Why multinationals are not avoiding Australian tax

The title of the interim report of the Senate economics committee inquiry into corporate tax avoidance, released this week, is "You cannot tax what you cannot see".

This is a rather embarrassing admission that the evidence for widespread corporate tax avoidance — the avoidance which has filled so many newspaper columns, so many hyperbolic speeches in parliament — just doesn't exist.

Imagine being pulled over by the police and told that even though you've been observed driving below the speed limit, stopping at stop signs, giving way at give way signs, indicating correctly, wearing your seatbelt, and maintaining a respectable distance from the car in front, the police have a hunch you're somehow violating community expectations.

While the Senate committee feels sure there are questionable corporate tax practices going on, it doesn't actually find any.

Rather, it relies very heavily on the political rhetoric of a now-discredited 2014 report by the Tax Justice Network, which claimed that firms were denying the government vast sums of revenue through opaque and confusing tax arrangements.

In fact, what the committee's interim report shows is that the tax practices of the big tech firms are quite explicable.

For instance, Microsoft and Google have their regional headquarters in Singapore.  As the committee admits, these headquarters are not shells, existing solely to avoid giving Joe Hockey money.  They're real.  They have real offices, real assets, and real staff doing real work.  In Singapore.  Not Australia.  Just because those Singapore headquarters digitally export some products and services to Australia does not mean they should pay Australian corporate tax on the profits.

Even more explicable is large firms with large research and development costs deducting those costs from their taxable profits.  The R&D corporate tax deduction is bipartisan government policy.  It seems a bit much for governments to introduce a tax incentive then get angry with firms for using it.

The lack of evidence of tax avoidance makes the committee's belief that the Australian government should name and shame corporate tax avoiders vaguely comic.

Certainly, the Australian Tax Office should be vigilant ensuring firms are paying what they owe.  Firms that fail to do so should face the full consequences of the law.  But that already happens.  Australia has some of the strongest anti-avoidance laws on the planet.  The government has the tools, right now, to deal with illegal tax evasion.

Underpinning this whole debate is the fact that Australia's corporate tax rate is very high.  At 30 per cent, it is substantially above the OECD average of 25.3 per cent.  And Australia is one of the most heavily reliant countries on corporate tax revenue in the OECD.  The Senate committee admits that this heavy burden puts Australia at a "comparative disadvantage".

With such a disadvantage, it is no surprise that multinational companies are not lining up to establish their regional headquarters here.

But a failure to establish regional headquarters in Australia — "avoiding permanent establishment" in the lingo of the committee — does not constitute tax avoidance.  Australia's tax and regulatory environment is not competitive.  Singapore's is competitive.  This ought to cause some soul-searching by the Parliament.  Handwringing about phantom corporate tax avoidance just postpones consideration of the real problem.

Perhaps we might expect the sort of anti-corporate nonsense espoused at the inquiry from Labor and the Greens.  What's really disappointing is the full-throated support of the corporate tax panic from the Coalition.

Government senators on the committee wrote a dissenting minority report.  Yet their complaint was that the committee did not fully acknowledge all the exciting work the Abbott government was doing to clamp down on multinationals.

Earlier this year the government released its own proposed legislation to deal with corporate tax avoidance.  In effect that legislation would empower the ATO to second-guess where it feels profits should be booked for tax purposes.

The consequences of such an approach would be dire.  It would expose multinational firms to double taxation.  It would be a huge incentive for those firms to leave Australia all together, taking jobs and economic activity with them.

All this fretting about tax avoidance makes good demagoguery.  But it might seriously harm Australia's economy.

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Jeremy Corbyn shows how ideas alone can move political debate

In Australia we've had our fair share of "unelectable" politicians get elected.  As has Britain.

At the moment the British Labour Party is in the process of electing a new opposition leader following their thrashing at the general election in May.  Under the party's new rules, Labour's 232 MPs each get one vote to cast for the leader as do the party's 299,755 members, together with 189,703 trade unionists who are members of a union affiliated with the Labour Party, and as do 121,295 members of the general public who are not party members but who've paid £3 and registered themselves as Labour "supporters".

The process was intended to bring democracy to the Labour Party — but the problem with democracy is that sometimes it gets out of hand.  There's accusations that "entryists" have infiltrated the party.  A Tory MP had registered as a Labour supporter so that he could vote for the Labour leader.

