Carbon tax final straw in a lethal energy plan

On Sunday the carbon tax will be implemented.  This tax is the latest and most lethal of the suite of carbon-reduction measures delivering crushing blows to businesses and households.

We already have the cancer of the Commonwealth's Renewable Energy Target.

This requires an increasing proportion of electricity to be supplied from high-cost wind and solar generators.  As well as dotting unsightly giant windmills around the countryside, wind and solar renewable facilities are hopelessly uneconomic.

The RET presently adds 6 per cent to consumers' electricity bills and the scheme is only halfway to its goal.

On top of this, taxpayers are carrying the additional taxation weight of about $3 billion a year to finance green schemes and subsidies to exotic energy developments.  None of this spending will ever prove worthwhile.

And the Government has also created a $10 billion green-energy bank to fund business proposals that private-sector banks and venture capitalists have rejected.  The taxpayer will pick up the costs of its failures.

The carbon tax builds on these injurious policies by adding 40 per cent to the wholesale price of electricity.

This crushes the profitability of many of Australia's most productive businesses, especially exporters and those facing import competition, which are unable to raise their prices to cover additional costs.

Half of the carbon tax revenue goes to handouts to the less well-off voter and half goes to preventing the most adversely affected businesses from immediately going broke.

Brown-coal electricity generation, aluminium, concrete, steel, glass and many other such types of industry cannot survive without the antidote of these subsidies.

And supplementary life support now being offered to aluminium smelters such as Port Henry, already demonstrates that planned levels of assistance are insufficient.

In addition to taxing firms out of business, Canberra's carbon-reduction policy is also offering the owners of the Hazelwood Power Station cash to close it down.  Carbon-emission policies have already prevented Hazelwood from rolling over its bank loans and forced a bailout by its owners.

The carbon tax and buy-out of Hazelwood are policies designed to force the closure of some of our most productive firms.

The coal-based power stations have given households and industries the world's lowest-cost electricity.

But the Government needs these and emission-intensive businesses such as aluminium smelters to shut down in order to meet its carbon-policy goals.

Indeed, an equivalent effect to buying and scrapping Hazelwood would be to immediately close down all Australian aluminium smelters rather than watch its policies force their slow death.  Although this would have an even greater adverse effect on national productivity and incomes, for the Government the overwhelming concern is unpleasant publicity on job losses.

And there lies the rub!  Once confronted by the effects of the electricity bill-boosting and industry-slaying monster it has created, an alarmed Government rushes in with additional funding to delay the closures caused by the very policies it has introduced.

The world will not end on Sunday.  Commerce will continue, energy will still be available.

But the carbon tax will introduce a new, more potent poison into the economy inflicting incalculable damage on living standards.

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Settled science? No such thing

The Intergovernmental Panel on Climate Change is a branch of the UN that advises governments on the topic of global warming allegedly caused by human greenhouse emissions.

Contrary to common assumption, the IPCC does not deal with the wider topic of climate change in general.  And neither is it the role of the scientists who advise the IPCC to conduct new research as such (though some, incidentally, do).

Rather, the IPCC's task is to summarise the established science as represented in the published scientific literature.

On February 3, 2010, Rajendra Pachauri, head of the IPCC, commenting in The Hindu on the IPCC's 2007 Fourth Assessment Report, said:  ''Everybody thought that what the IPCC brought out was the gold standard and nothing could go wrong.''

By ''gold standard'', Pachauri was referring to the IPCC's oft-made claim that the scientific literature on climate change it surveyed was only that published in peer-reviewed professional research papers.

Interestingly, Albert Einstein's famous 1905 paper on relativity was not peer reviewed.  It is therefore quite clear peer review is not a precondition for excellent, indeed epoch-making, scientific research.

Peer review is a technique of quality control for scientific papers that emerged slowly through the 20th century, achieving a dominant influence in science after World War II.

The process works like this:  a potential scientific author conducts research, writes a paper on their results and submits the paper to a professional journal in the relevant specialist field of science.

The editor of the journal then scan-reads the paper.  Based on their knowledge of the contents of the paper, and of the activities of other scientists in the same research field, the editor selects (usually) two people, termed referees, to whom he sends the draft manuscript of the paper for review.

Referees, who are unpaid, differ in the amount of time and effort they devote to their task of review.  At one extreme a referee will criticise and correct a paper in detail, including making comments on the scientific content.  At the other extreme, a referee may merely skim-read a paper, ignoring obvious mistakes in writing style or grammar, and make some general comments to the editor about its scientific accuracy or otherwise.

Generally neither type of referee, nor those in between, check the original data, or the detailed statistical calculations (or, today, complex computer modelling) that often form the kernel of a piece of modern scientific research.

Each referee recommends whether the paper should be published (usually with corrections) or rejected, the editor making the final decision.

In essence, traditional peer review is a technique of editorial quality control, and that a scientific paper has been peer reviewed is absolutely no guarantee the science it portrays is correct.

Indeed, it is the nature of scientific research that nearly all scientific papers are followed by later emendation, or reinterpretation, in the light of new discoveries or understanding.

A case in point is the recent paper by University of Melbourne researcher Joelle Gergis and co-authors that claimed to establish the existence of a southern hemisphere temperature ''hockey stick''.  Now, the authors have rapidly withdrawn the study after fundamental criticisms of it appeared on Steve McIntyre's Climate Audit blog and elsewhere.

The Gergis paper differs in kind from many other IPCC-related studies by establishment climate research groups only in that the tendentious science it contains has been rapidly exposed as flawed.  This exemplifies how the role of nurturing strong and independent peer review has now passed from the editors of journals to experts in the blogosphere, and especially so for papers concerned with perceived environmental problems such as global warming.

Scientific knowledge, then, is always in a state of flux;  there is simply no such thing as ''settled science'', peer reviewed or otherwise.  During the latter part of the 20th century, Western governments started channelling large amounts of research money into favoured scientific fields, prime among which has been global warming research.

This money has a corrupting influence, not least on the peer-review process.

Many scientific journals, including prestigious ones, are captured by insider groups of leading researchers in particular fields.  In such cases, editors deliberately select their referees from scientists who work in the same field and share similar views.

The ''climategate'' email leak in 2009 revealed this cancerous process is at an advanced stage of development in climate science.  A worldwide network of leading climate researchers was revealed to be actively influencing editors and referees to approve for publication only research that supported the IPCC's alarmist view of global warming and to prevent the publication of alternative views.

Backed by this malfeasant system, leading researchers who support the IPCC's red-hot view of climate change endlessly promulgate their alarmist recommendations as ''based only upon peer-reviewed research papers'', as if this were some guarantee of quality or accuracy.

Peer review, of course, guarantees neither.  What matters is not whether a scientific idea or article is peer reviewed, but whether the science described accords with empirical evidence.

So what about the IPCC's much-trumpeted, claimed ''gold standard'' of only using peer-reviewed papers?  It is completely exposed by Canadian investigative journalist Donna Laframboise, who showed an amazing 30 per cent of the articles cited in the definitive Fourth Assessment Report of the IPCC were from non-peer-reviewed sources, including student theses and environmental lobbyist reports.

The repetition of the ''we only use peer-reviewed information'' mantra that is so favoured by climate lobbyists and government-captive scientific organisations signals scientific immaturity.

It also indicates a lack of confidence or ability to assess the scientific arguments about dangerous global warming on their own merits and against the empirical evidence.

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Another year, another failed climate summit

The 49-page agreement produced at the Rio+20 Earth Summit is unmitigated junk.  I'm not going out on a limb here.  It's one of those rare universally agreed upon truths.

Greenpeace called the summit a ''failure of epic proportions''.  The organisers of the original 1992 Rio Summit said the document was a weak collection of ''pious generalities''.  Friends of the Earth described it as ''hollow''.  George Monbiot wrote it was ''meaningless platitudes''.  Richard Branson used the phrase ''mealy-mouthed''.

They are all correct.  The document, ''The Future We Want'', is stuffed full of trite acknowledgments, reaffirmations, recognitions, and renewals.  It's like a greatest-hits album.  There's no new material.

''The need to further mainstream sustainable development'' gets acknowledged, of course.  The ''natural and cultural diversity of the world'' has its due recognition.  The ''importance of freedom, peace and security [and] respect for all human rights'' gets reaffirmed.  Also reaffirmed is the Universal Declaration of Human Rights, which dates back to 1948.  Indeed, the word reaffirm is used 59 times throughout.

Virtually every goal of every lobby gets its due.  The unions even managed to get ''decent jobs'' thrown into the priority list.  Hell, why not?  Coordinated global action on decent jobs is no more or less likely than coordinated global action on emissions reduction.

One paragraph even proudly says the signatories recognise that ''Mother Earth is a common expression in a number of countries and regions''.  And they say satire is dead.

Rio+20 was supposed to be the revitalisation of the global climate movement.  The first Rio summit set in train everything from the Kyoto Protocol to Copenhagen.  After the failure of the 2009 Copenhagen conference, and the water-treading at Cancun and Durban in 2010 and 2011, Rio was to be the spark that got climate action going again.

