Politics, not policy, will decide who gets bailed out

What can we do about "too big to fail"?

The interim report of the Commonwealth's Financial System Inquiry, chaired by David Murray and released last week, spends a fair bit of time talking about this puzzle.

"Too big to fail" describes financial institutions, mostly banks, which have become so large and so deeply integrated into the financial system that if we let them collapse they would take everything else with them.

If a corporation is too big to fail, then, it follows, taxpayers have to bail them out.

It's quite a problem.  A market economy is supposed to be dynamic, full of entries and exits.  Firms that add economic value thrive.  Those that do not go broke.

So bailing out failed companies makes the economy less efficient.  More gallingly, it redistributes money from the poor to the rich.  And it creates "moral hazard" — a belief by management that ultimately they won't have to pay for their mistakes.

Moral hazard is a particularly severe problem for banks.  Banks trade on risk.  A bank's basic job is to transform short-term highly liquid deposits into long-term extremely illiquid loans.  Too much of the latter will prevent redemption of the former.

Too big to fail encourages banks to make riskier loans.  Why wouldn't they?  They're not the ones bearing the cost of failure.  Taxpayers are.

So it would be great to get rid of too-big-to-fail.  Or at least limit it somehow.  The Murray Inquiry has a few ideas:  higher capital requirements for bigger institutions, for instance, or new procedures for when banks do fail.

But the question isn't what should we do about too-big-to-fail but what can we do about it.

And the answer to that question is almost certainly nothing.

Because no matter what the Murray Inquiry recommends — no matter what policy the Government or Reserve Bank or Australian Prudential Regulatory Authority imposes today — the decision of which firms to bail out and which to let fall will be made by the policymakers of the future, according to their own whims, and mindful of political, not economic, considerations.

Simply put, there are no ways to credibly constrain future governments from deeming an institution too big to fail.

Nowhere is that clearer than in the United States.

After the savings and loans crisis of the late 1980s, American policymakers decided to put some limits on the availability of government bailouts.  The result was the Federal Deposit Insurance Corporation Improvement Act 1991.  This law was supposed to set rules under which an institution would be considered too big to fail.

But those carefully constructed limits fell apart when the Global Financial Crisis hit.  Consumed by panic, the American government bailed out not only banks but money market funds and Fannie Mae and Freddie Mac — two bodies that were theoretically and legally owned by private shareholders but were implicitly backed by a government guarantee.

Now American policymakers say they've come up with a new system supposed to constrain too big to fail — the 2010 Dodd-Frank Act.  Will it work?  Don't bet your house savings account on it.

We're lucky in Australia to have gone the better part of a century without a high-profile bank failure.  But we're hardly immune to the political pressures that have created the too big to fail problem.

One predecessor of the Murray Inquiry, the Fraser government's Campbell Committee, argued the responsibility of the government is to keep alive the system as a whole, not prop up individual institutions.  Banks should be allowed to go under.

But who gets bailed out is a decision made by politicians not economists.

In 1990 the Farrow Group — a Victorian group of building societies whose most prominent member was the Pyramid building society — got into serious trouble.  In July 1990 John Cain's Victorian government gave it the bailout it wanted, guaranteeing more than $1 billion of unsecured deposits.

Was the Farrow Group too big to fail?  The Cain government said it was — it was "systemically significant", to use our contemporary econocrat buzzword.

Systematic significance is a term of art, and not a very clear one.  Since the Global Financial Crisis systematic significance has become a totem of financial regulation.  The idea is that too big to fail isn't just about size, but more about integration.

There's been a cottage industry of academics trying to figure out how to tell which institutions are systemically significant.

No doubt they're all doing great, insightful work.  But the fact remains these studies of systemic significance are just a lot of after-the-fact reasoning.

It was policymakers — not scholars — who came up with the idea that some institutions were just too interconnected with the financial system to collapse peacefully.

Like pornography, politicians and bureaucrats know systemic significance when they see it.  The Victorian government just knew the Farrow Group was too important to collapse.  The American Federal Reserve just knew that they had to bail out the private money market funds.

Yes, systemically significant institutions get bailed out — but their significance should refer to the political system, not the financial system.

No matter what the Murray Inquiry decides, in the middle of a panic political expedience is going to beat carefully crafted rules every time.

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Lessons From the Aussie Carbon Victory

Five short years ago, Australian media thought that the center-right Liberal Party was crazy to oppose a cap-and-trade system for carbon emissions.  "Unless the climate change dissidents are brought to heel," wrote one supposed expert, "the Liberals face humiliation at the polls".  Conservatives, warned another commentator, "are on a political suicide mission."

How wrong they were.  Yesterday, the Liberal government of conservative Prime Minister Tony Abbott scored a crucial victory with the abolition of the widely detested carbon tax.  The extraordinary and fascinating odyssey down under holds lessons for the rest of the world.

Historians will probably look back at 2006-09 as the time when the climate hysteria reached its peak in Australia.  Those were the days when Labor Prime Minister Kevin Rudd called man-made global warming "the greatest moral, economic and social challenge of our time".  Even though average temperatures had barely changed in recent times, we were told that we were headed for environmental catastrophe and that only drastic changes to our way of life could prevent it.  Anyone who disagreed was treated with shock and derision.

With his poll numbers in the doldrums, opposition leader and Liberal Party chief Malcolm Turnbull — an Australian Mitt Romney without any conservative instincts — looked like a doctor who had observed the ailment but misdiagnosed it.  Echoing his media mates, Mr. Turnbull warned that opposition to Labor's cap-and-trade bills would annihilate Liberals at the ballot box, so he fell over himself to accommodate Mr. Rudd at every turn.

In late 2009, Mr. Abbott challenged this cozy consensus, defeated Mr. Turnbull for his party's leadership and ended bipartisan support for the climate bills.  Cap-and-trade, he argued, amounted to "a great big tax to create a big slush fund to provide politicized handouts, run by a giant bureaucracy".  He supported simpler, cheaper and more practical ways of creating a cleaner environment, and suddenly most Australians realized that the costs of decarbonizing the economy outweighed the benefits.

When the rest of the world refused to endorse the climate enthusiasts' unrealistic expectations at Copenhagen, Mr. Rudd imploded.  Almost overnight, his stratospheric poll figures fell.  The experts who a few months earlier had predicted electoral oblivion for the Liberals were forced to recognize Mr. Abbott's strong position.

Soon elections were approaching and Mr. Rudd was axed in a June 2010 internal party coup.  Panicked Labor members installed Julia Gillard, who then won votes in the August 2010 national election by promising not to enact a carbon tax.  Still, the first-term government lost its parliamentary majority for the first time in nearly 80 years.

After Labor joined with Green Party legislators to create a minority government, Ms. Gillard went about legislating the very carbon tax she pledged not to introduce (at 23 Australian dollars price per ton).  Climate enthusiasts admired her for breaking her word, but it was a dangerous backflip that would be her undoing.

Mounting mistrust in Ms. Gillard's authority led Labor to reinstate Mr. Rudd.  Back in office for only two months, he pretended that he would scrap the hugely unpopular carbon tax, again as a ploy to win votes.  But middle Australia, not to be fooled again, chose his opponent in a landslide last September.  With a new Senate in place this month, the scene was set to repeal one of the most unpopular laws in recent times — as senators did on Thursday.

The lesson here is that voters are not easily deceived when political leaders try to conceal the costs of their environmental ambitions.  Nor do emissions restrictions grow more popular the more politicians try to sell them.

Again and again, Australians have shown their distaste for carbon taxes and emissions-trading schemes, especially in the absence of a legally binding global deal.  When sophisticates try to shut down debate, it amounts to an attack on the public interest.

Another lesson:  Successful politicians are not afraid to challenge a stifling political consensus.  When global warming alarmism was dominant in 2009, Mr. Abbott had the nerve and conviction to stand against the religious fervor of carbon pricing.  He has now been able to pioneer a new climate policy that has transformed Australian politics.

American Democrats, who are pushing their own carbon-regulation scheme, could learn from Australia's experience.

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The Missing Foundation Of Development: Individual Rights

The Tyranny of Experts:  Economists, Dictators, and the Forgotten Rights of the Poor
by William Easterly
Basic Books, 2014, 416 pages

The major contribution of William Easterly's new book, The Tyranny of Experts, is simple and profound.  For the poor, individual rights isn't just the most effective path to development for poverty-stricken countries.  No, for the poor, individual rights is development.

Plenty has been written about the inefficiency of foreign aid.  Easterly's previous book ― The White Man's Burden, a practical "how-to" guide for reforming foreign aid ― is arguably the most prominent.  And plenty has been written about the instrumental role of individual rights along with free markets, property rights, the rule of law and democracy to achieve economic growth in poor countries.  But the intrinsic value of individual rights for poor people has for too long been overlooked.  What's more, it's completely foreign territory for the vast majority of those in the foreign aid industry.

Most foreign aid agencies don't acknowledge the instrumental, let alone the intrinsic value of individual rights.  They believe poverty is a technical problem to be solved by experts.  They implement their expert plans through and with authoritarian central governments, strengthening and legitimising those governments in the process.  Easterly's thesis is that it is these authoritarian governments that are causing poverty in the first place and from whom poor people need protection through individual rights.

