.  A man with an authentic intellect, a fine uncluttered mind, a man of relentless energy, a proud Australian with much to be proud about.  It was Hemmingway who described guts as being ''grace under pressure.''  Andrew Bolt has guts.  It was Andrew Bolt who exposed Lowitja O'Donoghue's fraudulent claims to be a member of the Stolen Generation and it was Andrew Bolt who exposed kooky Tim Flannery's mad claims about the Australian environment, particularly our dams and our rivers.  It was Andrew Bolt who challenged Robert Manne to name just 10 members of the Stolen Generation, something Manne has still been unable to achieve.

The Greens, Lowitja, Tim Flannery, Robert Manne and others appear rather paranoid about Andrew Bolt, but as Henry Kissinger once said, ''even paranoid's do have enemies.''  We should remember that Andrew is a man with an outstanding understanding of how the modern media works, which is critical to his influence in Australia today.

From 1926, Robert Menzies made his first political speech at the Prahran Town Hall as a member of the group fighting Stanley Bruce's attempts to centralise more arbitration powers in Canberra at the expense of the states.  After his speech Menzies asked his uncle who had attended the rally what he thought of the address.  Sidney Sampson, who was Menzies uncle, said ''My dear boy, as an argument to the High Court of Australia it was admirable, but as an address to the electors, it was hopeless.  The art of political advocacy is the art of judicious and varied repetition, until you learn to repeat yourself with skill, you will never make a politician.''  Andrew Bolt has an understanding of the power of repetition that few other possess.  He understands the power of reminding us all, on a regular basis of the failing of the policy positions of Manne, Flannery, O'Donoghue, Gillard, Rudd, the Greens and dozens of others.  It is a simple, but devastating tactic which has been used by the left for generations, but by the right with scarcity.

In Andrew's writing you also see elements of a belief in Maslow's theory of Human Motivation.  In 1943, Maslow said, ''It is quite true that man lives by bread alone, where there is no bread, but what happens to a man's desires when there is plenty of bread and his belly is chronically filled?''  As we move up Maslow's pyramid and satisfy our psychological needs, our need for safety and security, of love, of belonging, of self-respect and then social status we reach the top of his pyramid.  What happens then according to Maslow is that man expects to find a new discontent and restlessness.  This explains the drug-like addiction, therefore, of the upper-middle classes to issues like global warming, calls for Western nations to wipe out third-world debt, demanding that orderly refugee programs be subverted and ultimately demanding that we live in a society where people are not entitled to be offended, insulted or humiliated, that is to say, a place where freedom is strangled and corrupted by the parliament.

The Sydney Writers' Festival is a perfect example of why forums of thought and ideas, free speech must roam in a democracy.  Where else could there be a place where John Howard, four times elected by the Australian people as its Prime Minister, was booed and jeered by the same crowd that gave a standing ovation to convicted terrorism supporter, David Hicks.  I've often wondered who attends Sydney Writers' Festivals, but thanks to Paul Keating we now know -- sandal wearing, muesli chewing, bike riding pedestrians.

In a free society Larissa Brent should be allowed to tweet that watching bestiality on television was less offensive than watching Bess Price, a prominent Aboriginal leader who has done so much to campaign against violence against Aboriginal women and children.  People like Guy Rundle should be allowed, as he did in 2007, to demand that The Australian newspaper dismiss some of its conservative commentators on the basis that they are out of step with the thinking of the newly elected Rudd government.  To his shame the ABC's John Faine also joined this chorus.

In 2007, Robert Manne said, ''Twenty years ago Australia didn't have journalists like this in the mainstream press.''  He was referring to writers such as Ackerman, Albrechtsen, Bohme, Blair, Bolt, Devine, Duffy, Henderson, McCran, McGuinnes, Pearson, Roskam, Sheehan, Tom Switzer and others.  Robert Manne in 2007 was lamenting the end of the left's long running summer party of marijuana and cask wine, where they didn't have to put up and tolerate alternative opinions, god forbid.

In a speech to the Republican National Convention in New Orleans in 1989, whilst accepting the Republican nomination for the US presidency, George Bush Senior said that he was often criticised for being a quiet person.  In reply, Bush said it allowed him to hear the quiet people that others didn't.  In so many ways Andrew Bolt speaks for those that have no voice.  He speaks for the quiet people who think, but that also work.

Let us hope that Andrew Bolt continues his campaigns on so many issues of interest to ordinary Australians, so that in the decades ahead we can look back and say of his glorious career, that he changed Australia and changed the way Australians viewed their country.  Thank you.

---

Thank you John, it's a great honour to be speaking here this evening.  I regard Andrew Bolt as one of the very greatest journalists that Australia has produced for many, many years and I have no doubt that he is going to go down in Australian history as one of our greatest journalists.  I want to particularly draw attention tonight to one of the strongest advocates of the ideas which everyone on this platform is going to dissent from tonight.

On the 9th of April, only a few weeks ago, an article appeared in The Australian newspaper in defence of the legislation, which has brought Andrew Bolt before the Federal Court.  The article was written by none other than the Honourable Michael Lavarch, the person who was attorney general in 1995, had had the racial vilification clauses inserted into the Racial Vilification Act.  Mr Lavarch tells us that after sixteen years of the Act, and I quote his words, ''it is entirely clear that the law does not stifle free speech,'' these are his words, and it's important that we try to understand his frame of mind.

The political correctness on the Labor side of politics tries to stifle free speech and is intolerant of different views.  But here we have a Labor Party attorney general defending the law as being entirely compatible with free speech.  My own conclusion is the opposite, in my view it is entirely clear that the law does stifle free speech and it does so because it prohibits people from saying thing they ought to be able to say in perfect freedom without the authority of the state being triggered or aroused in this was.  Freedom of speech has clearly been breached when a person may be hauled before a tribunal of public servants or a court because of things that have been said or written in the media and when orders may be issued which prevent them from repeating these things or continuing with their publication and even requiring them to apologise for what they've said.