But now Kyoto expires at the end of this year, and the cycle of yearly climate meetings are a wash.  It's been obvious for years there would be no coherent or significant international action to reduce carbon dioxide emissions.

Yes, there was an outbreak of optimism before the Copenhagen summit.  Recall the ''Hopenhagen'' campaign, the sort of silliness only an alliance of the United Nations and high-price advertising agencies could produce.

For all that enthusiasm, there was never a clear explanation about why developing nations would suddenly jettison their long-term economic development goals.  At the time, we were told the Copenhagen negotiations were thwarted at the last minute by India and China.  This influential report in Der Speigel of the final moments of Copenhagen reads very different in retrospect — it's plain now the negotiations weren't scuttled by personal offence, but were doomed from the start.

That of course has been what free marketeers have been saying about global action all along.  And now a sense of hopelessness is starting to seep through the green movement.

The Australian Conservation Foundation's Don Henry told Radio National on Thursday last week that he was ''very disappointed'' with the Rio declaration.  In his view, Rio revealed an ''unusual confluence of caution'', as rich countries tended to their wounded economies, and poor countries focused on reducing poverty.

Striking the same baffled note, Martin Khor, one of the members of the UN Committee on Development Policy, said last week, ''We've sunk so low in our expectations that reaffirming what we did 20 years ago is now considered a success.''

But the reluctance to curtail economic growth for uncertain environmental ends has always been predictable.

Certainly, these climate conferences have coincided with one of the greatest economic down turns in the past century.  It is possible to blame their failure on the great recession.

But regardless of the global economy, it is in no single nation's interest to substantially reduce emissions unless everybody else is also doing so in unison.  Ross Garnaut described this as a true prisoner's dilemma:  international cooperation, he wrote, ''is essential for a solution to a global problem''.

So another interpretation is that climate negotiations have plateaued because such cooperation has a natural, hitherto undiscovered, limit.  It can only go so far.  The failure of coordinated emissions reduction is a natural experiment political scientists will study for decades.

I argued in The Drum last month adaptation is now the main game.  For green groups, this ought to be the take-home message from Rio.  And if they focus on adaptation, they might find surprising allies.

But to get there, they would have to drop their utopian fantasy of the planet coming together to achieve a shared goal.  And that realisation may be much more disappointing than their discovery the Rio agreement is nonsense.

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Just be grateful airlines can feed you at all

Nobody, it seems, is happy with the food served on planes.  But it may surprise you to learn that it's our own fault.  The customer is to blame.  Biologically, humans just aren't designed to fully appreciate flavours while travelling 800 kilometres an hour, 36,000 feet in the air, enclosed in a pressurised cabin, partly dehydrated and breathing in less oxygen.  (Flying, never forget, is bloody awful.)

But just as importantly, we don't appreciate just how amazing it is we get food on planes at all.

Flight catering is one of the most complex businesses in the world — it is 90 per cent logistics and just 10 per cent catering.

In an episode of MasterChef last week, the contestants were overwhelmed by the task of feeding 450 guests at an Indian wedding.  Poor them.  A single Boeing 747 can carry more than 500 people and all the food is heated and served from a tiny galley by flight attendants who double as passenger safety co-ordinators.

An airline catering firm has to supply dozens of those flights.  The typical industrial airline kitchen produces more than 40,000 meals a day.  The world's biggest, Emirates Flight Catering Centre in Dubai, does 115,000 a day.  Inflight food is a huge task, and one which we pay no attention to — unless we're complaining about it.

This is capitalism's big public relations problem.  If it is working properly (if products are exactly where we want them, when we want them, at a price we are happy to pay), we don't notice how much human effort and ingenuity goes into even the smallest things.

Inflight service wasn't always this complex.  The first meals were sandwiches, made on the ground and served in the air with tea and coffee.  In the 1920s Imperial Airways (an ancestor of British Airways) had 14-year-old cabin boys in monkey jackets serve passengers.  The boys had to weigh less than 40 kilograms.  The planes were small and underpowered.  Forty kilograms was all the extra load they could carry.

The first proper flight attendants were hired in 1930 by a predecessor of United Airlines.  They were all qualified nurses.  The flights were bumpy and there was no pressurised cabin.  It's been estimated one in four passengers were physically sick on each journey.  The nurses took the food out, then cared for the diners when it was brought back up again.

But it was not until the wave of airline deregulation in the 1970s and 1980s that serious attention was paid to the great problem of inflight food:  we can't really taste it.  The low humidity and high altitude make taste buds 30 per cent less effective.  So all meals served in the air are what we'd describe on the ground as heavy and rich — cream, pasta, stews and lots of sauce.  The wines are full bodied.  There's no prize for subtlety inflight.

Cooking in such volume, airlines can certainly save large amounts of money by skimping on ingredients.  And in an effort to wrestle prices down further, many airlines now charge for food.  Still, it's not heartless neoliberal bean-counting that makes the food so unappealing.  It's our frail human palate.

The dishes are better in first class and business, but even in economy plane food isn't anywhere as bad as we imagine.

Most great innovations in the modern world are completely out of sight.  They concern not the products we buy or the services we use, but how we get them.

When politicians try to describe progress they talk of tangible things such as iPhones and synchrotrons — things that can be manufactured and photographed.  But they ought to talk of supply chains, digital inventories and logistics.

Complex supply chains are behind the success of Amazon.com and Walmart.  One of the greatest inventions of the 20th century was the humble shipping container, which allowed the rise of just-in-time production.  Now even modern manufacturing should be seen less as a ''good'' and more as a ''service'' — products are the end result of taut lines of supply.

What we eat in the air is a perfect example of our modern logistical genius.  Dishes such as ''Italian-style braised beef with pumpkin'' are refined to within an inch of their life.  They are made not so much according to recipes as blueprints.

The marvel of inflight dining is not its taste, but how it got there.  Airline food is a sliver of modern capitalism we consume quickly and, just as quickly, forget about.

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Should governments protect independent journalism?

We already subsidise journalism heavily.  The ABC's budget for 2011-12 was $995 million.  SBS got $223 million in the same period.  And Parliament has specifically nominated the vast bulk of this money to ''inform, educate and entertain audiences''.

So it's peculiar that when media theorists devise clever schemes to subsidise journalism in order to protect democracy — such as publicly funded newspapers, or tax-deductibility for the print media — they rarely mention the money we give SBS and the ABC for that purpose.

Perhaps some people believe we should increase those broadcasters' budgets.  That's a legitimate debate.  Let's all draw lines and argue it out.  But pretending we do not already spend an enormous amount of the public's money to inform the public is simply dishonest.

Our media debate is very provincial.  Fairfax is at a crossroads.  News Ltd is too, although that company is reluctant to admit it.  Here, the US is about two to three years ahead of us.  Their experience suggests the print media will shrink dramatically in the next few years.  But it also tells us good journalism is good journalism, whether produced on paper or online.

I hope our two print giants develop new business models that suit the times.  Certainly many others will.  The online media in the US is vibrant and plentiful.  Australian readers and writers have good reason to be optimistic, at least about the medium-term future.

If they want to be taken seriously, advocates of subsidies have to answer some basic questions.  How many media outlets does healthy democracy require?  We might assume more is better than fewer.  But as the past year has demonstrated, many people believe some newspapers and radio stations should be run out of town.  Several media critics suggest tabloids and talkback radio are hurting democracy.  So just calling for ''more journalism'' is not much of a guide for policy-making.

Maybe the government should subsidise only ''worthy'' journalism, if there was a way to define such a thing.  The business of the press has always been intimately connected with delivering something people want to read or watch.  Right now, the case for even more journalism subsidies is little more than a thought bubble.

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Employer rights trampled

Of course Fairfax Media journalists want Gina Rinehart, the owner of 18 per cent of Fairfax, to sign the Fairfax Media Charter of Editorial Independence.  There's not an employee in any company in the country who wouldn't want to be free of any accountability to the people who pay their wages.

The charter ensures that the only control the owners of Fairfax have over what appears in the company's newspapers is by the owners hiring and firing editors.

Under the charter, the owners have no say in the work of editors or journalists.

In no other industry would the owners of a profit-making enterprise cede to employees the power to control what the enterprise produces and sells to its customers.  It's one thing for employees to seek a collaborative partnership with their employer.  It's something entirely different when employees claim their employer can't tell them what to do.

In the 1940s, economist Joseph Schumpeter predicted that the growth of large and bureaucratic corporations would produce the separation of the ownership of capital from the control of capital.  What he said has come true.

The thousands of shareholders in the multibillion-dollar global corporations of the 21st century have little effective say over what the management of the corporation does and matters such as what management pay themselves.

The only sanction shareholders have is to sell their shares.  The Fairfax charter takes Schumpeter's process one step further.  It attempts to enshrine the permanent separation of the owners of Fairfax from control of their company.