The Tyranny of Experts charts the history of the philosophical underpinnings of foreign aid through the twentieth century.  It reaches the damning conclusion that the foreign aid status quo doesn't just place the rights of poor people second, it often places them last.

Easterly recalls one such tragic example in 2010.  The World Bank (where Easterly was previously employed as an economist ― he is now a professor at New York University) wished to implement a forestation project in Uganda.  To make way for the project, villagers were violently removed from their land at gunpoint by government troops, their villages and farms burnt to the ground with one child dying in the process.  The farmers were told to never come back because the land was no longer theirs.

While no one is suggesting the World Bank would have sanctioned such activity, it is a graphic indication of where the individual rights of poor people sits on aid agencies' and authoritarian governments' list of priorities.  The point being that the foreign aid status quo doesn't simply neglect to consider individual rights, but often acts in direct competition to them.

Easterly couches the philosophy of foreign aid into three central issues.  Firstly, he believes the foreign aid status quo views recipient nations as if they are a "blank slate" instead of learning from the history of that country.  It pays no heed to how a county came to be poor and seeks only to shoe-horn its pre-determined solutions regardless of the circumstances.

Easterly highlights the absurdity of this approach by outlining the incredibly long-running causes of poverty.  For example, he cites one study that shows that the Aja people in Benin, Togo and Nigeria today display less trust towards their neighbours than similar ethnic groups in the same area because they were victimised by slave traders and betrayed by fellow African tribes in the seventeenth and eighteenth centuries.

This is a hindrance to them today in engaging in many activities predicated on norms of trust, such as commerce with strangers.

In fact, Easterly claims Italians from the north of Italy are more likely to be organ donors than those in the south because of the presence of "free cities" in the country's north in the twelfth century, compared to the absolutist regime in the south.  The implication being that individual rights have the long run effect of normalising behaviour that benefits strangers outside an individual's family or localised cultural groupings.

The blank slate view has negative ramifications for individuals in two ways.  Firstly, it allows foreign aid experts to ignore the effectiveness of individual rights in generating economic growth in other countries.  Secondly, because foreign aid experts ignore existing institutions and cultures, they require the coercive power of autocratic states to implement their plans.

The second part of Easterly's analysis focuses on the pre-eminence of nations over individuals in the foreign aid status quo.  That is, not only are nation states thought to be the goal of development but the vehicle through which development is meant to be achieved.  Clearly the advent of "national goals" proposed by organisations such as the World Bank are the antithesis of individual rights as it is impossible to aggregate all the choices and preferences of individuals, as famously demonstrated by Nobel laureate Kenneth Arrow.

Easterly quotes Friedrich Hayek in this regard, who once wrote of this view, "the individual is merely a means to serve the ends of the higher entity called ... the nation".  Easterly also notes that Swedish economist Gunnar Myrdal, the socialist economist who shared the economics Nobel in 1974 with Hayek, summed up the view of the foreign aid status quo perfectly when he said national governments needed to achieve development in spite of, "a largely illiterate and apathetic citizenry".  (The Tyranny of Experts is worth reading if nothing else for the imagined debate Easterly recreates between Hayek and Myrdal.)

The third area of the foreign aid status quo Easterly shines a light on is the preference for consciously designing solutions to poverty as opposed to those that spontaneously emerge.  Easterly stresses this is not a standard government intervention against free market argument.  Indeed, he asks readers to leave their domestic political allegiances at the door by drawing very little distinction between countries as economically and politically diverse as Norway and the United States when compared to a poor country like the Democratic Republic of Congo.  Whilst Easterly is very much in favour of free markets, he says the blunt feedback system and the checks on government provided by individual political rights and democracy are equally as important.

Easterly is at pains to point out that those in favour of individual rights for poor people have been misunderstood as zealots of the free market by the foreign aid status quo for six decades.  He wryly notes that foreign aid stalwart Owen Barder in 2013 called development "an emergent property of a complex adaptive system", meaning that genuine development emerged from a whole system that was too complex to be run by any one leader.  But the system was adaptive as it generated decentralised feedback and responses that enabled it to self-correct.  Barder's talk generated a positive buzz on development blogs and "nobody called him a free market extremist".

Easterly's book comes at an important stage for foreign aid.  Following The White Man's Burden, criticism of the status quo has mounted in the form of books such as Dead Aid by Dambiso Moyo, The Idealist by Nina Munk and Poor Economics by Abhijit Banerjee and Esther Duflo.  The emergence of New Institutional Economics (think Why Nations Fail by Daron Acemoglu and James Robinson) has sharpened academic focus on the individual rights of poor people.

And budgetary pressures have meant many governments are open to the idea of a new way of fighting poverty that may potentially require less public funding.

The Tyranny of Experts is not about aid effectiveness.  It is about aid philosophy.  Foreign aid has failed because it is based on a philosophy that believes poor people are incapable of making decisions for themselves.  For too long those who value individual rights have dismissed aid as a misguided sideshow.  The Tyranny of Experts is a call for those people to re-imagine aid's task as claiming the individual rights for poor people that will enable them to transform their own destinies.

The Christian Realisation Of Liberty

Inventing the Individual:  The Origins of Western Liberalism
by Larry Siedentop
Allen Lane, 2014, 448 pages

Since at least the Enlightenment, it has been popular to regard the medieval period as a kind of "dark age" that isn't worth studying.  After the collapse of Rome in the West in the fifth century AD, so the popular story goes, Western Europe plunged into a period of crushing superstition, in which society was utterly dominated by the Church and "secular" learning was lost.  Western Europe was saved only by the Renaissance, when a sudden resurgence of Classical learning slackened the grip of the Church and awakened the West to secular modernity.

Oxford Professor Larry Siedentop's latest book ― Inventing the Individual:  The Origins of Western Liberalism ― seeks to address this imbalance.  Christian morals and the medieval developments of the Church were integral to the development of Western liberalism, natural rights, and ― ironically ― the modern secular state.  Without Christianity, we wouldn't be benefitting from any of these now.

Siedentop's account begins with ancient Greece and Rome, where he makes an important point:  that the pagans had no concept of the "individual".  Greek and Roman society was composed not of individuals, but of various tribes or familiae governed by a semi-religious heads (the Roman paterfamilias), who were subordinated to the city or state.  An assumption of "natural inequality" prevailed;  it was accepted that some people were born to rule, others to be ruled.  Many people ― including women and slaves ― could not be citizens, and so were denied rights and regarded as "sub-humans".  There were no governing religious morals, and was no concept of individual liberty.

Enter Saul of Tarsus, aka Saint Paul:  a thinker who turned the Roman world upside-down.  Siedentop ― who takes an unapologetically technical view of Christianity ― argues that Paul, inspired by his conception of Jesus, essentially overturned the idea of natural inequality.  With his innovative philosophy ― "There is neither Jew nor Greek, there is neither slave nor free, there is neither male nor female;  for you are all one in Christ Jesus" ― Paul made a controversial argument:  that all humans possess a soul, and all are equal before Christ, regardless of birth and gender.

Siedentop describes how early Christian thinkers like Irenaeus of Lyons and Tertullian developed ideas of moral equality and religious liberty, the development of monasticism in Egypt and its spread throughout the east and west, and the transformation of the ancient hero from the wily, "Odysseus-like" aristocrat to the defiant Christian martyr.  He also describes the important fifth-century debate between Augustine and Pelagius over human nature.  While Pelagius believed perfection of humans, the law, and the church was possible, Augustine emphasised "that human weakness and vices beset all societies", and that no single human or institution could achieve perfection.  Through his emphasis on the imperfection of the human soul, Augustine "became the greatest single influence on Western theology for the next thousand years".

Siedentop then outlines the developments that occurred in the West after the collapse of the Western Roman Empire.  The Western church ― usually headed by descendants of powerful Roman families ― played a crucial role in converting their new barbarian overlords to Nicene Christianity, and thereafter the "Christianisation" of barbarian law codes.  Christianity also saw the disappearance of the religious basis for the paterfamilias, a change in attitudes towards slavery ― which was increasingly frowned upon by the church ― and the emergence of monasteries as centres of learning.

For some three centuries after 476, Siedentop argues, the church was the only unifying moral institution in Western Europe.  The situation temporarily changed with the rise of the Frankish Carolingian dynasty at the end of the eighth century.  Their most formidable figurehead, Charlemagne, aimed to establish a Christian power in the west to rival the persisting one in the east.  Inspired by earlier thinkers like Pope Gregory the Great, who had claimed a ruler's primary responsibility was the "care of souls", Charlemagne frequently requested that oaths of allegiance from his subjects ― sometimes including women as well as men ― should be taken in the local vernacular.  For Siedentop, "that emphasis on individual will ... represents a momentous moral step".

At the same time, Siedentop argues that Charlemagne's efforts to establish a permanent governing class gave rise to feudalism, and after the disintegration of the Carolingian empire in the late ninth century, power was increasingly localised and anarchy abounded.  Yet the church proved determined to assert its morals even here:  in the late tenth century, the "Peace of God" movement developed across Western Europe, compelling powerful knights and lords to respect the property of the church and the powerless ― including paupers, pilgrims, women, children, and various others.  A concept of natural rights was lurking beneath the surface.

The true turning point came with the Papal Revolution in the later eleventh century, when Rome ― during the Pontificate of Gregory VII ― made its "declaration of independence".  Though it acknowledged power of kings in secular matters, Rome now considered itself to hold supreme authority over affairs of the church.