In the short time I have tonight I propose to look at Mr Lavarch's defence or his legislation and to argue that he has advanced no sound argument to justify it, but in fact that his case is foolish and even dangerous.  Now Mr Lavarch starts out by reminding us that freedom of speech isn't absolute and in that of course he is correct.  The law, as it stands, apart from his Act does not permit perfect freedom to say anything, to say something which causes a riot, or which libels or defames a person, or which is misleading or deceptive in a commercial sense is not permitted and I don't think anyone on this platform would disagree with that.

The Lavarch Act however, is clearly an attempt to extend the prohibitions of the law, to new kinds of speech and the real policy question is whether this is done with good reason.  The Act prescribes unlawful acts which are, quoting the law ''unreasonably unlikely in all the circumstances to offend, insult, humiliate, or intimidate another person or group of people.''  The Act also initiates a new process for dealing with prohibited statements involving tribunals, staffed by public servants as well as courts and the question arises whether this process is an acceptable substitute for freedom of speech.  What can possibly be the justification for such a law?  Mr Lavarch says the following and his words bear close attention he says, ''The value of the law is to require those engaged in contentious debates to reflect on the accuracy of their arguments and the supporting facts before they are used.''  Apparently in Mr Lavarch's view of the world, the well-established processes of public discussion and debate and the sanctions of public opinion what we have hitherto known as freedom of speech is no longer good enough to test contentious views in contentious debates.

Such debates really need to be tested before tribunals of public servants so that parties can be persuaded to reflect on their arguments and their facts.  To enable a person who claims to be insulted by what someone else has said to enlist the full panoply of state power against one who has offended them is truly grotesque and it is this grotesqueness that places me on this platform tonight.  It is a principle which could not be generally applied without bringing the while system of justice to a halt.  To suggest that we need public servants or courts to invite us to reflect on what we say and even to recant and apologise is a reversion to the techniques of the medieval church with all the threat that that implies.  To a person used to freedom it's hard to imagine a process more insulting and demeaning, and to claim that it is in the public interest can be mounted in defence as Michael Lavarch does is to ignore the obvious fact that the intimidatory process to which a person can still be subject before such a determination is made cannot be but chilling to the whole process of free speech.

In his famous essay on liberty, John Stewart Mill, the strongest opponent of political correctness in his day considered the argument put by some at the time that, and I quote Mill, ''the free expression of all opinions should be permitted on condition that the manner be temperate and do not pass the bounds of fair discussion.''  Now that's the view Mill's criticising.  Mill pointed out the impossibility of fixing where the supposed bounds are to be placed and then he said in words that apply exactly to the present legislation, ''If the test be offence to those whose opinions are attacked, I think experience testifies that this offence is given whenever an attack is telling and powerful and that every opponent who pushes them hard and whom they find difficult to answer appears to them if he shows any strong feeling on the subject to be intemperate.''  To make the test is to undermine, to offence the test is to undermine the very freedom which exposes error.

Despite all this, however, Mr Lavarch is confident that free speech has not been damaged by his law because he says, and I quote his words, ''No shock jock has been taken off the air or newspaper columnist closed down.''  Think of those words, does that mean, does Mr Lavarch mean that free speech remains untouched and untrammelled so long as no radio host or newspaper columnist has been prevented from speaking or writing at all?  Closed down, to use his phrase.  If this is his standard for the survival of free speech, many more obnoxious laws I'm sure could be legislated that would still leave the former attorney general fully satisfied.

Mr Lavarch also informs us that allegations under his act have been dealt with in secret, he says confidentially, by the Human Rights Commission with, quote, ''Scores of determinations made initially by the Commission and now by Federal magistrates.''  Since it all happens behind closed doors, how can Mr Lavarch, or we, know what the effect of the thousands of instances and scores of determinations have been?  The law of secrecy replaces the law of free speech.

If the actions of state are justified in such cases, however, why does it not then apply to offensive, insulting or humiliating remarks that are religious in nature?  Or relate to a person's class, or gender, or political views or even to their opinions on industrial relations.  The federal law depends on the nation that there is something special about a racial insult, but is there?  Why is a special law needed for racial insults?  Mr Lavarch in his April article gives us his answer and this is all he has to say about it, ''history tells us'', he says, ''that overblown rhetoric on race fosters damaging racial stereotyping and this in turn can contribute to societal harm well beyond any deeply felt personal offence.''  Let us substitute the word class for race in the statement, or the word religious, or the word gender, or the word national or even the word politics or political, or, as I said before, even the words industrial relations.  Mr Lavarch's statement is true for each;  overblown rhetoric on any of these topics can create stereotypes, can cause offence and if made the basis for action, may lead on to damaging consequences.

It wasn't racial hatred, but class hatred that set the guillotine going in the French Revolution.  Scores of millions were starved and slaughtered in Stalin's attack on the wealthy peasants, or in Mao's collectivisation and in his vicious cultural revolution or the genocide perpetrated by the Khmer Rouge in Cambodia, but in democracies we have long known that it is not words that produce such horrors, it is the failure to expose prejudice, control violence and ultimately, the absence of democracy that leads to these catastrophes.  Violence and incitement of violence are proper domains of the law, but this is not what this law is about.  Because history tells us that overblown rhetoric in countries which are not democracies can precede damage to individuals, do we need a tribunal to control our overblown rhetoric?