Fairfax journalists, the government, and the opposition respond to all of this by claiming the media is different.  They say a company producing newspapers can't be compared to one making plastic cups.  Politicians claim an interest in the internal management systems of newspaper companies because, supposedly, newspapers are essential to democracy while plastic cups are not.

Both Stephen Conroy, the Communication Minister, and Malcolm Turnbull, the shadow minister, have said Rinehart should sign the Fairfax charter.

Treasurer Wayne Swan summed up the prevailing opinion of Australia's political class when he said in Parliament on Tuesday:  ''Nothing could be more important to the quality of our political debate and our national conversation than having fair and balanced reporting.

''And to have fair and balanced reporting you do need a degree of independence at the editorial level to make sure that it is not unduly influenced by commercial considerations.''

Swan is wrong.  Dead wrong.  There is something more important than fair and balanced reporting — and that's free reporting.  Let's be absolutely clear.

Swan's ''fair and balanced'' reporting has never existed, doesn't exist and never will exist.  Fairness is entirely in the eye of the beholder.  It's a travesty of the historical record to claim that democracy needs a fair and balanced media.

Editorial independence doesn't guarantee ''fairness''.  All that editorial independence means is that editors and journalists get to express their bias without interference from the owner of the company.  The requirement that reporting be ''fair and balanced'' is a recipe for political manipulation and for the erosion of freedom of speech.

A free media means neither the government nor government-appointed censors can tell the media what it can do.  And a free media means politicians don't decide who gets to own newspapers.  And a free media certainly means politicians don't get to decide how newspaper owners run their company.

You can have a fair media or a free media.  You can't have both.

Swan's comments were in response to a question from Adam Bandt, the Greens MP who asked whether the government would legislate ''to protect the editorial independence of major publicly listed media outlets like Fairfax''.  Thankfully, at least as yet, the Gillard government hasn't agreed to the Greens' demands.

But it's revealing that nowhere in his answer did Swan refer to the need for a free media.  He talked a lot about editorial independence and fairness and balance, but not once did he mention press freedom.  The Gillard government's recent review of the media (the Finkelstein inquiry) was also happy to sacrifice freedom of speech in the name of fair and balanced reporting.

Politicians can't resist the temptation to get involved in what's happening at Fairfax.  But for the sake of a free press and for the sake of freedom of speech, politicians should stay out of the fight.

Green growth comes at a high price

Australia's negotiating position at the Rio+20 conference this week confirms that the Gillard government considers Australia's national economic interest a secondary concern.

The conference was roundly expected to collapse in disaster as countries have radically different views on turning the rhetoric of sustainable development into action.

The expected collapse followed months of negotiations, with a text that was heavily bracketed.  In diplomat-speak, brackets appear around text that cannot be agreed to.

But on the eve of the conference's opening, Brazilian negotiators released a watered-down document expected to be adopted by the closing session tomorrow.  In essence, the deal reaffirms the principles of the 1992 Rio Earth Summit.

While the headline conclusions of the Earth Summit 20 years ago were new international conventions on climate change, biodiversity and desertification, there was also a secondary conclusion.

Developing countries were happy to tackle global environmental challenges, but not at the expense of poverty alleviation.  To protect their right to lift themselves out of poverty, developing nations blocked the excesses of wealthy countries wanting to impose big environmental costs on the world's poor.

At this conference, developed countries entered the negotiating ring for round two and wanted a heavy emphasis on the ''green economy'' and ''green growth''.  Australia held a similar position.  But it has been rebuffed by developing countries sceptical of the economic outcomes.

In the proposed final agreement, the ''green economy'' is considered ''in the context of sustainable development and poverty eradication ... and that it could provide options for policymaking but should not be a rigid set of rules''.

Developing countries smelled a policy rat.  India's Environment Minister, Jayanti Natarajan, said she did ''not want trade-restrictive measures or protectionism in the name of green growth''.

The opposition of developing nations is wise and hits at the heart of the problem of green economics.  Green policies require expensive taxes and regulations on industry that harm competitiveness.

Australia's expensive carbon tax is a perfect example.  As the carbon tax rate necessarily rises to drive cuts in our emissions profile, the political momentum to block or add taxes on imports that don't carry equivalent cost will also increase.

And that can lead to green trade barriers that will undermine the economic advantages of developing countries dependent on exploiting their natural resources to grow their economies and alleviate poverty.

But the consequences don't just fall on export-oriented developing countries.  Supporting ''green growth'' also ignores the realities of classical economics.

Green growth rebuffs the idea that countries should exploit their natural resources, limit trade barriers so countries can take advantage of each other's efficiencies, and not carry excessive regulatory costs.

Introducing carbon pricing without equivalent efforts from other major emitters undermines these aims.  Despite Australia's obsession with cutting greenhouse emissions, it is a relatively absent discussion point in Rio.  The conference's resolution on climate change was summed up in three paragraphs out of 49 pages.

Similarly, the Gillard government has adopted an excessively green position on ocean management.

A key ambition for Rio of the green movement was a proposed new governance structure for a treaty on the high seas that would seek to restrict fishing.  In numerous United Nations forums Australia has aligned its negotiating positions with other resource-rich nations to limit restrictions on our natural resource advantages.

But the push-back against a new high seas treaty came from our negotiating allies such as the United States and Canada.  It has ensured that a Treaty on the High Seas won't be discussed formally for three years.

It follows the Gillard government's recent announcement of an increase in Australia's marine parks that undermines the fishing industry.

The significance of this shift cannot be overstated.  Australian governments usually pay lip service to activists back home while driving a hard national interest agenda in global negotiations.  By going to water on the high seas issue, this government has traded national economic interest for the public applause of the green movement.

Former prime minister Kevin Rudd acted similarly by pushing hard in global climate talks despite Australia being a fossil-fuel- dependent economy that would have disproportionately shouldered the cost.  But even Rudd knew when to draw a line to protect national economic interest.  Based on its posturing at Rio, the same cannot be said of the Gillard government.

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House prices must be allowed to fall

The NSW budget allocated $561 million to promote increases in new housing.  Part of this was for grants to new buyers of $15,000 plus remission of stamp duty on new houses priced up to $650,000.

The $650,000 limit is around the median-priced Sydney home.  Sydney has had the most draconian regulatory regime imposed on it since the days of Premier Carr, and its house prices are a fifth higher than in Melbourne, and 50 per cent above Brisbane's.

But all Australian cities have massively overpriced housing compared to their counterparts overseas.  In relation to median family-income levels, Demographia puts the average Aussie home 60-80 per cent above that in the US and Canada.

In fact, in relation to incomes, average Sydney prices are over three times average prices in comparable major US cities like Atlanta and Dallas, and even two-thirds higher than Los Angeles in regulation-wracked California.

This sorry picture is not caused by the cost of building houses themselves.  The weekend newspaper pages around Australia have many ads for three-bedroom, two-bathroom, two-garage houses on your own land priced from $140,000.

The cause of high prices lies squarely with regulatory approval processes.  Starting with the designation of land as potentially available for housing development, there are mountains of approvals to gum up the process of building the house.  In Melbourne, the Growth Area Authority identified 540 separate regulatory ticks required from when the land was designated as approved for housing and a house's completion;  Sydney would have more.

This restrictive approach starves supply, driving up the price of a block of land (serviced so it includes water and sewerage facilities, roads, electricity and so on).  Further costs result from the inevitable days and holding charges and plan modifications required by the regulatory agencies.

Without restraints on subdividing land for housing, a serviced block would cost around $80,000.  Regulations over land boost this by $250,000 and more, converting a house-land package from $220,000 to $400,000 and more.  And yet, notwithstanding national parks and mountains, there is no shortage of developable land on the outskirts of Sydney or any other city in Australia.  Sydney's County of Cumberland has enough developable land to expand by 50 per cent without any expansion in the Blue Mountains.

In Sydney, the underlying demand for new houses is upwards of 60,000 per annum, but government regulations mean developers have struggled to get half this amount approved.  Victoria's performance has only been a notch better.

In both Sydney and Melbourne, state governments are now taking steps to ease the regulatory planning impediments.  Such measures would entail considerable savings to new home owner.  In the case of Sydney, they would be worth tenfold the value of the subsidy packages.

For NSW, budget measures seek to provide up to 76,000 additional new housing lots.  But even if these survive the regulatory thickets and are completed over a five-year period, they will add only 15,000 new houses a year to existing annual supplies of, at best, 30,000.  With the underlying demand in NSW at over 60,000 new blocks a year so that even the target is met, it will leave ongoing annual shortfalls of 15,000 blocks.

NSW Treasurer Mike Baird has allocated $50 million to help expedite the planning process time.  There are undoubtedly measures that can be taken to better computerise applications so that developers can see where the process application is within the planning and approval network.  And more administrators might expedite processing times.  But the real problem is not the state and local bureaucracy but the bevy of environmental, cultural, anti-sprawl and cost enhancing requirements that successive governments have enacted.