The declaration heralded the drafting of copious canonical laws founded on ideas of natural justice and moral equality.  These were important in the development of natural rights, and Rome's "declaration" resulted in the division between church and state.  The latter reform made the modern secular state possible.

The final section of Siedentop's book examines how the later medieval era laid the foundations for the concept of natural rights.  The High Middle Ages were characterised by the growing power of the papacy, of which the crusades is an especially powerful expression.  This had unintended consequences.  Not only was there ongoing conflict between the Popes and secular rulers, but suspicion of the papacy began to trigger urban and rural uprisings, and the foundation of two popular monastic movements:  the Dominican and Franciscan.  The latter ― which spread more rapidly and was the more populist of the two ― was especially important for the history of rights;  the Franciscan order generally supported individual liberty, and throughout the thirteenth and fourteenth centuries was at the forefront of a debate over the nature of rights.  Especially notable was the Franciscan Friar William of Ockham, whom Siedentop describes as an especially powerful defender of "both natural rights and the limitations of human reason".

The story ends with the fifteenth-century conciliar movement ― a pre-Reformation movement which, inspired by theories of natural rights by Ockham and the canonist writers, aimed to restore a more representative and legitimate government in the papacy.  At this point, Siedentop spells out the main conclusions of the book:  "in its basic assumptions, liberal thought is the offspring of Christianity ... the roots of liberalism were firmly established in the arguments of philosophers and canon lawyers by the fourteenth and early fifteenth centuries".

Given how little regard academia currently has for medieval history, Inventing the Individual is a book that certainly needed to be written.  Siedentop makes a compelling argument ― that liberalism owes much to Christianity ― and offers convincing primary and secondary evidence in support.

Nevertheless, some criticisms must be made.

Siedentop takes a pan-European approach, and tends to treat all regions of Western Europe ― France, Italy, Germany, Christian Spain, and England ― as a whole.  Yet modern liberalism, as a distinct political ideology championing legitimacy of government and natural rights, is generally believed to have emerged out of the British Isles between the seventeenth and nineteenth centuries.  Siedentop does not attempt to explain why modern political liberalism ultimately emerged in England and then spread to France, and not vice-versa.

While Siedentop certainly makes an excellent point about the absence of the concept of the individual in the pre-Christian world, he does not always give Greece and Rome credit where it is due.  His tendency to dismiss them as "default" ancient societies is perhaps unjustified;  while the Athenians and Republican Romans lacked a concept of individual liberty, they did dabble with ideas of (primitive) democracy, legitimate government, the rights of citizens, and the rule of law ― ideas important to modern liberalism.  This book would have been more satisfying if it had taken a more even-handed approach to Greece and Rome in the opening chapters.

The book also tends to disregard the other half of medieval Christendom ― the eastern Roman (Byzantine) Empire.  This is a pity, given that eastern Christendom was also influenced by the doctrine of the equality of souls, and although it also saw some of the most extraordinary expressions of Christian values, it took a very different path to the West.  Perhaps because the eastern central government did not collapse in the fifth century, an ideology gradually developed whereby "individuals" were subordinated to the semi-religious figure of the emperor.  Unlike the West, therefore, the east never developed a strong division between church and state, ideas of individual liberty, or the rule of law.

Though he does touch on this issue occasionally, Siedentop largely misses the opportunity for an interesting discussion on the growing divide between the "autocratic" Christian east and the more "liberal" Christian West throughout the early medieval period ― crucial though it was for the West's identity.

Nevertheless, this is an important book which addresses many common misconceptions of the role Christianity played in making the modern world.  Though sometimes dense, it is an informative read, and might well turn your understanding of medieval world upside-down.

Why We Need A Coalition Of The Unwilling

A U-Turn on the Road to Serdom
by Grover Norquist with contributions by Nima Sanandaji, Matthew Sinclair and David B. Smith
Institute of Economic Affairs, 2014, 114 pages

It has been 70 years since Friedrich Hayek released The Road to Serfdom, and despite his warnings, that is certainly the road that the West is travelling down.  Governments are becoming larger and more people are becoming dependent on the state for their livelihoods.

But there is still hope.  This is the central message of A U-Turn on the Road to Serfdom, a new monograph by the Institute of Economic Affairs (IEA).  This work features Grover Norquist's 2014 Hayek Lecture, given to the IEA, and contributions from three European economists detailing the prospects for taking Europe off the road as well.

Grover Norquist, the founder and president of Americans for Tax Reform, believes the United States will reverse the expansion of government through the growing "leave us alone coalition" ― a group of constituents that, despite having little in common with each other, are united in their wish to be left alone by the state.  This group consists of small business owners, taxpayers, gun owners, the religious, and those that believe in school choice.

Norquist believes this group has enough influence within America to start changing things now.  This group can vote in elections and with their feet.  An example Norquist uses is the migration from Illinois to Indiana.  In Indiana, taxes are low, regulations are being removed and school choice programs are being introduced.  In Illinois, government is expanding, and so many of their citizens are moving to the more free Indiana that the Obama administration is no longer keeping statistics about it, lest their belief in government expansion be shown to be unpopular.

As Norquist argues, this is the ultimate virtue of federalism.  Allowing state governments to compete against each other in services and business environment will lead to a freer and more economically stable America.

Norquist is very optimistic about Republican chances at the 2016 and 2020 elections.  Not only are those chances boosted by eight years of the Obama administration demonstrating the dangers of the Leviathan state, but the potential Republican candidates are much stronger than in previous years.

Should the Republicans win, it will be a chance to limit the reckless federal government spending.  Norquist is a keen advocate of Paul Ryan and the cost-cutting "Ryan Budget", and believes both will be able to start halting the catastrophic debt levels the US finds itself in.

There is an obstacle to this:  what Norquist calls "the takings coalition".  These are the people that need big government to support their way of life, and as such will fight the leave us alone coalition to keep the state large.  However, not every member of the takings coalition is fully signed up to the takings philosophy.  They can be convinced to join the leave us alone coalition through reason or by seeing the benefits that competition could bring to the services government currently provides for them.

The contributions from the European economists discuss how the ideas from Norquist's lecture can be adapted for Europe.  David Smith explains in great detail how the growth of government over the twentieth century has severely curtailed economic growth across the world.  Matthew Sinclair, former chief executive of the Taxpayer's Alliance, details how transitioning tax power to local governments will create more responsible and representative government, and also stimulate more political interest in the citizenship.  People can't see how a centralised government is spending their tax dollars as clearly as they could their local government.

Nima Sanandaji discusses how to raise a European leave us alone coalition.  Despite that continent having a larger government and not having the same inherent sense of individualism as America, Sanandaji argues that once people are given choice in an area government usually mandates, they are not likely to give it away.  When one Swedish municipality introduced a school choice program, it became impossible to convince residents to change back.

So what hope does Australia have to foster a leave us alone coalition?  Norquist and his respondents emphasise that political coalitions are not formed on the floor of the legislature:  they come from below.  It will fall to the Australian people to reverse the path to serfdom.

The Answer To Broken Government Can't Be More Government

The Rule of Nobody:  Saving America from Dead Laws and Broken Government
by Philip K. Howard
W.W. Norton & Company, 2014, 256 pages

In February 2011 in a little place named Franklin Township, New Jersey, a tree fell into a creek and caused a flood.  It took twelve days and a $12,000 permit to get environmental approval to pull the tree out of the creek, which only took a few minutes.

Philip K. Howard has made a name for himself in recent decades writing about the absurd outcomes that bureaucracy ― particularly environmental regulation ― dishes up to the citizens of the United States.  Of course, these are tales from which we Australians can learn much too.

The Rule of Nobody is Howard's latest contribution to this series.  It is a concise, punchy and enjoyable read, and the many examples he provides of bureaucratic monstrosity are worth a laugh.

The central argument of the book ― that bureaucracy has become so pervasive that it has become a self-servicing machine, like the robot army in The Terminator films (my analogy, not his) ― is interesting and one that I suspect many of my readers will find appealing.

For anyone who has read Howard's earlier works, there is little new philosophy in this publication with respect to the government Leviathan.  The fact that government is out of control is a well-trodden path for him.  But he also appears to have been stung by past suggestions that he is some kind of Tea Party campaigner ― and I suspect that just doesn't sit too well with his pretences to be a household name in the Jon Stewart and New York Times twitterati.

Those forces have combined to give this book a feeling that it has not only been padded out for length (it is very repetitive) but also to address his critics he devises his own "third way" between big government socialism and Tea Party libertarianism via a proposal to amend the Constitution of the US to "empower those in authority to make decisions".

Howard's proposal to fix a bloated bureaucracy is to give the President more powers (at the expense of Congress and the courts) because having someone unambiguously in charge will supposedly mean more common-sense application of regulation and faster decision making.

History suggests this is fantasy.  For example, Gough Whitlam and Lance Barnard ran a two-man cabinet in the fortnight after Labor won the 1972 election.  This duumvirate increased minimum wages, increased public subsidies for certain pharmaceuticals, made huge financial gifts to the arts community and ended diplomatic relations with Taiwan.  They certainly made a lot of decisions and quickly, but common sense was nonetheless in short supply.

Our legislators write reams of regulation and pass things to committees precisely because they aren't prepared to take the risks that private actors can.  A president is never going to build a bridge in the face of opposition that is attempting to save the two-toed tree frog.  Politicians with such authority would likely rarely use it.