Australia is a nation, I would have said, with a well established reputation amongst the democracies for both its overblown rhetoric and its peaceful society.  Perhaps the two even go together, but not if Mr Lavarch's law is allowed to prevail.  I am conscious of a distant echo, a historical echo in this debate.  It is the voice of Robert Menzies opposing Chifley's nationalisation of the private banks.  Chifley claimed his measure was needed, in an argument worthy of Michael Lavarch on the basis that, quote, ''Since the influence of money is so great, the entire monetary and banking system should be controlled by public authorities responsible through the government and parliament.''  Menzies ridiculed this argument as absurd by asking the leader to substitute primary production, transport and even opinion instead of money.  Menzies said, ''There we have the entire totalitarian concept, totalitarians in Europe preceded by exactly the same logic they said, 'Here is something which has great influence on the community life, therefore the government must control it' and they went step by step so that in the long run, the government controlled everything.''

Mr Lavarch and his ilk tell us that what people say is potentially too dangerous to be left to the uncertain processes of freedom of speech and the sanctions of public opinion.  ''What is needed,'' he says, ''is a government tribunal to counsel and warn and secure retractions,'' like the medieval church.  If his view is accepted then liberal democracy becomes a historical interlude between the ruling classes that preceded it and the bureaucracies and tribunals that Mr Lavarch would apparently, like to see replace it.

The numbers here tonight are a clear message, but there are many Australians will not accept that Australia is on the road to such serfdom.  The processes of this law I find obscene in the full meaning of the word:  offensive, loathsome, ill-omened, disgusting.  That is why we are here tonight, the law which has made this event possible, must be abolished without delay.

---

The gist of my remarks were that the fight for free speech and the liberty to speak up on public issues -- issues not excluding who we want to receive affirmative action or group rights-type benefits that attach only to a special few in society -- is a fight that will never go away.  As former US president Andrew Jackson put it, ''eternal vigilance is the price of liberty''.

And those who attended were not just supporting Bolt but freedom of speech and of liberty more generally.  Because let me blunt.  In my view this Racial Discrimination Act, the part amended by the Racial Vilification Act that gives us section 18C and in some circumstances makes hurting someone else's feelings, is awful.

Think about it.  Someone's subjective sense of being offended or humiliated has been made determinative of whether an unlawful act has been committed, subject to a few exemptions in section 18D.

That's a terrible statutory provision.  It ought to be repealed.  Now.  Yes, a judge may, perhaps, find the exemptions apply.  Yes, there is some wiggle room.  But even forcing someone to have to litigate constitutes a massive chilling effect on free speech.  Let's face it.  Not everyone has Bolt's cojones (and I know that may not have been the most felicitous way of putting the point).  And not everyone has the resources of a big employer to back this sort of egregious litigation.  These provisions create a sort of half-baked right not to be offended, a big mistake in my view.

So the fault lies with the legislature for passing these statutory provisions, not with the judges who have to interpret them.  This is politically correct, pandering, group rights-inspired legislation.

The only sort of free speech that matters is the sort that offends some people somewhere.  In a situation where all is agreement and harmony and people sitting in circles, holding hands, and singing Kumbaya, the concept of liberty and free speech does nothing.  You will never have to fight for it meaning a freedom only to act or speak within the bounds of agreed opinion, good taste and proper decorum just isn't valuable.  It doesn't carry with it any obvious good consequences.

The threat to our freedom of speech in the West today does not come from some Soviet-style secret police.  No, it comes from turf-protecting bureaucrats who find themselves all of a sudden in the human rights game;  it comes from people who want to create a right not to be offended.

Or at least not to be offended about the things that matter to them, because almost all the sorts of people who like the legislation being deployed against Bolt would be horrified to think that those in the US who are offended by the burning of the American flag ought to be able to prosecute the burners for their offended sensibilities.  So what they really want is a right not to be offended, as long as it's the sort of things a good chardonnay-sipping member of the progressive elite ought to be offended about, nothing else.

But plain and simple that's a mistake.  The only kind of free speech worth anything is the kind that leads to speech that offends people.  And I say that knowing full well that none of us can be absolutists and there will always have to be some limits on speech, against counselling murder, say, or detailing how to make biological weapons.

But we ought to want as much scope as possible for people in a democracy to speak their minds.  And precluding people from having and expressing an opinion on the problems with self-identifying as an indigenous person, or on who ought to be able to benefit from positive discrimination laws, well that's ridiculously inhibiting of free speech in my view.

I think that in any well-functioning democracy it is incumbent on all citizens to grow a thick skin.  If you're offended, tell us why the speaker is wrong.  Tell us why he or she is misguided or has defective moral antennae.  Don't go to court and seek a court-ordered apology, or orders prohibiting publication of views you find offensive, or some two-bit judicial declaration.

And as a legislator under no circumstances pass statutes that allow for the creation of this mutant, half-baked right not to be offended.  The very fact that people can be dragged through the courts -- whatever the ultimate outcome -- has a massive chilling effect on free speech.  I know it.  You know it.  And our legislators ought to know it too, and do something about repealing this terrible piece of legislation.

At the end of the day those of us who want a considerable amount of scope for people to speak their minds are the optimists.  We're the ones who are in the tradition of John Stuart Mill.

Recall the main ground that Mill gave for preferring very few limits indeed on what people can say.  It was a consequentialist ground or justification.  Leave people almost always free to speak as they like and in the ensuing battle of ideas truth will out, or in less hopeful terms, it is more likely to emerge than if people are silenced and issues are resolved by self-styled human rights experts or government appointees.

So for the benefit of getting at truth and true assertions we override hurt feelings, we ignore offended sensibilities, we discount the possibility of outright lies being spread, and we choose not to have our legislation accord with the world view of grievance industry mongers.  Short of obvious, concrete, unavoidable harm to others, we let speech alone.