These regulatory measures have been in response to pressures from noisy groups.  And those pressures are not abating — in Victoria Planning Minister Mathew Guy announced a 30-year plan for 37,000 new greenfield approvals — that's 1000 blocks for year in a market where underlying annual demand is over 40,000.  He faced the usual pressures against the proposal from a mixture of environmentalists and planners, people who want to impose their own preferred living situation, and its associated cost premiums, on those not on the home ownership ladder.

Such pressures have been crucial in creating the accumulated regulatory barriers to allowing inexpensive houses to be built.

Additional funding for administrators and a piecemeal expanding of the urban growth area boundary is of only limited help in increasing the available supply of land on which housing is permitted.  Even if the growth area boundaries were to be eliminated, this would be only the first step in expanding market supply.  It needs to be accompanied by Governments eating into the array of regulatory impediments preventing developers from providing the houses that consumers want at an affordable price.

Finally, as pointed out by Greg Jericho, house prices boosted artificially by regulatory measures create illusionary wealth.  As housing comprises the greater part of most Australians' wealth, unwinding the regulatory scarcity can bring about financial pressures on banks and on households.  The housing bubble in the US was really confined to the west coast, Florida and some east coast markets, and prices fell much less markedly in states like Texas which have never had regulatory-induced land shortages driving up prices.

The US housing bubble burst as a result of a collapse in demand.  Australian state governments aim to generate an increase in supply to allow more gradual downward pressure on prices.  If they are successful, existing home owners will suffer an apparent loss of wealth.

Nevertheless, house prices have been artificially boosted in Australia and need to be allowed to fall so that they reflect their true underlying value.  Without this, younger people who are presently priced out of the market will face continued discrimination and as a community we will be wastefully spending too much on housing.

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The farce that is the Leveson inquiry

On October 7, 2009, News International chief Rebekah Brooks sent opposition leader David Cameron a text message:

I am so rooting for you tomorrow not just as a proud friend but because professionally we're definitely in this together!

The ''tomorrow'' in question was the final day of that year's Conservative Party conference.  Cameron would not have been surprised by Brooks's words.  James Murdoch had told him the Sun newspaper would abandon Labour because the Conservatives would be better economic managers.  During the Labour conference a week earlier the paper declared ''Labour's lost it''.  So while Brooks put it in an unsophisticated way, she was right:  professionally they were now ''in this together''.

The uncovering of this bare little text message was the fruit of Cameron's five hours of testimony to the Leveson inquiry into the phone-hacking scandal last week.

The message has been reported in headlines around the world, from the Huffington Post to the Calcutta Telegraph.  It is, according to the Daily Mail, ''explosive'', ''cringe worthy'', ''astonishing'' and ''incredibly embarrassing''.

But embarrassing for who, exactly?  Cameron was the one giving testimony, not Brooks.  It's hard to see why an opposition leader securing the support of a media proprietor for an upcoming election should be cringe worthy.  That is his job — to gather support where he can.

The Leveson inquiry started in November with Hugh Grant and the parents of the murdered school girl Milly Dowler.  Back then, its themes were criminality and police corruption.  It was surrounded by arrests and resignations and Scotland Yard.  All serious stuff.

But six months later, what was a serious inquiry has devolved into a strange sort of puritanism.  Participants are being judged against ethical rules unheard of before Leveson convened.  For a newspaper to back a political party is apparently a breach of these novel rules.  And friendship between politician and proprietor is outrageous.

The phone-hacking affair no longer has anything to do with phone-hacking.  It's trying to make scandals out of the basic practices of representative democracy.

Politicians cultivate relationships with journalists.  They have to, if they want to achieve their political and policy goals.  That might seem distasteful.  We all share a romantic ideal about the fourth estate being implacably at odds with the first estate.  But let's not be too delicate.  Democracy is about coalition-building.  Journalists and editors are stakeholders.  A politician that does not make friends in the media will not be a very successful politician.

But we also shouldn't pretend Cameron's fortunes were solely in the capricious hands of media moguls.  Yes, only Brooks's side of the SMS conversation has been released.  But its clear impression is of a proprietor sucking up to an opposition leader — not, as those who imagine Rupert Murdoch has an iron-grip on politics expect, an opposition leader coming cap in hand to a proprietor.

So an ambitious Cameron convinced the Sun to editorialise in favour of his party in 2009.  It's questionable how big a coup this really was.  Does anyone genuinely think Gordon Brown could have held on if he'd only had the Sun's support?  Labour had been in power for 12 years.  Brown was astonishingly unpopular.  And the British economy had collapsed.  Tabloids have always chased popular sentiment more than they've led it.

In Australia, the Finkelstein Inquiry into media regulation flirted with deeper questions about the functioning of democracy.  But, ultimately, Ray Finkelstein had a limited brief.  His final report charged towards a single, digestible proposal for a new regulatory body.  He steered clear of uncomfortable philosophical questions.

By contrast, the Leveson Inquiry lacks Finkelstein's modesty.  Lord Justice Leveson's team has now grilled four Prime Ministers and nearly 20 cabinet ministers.  They've interrogated them about press strategy and public relations, the use of anonymity and favouritism, leaks and friendships.

It's Cameron's fault.  The phone-hacking was the scandal.  But Cameron was embarrassed by having hired Andy Coulson, a former News of the World editor.  So he gave Leveson virtually unlimited terms of reference.  One of his tasks is to make recommendations concerning ''the future conduct of relations between politicians and the press'', which would seem to encompass every aspect of political and government communication.

Future historians will no doubt appreciate Leveson's forensic accounting of who had lunch with who.  But it seems more designed to appeal to the coterie of media critics sure that democracy is on the slide.

There's an absurdity that the Finkelstein and Leveson inquiries share.  They both held court on the nature of democratic politics, and they were both conducted by a senior judge whose touted virtue is that they are independent and unaccountable — that is, completely undemocratic.

That Brooks's artless text message is now seen as a scandal illustrates how farcical the Leveson circus has become.

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Time to reduce government

Classical liberals often convince themselves that a small government agenda could never be politically popular in Australia.  Two new polls suggest they're wrong.

It's an all too common lament that Australians are quite happy with big government.  Frustrated and sometimes even cynical believers in individual freedom see middle class welfare, subsidies for business and programs for special interests as yet more evidence that Aussie voters just love government spending.

There's some truth to these fears.  The howls of protest in the media and elsewhere whenever someone proposes cutting an entitlement program — think the federal government's recent tiny cuts to the baby bonus — seem to bear this out.  Aussies apparent attachment to Howard government era handouts like ''Family Tax Benefits'' are hardly encouraging.  And UK commentator Christopher Snowden has famously dubbed Australia the Nanny State capital of the world, thanks to our draconian limits on cigarette packaging and other government bans.

But new evidence suggests that Australians are more likely to reject government intervention than citizens of other countries.  Whereas 62% of people worldwide supported a ban on unhealthy food, polling company Ipsos found only one-third of Australians agreed with such an illiberal proposal.  Also encouragingly, 57% of Australians were found to be opposed to a tax on fatty foods in the name of fighting obesity.  Last year Galaxy conducted a poll on Australian attitudes to the Nanny State which found 55% of agreed there is too much government intervention and control in people's lives.  The same poll found the clear majority thought plain packaging for alcohol, fast food and cigarettes were unlikely to be effective.

Perhaps Australians are less enamoured with the Nanny State than many thought.

Essential Research, a left-leaning Australian polling firm, also recently conducted a poll which offers some signs of hope.  They asked voters whether government is too large and tries to do too much — and a plurality, 44% agreed.  Just 28% disagreed with the proposition.

But Essential also asked sector-by-sector questions, for example, whether government does too much or too little to provide quality health care and education services.  Predictably, in these politically-popular areas of spending, most voters were happy for the government to do more.  Tellingly, Essential didn't ask voters whether they thought government employed too many or too few public servants, whether they spent too much on ineffective climate change schemes or whether the welfare system was too costly.  They might have got very different answers if they did.

Nevertheless, it would be fair to say that slashing spending on schools and hospitals is highly unlikely to ever be popular in Australia.  But that doesn't mean that a small-government political agenda can't be sold to voters.

For a start, there are many ways to reduce government involvement in sensitive areas like education or health without being seen to be cutting public services.  Abolishing the badly-drafted and poorly-conceived national education curriculum in favour of competitive curriculums is unlikely to offend many voters.  Introducing a voucher system for delivering existing education spending has the potential to be very popular.  And lightly-taxed health savings accounts to replace Medicare for those who can afford to pay for their own healthcare could be done with minimal political pain.  Australians might view the size of the federal public service differently if politicians were able to effectively convey that while the federal departments of education and health employ thousands of public servants, not one principal, teacher, doctor or nurse is among them.

More broadly, the key to advancing a small government agenda in Australia is to seize on the general perception that government nannies us too much.  An effective political narrative that speaks in general terms about individual liberty versus state control is occasionally put forward by some Liberal MPs.  But there is fertile ground for much more of it.