But even if you could trust a president to have some common sense ― a Ronald Reagan does come along once a century after all ― the chances of getting such an amendment to the Constitution approved is highly unlikely.  The general public is far too wary of the potential for corruption to ever agree to laws which could be applied arbitrarily at the whim of an official.  Conservatives and socialists alike would fight such a proposal vigorously.

But Howard is nonetheless right that we currently find ourselves in a malaise.  Taking ten years to approve the construction of a bridge proves that the system is undoubtedly broken.  The current arrangements are immensely unproductive and destroy the common wealth.  But the solution has always been less, not more, government.

The Colonialist Charge

Macaulay and Son:  Architects of Imperial Britain
by Catherine Hall
Yale University Press, 2012, 420 pages

English historian Catherine Hall had a specific political purpose in writing this book.  In the aftermath of 9/11, she strongly opposed the Blair Government's decision to participate in wars in Afghanistan and Iraq, and was particularly "horrified by the claim that the West had the right to assume such positions of moral certitude".

Hall was particularly incensed by the liberal humanitarian part of the justification for these interventions, seeing this as having clear echoes of Britain's "shameful" colonial past.  As well as marching against the war, she felt she needed to make a professional response as a historian.  So she began working on a book about the renowned nineteenth century Whig historian, Thomas Babington Macaulay, because she regarded him as "one of the most influential proponents of liberal imperial discourse".

However, rather than just study Thomas Macaulay, Hall chose to include his father, Zachary, as a major player in the story too.  The father was useful to Hall, as his engagement with the Empire was a crucial turning point in Zachary's life.  Zachary went to colonial Jamaica as a sixteen year old and later time spent in Sierra Leone.  His imperial experiences led to his becoming a member of the Clapham Sect, a group of evangelical Anglicans.  He devoted much of his life to the campaign to abolish the slave trade, working closely with the Sect's most famous member, William Wilberforce.

Like his father, Zachary's first-born son Thomas also had a colonial experience, going to India in his thirties, but by then his attitudes were already well formed.  Both before and after his time in India, he was a Whig MP, and served in two Whig ministries.  However, Thomas' lasting fame came from writing the History of England, which told the national story from 1685 to 1702, the period straddling the Glorious Revolution, an event which, in Whig eyes, made the country politically unique.  Macaulay's history was hugely influential.  His sales matched those of the novelists Charles Dickens and Sir Walter Scott, and his work remained the standard history until the twentieth century.

Hall's political purpose with Macaulay and Son is to link the father's colonial experience to the more famous Whig son and thereby describe both men as "architects of imperial Britain".

However, she fails on two grounds.  First, the word "architect" ascribes way too much significance to both their roles.  Second, and more importantly for Hall's thesis, it subsumes the profound differences in outlook between father and son.

The two men were not personally very close.  Thomas was arguably more influenced by his mother than his father, and certainly had a far more intimate relationship with two of his sisters.  It seems odd that a feminist historian would use a title that reinforces gendered expectations that fathers are more significant than mothers, and that sons inherit the family business.

More fundamental was the difference in the political outlooks of father and son.  Like most Evangelicals, Zachary was a Tory.  The Evangelicals and the Whigs shared one great cause, the abolition of slavery.  In her discussion of this slavery, Hall tends to over-emphasise the role of the Evangelicals at the expense of the Whigs.  The abolition of the slave trade was only achieved in 1806-07 because a Whig administration under William Grenville briefly interrupted several decades of Tory rule.

Thomas was only a child when the trade was abolished, but was an MP when slavery itself was abolished in the British Empire in 1833, under another Whig administration.  Even on slavery father and son disagreed on detail, and on other issues there was a more significant divide.  This was particularly the case in regard to religion.  Hall herself acknowledges that Thomas' religious "distance from his father in this respect was immense".  While Zachary was more tolerant than many Evangelicals, his vision was for an England where people of other faiths converted to Christianity.  In contrast, Tom's first speech in the House of Commons was in support of the removal of civil restraints against Jews.  His argument was that Jews, like Catholics, could be patriotic members of the English nation.

Hall gives little credit to the Whigs for liberal reforms in Britain, or to Thomas for his role in them, because of "the unfreedoms on which white freedom was built".  In other words, religious toleration, parliamentary reform, and other liberal reforms cannot be celebrated because the Empire remained intact.  For instance, Hall tries to undermine the value of the Great Reform Bill of 1832, painting it as regressive and an attack on the working class.  It is true that it did not extend the franchise to working class men but, as she herself describes, there were riots across the country when the Lords blocked the Bill in 1831.  This would tend to indicate that there was strong working class support for getting it passed, no doubt feeling that it would be the precursor to further reform.

Thomas himself was not a supporter of further reform after 1832, describing John Bright's proposed Reform Bill in 1859 as "trash".  This highlights the fact that Thomas was more Whig than liberal.  He did not believe in the rights of man, nor agree with the arguments of John Locke or Thomas Paine.

The other great cause of Macaulay's time was free trade, a topic which Hall only mentions in the context of whether sugar produced by slaves should be treated equally with that produced by the emancipated.

For Hall, everything needs to be treated in the imperial context.  And in her eyes, all shades of nineteenth century opinion were guilty of not recognising the value of "the other", and held many views which are now regarded as "tropes".  "Other" and "trope" are fast becoming the most clichéd words in contemporary academic writing.  Surely there are better ways of expressing oneself than writing that "Tom's mind was replete with images of otherness".  For Hall, any Western attempt to change traditional behaviour in a colonial context is a failure to appreciate "the other".  Hence, there is no acknowledgement that the imperial administration banning sati, the burning of Indian widows, was a good thing.  Of course, today we might regard as wrong the position Thomas Macaulay took in his 1835 "Minute on Indian Education" to make English the language of education in India rather than the native languages, but it is worth acknowledging that it was done with at least partially liberal instincts in the 1830s.

There is often a sense in Hall's book that Thomas Macaulay cannot win, whether as political reformer or Whig historian.  For instance, Hall criticises his history for having "little interest in the details of war or warfare" and argues that thus "the horror and terror of war was distanced".  In most cases, contemporary left-wing academic historians tend to claim that there has been too much focus on military matters in traditional histories, so this is at least a novel line of attack.

Yet, for all its ideological baggage, this book does have strengths.  Hall correctly identifies sibling relationships as an under-studied feature of history.  Her descriptions of Thomas' relationships with his favourite sisters, Hannah and Margaret, are fascinating and Thomas' view that their marrying was akin to death provides the basis for much absorbing psychological analysis.  The language and content of the letters between the three provide a wonderful insight into the period.

The quality of some of this material, plus the range of insights into Thomas Macaulay's character, makes this a worthwhile contribution to the understanding of an important nineteenth century figure.  The chapters on Zachary are also interesting, but what Hall writes about him is unlikely to convince her readers that he had any unusually large influence over his son, or was in any substantial way the architect of Empire.  And her political point about the Macaulays and the post 9/11 world is even less persuasive.

ACCC goes AWOL on union bullies

The Abbott government's Royal Commission on Trade Union Governance and Corruption is aimed at the wrong target.

It's the regulators and the law enforcement agencies who have allowed a few select unions to get away with blatant criminality for years that the commission should pursue.

If unions break the law and escape prosecution, unions will keep on breaking the law.  It's that simple.  The scandal the commission must investigate is why the rule of law doesn't apply to trade unions.

The big issue for the commission is not a handful of union officials using their members' money to pay for personal expenses.  The administration of trade unions is not the big issue either.  Unions should be governed by the same laws that apply to public companies and union officials should operate under the same provisions as apply to company directors.

The big issue confronting the commission is the endemic culture of corruption and criminality that thrives in some industries, and in particular in the construction industry.

If anyone is any doubt about what's happening on building sites around the country they should read the 15-page letter of July 7 from Mike Kane, the chief executive of the building materials company Boral to the commission.  It's publicly available at the official commission website.

It's chilling.  It is one of the most important statements made about industrial relations in this country in the past 20 years.  Responding to it, Dave Noonan the construction division secretary of the Construction Forestry Mining and Energy Union pointed out that Kane was American-born.  Kane is indeed American-born.  And that's the point.  It's taken a foreigner to have the guts to stand up to union intimidation.  If Kane were Australian-born and bred he'd take it for granted that when a union makes a threat the authorities will do nothing, and he'd be forced to give the unions what they want.

As Kane's letter makes clear there are plenty of laws already on the books against corruption, blackmail, and intimidation.  But the laws are not being enforced.

SELECTIVE APPLICATION OF THE LAW

The authorities charged with enforcing the law are picking and choosing when they will apply the law and when they won't.

For example the Australian Competition and Consumer Commission is always willing and eager to bring the full force of the law to bear when a door-to-door salesperson ignores a "Do Not Knock" sign, or when a supermarket wants to sell cheap petrol.  But when trade unions threaten illegal boycotts against companies the ACCC claims "we had difficulty getting evidence."