OVERWHELMING FAVOURITE CORBYN

According to the polls the overwhelming favourite to win the election for leader is Jeremy Corbyn.  Until a few weeks ago no-one had heard of the thrice-married, 66 year-old who has spent the last 32 years in obscurity on the backbench.  To describe him merely as "left-wing" doesn't do justice to his policies on everything from economics to terrorism.  He supports printing money to defeat "austerity", wants to nationalise energy companies, and he advocates unilateral nuclear disarmament.  He once described representatives of the terrorist groups Hamas and Hezbollah as "our friends".

Corbyn would be a disaster for the Labour Party — and if heaven-forbid he ever became prime minister, he'd be a disaster for the country.  Which is why Tony Blair and practically every senior and serious Labour leader have urged the party to pick anyone but Corbyn.  On all the evidence Corbyn is unelectable.  Yet the slight nagging worry of the British ruling class is that he might not be.  And there's a precedent.

There once was a candidate for their party's leadership who was similarly described as unelectable — who was "extremist" and "class-conscious" — and who would shift their party from the "middle ground" and consign it to electoral oblivion.  The Economist magazine said of the leadership aspirant that they were "precisely the sort of candidate ... who ought to be able to stand, and lose, harmlessly".

That candidate, of course, was Margaret Thatcher, and the year was 1975.

Gordon Brown, the former Labour Chancellor of the Exchequer and Prime Minister delivered a speech this week urging Labour party members to be sensible.  He pleaded with them to remember their party had to be "credible" and "electable".  Brown was mystified that someone could vote for a leadership candidate in the full knowledge that the person they're voting for would probably never win a general election.  A similar critique of Corbyn's supporters has been extended to Corbyn himself.  He's suspected of being more interested in propagating his political philosophy than in becoming prime minister.

According to Brown it's "not an abandonment of principles to seek power" and power "is necessary to change lives".  Brown is right, but he's wrong to have convinced himself that only party politics changes lives.  As wrong and as misguided as Corbyn and his supporters are, they may just have a more sophisticated appreciation of power than Brown.

MORE POWER THAN POLITICS

The Chief Justice of the High Court, the Governor of the Reserve Bank — even the Managing Director of the ABC and the President of the Australian Human Rights Commission have far more power over people's lives than your average minister or even average prime minister.  Admittedly judges, regulators, bosses of state-owned media companies, and human rights bureaucrats are all appointed by politicians but none of them are actually politicians.  The insight that politics is practised in many ways, and not just through the formal political process was appreciated by the Italian Marxist, Antonio Gramsci, when in the 1920s he talked of the left gaining power via "the long march through the institutions".

If power and the ability influence the public debate is measured in decades rather than in the weeks of parliamentary sitting terms, by the publicity he's received for his views Corbyn has already fundamentally changed British politics.

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There's nothing conservative about using the constitution as a political trick

The Australian constitution has one great feature.  It is incredibly hard to change.

This, obviously, is what Scott Morrison was thinking about when he proposed last week that Australia hold a constitutional referendum to deal with same-sex marriage.

A plebiscite would simply determine the public's view on changing the Marriage Act via Parliament, but a constitutional referendum would propose adding the words "opposite and same-sex" before the word "marriage" in section 51(xxi) of the Constitution.

A plebiscite would have to simply receive a national majority to be considered decisive.  But a constitutional referendum would have a much higher bar:  both a national majority and majorities in at least four states.

Australia's constitutional amendment system is often described as "notoriously difficult".  We are a "frozen continent", constitutionally speaking.

Only eight out of 44 referendums have succeeded.  This often cited figure understates the failure rate.  Other possible referendums have been abandoned before coming to a vote.  Kevin Rudd dropped Julia Gillard's local government referendum when it became clear the Coalition's enthusiasm for change was waning.

The Australian founders may not have intended it to be this hard to change the constitution.  But there are good reasons for constitutional change to be difficult.

Constitutions exist in order to provide fixed rules about what governments can and cannot do.  The strength of a constitution derives from the certainty it provides.  A constitution that can be easily changed is not a constitution at all, in that it does not offer the stability necessary for long term economic and political management.  In the pre-constitutional era, governments did not feel bound by rules.  Now they do.  That's a very good thing.