And while the left is great at cataloguing examples of where reduced government involvement hurts some people — say workers who lose out from tariff cuts — supporters of small government can respond.  The carbon tax will be a great political opportunity to highlight the very real damage government intervention can do to peoples' lives and businesses.  But every single instance where big government hurts individuals needs to be highlighted by politicians who value liberty.  Sometimes a personal story can have far more impact than even the most persuasive facts and figures.

Of course, they need good allies who help them make the case.  Too often supporters of small government are not consistent in their advocacy for individual liberty over state control.  Business groups, for example, ultimately only harm their own cause when they decry wasteful and inefficient welfare spending for people, but go missing in action when government gives welfare to business.  A handout to a business has the same corrosive potential as a handout to individuals, and a welfare-dependent business is no better than a welfare-dependent person or family.

Granted, it is often tempting for politicians to pretend their new spending scheme will ''fix'' whatever problem is currently on the political agenda.  It is harder to point out the risks and pitfalls of big government.  But a small government agenda is much more politically feasible than some suggest.

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Fairfax is broke and dying before our eyes

Every business needs paying customers.  Who those paying customers are varies from business to business.  The single largest paying customer for Australian universities, for example, is the federal government.  Similarly the ABC's only paying customer is the federal government.  The point being that the single largest customer might also own the organisation.

Fairfax used to have lots of advertisers as paying customers — but no longer.  Bottom line is Fairfax is broke and dying before our very eyes.  They need a viable business model quickly.  The old model of selling eyeballs to advertisers isn't going to sustain Fairfax much longer.

Fairfax has announced that their metro papers will move from broadsheet format to tabloid size next year.  It isn't clear to me, however, that the size of the paper is the problem.  The product itself is the issue — not enough people want to read The Age or Sydney Morning Herald.  True — this is a problem all media organisations face and the industry as a whole will be radically restructured over the next decade.

Fairfax, however, doesn't have a decade.  The organisation as it currently stands has run out of time.  As Business Spectator columnist Stephen Bartholomeusz argued a few weeks ago, Fairfax revenues are falling faster than it can cut costs.

Those who fear a Gina Rinehart takeover of Fairfax are imagining a future without a Fairfax at all.  In practice, she has become their single largest paying customer.

A lot of ink and pixels are going to be wasted on a Rinehart takeover of Fairfax.  People will talk about the end of democracy, a lack of diversity, perhaps even the collapse of civilisation as we know it.

The first objective of any media company is to earn a profit, or have a patron who will tolerate losses.  All the other objectives, promoting democracy, providing alternate voices, enhancing civilisation, whatever, are subsidiary to the first objective.  Right now Fairfax can't earn a profit and doesn't have a patron.

Media patrons are not unknown or even unusual.  As indicated the ABC has the federal government, The Conversation has a consortium of universities, Crikey has Eric Beecher, the Global Mail has Graeme Wood, The Monthly has Morrie Schwartz.  This pattern of ownership is hardly surprising.  In a 2003 Journal of Law and Economics paper looking at media ownership across 97 countries, Harvard economist Andrei Shleifer and co-authors found two dominant modes of media ownership — government and concentrated private owners.

The apparent concern, however, is that Gina Rinehart is said to be somewhat conservative and the Fairfax papers — especially The Age — are considered to be quite progressive.

Specifically it has been reported that Gina Rinehart has refused to guarantee ''editorial independence'' at Fairfax.  Who can blame her?  It isn't like that ''editorial independence'' has produced an excellent product commanding a price premium.  Fairfax needs to be restructured beyond simply changing the size of the paper.  One of the benefits of a takeover is that inefficient and ineffective work practices get abolished.

But some might argue that Gina Rinehart will use Fairfax to push her own views and agenda — as opposed to the current editorial stance.  How much of a problem is this really?  It doesn't matter who owns the media — if they cannot attract other paying customers the media patron will lose money and eventually will sell out or shut down.

The old Fairfax is gone.  Whether a new Fairfax will rise out of the ashes I cannot say.  But without a patron it certainly will not.  There is no guarantee that a Rinehart-controlled Fairfax will be successful, but in the first instance she will give it a red hot go.  This takeover buys breathing space that will allow the company to restructure and gives Fairfax the best chance of survival.

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Happy birthday to free market liberalism

This year what we think of as modern free market liberalism turns 50.

We can thank the 1962 book by the American economists James Buchanan and Gordon Tullock, The Calculus of Consent, for laying the intellectual foundation of the philosophy of limited government.

Call it economic rationalism or ''neoliberalism'' if you like.

This is not to suggest that all free marketeers have read deeply in the academic field — public choice — that this book spawned.  Or that the philosophy of freedom isn't a lot older.  Supporters and opponents are more likely to focus on the more famous names of Adam Smith and Friedrich Hayek.  No surprise there.  Calculus of Consent is dense and mathematical.

Smith and Hayek studied the market.  They were looking at the way human society was spontaneously and efficiently ordered by price system.  Buchanan and Tullock shifted the focus;  grounding free market thought not in how markets work, but how politics doesn't.

Half a century later, that is still where the debate is.

Buchanan and Tullock start with a simple, seemingly obvious assumption:  people are people.  Whether they work in the private sector or in public service, all people respond to incentives.  Everybody pursues their own goals and interests.  Everybody has their own preferences about what they would like to do.  Economists sometimes describe people as ''profit-maximising'' but this isn't quite right.  People can be salary-maximising, or enjoyment-maximising, or compassion-maximising, or leisure-maximising.  Anyway, we're all trying to maximise something.

The first half of the 20th century saw economists explore the implications of self-interest as it existed in the marketplace.  They derived theories of monopoly, public goods, information problems, externalities, and predatory pricing.  And they argued that when markets break, government must clean up.

Buchanan and Tullock just extended those theories to government itself.  They argued that the public policy question isn't whether markets have flaws.  It is what happens when you try to resolve those flaws through collective action.  The Calculus of Consent applied economic analysis to non-market decision making.  The book explores the incentives faced by individuals acting in a political environment.  After all, people don't stop being people when they enter a voting booth or sit down at their computer in the Department of Agriculture.  Everybody is still motivated by their own personal goals.

This was a necessary corrective to political economy, and a radical one.  It is easy to imagine solutions to social and economic problems — the optimal solution is simple to design on paper.  But designing and implementing those solutions in the real world is not a trivial matter.  Getting self-interested individuals to work towards collective goals is hard.  Special interests seek advantage.  People use the public apparatus for private gain.  Politicians drop good policy and embrace good politics.  In a democracy the majority tend to support what is good for the majority, not what is theoretically ideal.  What was optimal easily becomes corrupted.

The public choice school is relentlessly realist.  It offers a vision of politics without the romance.  Public choice counsels caution — if not outright scepticism — about government activity.  It underpins the popular claims like Ronald Reagan's ''government is the problem''.

In his 1963 review of the Calculus of Consent, the British economist James Meade criticised his colleagues for being ''much too ready to call in the State as a deus ex machina to remove the imperfections of the laissez-faire market''.  It was an uncomfortable critique.  Meade was a former Labour Party advisor and a firm advocate of government intervention.

The lesson Buchanan and Tullock drew from their research was that rules matter.  Buchanan spent his career looking at the structures which could constrain government action and therefore keep the actions of the public service as close to the desires of the public as possible.  He won an economics Nobel Prize in 1986 for this work.

So far, so good.  A full recognition of the problems of collective action in government should lead to a general reluctance to trust government to act on our behalf.  Not to no government, but to modest government, constitutionally restrained.  The British political philosopher Mark Pennington says the goal is a ''robust'' political order.  That is, one which is designed to face political as well as market failures — and to limit the damage caused by either.

Certainly, public choice hasn't penetrated mainstream policy thinking.  Conservative politicians (at least those of the free market variety) should be sympathetic but are as embedded in the system as anybody else.  The public may be sceptical about bureaucrats and politics but they still, instinctively, want government to fix things.  There always ought to be a law.  And clever people pushing policy ideas tend to assume their ideas will be implemented wholesale and uncorrupted.

But we shouldn't underestimate how much Buchanan and Tullock's book influenced the political contest.

Even the most populist supporter of small government uses language and insights gained from public choice — the understanding, implicit or explicit, that the question isn't whether society has problems, but whether we can really rely on the strange institution of government to solve them.

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Pause aid budget and audit for political activity

It's time to hit the pause button on Australia's rapidly growing aid budget and audit expenditure against an appropriate assessment of political activity.

Despite a delay in the recent budget, Australia's total aid spending has grown significantly.

In the Rudd government's first budget, aid funding was already $3.8 billion and has grown to $5.2bn this year.

Based on projections in this year's budget, total spending on aid is intended to continue growing to about $7.5bn, or 0.5 per cent of gross national income, by 2016-17.  That commitment is bipartisan.

In the same timeframe NGOs have seen their share of dedicated aid funding more than double from at least $40 million to $112m, and are now responsible for delivering more than 10 per cent of Australia's aid program.

According to NGO annual reports, some have received nearly $40m in one year alone across multiple aid programs.

But once taxpayers' money is given to such organisations they cease being non-government and become semi-government organisations.

For transparency reasons there should be close tabs kept on how taxpayers' money is spent through them.