At a parliamentary hearing last month the ACCC attempted to excuse its failure to apply the law to trade unions by claiming potential witnesses were "not co-operative".  That's not surprising — union officials could hardly be expected to be anything else.  The ACCC hasn't explained why up until very recently it has refused to use section 155 of the Competition and Consumer Act to compel witnesses to answer questions

As Nationals senator Bridget McKenzie said in Parliament in March about the actions of the CFMEU against Boral.  "With 15 supporting affidavits, three separate injunctions and ongoing contempt proceedings before the Supreme Court of Victoria I seriously struggle to understand what issue Mr Sims [the boss of the ACCC] has identified in gathering sufficient evidence.  The evidence of the CFMEU secondary boycott is freely available to anyone who might choose to look."

In its submission last month to the Harper Competition Review the Australian Chamber of Commerce and Industry providing a forensic analysis of the history of the ACCC's failure to enforce the law on illegal boycotts.  In 2003 the Cole Royal Commission on the Building and Construction Industry concluded "few of the many instances of secondary boycotts which have occurred in the building and construction industry and which have come to the commission's attention have been referred to or pursued by the ACCC."

If the current Royal Commission on Trade Union Governance and Corruption is to provide any benefit to the community it must answer the question why regulators and law enforcement agencies have tolerated a situation whereby there's one law for trade unions, and one law for everyone else.

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End of the carbon bubble

In the UK political satire The Thick of It, Peter Mannion MP speaks for all politicians when he says "I got into this game because I wanted to make a difference".

But it is a rare politician who does that by stripping away costs and functions created by governments.  For most of them, it means adding taxes, spending, and regulations.

Climate change has become an exemplar of this.  A perfect storm during the past quarter century has catapulted carbon dioxide to a central political role.

A key ingredient was "market failure".  Carbon dioxide became rebadged from a trace gas essential for plant growth to temperature-boosting emissions which could only be combated by political controls.  Had politicians dispassionately examined cause and effect, they would have discovered no grounds for concern.  Though politicised economists embellished the issue, the effects of a doubling of atmospheric carbon dioxide levels are trivial.

Even the alarmist IPCC in its latest estimates puts greenhouse gas induced temperature increases — themselves far from certain — at imposing a cost over the next century of less than half a year's loss of GDP growth.

However, the global warming agenda placed the scientific establishment in the spotlight.  It had been almost 50 years since Time magazine had put Robert Oppenheimer, the head of the Manhattan Project, on its front page.  Suddenly scientists were flying around the world, briefing politicians, delivering papers and taking over editorial control of learned journals.  Our very own CSIRO and Bureau of Meteorology basked in their new importance, the former maintaining that half of its staff and activities had been diverted to climate change related matters.

COMMERCIAL HUCKSTERS

This was amplified by a new breed of commercial hucksters.  The demise of tariffs and other "industry policy" interventions left an enticing gap for pursuing politically assisted profits.  Windmills and solar panels, which required subsidies to cover two-thirds of their costs, were ideally placed to fill this.  Politicians and political scientists saw these as emerging new industries that would allow them, with their "holistic" framework, to demonstrate how they were more far-sighted than those businessmen focused on paring costs and seeking to supply the often irrational wants of ordinary folk.

Underpinning the perfect storm was the growth of environmental activism.  The environmental movement started with the hippie fringe of society but came to claim a large swath of the media and has become sufficiently mainstream for major banks to promote their green credentials by not investing in legitimate business ventures that environmentalists oppose.  Global warming rose from bit player within the movement to the crowned head directing all other issues.

The outcome was cascading programs of support for high-cost renewables and penalties for fossil fuels.  In Australia these comprised the carbon tax, the Renewable Energy Target (RET) the Clean Energy Finance Corporation (CEFC) and a bewildering array of subsidies and programs.  Planned costs under Labor in 2014 were $14 billion from the carbon tax, $5 billion in direct spending and a sum, rising to $5 billion a year from the RET.  The RET has already sucked in $20 billion in investments that pay barely half of their commercial cost and will cost another $13 billion over future years.

But now the tide has turned.  The political entombment of the climate change agenda began at the 2009 Climate Change Conference in Copenhagen to which Kevin Rudd, now an obviously ludicrous character, took a 114-strong delegation to resolve "the greatest moral challenge of our time".

REPEAL NEXT WEEK

The carbon tax will be repealed next week and only a suicidal ALP would promise to reintroduce it.  Budget disbursements are being reduced in spite of the Coalition's own Direct Action policy, and though it is defying its government owners, the CEFC has throttled back its $2 billion a year allocation for wasted spending to less than half that.

The final domino, the RET, is under review.  The only issue is how fast it is to be abolished.  In this respect, powerful forces continue to demand payment for the worthless energy they have persuaded governments to fund, and these apparently include Clive Palmer and those close to Al Gore.  But, as the prime minister has said, the RET "poses a serious threat to household budgets and energy-intensive industries", adding:  "All of us should want to see lower prices and plainly at the moment the renewable energy target is a very significant impact on higher power prices."

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The right to be forgotten online sets a dangerous precedent for freedom of speech

Last month an EU court invented the "right to be forgotten".  Individuals in the 28 European Union member states can now force Google and other search engines to remove online material about them that is "inadequate, irrelevant or excessive".

The regime is an unprecedented attack on freedom of speech.  What is concerning from an Australian perspective is that Communications Minister Malcolm Turnbull endorsed the right to be forgotten just two years ago.

The EU case was brought by a Spanish man who sued Google to force the search engine to remove internet search results that included 16-year-old notices in a local newspaper about property that had been repossessed to pay debts he owed at the time.

Mario Costeja Gonzalez argued that the material should be removed because it breached his right to privacy — the notices were no longer current or relevant, so they should be deleted.  His victory creates a dangerous precedent that gives every European the right to delete things on the internet they don't like.

The threat of such a regime making it to Australian shores might seem small.  Perhaps our judges aren't quite as activist as those who sit on the benches of the European Court of Justice.  And Australia doesn't have privacy laws that pose the same threat to free speech as those in the EU.

But it's certainly worth pointing out that at least one federal member of parliament has promoted the right to be forgotten.  And he just so happens to be the man that would be responsible for implementing such a regime if it was to be adopted in Australia — Malcolm Turnbull.

On October 8, 2012, Turnbull delivered the 45th Alfred Deakin Lecture.  He used the speech to spruik the benefits of the right to be forgotten, saying:  "Surely as we reflect on the consequences of the digital shift from a default of forgetting to one of perpetual memory we should be seeking to restore as far as possible the individual's right not simply to their privacy but to having the right to delete that which they have created in the same way as can be done in the analogue world."

It's a baffling position for Turnbull to take.  This is the man who led the Coalition's charge against then communications minister Stephen Conroy's internet filter.  In the same speech where Turnbull endorsed the right to be forgotten, he also took a stand against the proposal to impose a mandatory data retention regime, which would have allowed the government to spy on the online activity of every Australian.

There are a number of concerns here.  The biggest is that the European Court of Justice has just given a gag to every internet user.  The right to be forgotten makes every man a censor.  Put simply, anyone who finds material online that they disagree with now has the power to force Google to remove it.

Following the ruling, European search engines have been inundated with requests.  Some of the tens of thousands of requests include a business seeking to have negative feedback on a review website removed, convicted criminals seeking to have articles about their crimes deleted, and an individual suspended from their job wants articles about the suspension taken down.

These examples demonstrate how absurd this regime will be.  A one-star customer rating on Yelp is not ideal from the business-owner's perspective but these feedback mechanisms are an essential part of 21st century life.

The early flood of requests for deletion highlights another unusual aspect of this regime — the search engines themselves are the ones that have to decide whether material is "inadequate, irrelevant or excessive".  It's the ultimate in state outsourcing.  Rather than judges and courts adjudicating what material gets taken down and what material stays up, it forces a private company to do the work of a proxy censor.

This raises a significant rule of law problem.  It is contrary to some of the most basic principles that our legal system is built upon.  Applying and enforcing the law is the role of the courts.  Companies don't exist to enforce the law, and any legal system that asks them to is very seriously flawed.

It also raises a number of questions about the legal intersection between the right to free speech and the new "right" to be forgotten.  For instance, subsequent court cases will have to determine the consequences of over or under-deletion by search engines.

There is an important distinction to be drawn here.  Search engines already remove some websites from their search results.  Other sites are simply never indexed.  For example, Google routinely removes personal information and child sexual abuse imagery from its index.

Users can also make a request to Google to have certain material removed on a range of grounds.  This is entirely legitimate.  Policies that a company enforces voluntarily are legitimate business decisions.  The right to be forgotten is fundamentally different.  It's a state-backed censorship regime and an unprecedented attack on freedom of speech.

In light of the recent legal decision giving Europeans the right to be forgotten, the Abbott government should clarify its position.  Does it stand with Turnbull in endorsing a digital censorship regime, or will it reject this latest threat to freedom of speech?

The lessons Abbott should learn from Victoria

Tony Abbott ought to be watching Victoria closely.

His problem — a disgruntled former Liberal controlling the balance of power and holding the Government's agenda to ransom — is exactly what Denis Napthine has had to deal with for the past year.

In 2010 the Victorian Coalition won government with a one-seat majority.  Such a margin would have been perfectly serviceable if it wasn't for the fact that Geoff Shaw, the Liberal member for Frankston, was accused of an entitlement rort, fell out with the Speaker, then fell out with his party, and then fell out with the entire Parliament.

Since then he has been creating havoc.  Shaw has a single agenda — he's anti-abortion — but beyond that he's been mainly focused on creating problems.