This does not mean constitutions should be impossible to alter.  But the danger to the constitution comes from reckless change, not stubborn adherence to the status quo.  As Geoffrey Brennan and Hartmut Kliemt have written:

The slowness of the procedure will give us pause and help us steer a steadier constitutional and political course than we would do otherwise.

It's important to note that the desirability of constitutional rigidity holds true even if we think the constitution is weak, or flawed, or could be amended in an obvious way.

Yes, we all have our own ideas of how statutes and constitution might be rewritten that would make this country more perfect.  But just have a brief scan of the previous 44 referendums (Wikipedia has a nice list, with links to the questions themselves).  It is pretty clear that Australia is better off, on balance, for having rejected most of them.  Almost all were outright and explicit power grabs by the Commonwealth.

With all this in mind, the requirement that a constitutional referendum achieve a double majority — majority of the population and majority in the majority of states — is in fact a relatively low bar for a change to the rules that govern the structure of the government.

After all, what is the alternative?  Simple majority voting?  Majority voting is not inherently more democratic.

We are more likely to make democratic decisions — that is, decisions that more represent the will of the people — with a higher threshold.  When 51 per cent of the population impose their views on 49 per cent of the population, it's hard to say that imposition has much moral authority.

This is the basic case for constitutional conservatism (couched admittedly in economic terms rather than the usual legal ones).  Continuity should be preferred.  Change should be resisted.

The Liberal Party used to be the party of constitutional conservatism.  Labor has always wanted constitutional reform.  The Coalition's historical role is to hold the line, to espouse modesty and stability;  the sort of virtues represented by the Samuel Griffith Society and a long line of conservative judges and political leaders.

Yet under Tony Abbott, the Coalition appears to have abandoned that storied and entirely necessary tradition.

In opposition, Abbott had signed up to Gillard's local government referendum.  He had to be pulled back into line by state Liberal party divisions.

Abbott wants to amend the constitution to recognise Indigenous Australians.  You only need observe how the recognition debate has spiralled out of the Government's control to see how antithetical it is to the conservative mindset.

Now senior ministers of the government are seriously proposing a constitutional amendment for no other reason than to stack the deck against a policy they oppose.  And that policy is, we are repeatedly told, a second-order issue.

There's no reason for a constitutional referendum on same-sex marriage.  The High Court has said the Commonwealth Parliament has the power to legislate in this area.  The constitutional approach is only being floated because Morrison and others want the measure to fail.

Constitutional conservatism was once a matter of deep Liberal identity.  Now it's just another political trick for short-term gain.

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How UEFA's financial fair play rules are destroying football

With the English Premier League kicking off last weekend, we'll no doubt hear the well-worn refrain that foreign billionaires are destroying English football.  But it is UEFA's financial fair play rules, not billionaires, that are sucking the soul out of the English game.

Over the last decade or so, several English and European football clubs have been purchased by foreign owners.  Many fans, commentators and officials argue that the enormous wealth of these individuals means clubs are able to buy their way to success and that this is ruining football.

To combat this trend, European football's governing body, the Union of European Football Associations (UEFA), with the support of the EU, introduced the UEFA financial fair play rules (FFP) in 2011.

In 2013, it introduced the so-called "break even" requirement, preventing clubs from accumulating debt.

While UEFA argues these rules prevent clubs from becoming the playthings of billionaires — who they think will leave them with crippling debt once they grow tired of them — they actually ensure small clubs remain small.  By shackling spending to revenue they effectively outlaw risk-taking behaviour.

For example, a small club on the brink of glory is unable to go into debt to purchase the superstar or two it may need to take the next step, with the intention of covering the debt with the increased revenue success brings.

As Manchester City captain Vincent Kompany points out, these rules simply serve to protect the established order in English football.  They are a form of crony capitalism.

This is obvious to anyone who glances at the list of English champions over the last couple of decades.  Between 1993 and 2004 Arsenal and Manchester United won all but one title.  This was broken in 2005 when, having been bought by Russian oligarch Roman Abramovich, Chelsea won only their second title ever, and their first in 50 years.

In 2012, Manchester City won their first title in 44 years after being purchased by Abu Dhabi United Group (ADUG), having lived in the shadow of their illustrious neighbours Manchester United for decades.

But a better example exists before the fleet of foreign owners made their appearance.  In 1995, tiny Blackburn Rovers — hailing from a town with a population of 100,000 — were champions of England as a result of funding from local Steel baron Jack Walker.