And underlying that rationale for lots of scope to speak our minds is a clear optimism about truth emerging in the tussle of ideas and ultimately an optimism about the views of the ordinary voter in a democracy.

In my opinion too many of the people who push these speech-limiting laws have simply lost faith in the views and beliefs of their fellow citizens.  They have even lost a bit of faith in democracy itself.

Theirs is not the optimistic position.  Ours is.

We are the citizens of one of the world's oldest and greatest democracies;  we are not a collection of victims too offended to muster up the resources to reply on our own behalf when we disagree with others.

It is a badge of honour to live in a society that protects differences of opinion, including ones with which we vehemently disagree.

But Ross, who has an economy-wide carbon tax?

Yesterday saw two very important contributions to the carbon tax debate being published.

First Greg Sheridan published a takedown of Ross Garnaut in The Australian.

The Age published an edited speech by Ross Garnaut reconciling his recent report with the Productivity Commission (PC) report on Carbon Emission Policies in Key Economies.

Sheridan has identified a fundamental problem with these two reports;  they cannot both be correct, one is wrong.  Garnaut has argued that Australia needs to act of climate change policy or will be left behind.

The PC report finds no such thing.  Within a government-selected group of countries Australia fares well.  The PC was able to identify 1,096 climate change policies across nine countries and Australia accounts for 237.  In bang-for-buck terms the PC found Australia did well.

So the argument that Australia is doing nothing is simply wrong.  The argument that Australian needs to adopt an economy wide carbon tax to avoid falling behind is also simply wrong.

The PC provides a simple answer to the question, ''How many countries have economy-wide carbon taxes?'' Answer:  no-one does.

In fact the PC was unable to execute their brief to provide an estimate of the effective carbon price per tonne of CO₂-e faced by the electricity generation sectors.  This is because all the countries the Government chose for analysis eschew ''broadly-based explicit pricing for a myriad of less transparent, more narrowly-focused interventions designed to assist the production and consumption of selected, less emissions-intensive technologies, or penalise particular emissions-intensive products and processes''.

No other country actually does what Garnaut proposes.  This, you would think, poses something of a problem.  Garnaut, however, plans to brazen out any inconsistencies between his and the PC reports.  Garnaut wrote in The Age, ''The excellent Productivity Commission report has settled the question of whether other countries are taking action to reduce the risks of dangerous climate change.  It has also played a significant role in what is now a decisive victory for carbon pricing over regulatory intervention in the battle of ideas.''  But the ''excellent'' PC report finds no such thing.

True, other countries are taking action -- as is Australia.  In fact, at the last budget some of the Australian policies were actually wound back.  But the notion of decisive victory is not a victory for Garnaut.

Quite the opposite -- regulatory intervention is the world standard;  carbon pricing is a small policy and the PC tells us, ''Carbon taxes have generally not been used to date in the countries studied'' furthermore ''no country currently imposes an economy-wide tax on greenhouse gas emissions or has in place an economy-wide ETS''.

That leaves Garnaut in a difficult position.  He is proposing policy by assertion.  He tells us that adopting a carbon pricing policy and supporting innovation will allow ''Australia to catch up without putting prosperity at risk''.

But how would he know?

This policy has never before been attempted and Australia is not falling behind -- as the PC show.

In a 2010 report to the Department of Resources, Energy and Tourism the US-based Electric Power Research Institute concluded that low emissions were high-cost and there were significant technical uncertainties associated with their development.  That probably explains why most countries have not adopted them on any large scale.

Much is being made of the fact that China proposes to shut down a large number of smaller inefficient power plants and replace them with larger more efficient power plants.  This is an economic decision that has the consequence of reducing emissions.  Garnaut points to this outcome suggesting that the PC should have included this policy in its report.

The PC was attempting to measure abatement policy -- not business model improvement.  The Chinese are replacing expensive ''dirty'' energy with cheaper slightly less ''dirty'' energy;  Australian policy is aimed at trying to replace cheap ''dirty'' energy with very expensive less ''dirty'' energy.  The former is a business decision;  the latter is a policy decision.

The problem the Gillard Government now faces is that two important contributors to its carbon tax policy have provided very different information.  Clearly the PC report is a far more credible document than Garnaut's report.

This PC report is the first solid, serious and sensible report that we've seen on carbon tax policy after three years of debate.  The actual findings are not as conclusive as the Government would have us believe.  Given the difficulties that the PC faced in preparing the report it quite clear that the Government's proposed policy isn't quite the no-brainer they'd have us believe.

Good policy formation would rely more on the PC than on Garnaut -- yet it remains to be seen whether the Government will be more cautious and nuanced following the PC report.

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Great Recession, Great Depression: a sign of things to come

Is Barack Obama being haunted by the ghost of Great Depression past?

Is the economic malaise currently plaguing the United States taking on an uncanny resemblance to the lost decade of the 1930s?

In May 1939, president Franklin Delano Roosevelt's senior economic advisor made a pilgrimage to Capitol Hill where he raised the white flag of surrender.  Secretary of the treasury Henry Morgenthau appeared before the Ways and Means Committee of the US Congress to confess defeat:

We are spending more money than we have ever spent before and it does not work.  I want to see this country prosperous.  I want to see people get a job.  We have never made good on our promises.  I say after eight years of this administration we have just as much unemployment as when we started and an enormous debt to boot.

The source of Morgenthau's lament was found in the US unemployment rate.  Halfway through FDR's second term, official statistics showed the jobless rate hovering stubbornly in the mid-teens.  In his testimony to Congress, president Roosevelt's senior economic advisor was essentially admitting that the entire Keynesian construct of the New Deal was a failure.