So yes, Shaw is a lot like Clive Palmer — the man who was a climate sceptic one day and an Al Gore climate ambassador the next.

In June the major parties finally ganged up on Shaw and voted to suspend him from Parliament.

Obviously Palmer and his three senators won't be suspended or expelled, even if the Abbott Government wanted to do such a fundamentally undemocratic thing.

The first and most important lesson of Victoria is simple:  Abbott needs to go to an election as soon as he can.

When the Shaw crisis came to a head last month, Napthine said he would have liked to call an election six months ago.  Spill the entire Parliament.  Let a ballot resolve the crisis.

But in Victoria the key mechanism to resolve parliamentary instability in the Westminster system — an election called by the government leader or forced by the head-of-state — was eliminated when the previous Labor government introduced fixed terms.

Abbott doesn't have that problem.  And his problem is in the upper house not the lower.  He can play the double dissolution card.

This would be a drastic strategy of course, especially because the polls make it look unappetising.

But the alternative may be a lot worse.

The new Senate has sat a single week but there must be Coalition hard heads thinking about the future.

So let's play this out.  (As a hypothetical, mind you, not as a prediction.  Who'd be so reckless as to make predictions about the 44th Parliament?)

The carbon tax is likely to be repealed.  But almost every piece of ancillary legislation to that repeal has been held up or explicitly rejected by the balance of power senators.  They won't abolish the Australian Renewable Energy Agency, they won't abolish the carbon tax compensation tax cuts, and they won't abolish the Clean Energy Finance Corporation.

Sure, in themselves these programs are subordinate to the main game.  The Government gets its win from repealing the carbon tax.

Yet Palmer is certain to repeat his theatrics with every moderately controversial bill.  The GP copayment.  The medical research fund.  The welfare reforms.  University deregulation.  Those dozens of agencies the Government has promised to abolish.  Why wouldn't Palmer make trouble?  What else has he got to do with this time in parliament?

And that's just Palmer and his senators.

Ricky Muir, Bob Day, David Leyonhjelm, Nick Xenophon, John Madigan — none of them are fully signed up to the Coalition's budget, let alone their broader program.

We could very easily get to Christmas without the substance of the May budget having been passed.

Could the Abbott Government negotiate its way through to parliamentary stability?  Perhaps.  But recall that last week wasn't the first time the Abbott team's negotiating skills have been wanting.  The Coalition failed to negotiate minority government in 2010.

These are the Abbott Government's parliamentary problems.  The polls are a worse problem.

Before last week the mantra has been that it is a long time until the next election — polls change.  Yet after last week that mantra sounds a little desperate.

More importantly, the Victorian saga shows that voters blame anarchy in parliament on the government.  It's not fair, of course — the Napthine Government is governing well enough.  Yet the parliamentary drama overshadows everything.

It is certainly true that if Abbott went to a double dissolution, voters may give him an even more unpredictable parliament, stuffed full of Palmer senators and micro parties.  If so, then the Coalition will just have to grin and bear it.  Such is democracy.  (For that matter, Shaw could be returned in Frankston, and the Victorian Parliament might be hung again.)

But what's the alternative?

Laura Tingle wrote in the Australian Financial Review on Friday that "cornered ministers have resorted to arguing that no matter how untidy things were at the moment, the Prime Minister will get to the end of this year".

An earlier rallying cry was that the Government just needed to get to July 1 when the senate changed over.  Before that, the Government just needed to get to Christmas.

This is what governments say when they don't have a Plan B.

Maybe Palmer will calm down.  Maybe he'll play ball.  But remember the Gillard government's hope that they would eventually find "clear air"?

They never found it.

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Iraq: Why we must not go back

The heightened instability in Iraq arising from the ISIL insurgency should serve as a reminder of the failings of interventionist foreign policy pursued by the United States and her allies.

The jihadist military group the Islamic State of Iraq and the Levant recently made significant territorial gains in Iraq, including the capture of the major cities of Mosul, Fallujah and Tikrit, surprising some Middle Eastern observers.  These events have been accompanied by disturbing reports of the maltreatment of women and children, beheadings and even crucifixions in ISIL-occupied territory, along with shocking social media footage of captured Iraqi government troops slain by the ISIL forces.

The advance of ISIL through large tracts of western and northern Iraq, and accounts of the brutal application of sharia law, impose submission on those still remaining in occupied areas and cast fear into those living within unoccupied areas under threat, including the Iraqi capital Baghdad itself.

The ISIL jihadists are aiming to goad Western politicians to invoke humanitarian motives and stability arguments as rationales for returning to open conflict in Iraq, threatening a re-run of Western military intervention from the invasion of Iraq in 2003 to the eventual withdrawal of US troops by December 2011.

There is no widespread yearning in Australia, or the US, to make a full-scale return to Iraq, and in any case surveys consistently showed that the multiple years of military engagement in the Middle Eastern country was deeply unpopular throughout the West.  But this fact has not stopped prominent neo-conservative figures, such as US Republican politician John McCain and former vice-president Dick Cheney, and their allies, including former British Prime Minister Tony Blair, to wag accusatory fingers at US President Barack Obama's Iraq withdrawal as the catalyst for the ISIL onslaught.

But from a perspective of maintaining peaceful economic and social interactions among peoples, America and her allies should not have engaged militarily in Iraq in the first place, and should not countenance doing so in the future.

The most obvious and visible cost of the militaristic escapades in Iraq, by the Western multinational forces, was the loss of blood and treasure.  It is difficult to obtain precise estimates of total Iraqi civilian casualties, but some sources have suggested between 125,000 and 140,000 violent deaths alone, with that number approaching 500,000 if we include other avoidable deaths indirectly associated with the invasion and subsequent insurgencies.  In addition, it is estimated that 4400 American troops were killed in combat and more than 300 troops from international coalition forces, including two Australians.

The US Congressional Research Service in 2011 estimated the Iraq war cost American taxpayers more than $800 billion in war and diplomatic operations, and medical care for war veterans, with undoubtedly some of that burden foisted onto future taxpayers by virtue of a worsening of that country's public indebtedness.  While there appears to be no definitive estimates of the fiscal costs of the Iraq war for Australians, there seems little question that the bill would have run into the billions of dollars.

Not only are wars raised to carry on taxes, to paraphrase the 18th-century English-American theorist Thomas Paine, but the Iraq military campaign enabled governments to circumvent our liberties and to do so with the willing endorsement of the general populace.

On the grounds of preventing Muslim extremists from conducting revenge terrorist acts on Western soil, governments radically increased their surveillance activities, allowed airport security to X-ray, photograph and grope travellers, interrupted cross-border financial flows to prevent "money laundering", and arrested and detained people on suspicion but without sufficient warrant.

Changing the justification for military intervention from weapons of mass destruction to hunting down al-Qaeda to regime change to exporting liberalism to the Middle East, it is manifestly clear that Iraq is not only unstable, as shown by the ISIL threat, but is as illiberal as ever.  Criticisms have been levelled against an increasingly autocratic style of governance by Iraq's Prime Minister Nouri al-Maliki, and a high degree of corruption continues to stifle opportunities for ordinary Iraqis to trade their way into prosperity.

In post-World War II Germany Ludwig Erhard fostered an "economic miracle" of swift reconstruction and recovery by abolishing price and production controls, but the continuing lack of economic freedom in Iraq suggests al-Maliki is by no means an "Erhard of the Euphrates".

In an apparent concession to the neo-con charge that Western "cutting and running" from Iraq has allowed ISIL to increasingly fill the void, Obama announced that 300 military advisors would be sent to Iraq to assist the national government resist ISIL militants.  Shortly after the announcement, Prime Minister Tony Abbott indicated that a small contingent would be sent to assist with security at the Australian embassy in Baghdad.

As is evidenced in numerous fields of public policy, the risk here is that America and her allies might well be tempted to direct more military power and resources back into Iraq should the ISIL insurgency worsen, despite political assurances to the contrary uttered today.  But to do that would be a great error, and an affront to the ideal of non-interventionism as the centrepiece of a liberal foreign policy.

As heinous as ISIL is, as was the autocrat Saddam Hussein before them, better that we in Australia and the West save our taxpayers the expense of governments militarily indulging in remote quarrels we know no solution to, and avoid the risk of such intervention threatening our liberties, and sense of security, at home.

If we are truly concerned for the wellbeing of everyday Iraqis, many of whom, incidentally, have fled the prospect of sharia rule in ISIL-occupied areas, we should open our border to accommodate more immigrants from that region and other war-torn areas.  More open borders would enable immigrants from Iraq, and elsewhere, to keep safe and more freely discover new opportunities to work and produce, building a better life here in Australia for themselves and their families.

This cosmopolitan liberal approach to foreign policy would be a far better alternative to financing the destructive war machine, and expunging our precious liberties, for the sake of another military misadventure of likely dubious effect.

Star Wars cantina: patronising politics strikes back

The independent senators are not a bad cross-section of the community.  So why are they being portrayed as a raucous gathering of aliens from a sci-fi film?

"Senator school", as it's colloquially known, happens every time there is a new crop of senators.  It's an induction process.

The two day course takes new senators through the tedious nitty-gritty of work in the red chamber.  Education in parliamentary skills is a serious thing.

Usually senator school passes without comment.  There's a (slightly shorter) program for new members of the lower house as well.