For example, in 2008 and 2009 the Australian Conservation Foundation received a total of $200,000 from Australia's program.

In the 2010 and 2011 financial years the World Wildlife Fund Australia collected $400,000 from AusAID.

To its credit, the environmentally militant Greenpeace does not take funding from government, recognising it taints its agenda.

But for those who do there are increasing grounds for concern that public money is being inappropriately spent.

As Greg Sheridan recently wrote in The Australian, as a recipient of aid funding, World Vision was working with a group that has ''deep links'' with the Popular Front for the Liberation of Palestine group, a proscribed terrorist agency.

Not that the World Vision's example is in isolation.  Recently the World Wildlife Fund was suspended as a Norwegian aid provider after staff were caught embezzling money from a funded program in Tanzania.

But scrutinisable activities need not be illegal.  They are increasingly political.

A large number of NGOs that are recipients of aid funding have been actively lobbying against the federal government's decision to prioritise a budget surplus ahead of increasing aid funding.

NGOs are within their rights to lobby for the government to increase government aid spending.  But that right is diminished when they are also recipients.

Similarly, the Australian Conservation Foundation receives taxpayer aid funding to run programs to promote grassroots engagement on climate change-based policy.

As a recipient of aid funding the ACF was also involved in the Say Yes! Coalition with Greenpeace and GetUp! to provide political support for the Gillard government's introduction of the carbon tax.

Worse, in some cases aid-funded NGOs are engaged in political activity that undermines the objectives of Australia's aid program to promote sustainable economic development.

At earlier stages of economic development, countries are required to exploit their natural resources as they make the leap from a subsistence economy to manufacturing and eventually a service-based economy.

There are constant efforts by aid-funded NGOs against the development of export-focused primary industries in Indonesia, Malaysia and Papua New Guinea.

Targets have included their forestry and mining and agriculture sectors.

These efforts have been coupled with campaigns by the same groups targeting consumers and businesses to stop using developing world exports, as well as the erection of trade barriers.

A recent example includes efforts to target KFC to stop using Indonesian and Malaysian palm oil in their frying and forestry products in their packaging.

Again, NGOs have every right to engage in political activity if they feel it advances their organisational objectives.

But that capacity is compromised when they start taking public money.

Currently NGOs are restricted from being accredited organisations to access NGO-specific AusAID funding programs if they are engaged in political activity that is primarily isolated to partisan activities.

But that relatively narrow definition of political activity means they can be engaged in political campaigns so long as they don't involve directly endorsing parties in Australia or abroad.

Before either side of politics increases the aid budget further, a proper audit needs to be completed so the public can be confident aid funding isn't being used for political activity.

And the definition of political activity should be broadened to recognise that political activity that undermines the sustainable development objectives of Australia's aid program is not acceptable.

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Austerity versus growth

Despite all the rhetoric, the latest figures show euro zone countries continue to spend.

There is arguably no greater gap between perception and reality in contemporary economic debate today than the trade-off between alleged fiscal austerity and economic growth.

Writing in The New York Times earlier this year, economist Paul Krugman stated that the euro zone's seemingly immovable state of economic weakness served as ''evidence that slashing spending in the face of high unemployment was a mistake''.

Krugman called for governments to defer their efforts to reduce budget deficits, ''because tax increases and cuts in government spending would depress economies further, worsening unemployment''.

The subsequent rise of far left parties in Greece, and the election of French socialist president Francois Hollande who campaigned against ''anglo saxonisme'' austerity, seemingly gave voice to European electorates resistant to rolling back the public sector.

However, there are two key shortcomings with the austerity-versus-growth theme presently holding sway in some economic policy and business media circles.

First, for all the intense rhetorical heat generated about persistently low growth attributed to significant public spending cuts there is little light by way of sober evidence demonstrating that reductions in expenditures by European governments have actually occurred.

Government financial statistics compiled by the European Commission's own statistical agency shows that all of the 17 euro zone countries continue to increase government expenditure, even if at a slower rate than previously in some instances, since before the global financial crisis.

Between 2007 and 2011 spending by euro zone member national governments increased on average by three per cent a year.

Almost two-thirds of these countries are growing their public sector spending levels at rates greater than the euro zone spending growth average.

Even with all the focus of the sovereign debt crisis trained upon Portugal, Ireland, Italy, Greece and Spain (PIIGS), they still increased their government spending by an average of two per cent a year, putting additional pressure on their budgets.

With economic weakness in the euro zone contributing to high unemployment, it is unsurprising that government expenditure on direct social security benefits has also increased across the euro zone, at an average rate of three per cent a year.

Among the PIIGS countries this spending component has risen by an average of four per cent each year between 2007 and 2011.

These statistical trends are also generally reflected in measures capturing changes to the size of government, such as public spending as a percentage of gross domestic product.

The second problem is that the fiscal policies pursued by European governments have hardly created conditions which are conducive to robust private sector investment and growth.  It is generally agreed among economists that increases in welfare state spending detracts from economic growth, since their provision reduces labour supply, including in cases where public pensions are made accessible to healthy individuals during their '50s or early '60s.

More broadly, numerous academic studies over the past two decades have shown that a growth in government size, as has been experienced in euro zone countries since the crisis, associated with slowing rates of economic growth as less efficient public sector activities crowd out more efficient private ones.

It should also be noted that European governments have wasted no time in raising taxes in their efforts to plug self-induced budget deficits courtesy of the beleaguered taxpayer (or at least those who do not evade their tax liabilities).

Reversing the income-tax-cutting trend over the past three decades in response to globalisation, euro zone countries such as Cyprus, France, Greece, Italy, Luxembourg, Portugal and Spain have increased taxes on personal or corporate income, including the imposition of surtaxes on the wealthy.

And since 2007, Cyprus, Estonia, Finland, France, Greece, Ireland, Italy, Portugal and Slovakia have implemented or announced increases in their value-added taxes.

Other tax increases or new taxes include the Spanish wealth tax, financial taxes in Austria, Belgium, France and Portugal, flight taxes in Germany, the Maltese cement tax, the Finnish confectionary tax, and repeated increases in petrol and tobacco excises in numerous countries.

Many of these tax increases have been rhetorically passed off by governments as ''solidarity contributions'', which is cold economic comfort for many Europeans whose businesses have already been shut down or have been laid off from salaried employment.

Another factor that has been largely ignored in the austerity versus growth debate is that governments also intervene in the economy through regulations, which often act as substitutes for taxation, and that deregulation can on its own accord boost economic performance.

Arguably the most comprehensive measures of regulatory burden are encapsulated in economic freedom indexes published by the Fraser Institute and Heritage Foundation, since they attempt to quantify the numerous dimensions of government regulations.

While there are mixed results across the non-fiscal dimensions of the freedom indexes, business, credit, labour market and trade regulations, and the security of property rights, have been assessed to have deteriorated noticeably among numerous euro zone countries since 2007.

The Heritage Foundation economic freedom index also suggests that an important aspect of the rule of law — freedom from corrupt activities — has deteriorated in 11 out of 17 euro zone countries.  Other proxy indicators of regulatory burden where available, such as growth in the number of pages of legislation passed each year by national governments and the European Commission, also show no signs of letting up.

The beneficiaries of big government, including politicians, bureaucrats and public sector unions, rent-seeking crony capitalists and dependants on publicly financed handouts, naturally tend to resist any reductions in the size of government.

But for these and other groups to suggest that European governments have trimmed down, but the private sector is suffering from anorexia as a consequence, is not only inaccurate but creates an intellectual climate conducive to postponing the necessary right-sizing of government that must take place.

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Politics of contradiction mean democracy for me, but not for thee

The scepticism of voters is troubling but not surprising.

Only 60 per cent of Australians think democracy is preferable to any other form of government, according to a Lowy Institute poll published last week.  It gets worse.  Just 39 per cent of 18- to 29-year-olds favour democracy.

This anti-democratic scepticism seems to have taken everybody by surprise.  But it shouldn't, because we live in a profoundly undemocratic age.

The key is a follow-up question which asked whether the right to vote is important to the poll respondents — 98 per cent believe we personally deserve the vote.  There's no contradiction here.  Many Australians think they should have a say on how the country is run but other Australians shouldn't.  We could dismiss this as the famed arrogance of Generation Y, but it's more troubling than that.

Democracy requires a belief that all Australians have an inherent right to decide the future of the country.  Every person can help choose the government, regardless of their background, wealth, intellect, or knowledge about public policy and current events.

Democracy won't inevitably result in the best decisions.  That's not why it's valuable — it's valuable because it says we all have an equal right to participate in collective decisions.

The results of the Lowy poll show a rejection of that value.  This is the fruit of a long process.  We've been undermining political egalitarianism for decades.  We no longer have any faith in the capabilities of other Australians.

Critics of the modern world claim Australians act contrary to their own best interests.  We've apparently been brainwashed into buying things we don't need with money we don't have.  We work too long and too hard for wealth that doesn't make us happy, but we're too miserable to stop.