Of course, those who continue to defend the validity of Keynesian economics point to WWII as definitive proof that their worldview is correct.  They argue it was massive wartime deficit spending on tanks, planes and ammunition that stimulated the economy out of its depressed state.  And with US unemployment falling to a negligible 4.2 per cent by 1942, at first glance this argument appears to have some merit.

But when one recalls the 12 million men who were conscripted during that time into the armed forces, the pro-Roosevelt narrative is found wanting.  With so many healthy males of prime working age being forcibly taken out of the labour force, it's no wonder that unemployment disappeared.  The phenomenon of Rosie the Riveter arose from GI Joe being sent to fight in Europe and the Pacific, not from the policies of John Maynard Keynes.

We see a similar track record of failure on the Keynesian policies of Barak Obama.  Almost immediately after his entry into office, president Obama and his Democrat Congressional allies enacted a $787 stimulus bill that was supposed to keep unemployment below 8 per cent.  President Obama promised that mid-year 2010 would become the US economy's ''recovery summer''.

But as of June 2011, unemployment numbers have increased by a whopping 1.9 million Americans since Barack Obama signed his economic stimulus package into law.  And over the same 28-month period, the Democrats have almost tripled the federal government deficit.  With the treasury borrowing 41 cents out of every dollar it spends, the spectre of a US sovereign debt crisis impedes the prospect of economic recovery.

Of course Julia Gillard and Kevin Rudd would have us think that the Australian version of Keynesian stimulatory economics worked an absolute charm.  Wayne Swan likes to portray himself as a veritable Macaulayan Horatius at the bridge, single-handedly holding off the oncoming hordes of economic depression.

But our current economic resilience owes much more to the $20-billion surplus bequeathed to Kevin Rudd by the departing Coalition team of Howard and Costello.  By contrast, the failure of the Obama stimulus program proves that you can't borrow your way to prosperity if you're already eye-deep in debt.

So what do all these grim economic tidings mean for Barack Obama's prospects for re-election?  Nothing good.  But it is instructive to look back from our current Great Recession to the Great Depression of the 1930s for indications of events to come.

By 1938, the bloom had well and truly come off the Roosevelt political rose.  Despite the vast alphabet soup of New Deal programs, America's economy continued to stagnate.  The numbers of families reduced to penury by sustained joblessness remained legion.  And at that year's mid-term elections, FDR and the Democrats paid the price of failure at the ballot box.

The November 1938 elections saw the Republicans pick up 72 seats in the House of Representatives and an additional six seats in the senate.  While the science of opinion polling was still in its infancy, there were indications that FDR was headed for defeat in 1940 as he sought to achieve something unprecedented in US history -- a third presidential term.

Professor David Kennedy of Stanford University holds that it was only the coming of WWII that saved Roosevelt from electoral defeat.  The conflict in Europe -- and in particular the fall of France in June 1940 -- allowed FDR to position himself as a strong national security president.  By contrast, the Republicans were tainted by the isolationism espoused by some of their leading contenders for the White House during that election year.

The flush of political triumph generated by the raid on Osama bin Laden has already faded.  The bump in the polls that the president enjoyed has long since evaporated, with Obama sinking back to an election-losing 48 per cent approval rating that has plagued him over the past 18 months.

If the Republicans can field a good candidate in 2012, Barack Obama's second term is in serious jeopardy.  Any incumbent president who runs for re-election in a stagnant economy plagued by high unemployment has an extremely tough row to hoe.

The only thing that's certain at this stage is that it'll be interesting to watch.

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States in crisis mirror EU

As the euro zone teeters on the brink, interested bystanders ask how long Germany will keep bailing out Greece, and why on earth it wants to.  But while we may laugh at Europe's fiscal dilemma, when it comes to how we manage financial relations among our states, Australia is not very different from Europe.

Here in Australia those taxpayers in states encouraging economic development (like Western Australia) subsidise taxpayers in states where industrial development is actively discouraged (like Tasmania).

Tasmanians are entitled to try to turn their island into a Bob Brown-inspired autarkic nirvana, but they shouldn't expect the mainland to pay.

Likewise Greece can keep its average retirement age at 61, but it shouldn't hope to stay part of the euro.  (In Greece nearly 600 occupations are classified as ''hazardous''.  Women in those jobs can retire at 50 and men at 55.  Television presenters and musicians who play wind instruments apparently have hazardous occupations.)

Tasmania gets about 3 per cent of all federal government funding to the states and territories.  If that money were allocated according to the size of its population, Tasmania's revenue from Canberra would be cut by one-third.

Few Australians would deny that some level of fiscal equalisation is appropriate to compensate states for the particular characteristics of their demography or geography.  So Queensland should receive additional funding because of its indigenous population living in remote areas.

It's wrong, though, when states are compensated because of deliberate decisions to make their economies uncompetitive.  Yet this is exactly what happens when the Commonwealth Grants Commission allocates federal government funds among the states.

NSW, for example, is declared by the commission to have a higher requirement for GST revenue than, say, Victoria because of higher wage levels in Sydney compared with Melbourne.

However, part of the reason for those higher wage levels is because of sweetheart deals between the public service unions and successive state Labor governments -- deals which the O'Farrell government is now trying to unwind (It was amazing to see this week the ACTU claim that O'Farrell's legislation to limit public service pay increases is somehow a breach of international human rights law.)

On the other side of the continent there's Western Australia.  Taxpayers in that state send 100 per cent of their GST payments to Canberra and they get back 33 per cent of those payments.  Last month WA Premier Colin Barnett pointed out the obvious:  ''The Commonwealth Grants Commission process is absolutely archaic.  It is irrelevant to a modern Australia.''  He went on to say something, which even leaving aside the rhetorical flourish, is quite important.  Unless the tax system is fixed ''the relationship between Canberra and Western Australia becomes secondary to other relationships.  Our links with South-East Asia, China and Japan actually become more important to us than our links with Canberra.''