This year, however, senator school is newsworthy.  It's been talked about everywhere.  The program has been leaked to Business Spectator.  AAP wrote, "There won't be any finger painting but some may have a nap when a dozen new politicians head to Canberra for 'senator kindy'."

It's all incredibly patronising.

The only reason we're hearing about senator school is because six of the new senators (out of twelve new senators in total) aren't from the political class.

The nickname that's been given to the new senate crop is the "Star Wars Cantina" — suggesting the independents are a raucous gathering of aliens, rather than the usual well-disciplined political natives.

(Sometimes the clownish Joe Bullock has been included in the cantina, cast by the press as an honorary independent after he disgraced himself, and Labor, at the election.)

One of the most common complaints in recent years about Australian politics is that it is too clubbish — politicians are drawn entirely from the ranks of political staffers, lawyers, party officials and union reps.

John Howard made this argument last month, decrying the rise of politicians "whose only life experience has been politics".  You hear it from Malcolm Fraser often too.

Here we have, now, a home builder (Bob Day), an agri-business owner (David Leyonhjelm), a military police officer (Jacqui Lambie), a civil engineer (Dio Wang), a footballer (Glenn Lazarus) and a sawmill manager (Ricky Muir).  None are ex-staffers.  Lambie has the most first-hand experience in the practical business of politics.  And all that is a stint volunteering for Labor senator Nick Sherry.

Far from unrepresentative swill, these independent senators are not a bad cross-section of the community.  Compared to the rest of the incoming senator cohort they're much more representative — the other six new senators from the major parties are former union bosses, former mayors, former party directors and former chiefs of staff.

This isn't the first time the press has treated independent senators as if they didn't belong.

In 2005 the Canberra Times reported that Steve Fielding was the only incoming senator going to senator school.

A few days later the paper issued an embarrassed correction that, no, all 15 new senators in Fielding's cohort had to attend.

In other words, the press only find senator school interesting when the aliens take it.

Odgers' Australian Senate Practice, the manual by which the Australian senate operates, is more than 900 pages long.  How many major party senators do you think have read that tome?  That's why politicians have staff.  That's why the parliament has clerks.

Yet we're being asked to laugh at the entirely reasonable statement by Dio Wang that the details of senate practice are "pretty boring ... For things like this it's always better to learn through practice."

If we assume that politicians, being human, have limited time for self-education, perhaps it would be preferable they study unfamiliar policy areas rather than the details of senate procedure.

Recall that the new senators aren't given money for staff and support until they officially enter the senate.

Major party senators have been coddled and cared for by their party organisations while they waited to take their seats.

The micro-parties and independent senators have had to get on with their lives.  They've had businesses to run and livings to make, while trying to fend off the Canberra press gallery looking for a colourful sound bite to fill out dull copy.

Ultimately, the condescension with which the new senators have been greeted is another attack on their legitimacy to sit in parliament.

I argued in The Drum in April that the new senators do in fact represent the will of the voters;  the will of the nearly quarter of the Australian population that chose to vote against the major parties, Greens included.

The major parties are deeply worried that they've lost control over their third senate spot.  Don't imagine it's anything more principled than that.

That raw political calculation explains why the majors have been so patronising towards their new colleagues.

So what explains the media's snobbery?

There's a reason we call it a political class.  When threatened by outsiders, they protect their own.

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Federal government must learn from chaplains case

The unanimous High Court decision in the Williams (No 2) school chaplains case offers the Abbott government a historic opportunity to restore federalism.

The court found that federal legislation passed in 2012 authorising funding agreements for the national school chaplaincy program was invalid and that the provision of a chaplain or welfare worker at a school was outside the legislative and executive powers of the commonwealth.

Federalism is enshrined in the Constitution.  There's no doubt that the framers of the Constitution intended for Australia to remain a strong federation.

The commonwealth was given only a limited number of enunciated legislative powers.  The intention behind the demarcation of power was to limit the size and reach of the commonwealth, retaining strong states.

Yet despite this, the trend in Australia has been towards an ever stronger federal government.

Over the past 100 years, High Court decisions such as the Engineers case, the Tasmanian Dams case and the Work Choices case have provided an expansive reading of the commonwealth powers enabling federal governments to trample into areas traditionally of state concern.

Blurring the lines of responsibility and accountability has led to the blame game of modern politics.

Duplication of commonwealth and state activities has added to the overall burden of government.  For example, the federal Health Department has 4500 public servants without running a single hospital.

Likewise, the federal Education Department has 3500 public servants without running a single school.

The Abbott government is acutely aware of the problem, having committed to undertaking a white paper on the federation.

The government's first budget showed promise in handing back responsibility to the states, with Treasurer Joe Hockey stating:  "Over the next 18 months, we will work with state and territory governments to strengthen the federation and ensure that the overlap between the layers of government is reduced or removed."

The government may not have a choice.  The High Court's decision in Williams (No 2) is significant, not because it invalidates the national school chaplaincy program (Ron Williams' primary motivation for bringing the challenge) but because it is the third in a series of recent High Court decisions that counters the long-term trend;  limiting commonwealth power and reasserting the role of the states.

First is the 2009 decision of Pape.  Lawyer Bryan Pape challenged the Rudd government's global financial crisis "stimulus package" of cash handouts between $250 and $900.

While the majority of the High Court upheld the validity of the payments, the court unanimously found that the executive did not have a substantive spending power — contrary to the conventional wisdom.

Any power to spend taxpayers' money must be found expressly in the Constitution, or in statutes made under it by the parliament.  Pape put many areas of commonwealth expenditure into doubt, and this was the basis for the two Williams decisions that followed.

The chaplaincy program, introduced in 2007, was funded in accordance with government guidelines rather than legislation.

In December 2010 Williams brought his first challenge, opposing the payment of money from the commonwealth to Scripture Union Queensland on various grounds.

In 2012, the High Court in Williams (No 1) found that the payments were unconstitutional because they were not supported by the executive power of the commonwealth.

In response, the Gillard government rushed through unprecedented and undemocratic legislation that stripped the power of the parliament to oversee government spending in 415 different, often vaguely described, areas.

The key question for the High Court in Williams (No 2) was whether the commonwealth parliament had the power to pass this legislation.  The High Court found that the program was outside the legislative and executive purview of the commonwealth.

More challenges to other federal government programs could succeed for the same reasons.  Because the ruling casts doubt on many areas of commonwealth expenditure, fixing federalism is an urgent constitutional necessity.

However, the policy case is also strong.  The case rests on two main principles:  subsidiarity and competition.

Under subsidiarity principle, policy and service delivery should be decentralised to the level of government closest to the affected people.  State governments are in a much better position to formulate policy and deliver services specifically tailored to local needs and preferences, rather than the one-size-fits-all approach of Canberra.

Under the competition principle, multiple sovereign governments setting different policies will breed innovation and choice.

The bar lifts over time, resulting in better outcomes for all jurisdictions, rather than centralised mediocrity.

The Abbott government must seize this rare opportunity to restore the principles of federalism in Australia.  Already, the government has made some welcome steps in this direction, with the establishment of a one-stop shop for environmental approvals, avoiding the costly situation in the past where major projects required permission from both state and federal governments to proceed.

But there is scope to go much further.  The commonwealth should cease meddling in policy areas that were clearly intended to be the responsibility of the states, like health and education.  The wasteful duplication of government departments and agencies should end.  States should be given the capacity to raise enough revenue on their own to cover the cost of the services they deliver.

If the Abbott government doesn't act quickly to revive federalism, the High Court might force it to do so.

Whole-of-school approach needed to lift levels

The Direct Instruction teaching method has merit but it is not the role of the federal government to dictate how teachers teach in classrooms.

In a return to exactly the approach that is holding back improvement for all Australian students, this week the federal government announced $22 million school spending allocated to a specific program.

The funds have been assigned to roll out the Direct Instruction method of teaching in remote indigenous primary schools in an effort to improve literacy levels.

There is a compelling case for directing efforts to where the greatest difference can be made and the achievement gap for indigenous students is clear.  The 2013 NAPLAN results show that 94.6 per cent of non-indigenous Year 5 students are at or above ­national minimum standard, compared with 73 per cent of indigenous students at the same age.

Equally, there is nothing wrong with the Direct Instruction model.  In fact, many people would recognise this approach as the way they learned.  Simply put, the teacher explicitly presents the material to be learned, breaking it down into its component parts.  Children work in ability groups, they are frequently assessed and corrected, and material is repeated until it is learned.  The advantage of Direct Instruction is that it works and is good at boosting test scores.

The problem is that it reduces learning to a very narrow set of objectives and doesn't reflect all of our aspirations for our children.

That doesn't mean, however, that Direct Instruction doesn't have a place.  Skilled teachers routinely adapt their teaching approach to match the situation, the children in their class and the material being presented.  Direct Instruction is just one of the many techniques that may be used.  And it should be used in every school, not just in schools that cater to indigenous students.

The most successful teachers routinely combine a balance of approaches, recognising that there is no one magic bullet that will work in every situation.

So it is not a question of whether Direct Instruction is a worthwhile approach.  Nor is it a question of whether we should be providing extra support to children struggling with literacy.  The problem is that if we want to do a better job of ensuring educational success for all students we need to stop thinking of improvement in terms of isolated and unconnected policies and approaches that do little other than make for a good press release.