Naturally, these criticisms are never self-applied.  They're faults found exclusively in other people.

If we're all hopeless in our private affairs, no wonder we are second-guessing voting about public affairs.

There's a psychological bias called the Dunning-Kruger effect, named after its authors, which says that incompetent people don't know they're incompetent.  In February, David Dunning told the science website Life's Little Mysteries that this has consequences for democracy:  ''most people don't have the sophistication to recognise how good an idea is''.  His comments were reported around the world as meaning science has proven democracy ''doesn't work''.

So this is a great time to be an expert.  Elected politicians cannot possibly steer the ship of state by themselves.  As Laura Tingle shows in her new Quarterly Essay, Great Expectations, Australians want government to solve almost every problem.  Governments likewise want to be in control.  And fulfilling our limitless demands requires technocrats, not democrats.

Policymakers often talk about regulations being administered ''at arm's length'' from government.  This is to ensure they are not subject to political interference.  If we're going to regulate, that's probably a good thing.  But we should be clear about exactly what ''arm's length'' means:  outside the control of the democratically elected representatives of the people.

Nothing illustrated our technocratic age better than Kevin Rudd's 2020 Summit, where the ''best and brightest'' were assembled in Canberra to set policy agenda.  The new PM said he was ''throwing open the windows of our democracy''.  But Rudd had just won a landslide election and had all the democratic approval he could need.  The symbolic purpose of 2020 was not democratic at all.  It was to hand the reins over to experts.

The cohort most sceptical of democracy is also the cohort that most votes Green.  This is unlikely to be a coincidence.  The sympathetic author of the textbook Green Political Thought, Andrew Dobson, writes of the ''palpable tension between radical green objectives and the democratic process''.  The public opposes much environmental action.  Anybody with radical politics will be just a little bit disappointed by democracy's results.

The response to the Lowy poll was telling.  Some said it showed how badly we teach civics.  Others flocked to social media to complain darkly about how intelligent the poll respondents were (''these people vote!'').

But ironically, the complaints show why Australians have come to be sceptical about democracy in the first place.  Do we really want people who are too uninformed or too stupid to trust democracy to vote?  Talk about reaping what you sow.

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Should voting be compulsory?

The biggest myth in this debate is that Australia's system of compulsory voting is normal.  Forcing our citizens to vote in every state and federal election is not normal.  Virtually no other democracies in the world do it.

Australia's compulsory voting laws are coercive and paternalistic, and they are out of step with the majority of developed countries, including the US, Britain, Canada and New Zealand.

People who support our current system claim that we have to force citizens to vote otherwise they might lose interest in the political process.  The reality is that, compulsory voting or not, some people just don't care much about politics.

Australian democracy is not enhanced by forcing these people to express an opinion on parties and candidates they dislike.

Rejecting all candidates on the ballot paper and staying at home on election day is a legitimate democratic expression that Australians do not have the right to exercise.  We are all forced to vote because other people have decided that we ought to be involved in the political process.

Lots of people claim that Australians are not actually compelled to vote.  They say all we are required to do is show up at a polling place and have our names marked off.  They are wrong.  The Commonwealth Electoral Act says it is our duty to vote, not just to show up.

People who support compulsory voting argue that we should be compelled to vote to stop us from becoming politically disengaged.  But on the other hand, they defend their stance by saying that Australians aren't technically forced to vote.  They're telling us we don't have to vote while frog-marching us into the polling booth.

It's also likely that compulsory voting has a negative impact on politicians.  Though we're told compulsory voting forces our politicians to appeal to the entire electorate, in reality it encourages them to adopt stances that will offend the least number of people.  As a result, politicians embrace the policy-by-focus group approach to governance.

This approach has led to unprecedented disillusionment with the political process by voters.

And with electronic voting potentially around the corner, gone could be the days when you could scribble ''none of the above'' on your ballot paper, or even just fold it up blank and pop it into the ballot box.  Voters could be forced to submit a valid vote by numbering all the boxes before a computer will accept their vote.

The last refuge of a voter who does not wish to support any candidate — the blank ballot — may soon be denied to Australians too.

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Democracy in doubt

If the young are our future, then we're in trouble.  The results of two polls released this week give a glimpse of what young people in Australia think about democracy and free speech.

For anyone who thinks these two things are fundamental to our society, the figures are not pretty.

A poll for the Lowy Institute found that 23 per cent of respondents between the age of 18 and 29 said:  ''For someone like me, it doesn't matter what kind of government we have.''

Thirty-eight per cent said:  ''In some circumstances a non-democratic government can be preferable.''

That's more than half who said they would contemplate an alternative to democracy.  Just 39 per cent said:  ''Democracy is preferable to any other kind of government.''

A Galaxy poll found that 29 per cent of respondents between the ages of 18 and 24 said government should regulate the opinions published in newspapers.

Fifty-three per cent said the government should not, and 18 per cent did not have an opinion.

It's difficult to know what's more worrying — that 29 per cent of young people had no problem with government censorship or that 18 per cent didn't know whether they had a problem with it or not.  It's not much of a relief that a bare majority came out in favour of freedom of speech.

It would be easy to rationalise these results away.  You could say that ''democracy'' is so vague and theoretical a concept that young people don't really know what it means anyway, and if ever democracy as we understand it were actually threatened they would choose the right side.  Or you could believe young people are naive.  You could hope that as people get older and get some life experience, they get more sensible.  These polls do, indeed, reveal a stark difference in attitudes between old and young.

Seventy-four per cent of respondents in the Lowy Poll who were aged 60 or older thought democracy was preferable to anything, compared with the 39 per cent of young people who thought the same thing.  In the Galaxy poll only 11 per cent of respondents aged 50 or more thought government should regulate opinions in newspapers, which means young people are three times more likely than older people to believe in government censorship.

The line, supposedly from Winston Churchill, that ''if you are young and not liberal, then you have no heart;  but if you are old and not conservative, then you have no brain'', is funny, but not necessarily true.  The evidence is unclear whether people's attitudes actually do change as they get older and get a job and a mortgage.

There is an alternative explanation for all of this.  Which is that these poll outcomes are not just what's to be expected — they are in fact exactly the outcomes intended to be produced by our education system.

Put simply, students in schools and universities are taught that the ideal of democracy is but one value among many other values, and it is neither better nor worse than the alternatives.

The new national curriculum to be taught to every school student in Australia says very little about democracy and free speech.  The priorities of the curriculum are that students understand Aboriginal and Torres Strait Islander history and culture, Asia, and sustainability.

The claims that whether democracy is a good thing or not depends on the context, and that democracy can be sacrificed to achieve other objectives, are widespread.

New York Times columnist and best-selling author Thomas Friedman famously said back in 2009:  ''One-party autocracy certainly has its drawbacks.  But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages ... Our [America's] one-party democracy is worse.''

The anniversary of Tiananmen Square was a few days ago.

The classic example of such thinking is the old chestnut:  ''Well, Cuba might not be a democracy but at least it's got good health services ...''

A professor at an Australian university wrote almost exactly this about Cuba in The Age a few months ago.  Another Australian academic is renowned for recommending democracy be suspended so we can deal with climate change.

If these are the sorts of things students are being told by their teachers, it's no surprise that young people would prefer Fidel Castro's hospitals to democracy and free speech.

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Remittances dominate aid yet remain unspoken

The underappreciated thread that ties the global economy together is remittances — the money sent by migrants back to their home countries.

Remittances are the silent player in the immigration debate.  They're almost never referred to in our domestic politics or press.

The news monitoring site Factiva records just two mentions of remittances in Australian newspapers over the past two years.

Compare that to the reams of copy filed about foreign aid — 706 newspaper articles in the same period.  Then add all the vox pops, chat shows, and talkback calls.  Recall the hand-wringing which greeted Wayne Swan's announcement that foreign aid growth would be modest in this budget.  Yes, both left and right positively obsess about the cash the government gives to the third world.

But, even though we're also constantly yabbering about immigrants, the vast sums of money foreign workers privately send home themselves goes entirely unnoticed.

So a new World Bank report, Migration and Remittances during the Global Financial Crisis and Beyond, released last week is all but guaranteed to be ignored.  This is a shame.

The report underlines that the amount of money migrants send home far, far exceeds the amount of money the West spends on foreign aid.  Remittances are a big deal.

And they're an increasingly big deal.  Total remittances used to be double the total amount of aid, which was impressive enough.  But now, after the financial crisis, they are more than triple.

This is not because foreign aid has declined — official development assistance has continued to grow during the economic downturn.  It's because remittances have shot up further.  While the developed world spends roughly $US100 billion on aid every year, migrants now send more than $300 billion home.  And as remittances are extremely hard to measure (not all of it is sent through formal channels) it is likely to be much more.

This is a good thing.  The financial crisis demonstrated that remittance income is stable income.  Foreign direct investment in the developing world has wildly fluctuated since 2008 and has not yet returned to pre-crisis levels.  By contrast, remittance flows have remained relatively steady.  They dipped slightly in 2009 but quickly popped up again;  in two years, the World Bank believes global remittances will be close to $600 billion a year.