Which is how most West Australians feel, anyway.  They're just as likely to have recently holidayed in Bali than visited Sydney.

Western Australia has been gifted abundant natural resources, but these resources nevertheless need substantial public and private investment to be developed.  Governments of all persuasions have talked about ensuring that in the midst of the resources boom Western Australia moves beyond being a quarry, but if there's anything that will definitely ensure the state remains a quarry and nothing more, it is the federal government's policy of squeezing every last cent out of the west and sending its resource revenues to the east, exactly what the original resources super profits tax was intended to do.

State governments are blamed for being bloated, inefficient, and occasionally corrupt.  Sometimes they are.  But our system of federalism doesn't give premiers much incentive to change the way they do things.

The head of the Department of Prime Minister and Cabinet, Terry Moran, called it exactly right in a significant speech last week when he said:  ''Instead of striving to deliver the best results there are incentives for state governments to pass the buck.''

Indeed they do.  They pass the buck to Canberra and to taxpayers in other states.  It's not too different from the yoghurt-throwing rioters in Athens passing the bill for their retirement to the car industry workers in Bavaria.

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Government bully girls are just as bad as bully boys

In her recent contribution to the Punch, Tanja Kovac illuminates her readers with a startling observation.  That I am talking about the risks of paternalist policies, colloquially labelled the ''nanny state'', for our economic and social freedoms.

Kovac singles me out for ''whipping off articles condemning the nanny state quicker than you can say supercalifragilisticexpialidocious.''

So why was I singled out for special attention?

Perhaps, in the minds of some pro‑nanny statists, critiques written by female classical liberals and libertarians are nothing more than a passing phase, a strange aberration, or obscure ranting by sisterhood outcasts that should never be spoken about?

So, Tanja Kovac feels a sense of indignation that the description of state paternalism has evolved into a highly gendered metaphor.  I don't know how she would feel, then, if she discovered that the phrase ''nanny state'' replaced the term ''grandmotherly government,'' which appeared in an 1873 edition of The Brisbane Courier?

In all fairness, the fellas don't get off lightly when it comes to gendered metaphors or colloquial phrases.  After all, the term ''big brother'' has been used ever since George Orwell's 1948 dystopian novel Nineteen Eighty‑Four to describe governmental invasions of financial and personal privacies.

All of that said it's not Kovac's criticisms of me or my work that I worry about.  What shouldn't be left unchecked are her misguided economic and political strictures based on radical feminist theory.

Much of modern feminism perceives markets (remember, those things that provide us with food, clothing, shelter, entertainment and even paid care) are being fundamentally exploitative, often to the detriment of women.

For example, the American feminist economist Julie Matthaei once described a ''capitalist patriarchy'' whereby ''competition pervades the masculine economic sphere. ... The new ideal ... becomes struggling to advance oneself in the ''dog eat dog'' economic world, in which everyone is out to get you.''

Competition between sellers for buyers in a market might look ruthless, but in fact the outcome is social cooperation as successful transactions secure the peaceful and mutually beneficial exchange of products for money.

As the famous philosopher Sir Henry Maine once wrote markets fundamentally changed the nature of social relationships from ''status'' to ''contract'', meaning that anyone, regardless of race, religious belief, sexual preference or, for that matter, gender can arrange to strike a deal within free and open markets.

Prior to the second and third waves of feminism that barnstormed the Western world from the 1960s, feminists saw as their primary objective the elimination of government restrictions preventing equality of opportunities for both sexes.

This meant liberalising laws enabling women to acquire their own property and to participate in the workforce if they so wished.  The results of the first wave of the feminism project were nothing short of historically transformative.  The labour market opened up, and women were able to earn their own incomes outside the home.

Women today are free to choose any occupation that matches their skills, aptitudes and aspirations.

We see women driving huge trucks carrying iron ore in Western Australia, we see women dedicate time and emotional capital in the paid care of our elderly and disabled, and, yes, female Prime Ministers are now an Australian reality.  And the current debate about female representation on large company boards becomes somewhat irrelevant when we recognise that most small business entrepreneurs are women or, in effect, their own bosses.

Technological innovations, including in electrical whitegoods, and the market outsourcing of some previous aspects of home production, such as child care, have helped make the age‑old feminist agitations over the gendered division of home labour increasingly redundant.  Hubbie can not only mow the lawn but pop the clothes into the washing machine and change baby's nappy for good measure.

So, if we consider that markets are not detrimental to the interests of women or men, what are we to make of government?

Despite all the superlatives that Kovac wishes to attribute to it, the fact is that throughout history government has possessed monopoly power to coercively regulate and tax its citizens.

One might label some of the government's measures as ''nannying'', but perhaps we should really just tell it like it is.  With its powers of coercion in tow the government is a straight out bully, pure and simple.

No amount of skewing parliament's gender composition, such as the aim of Emily's List, can ever change the fact that government was, is, and always will be a bully.

It is cold comfort to feminists, that a female Prime Minister and Health Minister are taking government's bullying to new heights, whether it is alcohol floor prices, tobacco plain packaging, gambling precommitments, punitive carbon and mining taxes and so on. 

It seems that government bully girls are just as bad as bully boys.

The only fair thing to do is sound out concerns about bad public policy regardless of the gender of those pushing them.

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Population and misanthropy

''I have no doubt that the present uprisings in Tunisia and Egypt have unsustainable population levels as their root cause,'' wrote Labor backbencher Kelvin Thomson to his constituents earlier this year.

Not tyranny.  For Thomson, the important thing to note about the crowds at Tahrir Square was not that people were angry, but that the square was very crowded.