The problems facing schools and students are more complex than can be fixed with the introduction of a single federal government program.  Improvement comes from a whole-of-school approach, conceived and driven from within and supported by the school community.

It is not simple, and requires a very clear and sustained focus on specific goals that are supported by everyone within a school.  It is not the sort of change that comes from some extra money that carries with it myriad conditions and is imposed from above.

Parents and school communities are best placed to decide which programs and approaches will work best for them.  These decisions, taken at school level, have a much greater chance of long-term success and impact.  The education minister's "students first" policy actively recognises that giving schools and school leaders greater autonomy can help improve student results.  That is why this latest move is so puzzling.

The allocation of funds into separate programs and initiatives without broader integration and strategic direction misdirects resources away from schools and into costly bureaucratic requirements for accountabilities and program reporting.

There is overwhelming evidence, here and overseas, that shows funding allocated in this way does not lead to long-term improvements in student achievement beyond the schools that directly participate.

Rarely are the advantages gained sustained after the completion of the funding term because the new practices have not been incorporated into existing school practice.

One of the changes in school funding that arose from the renegotiation between state and federal governments was the rolling in of multiple separate funding allocations into block grants, allowing a welcome move for more resourcing decisions to be made closer to where the services are ­delivered.  Seeing the end of separately identified program allocations at the national level provided hope for a new direction in education.  It allows schools to decide where resources could best be allocated to do the most good.

Under the guise of a targeted investment in schools this new announcement signals a worrying sign that we may again slide back into thinking the federal government is best placed to know what should happen in classrooms.

Ricky Muir — the Senate's everyman

The great American conservative William F. Buckley Jr. said:  "I would rather be governed by the first two thousand people in the Boston telephone directory than by the two thousand people on the faculty of Harvard University."

The Australian version of that quote would be "A cabinet full of Ricky Muirs couldn't be any worse than a cabinet full of Gillard government ministers."

Ricky Muir, the 32-year-old former timber worker from Gippsland in Victoria, took his place in the Senate on Tuesday for the Australian Motoring Enthusiast Party.  His spot in Parliament is as legitimate as that of any other MP.

The suggestion that somehow he shouldn't be in the Senate because he only received a total of 17,122 votes and was elected as a result of other parties' preferences can't be sustained.

The Coalition, the ALP, and the Greens all had senators elected via preferences flows from other parties.  Likewise, numerous MPs in the House of Representatives are elected via preferences.

It's difficult to argue an MP elected via preferences from four or five other parties has a better right to be in Parliament than someone elected via preferences from 10 or even more other parties.  For as long as Australia has preferential voting, people are going to get into Parliament on the votes from parties other than their own.

The reason why so many political commentators are upset by Ricky Muir's election is not because of the way he was elected.

What's upset the Canberra press gallery is that Ricky Muir is different from them.  And he's different from the politicians, the staffers, and the public servants that the Canberra press gallery spends its time reporting on and socialising with.

Muir doesn't have a university degree.  He's done manual labour.  He's been unemployed.  He hasn't done media training (as was obvious from his infamous interview with Mike Willesee).  And we don't know for sure, but he probably doesn't think the Three Rs — the republic, "reconciliation" and refugees — are the three biggest issues immediately facing the country.

In other words Ricky Muir is like the vast majority of the population.

The disdain and the sneering with which so many political commentators have greeted Muir is palpable.

Perhaps the least bad thing that's been said about Muir was on the ABC's The Drum last month when all the panellists agreed he "wasn't up to it".  None of the panellists explained exactly why they thought this, but the imputation was obvious — Muir wasn't smart enough to be a senator.

EDUCATION V EXPERIENCE

Unfortunately the panellists didn't reveal exactly how smart they thought someone needed to be before they could be in Parliament.  No one on the panel pointed out that if there was a piece of legislation before the Parliament that Muir (or any other MP for that matter) couldn't understand, than perhaps the problem might lie with the legislation not with legislators.

The panel all assumed that government is now so large and so complicated that inevitably laws will be passed which only someone with a university degree would able to understand.

Julia Gillard's last cabinet had plenty of smart people in it.  The 20 ministers had between them no fewer than three dozen university degrees (a third of them in law).  Every single member of the cabinet held a university qualification.

All those smart people in Gillard's cabinet thought it was a good idea, for example, to abolish freedom of the press in this country.

It wasn't education or eloquence that was missing from Gillard's cabinet — what it lacked was any experience of the real world.

In the scheme of things whether or not Muir mangled a media interview is irrelevant.  (Remember Gillard delivered her "no carbon tax" promise impeccably and pitch-perfect.) Muir should be judged on his merits and he should be judged on his policies (or lack of them).

Whether Ricky Muir has the character, the judgment and the sensibleness to be a good parliamentary representative it is too early to tell.

But the fact that he's upset so many people simply because someone like him is in the Senate means he's already made an excellent start to his parliamentary career.

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Shining a light on the dangers of royal commissions

Royal commissions are said to have coercive powers to uncover "hidden truths", but their lower standards of procedural fairness mean they are just as likely to uncover untruths.

Last week, the Senate Standing Committee on Economics called for a royal commission into the Australian Securities and Investment Commission and the Commonwealth Bank over the financial fraud scandal.

In other words, the key recommendation of one parliamentary inquiry is that the government should establish an even bigger inquiry.

Royal commissions have an almost magical, mythical status in Australian politics.  They have become less a means to an end, and more an end in themselves.

There are already three royal commissions ongoing at the Commonwealth level:  one into institutional responses to the sexual abuse of children, another into the Rudd government's home insulation scheme, and the third into trade union governance and corruption.

It's been 20 years since there have been this many commissions going at the same time.

Yet there's only one real public policy reason to choose a royal commission over any other form of inquiry — their coercive powers.

Royal commissions awkwardly span the gap between executive government and the judiciary.  They're formed by the government of the day according to its whim.  See, for instance, the royal commission into pink batts — an incredible precedent for new governments to punish the policy decisions of previous governments.

But while royal commissions are creatures of the executive — that is, driven by politics — they're also empowered with the sort of coercive powers only granted to apolitical courts.

They can summon witnesses.  They can compel those witnesses to produce documents.  They can force testimony — even self-incriminating testimony, eliminating the right to silence in the process.  They can apply for search warrants.  (In the Northern Territory, no warrant is even needed.  Any member of a commission can enter any building they want and take what they please.)

As the Law Council of Australia told a 2009 inquiry into royal commissions, the Commonwealth Royal Commission Act "removes or significantly dilutes the traditional common law protections usually afforded to witnesses".

This makes them exceptionally powerful.  Even for undoubtedly worthy subjects of investigation (and who could question the virtue of an inquiry into institutional responses to child sexual abuse?) it should be of serious concern that royal commissions throw basic legal rights out the door.  Even the worst people have rights.

Do these coercive powers uncover "hidden truths", as many advocates of royal commissions suggest?  Maybe.  But royal commissions have lower standards of procedural fairness than courts.  They can admit hearsay, for instance.  They are as likely to uncover untruths as traditional courts are to miss hidden truths.

In his book Royal Commissions and Public Inquiries in Australia, Scott Prasser distinguishes between royal commissions whose purpose is to advise on policy questions and those that are inquisitorial;  that is, those which investigate and expose wrongdoing.  All three current commissions take the latter form.

But we already have elaborate and expensive law enforcement and judicial systems to investigate, expose, and finally prosecute wrongdoing.

Every inquisitorial royal commission is a tacit admission that the existing legal system isn't working.  More prosaically, every inquisitorial royal commission should be focused on law-enforcement failure.

One survivor told the child abuse royal commission that "the police don't listen to children".  Another was told by police "we can't do anything" and that the issue of sexual abuse was too much of a "hot potato".  Whatever comes out of that royal commission, changes in the way the police handle abuse allegations are likely to have the most long-term importance.

While the ability to coerce testimony may be the only real policy reason to form a royal commission, there are a whole lot of political ones.

Nobody ever made headlines by calling for an interdepartmental review.  When a government appoints a royal commission, it is trying to tell the public that there is no limit to how seriously it takes a given issue.  The government looked at its menu and chose the crown jewels — a royal inquiry.

When the royal commission into union corruption was announced earlier this year, the unions were quick to denounce it as a witch-hunt.

The metaphor was more correct than was perhaps intended.  Once formed, royal commissions are impossible to control.

Usually governments have a good idea about the result they'll get from an independent inquiry.  They write the terms of reference.  They choose who heads the inquiry.  Did anybody doubt that the Gillard government's inquiry into media regulation would propose new media regulation?

By contrast, the Fraser government wouldn't have expected its royal commission into the Federated Ship Painters and Dockers Union to delve into corporate "bottom of the harbour" tax evasion schemes.  Royal commissions are fishing expeditions, and heavily armed ones at that.

So why a royal commission into ASIC and the Commonwealth Bank?

ASIC is one of our most heavily empowered regulators.  If any regulator deserved to have its feet held against the fire, it would be ASIC.

Yet, as the Coalition Senator David Bushby pointed out in a dissenting appendix (page 457 onwards), we already have an inquiry looking at the structure of financial regulation.

The Financial System Inquiry isn't draped in the Queen's regalia, sure.  It can't coerce testimony.

But isn't that a good thing?  The cultural status of the royal commission has obscured its very real dangers to the rule of law and civil liberties.

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