Walker was a local boy made good who wanted to give something back to the town where he had grown up and made his fortune.  He appointed the legendary Kenny Dalglish as manager and provided the finance to purchase stars such as Alan Shearer, Chris Sutton, Tim Sherwood and others.

Blackburn's star burned bright but it burnt out quickly.  Having won the title, many players moved on and the club was relegated four years later.  It was noted recently by Andy Dunn in The Daily Mirror that what Blackburn did wouldn't be possible today because of FFP.

Football is about hope, dreams and glory — not the quiet satisfaction of prudent financial management.

Does anyone seriously think that football would be better had Blackburn lived within its means and finished a solid eighth in the first division every year?  Would Blackburn fans prefer that to that glorious afternoon at Anfield when Jack Walker wept in the directors' box?

How can foreign billionaires be ruining the game when they are giving fans their first taste of glory in decades and when they are breaking up a duopoly that meant only two teams could be champions?

If ever there was a symbol of the dimension of hope and drama that a dynamic financial environment brings, it would be the stunning finale to the 2011-2012 season, when Manchester City secured their first league title in 44 years with the help of ADUG.

In what was probably the most dramatic end to an English league season in history, City scored two goals in injury time to steal the title from Manchester United.

As commentator Martin Tyler famously screamed "Agueroooo!", as thousands of City fans streamed on to the pitch in tears, as people around the world danced in pubs and living rooms, can anyone seriously say that the huge investment brought into the English game by foreign investors hasn't been a good thing?  Would football really be better if Manchester United and Arsenal were 20 points ahead of everyone else every single year?

Creative destruction is an economic term referring to the process whereby new, more efficient and more innovative products and firms destroy existing players.  This is exactly what football should be.

There is unlikely to be a more salient example of creative destruction than Manchester City, Chelsea and others upsetting the English and European football applecart.  FFP threatens to put a stop to the next wave of creative destruction that may well knock City and Chelsea off their perch.

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Let's be honest, Question Time makes everyone look stupid

The importance of the speaker in Australian Parliament is wildly overstated, because the stakes of parliamentary Question Time are wildly overstated.

It is a sign of how far the Abbott Government has lost control of the agenda that the appointment of what is normally a minor administrative position became the centre of Canberra politics.

By now the entitlement saga has spiralled out of control, enveloping every side of politics.

But recall that Labor was delighted when the Bishop helicopter photos emerged.  It seemed like a perfect encapsulation of the charge they'd levied at Bishop ever since her appointment.  Bishop was hopelessly partisan.  Indulgent.  Shameless.  Here was Bishop's performance as speaker converted into metaphor and given corporeal form.

That delight was really because Labor's constant complaints about her speakership weren't exactly resonating with the public.  There's nothing more inside beltway than complaining about how many people Bishop threw out of the chamber during Question Time.

Of course, you can understand why parliamentarians think the conduct of Question Time is important.

It's a big part of their parliamentary week.  For many of them, Question Time is a theatre where they can try to rise above the undifferentiated mass of other representatives.  The person who held the record for being thrown out under Bronwyn Bishop was Nick Champion.  Champion is the member for Wakefield and shadow parliamentary secretary for health, hardly a high-profile day job.

Labor types have been tweeting all weekend about the need for a new speaker to uphold standards and restore respect to Parliament.  But never mind whether the speaker is biased.  What are all these parliamentarians doing yelling and heckling from the back seats, and then blaming the speaker for Parliament's low reputation?  It's like criminals blaming the police for failing to prevent their crimes.

Back in 2011, Katharine Murphy described the Gillard-era Question Time as the worst "grinding and time-wasting ritual" in federal politics.  Murphy wrote that we should "make it matter once again".

If anything this is too optimistic.  Commentators often lament the lack of presence in the current Parliament.  They are nostalgic for the great performers of previous generations.  We used to have politicians who looked like they owned the room, and by extension, commanded the country.  Question Time favours the fast-witted, the biting, and the aggressive.  Peter Costello is acknowledged as a great Question Time performer.  Paul Keating is known as the master.

But to what end?  YouTube helpfully has Keating's most famous performance:  the "I want to do you slowly" response to John Hewson's question about an early election.  It's great fun, sure.  On the other hand, strip it back and Keating was just hurling a barrage of insults.  Nothing wrong with that, but we shouldn't pretend that it was a great democratic contribution.