Is there anything that so neatly encapsulates the misanthropy of much population scepticism?

His is an attitude which can marvel at nothing but the size of the teeming masses in the Arab world.  No wonder at the historical nature of their revolt against dictatorship.  Or speculation about the individual courage it must require.  The Arab Spring is just another data point to support a belief that the world has too many people.

Thomson, with Dick Smith, is one of the few mainstream faces of the sustainable population movement.  They blame an extraordinary array of problems on population growth -- not just revolution against tyranny (which, Thomson perhaps unintentionally implied, is a bad thing) but war, famine, terrorism, over-consumption, climate change, price inflation, and the high cost of housing.

It's very meta -- a thread that ties together almost every single problem, real or perceived, facing the world today.  Dick Smith writes in his new book:

Surely it is obvious that just about every problem we have is made worse by more people.

Not poverty, for one.  The world has never been richer, and never had more people.  Nor life expectancy, which has also been increasing along with population.  Yes, food prices have increased modestly in recent years, but there's little reason to believe they won't continue their historical downwards trajectory.

The picture painted by the population sceptics is of a world of unmitigated catastrophe.  The reality is far from that.  On nearly every metric the world is getting better.

Even war is on a long-term decline -- both in the number of conflicts and their relative deadliness.

As for the claims that we're running out of resources?  Fewer resources, prices for those resources go up.  And as prices go up, replacements are found.  Of course there is a physical limit to coal or oil.  But we'll never reach it.

Fear of overpopulation is just as misplaced now as it was for Thomas Malthus and Paul Ehrlich.  Yet the fear sticks -- the fear that this is somehow the end of the road for mankind, and the choice we now face is either to plateau or suffer.

So the question isn't whether Smith and Thomson are wrong.  It's why they are.

Part of the explanation has to be just how deeply personal population scepticism is.  Not for nothing is Smith's book titled Dick Smith's Population Crisis.  It features photographs of his family, his childhood, and his favourite place in Australia -- the tranquil, rarely-visited Coopers Creek.

Like his documentary Population Puzzle, the book is part argument, part lament for an Australia which has disappeared, or seems likely to.  That Australia had big backyards and vegie patches and open spaces.  The modern Australia, Smith claims, is at risk of becoming like Bangladesh -- poor, overcrowded and environmentally degraded.

Of course there is no neat relationship between density and poverty.  There are dense poor countries and dense rich ones.  If Australia became as dense as Bangladesh we would remain rich.  If Bangladesh somehow reduced its density it would likely remain poor.

But there is a clear relationship between population growth and the growth in living standards.  Urban Bangladesh is busy because that's where the employment opportunities are -- people have left the sparse rural environment and deliberately chosen the intensity of city existence.

Why describe population scepticism as misanthropic?

Well, how else to describe those who agitate for millions of potential individuals not to exist at all -- and regret the existence of millions of those who already do?  Who see nothing but problems in future people?

The great economist Julian Simon once wrote:  ''What business do I have trying to help arrange it that fewer human beings will be born, each one of whom might be a Mozart or a Michelangelo or an Einstein -- or simply a joy to his or her family and community, and a person who will enjoy life?''

As it is 2011, the population debate is inevitably wrapped up in the debate about climate change policy.

It will take all of the intellectual and technological ingenuity of future generations to adapt to the consequences of climate change, regardless of whether that change is caused by human activity or otherwise.  Trying to reduce or stabilise population in response to climate change would be entirely counterproductive.  More people have more ideas.  The Thomas Edison of climate change adaptation may not have been born yet.  If the sustainable population crowd have their way, he may never be born.

In the New York Times last week, Thomas Friedman wondered how humanity will cope with crossing the ''growth/climate/natural resource/population redlines all at once''.

The same way we've always done -- through human creativity.

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Govt gets it wrong on spending

The political orthodoxy is that budget spending cuts should be avoided as they cause widespread economic pain if implemented. 

According to standard Keynesian macroeconomics, government expenditure is a key component of aggregate demand and so any given spending cut would lead to a greater than proportionate fall in economic activity.

However subsequent developments in economic thinking raise legitimate doubts about the allegedly damaging effects of spending reductions.

First it is necessary to consider the financial market implications of fiscal policy.

In a simple model a reduction in government spending leads to a reduction in output but also an easing in interest rates as the demand for real balances falls.

If sustained, the interest rate reduction would in itself encourage additional private sector investment, counteracting the adverse effect of reduced government spending on output.

In the early 1960s economists Mundell and Fleming augmented the analysis by illustrating the effects of fiscal policy under floating exchange rates and capital mobility.

As mentioned, a reduction in government expenditure leads to a reduction in interest rates.  However in an open economy lower interest rates leads to an outflow of capital and, through it, depreciation of the exchange rate.

This exchange rate depreciation will have a crucial effect on the tradeable goods sectors of the economy by promoting the international competitiveness of exports.  An increase in our export trade counteracts the output effect of reduced government spending.

It is possible to extend the macroeconomic analysis further still by considering the crucial role of expectations held by economic agents such as consumers and private investors in response to changes in government policy.

The famed ''Ricardian equivalence'' proposition suggests that an increase in public sector savings will lead to an increase in private consumption to some extent, as individuals perceive that future taxation burdens will decline.

In addition, it is necessary to consider some potentially beneficial effects of government spending cuts for the supply side of the economy.

If spending cuts are accompanied by a reduction in distortionary taxes then productive economic activity will expand as people becoming willing to work more hours and investors purchase extra capital.

The reduction or elimination of public sector spending that detracts from the capacity of the economy to add value will induce economic growth as scarce resources are freed up for higher valued uses.