We're all familiar with the long-running ''trade versus aid'' debate.  Which is the most effective development policy?  There's an increasing consensus that the actual winner is remittances.

So the significance of the global remittance economy ought to dominate the immigration debate.

But it doesn't.  Understandably, Australians look at immigration through Australian eyes.  The emphasis is on us:  how will migration programs affect domestic employment?  How will migrants culturally integrate?

Barely do the fortunes of the migrants themselves figure.  Working in the rich world, whether temporarily or permanently, is extraordinarily beneficial for people born in poor countries.  The opportunities are much greater, and the prevailing salary for equivalent work much higher.

This simple and obvious fact is virtually absent from discussions about immigration.  Perhaps it is an unstated assumption shared by all participants.  But as the development economist Michael Clemens has pointed out, the benefits which are conferred on the migrants and their countries of origin are almost uniformly neglected by all sides of the debate.

No more so than with remittances.  The flow of money from migrants helps fund investment and grow capital in the world's poorest countries.  It keeps families above the poverty line.  It goes directly to households.

And as a form of third world development, remittances put no pressure on taxpayers in the first world.  They are not planned by clever development economists or policymakers.  They have not been coordinated by an international bureaucracy.  Indeed, remittances are nothing but the result of the hard work of migrants.

That might sound hard-hearted but it helps keep the flow of money stable and targeted — certainly more stable and targeted than foreign aid, which is highly influenced by political decisions, and subject to the budget planning of treasurers for whom third world development is not an urgent priority.

But there's also a political reason that remittances don't get talked about.  It's in nobody's interest to do so.

They don't fit the left's vision of economic development.  Foreign aid is grand and interventionist and state-driven.  Remittances are earned by individuals and spent in ways the migrants and their families choose.  One small, pathetic, but indicative criticism of remittances from the left says they encourage ''conspicuous consumption'' in the developing world.  It's a common complaint and a bizarre one.  Is the third world's problem really not poverty but consumerism?

And it's clear that many calls for foreign aid are driven by a belief in distributive justice — that foreign aid should be a penance for first world wealth.  Certainly this is the message broadcast by the fashionable anti-poverty causes marketed to young people.

Nor do remittances appeal to conservative populists.  Remittances offer one of the most compelling utilitarian arguments for importing foreign workers from the developing world — not only is immigration good for our economy and the migrants themselves, it's also good for the countries the migrants come from.  This is not a story that those sceptical of immigration want to tell.

But it is one we'll have to start recognising if we want to understand our place in the global age of migration.

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ACCC needs to wear realities of fashion's changing look

With fashion goods in retailing, the internet has introduced new and unpredictable marketing dilemmas.

It has changed the way almost all of us go about shopping.

It has vastly complicated firms' approaches to the traditional trade-offs between what they charge for their products, the distribution and in-store promotion costs they incur.  And it is changing the nature of our high streets and shopping centres.

The volume of online sales is doubling every four years in spite of a stagnant overall retail market.

And the internet's role continues to evolve with new developments that include using Australia Post's ''click and collect'' post-boxes to supplement home delivery.

Six months ago, a Productivity Commission report noted that online imports of goods costing less than $1000 benefited from not attracting GST.

This enhanced the competitiveness of online sales, although the Commission argued other regulatory imposts were more important factors.

Chief among these were labour inflexibilities, causing Australian shop workers to be only 60 per cent as productive as their US counterparts, and excessive rents caused by our retail zoning laws.

The estimated cost of bringing all internet sales within the GST net is $2 billion.  This would collect only $600 million in revenue, hence the Government has established an inquiry to find a lower-cost solution.

Headed by Labor Party adviser Bruce Cohen, it also includes former Australia Post executive Jim Marshall, a director of several online businesses.

Lower prices from internet availability have their cost.

Where internet supply reduces demand for goods from conventional shops, one outcome is fewer such outlets and a diminished consumer's ability to examine a product and physically compare it with alternatives.

This new marketing context forces producers to review whether to spend money on sales promotion and distribution, or economise on such costs to enable lower prices.  They are experimenting with novel approaches.

Some firms may go totally online.  Others may have stockless outlets.  Some will continue to focus on more costly conventional retail outlets.

Of course, this is easier if the bricks-and-mortar shopping costs are not loaded with unnecessary regulatory imposts.

Some clothing firms have apparently struck agreements with bricks-and-mortar retailers in Australia not to supply goods online at prices that undercut those in the shops.

In response to complaints, Rod Sims, the chairman of the Australian Competition and Consumer Commission, has reportedly said he will crack down against clothing-importing companies who strike such agreements with online suppliers.

It is hard to see the reason for such action.  Prices are best set by supply and demand.

In the absence of monopoly, the ACCC cannot and should not force firms to supply at lower prices.  And while every fashion goods seller has some form of monopoly over its product, none has a monopoly over its market.

The last thing that is needed in the marketing maelstrom touched off by internet sales is interference from a competition regulator aimed at forbidding business approaches that it considers might raise costs.

Retailing is highly rivalrous.  Technology changes and consumers' responses present challenges to suppliers and retail intermediaries.

Regulatory interference can only bring further, unnecessary complications.

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''Finders, keepers'' mining law makes everyone richer

In her address to the Minerals Council, Prime Minister Julia Gillard said:  ''You don't own the minerals.  I don't own the minerals.  Governments only sell you the right to mine the resource.  A resource we hold in trust for a sovereign people.  They own it and they deserve their share.''

There are two issues here.  The first is legal.  The ownership of minerals is vested in state governments, not the Commonwealth.  And all state governments' mining laws say words like the ''lessee of a mining lease owns all minerals lawfully mined from the land under the mining lease''.

Even more important than the property rights enshrined in our state laws and states rights enshrined in our Constitution is that our existing mining laws have been developed to enable the nation as a whole to obtain the maximum benefit from its mineral endowment.

This means first discovering the minerals we have.  Minerals, until they are discovered, represent wealth that does not yet exist, rather like an uninvented iPad or other item of high technology.

Unless someone has an incentive to discover them, income-enhancing hidden mineral deposits, like new technologies, will remain dormant, or at least be developed much more slowly and at higher cost than would occur if the ownership is vested in the discoverer or inventor.

And, if having discovered something, a firm then has to negotiate a royalty or some other special payment with the government, it would be doing so at a severe disadvantage.  The government would cherry-pick the successes and extract punitive payments from them, leaving a pungent message to all explorers and severely reducing the amount of exploration activity.

If we tell explorers that they don't automatically own the wealth they have discovered on exploration leases they have been granted, ownership becomes conditional on what the sovereign people's representatives decide.

This introduces a massive disincentive to search and would severely reduce, if not destroy, most mining activity over time.

It could be that the government decides it will itself take on this entrepreneurial exploration role.  But if it does so it will not be as efficient as private-sector explorers or developers.  We will have less mining activity and reduced wealth.

The basic understanding under which mineral extraction law operates is therefore ''finders, keepers''.  An explorer obtains a licence to discover minerals and in return has to make regular reports on the findings which then become publicly available.  Subsequent searchers can build on this information.  The exploration lease holder has to progressively surrender parts of the lease to forestall ''real-estating'', ie, waiting for someone else to discover something and thereby reveal undiscovered wealth on his or her own lease.  Part of the deal with the government as lease granter is that development of a valuable resource can't be deferred indefinitely.

If a valuable mineral deposit is discovered it becomes the property of the finder subject to, theoretically, known and fixed royalties to the state (and of course, income tax).  Some miners are skilled or lucky and make a considerable profit from their finds.  But it is an open-access industry and over time the average profitability of mining is much the same as industry in general.

Search activity is further encouraged by the absence of mineral rights by the surface owner.  If the surface owner has the mineral rights, as is the case in many countries, the landowner becomes a beneficiary from successful search activity to which he may have contributed nothing.  This would create windfall gains at the expense of the searcher.  It must result in diminished search activity because the landowner's good fortune is at the expense of the parties undertaking the expense of search activity.

Mining law has evolved for conditions under which there is little publicly known about the area being searched.  Once an area's mineral wealth is well known, as is the case with coal reserves in the eastern states, a different approach recommends itself.

If proving up valuable deposits and subsequently extracting them is relatively straightforward, there may well be a scramble for exploration leases.  In that case, efficiency suggests that the best approach is to auction the right to search and benefit from any findings.  In most of Australia, an auction for mineral leases would not bring a positive bid.

But these are subtleties to the rules required for an efficient mining industry.  Those rules involve secure property rights following on a discovery and no additional taxation once a valued deposit is found.  If the government decides it will require higher shares for the ''community'' it needs to do so in a non-retrospective manner.

And it needs to do so in recognition that this will result in lower exploration activity and lower future income levels.

Unfortunately, not only does the Prime Minister appear to have been badly advised on mining law but in her taxation and regulatory approaches to business she seldom seems to recognise that imposing increased costs adversely affects profitability and future levels of activity and income.

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