Even at its most legendary — even in its most memorable, brightest moment — Question Time was just entertainment.  Entertainment for an infinitesimally small portion of the population.

More commonly, Question Time is just the forgettable recitations of the lines of the day — short term Capital Circle obsessions intoned as if they were matters of great Shakespearian substance.

It's true that there was a previous era in which Question Time was not the farce it is today.  As this guide to parliamentary practice notes, Question Time evolved out of the ad hoc custom of asking ministers questions without notice.  The earliest Commonwealth parliaments would only feature a few such impromptu questions.  Questions would be asked when there were questions to be asked.

Have a look at this "question time" from July 1915.  The questions were simple and unadorned.  The answers were direct ("I shall make inquiries into the matter" was the sum total of one response by the Assistant Minister of Defence.)  There's little of the modern preening and bluster.

The standing orders that govern questions without notice have changed many times in the last century.  Many proposals to reform Question Time focus on these standing orders.  But the problem isn't with the rules.  Nor is it with the speaker.  No doubt Tony Smith will be a great improvement on his predecessor.  But Bronwyn Bishop didn't wreck Question Time.

Question Time is farcical because it is an empty ritual.  It adds nothing.  It distracts the press gallery.  It distracts our politicians.  It undermines the more serious work that goes on in Parliament.  It is divorced from the actual business of government, the actual business of legislation, and the practical needs of democratic accountability.

Let's be honest, Question Time makes everyone involved look stupid.

Bronwyn Bishop's accidental contribution has been to illustrate just how ridiculous this feature of Australian politics truly is.

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Relax our borders, reap the benefits — and help millions who want a better life

Millions of people around the world are seeking a better life elsewhere.  Australia should help by relaxing our migration restrictions.

Debating the intricacies of contemporary policy issues makes us lose sight of the fact that what often shapes disagreement and discord is a fundamental tension between the interests of the individual and of the state.

This is true for conceivably every area of policy today, certainly on questions of economic, fiscal, political or social reforms, and a good example is in immigration.

At any given moment, millions of people are seeking to move to another place in the world for numerous reasons, such as securing better economic prospects, improved living standards or a safe haven that removes the threats of discrimination and persecution.

But many people's ability to move freely across political borders is constrained, and often negated, by governments' immigration policy restrictions, for the sake of such things as national security or ensuring that residents maintain stable employment and other economic conditions.

Governments have also justified restricting the entry of migrants on unconscionable race-based grounds, as was so long the case for Australia with its discriminatory white Australia policy.

Australia might now have officially a race-blind immigration policy but this is, in truth, a large step removed from a genuinely non-discriminatory immigration policy, in which restrictions on migration are deservingly relegated to the policy dustbin.

The Commonwealth government enforces a mind-boggling number of visas to control who arrives in Australia, and the obligations and restrictions they are placed under when they arrive.  Many of the visas limit the amount of time people can stay in this country, while the working-visa categories tend to privilege "skilled workers" on conditions nominated by politicians and bureaucrats, with little regard for changing market circumstances.

Of course, Australia maintains heavy restrictions against the entry of refugees, including quotas on the number of people classed as refugees who can arrive here and, controversially, detaining people without the desired official paperwork for long periods.

It certainly appears that our prescriptive immigration regulations garner the support of certain interest groups, such as unions, which demonise foreign workers for having the temerity of working here and contributing to our productive capacity.

Sadly, some voters are at times receptive to xenophobic fear-mongering that Australia risks being "swamped" by future waves of migrants — those allegedly wicked masses who, in truth, are simply our co-workers, friends, even loved ones we just haven't met yet.

That these claims and others, such as migrants adding to infrastructure congestion or milking the welfare state, still hold political sway is unfortunate, because tearing down the walls that are national borders would yield immense benefits for individuals, families and for all humankind.

A 2011 study by American economist Michael Clemens showed the gains from eliminating migration barriers dwarf the gains from eliminating barriers against the cross-border flows of goods or capital.

Removing all barriers to capital flows would raise global GDP by between 0.1 per cent and 1.7 per cent, and removing all barriers to merchandise trade would increase GDP around the world by between 0.3 per cent and 4.1 per cent.

Removing such restrictions would be most welcome for a world struggling under the weight of flagging economic growth, but eliminating all barriers to labour mobility would be estimated to increase global GDP by between 67 per cent and 147.3 per cent.