It is for these reasons that the Federal Government's ''tough as tofu'' approach to budgeting is inappropriately designed for our economic landscape of a very strong Australian dollar, internationally high interest rates and price inflation threats.

Treasurer Wayne Swan has extolled the Government's $22 billion of budget savings as a virtue and a strategy that will, depending on economic forecasts playing out exactly as planned, lead to a $3.5 billion surplus in 2012-13.

However, there is more than meets the eye when it comes to the nature of the announced savings over the next four years.

The budget fine print shows about $6 billion of the savings measures are, in fact, tax increases whereas the proceeds of most of the actual expenditure cuts will be reallocated towards other programs.

To add to this, the budget contained $19 billion in new spending over the next four years including election commitments.

The Gillard Government's tepid approach on expenditure rationalisation should be contrasted with that undertaken by the Howard government in its first term.

In 1995-96 the federal budget was in deficit to the tune of $11 billion with the government weighed down by net debt totalling $96 billion, figures which were concealed during the 1996 election campaign.

In government, prime minister John Howard and treasurer Peter Costello announced a range of sweeping expenditure reductions to return the budget to balance.

A range of decisions were made to reduce certain areas of expenditure, including cuts to ineffectual labour market and industry programs, tighter welfare means testing provisions and outsourcing public service functions.

Targeting the running costs of government, including through a reduction in public service numbers from 146,000 in 1995 to 121,000 in 1998 and 113,500 in 2000, was pivotal to the success of fiscal consolidation.

By 1997-98 the budget was in surplus with the proceeds of asset sales, particularly Telstra, used to eventually eliminate public sector net debt.

The Howard-Costello fiscal consolidation contributed to economic outcomes predicted by the more sophisticated macroeconomic theories.

A reduction in the government's call on national savings enabled the official interest rate to fall from 7.5 per cent in the first half of 1996 to 4.75 per cent by the end of 1998, fuelling an increase in private investment.

The Australian dollar also depreciated from 76c in March 1996 to 61c by the end of 1998 improving our trade competitiveness.

The budget cuts certainly did not prevent the national economy from growing and, if anything, assisted Australia in absorbing the economic shock of the Asian financial crisis.

With opinion polls showing that perceptions of wasteful spending are turning into a political negative, the Gillard Government should heed the lessons of the late 1990s and instigate deeper cuts to bolster private sector activity.

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Dig in, don't wait. Our slow food nostalgia is misplaced

We want food to be simple and honest, local and seasonal.  We want it to be organic, ''natural'', free of preservatives and homemade.  This, at least, is the message from food journalists and critics, celebrity cooks, recipe books and MasterChef.

It's a vision of food-before-the-fall, when people had a relationship with what they ate.  A lovely dream, but dream it in moderation.

For the most part, when it comes to food and agriculture, industrial is good.  Corporate farming is good.  Even processed is good.  Natural food is an illusion.  We wouldn't want it if we had it.  Our ancestors had natural food.  It was awful.

The history of eating is the history of shaping, manipulating, preserving and trading our food into digestible shape.  Only since the development of modern agriculture, reliable transportation and refrigeration -- in other words, industrial society -- has food been cheap, plentiful and safe.

In the 17th century, fruit was dismissed as ''unwholesome'' and blamed for the plague.  It was hard to grow and extremely susceptible to pests and the weather.  Today, even the most organic, locally sourced, seasonal tomato is the result of hundreds of years of human manipulation.

And even the most dedicated foodie's pantry is stuffed with items that are industrial.

Like soy sauce.  Nobody makes it from scratch.  One recipe warns:  ''If you get bored easily ... this project might not be the best for you.  It can take up to six months to see the finished product.''

You can just buy half a litre for $2, shipped in great quantities from China and available from a corporate supermarket.  Not local, not bought at a farmers market, but indispensable.

By far the biggest benefit of industrial food has been saved labour.  The only groups who practice ''slow food'' (regional cuisines cooked from scratch with local ingredients) are the extremely well-off with the luxury of time and the desperately poor who have no alternative.  The rest of us can buy our way out of dreary kitchen work.

As the food historian Rachel Laudan has pointed out, Japanese women in the 20th century embraced white manufactured bread because serving that was a lot easier than getting up early to make rice.  Prior to the 1950s, Mexican women spent up to five hours a day making tortillas.  And when they became available, Italians eagerly bought dehydrated pasta and canned tomatoes.  The potential for gender equality was immeasurably enhanced when women were freed from the kitchen.

Even much-maligned processed food is an advance on the past.  The processing of bread has not only made bread safer and healthier but it stores longer and is more nutritious than much of the food eaten by our ancestors.

The nostalgia for a lost world of pure food is nostalgia for a world of nutritional poverty.  Laudan describes it as ''culinary Luddism''.  And increasingly it has policy implications.

The recent debate over cheap milk was at its heart a debate over how we think about food.  Should governments protect family farms?  Or accept that in most cases the cheapest and most reliable way to feed the nation is industrial agriculture?

Yes, agribusiness is less romantic than the small farm that's been worked by a single family for generations.  But it's economically viable.  The Senate inquiry into dairy pricing heard stories of independent farmers toiling 12 hours, seven days a week, earning less than they could get from unemployment benefits.  That's no pastoral ideal.

Specialisation and economies of scale are just as necessary in agriculture as any other industry.  No wonder most organic food sold in Australia is grown by large agribusiness rather than small family farms.

Throughout history, and for all but the rich, the production of slow, natural food has been an arduous necessity.  Making food from scratch was the marker of a life of subsistence.  Eating local was a requirement.  The family farm was no Arcadian idyll.  It's long been a site of hard labour.

So let's embrace the higher standards of living offered by commercial, industrial food.

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