Allowing people to move freely for work that yields the highest value is therefore enormously beneficial, potentially doubling the world's output and eviscerating global poverty in the process, which should elevate reducing immigration obstacles to becoming the iconic global reform movement of our age.

The benefits accruing to individuals from less restrictive immigration controls should also prove to be substantial, with migrants able to work their way out of poverty in their freely chosen destination country and send remittances to family back home.

The World Bank estimated that the total value of remittances worldwide was a little over $US583 billion last year, with remittances to developing countries accounting for almost three-quarters of the total.  Opening up borders, enabling more migration to economically attractive destinations, should greatly enhance these flows.

There is also plenty of upside for existing residents in countries that would open their borders, not least because migrants contributing to production processes would increase national production, thus raising material living standards for the benefit of all.

And the lobbyists agitating for governments to grab more revenue should salivate over opening the borders, given more people means a larger taxable base for funding the likes of economic and social infrastructure projects.  Incidentally, with businesses forever crying out for more labour, having more people here, courtesy of immigration, should help with the development of extra infrastructure.

Also, consider that the economic benefits from open borders understate the total gains that existing residents may accrue, given the obvious benefits to quality of life associated with a co-mingling of people from all corners of the world, each engaging in their own experiments in living.

Cynically playing the nation-state card to foment damaging "us versus them" agitations against migrants should become a relic of the past, too, thus promoting a greater sense of social harmony.

As well as the economic disadvantages of restricting immigration, the case against opening our borders is also perplexing in that it is inconsistent with observed practices elsewhere.  After all, we rightly extol the clear economic and social benefits of moving freely within a nation-state, either from city to city or from state to state, and our policies also reflect a desire to free up the movement of capital and goods.

Australia proudly proclaims itself to the world to be an immigration nation, with the last two centuries most assuredly grounded in the influx of people from all corners of the earth.  To truly honour those sentiments, we should relax our remaining restrictions against the inbound movement of people, even if no other countries follow our lead, and reap the significant benefits from doing so.

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A Goodes reason to drop agendas

All of the attention devoted to the consequences of some people in the crowd at an AFL game booing footballer Adam Goodes is entirely justified.  Goodes is an Aboriginal Australian and a high-profile advocate of particular political causes.  What happened and the reaction to it reveals a great deal about the politics of race and racism in this country.

One of the things we've learned is that in Australia, the reaction of authorities to racism is selective.

At the MCG in Melbourne in 2013, when a 13 year-old girl yelled "ape" at Goodes she was taken away and questioned for two hours by police.  At a protest march in Hyde Park in Sydney in 2012, children held up placards advocating the beheading of "infidels".  Interestingly, there's no record of police detaining and interrogating any of those young people.  Meanwhile, at anti-Israel rallies around the country, Jews are routinely subjected to epithets no less offensive than what was shouted at Goodes.

We've also learned something about the politicisation of sport in Australia.  For the time being (until the Football Federation Australia — the body administering soccer — inevitably overtakes it) the Australian Football League is the premier sports organisation in the country.  The AFL has made a huge and beneficial contribution to Australia.  It has supported many worthwhile causes.  One of the most important things the AFL has done in recent decades is its work to eliminate on-field and off-field racial abuse.  The AFL even has specially designated Multicultural Round.  Yet for all of this, some in the crowd still jeer Adam Goodes.  The jeering of Goodes is all the more significant because such behaviour from spectators is unusual and has largely disappeared at AFL games.

In 2014, Goodes was appointed by a federal government committee as Australian of the Year.  In that role he made a number of highly political comments about Indigenous affairs.  This he was entitled to do.  And others are also entitled to disagree with him.  What Goodes says should be subject to as much scrutiny, if not more scrutiny than anything uttered by a politician.  His status as Australian of the Year is greater than that of a mere elected politician.  Yet some have argued that Goodes is above reproach.

CAMPAIGNS HAVE CONSEQUENCES

The AFL could be discovering that its political campaigns have consequences.  It's one thing for the AFL to support breast cancer awareness on Mother's Day.  But that's something entirely different from the AFL endorsing a political campaign to change the Australian constitution and divide people according to their race.  The AFL promoting the Recognise campaign is entirely different from the AFL stopping racial abuse on the football field.  Andrew Demetriou, the former AFL boss, instituted a "Green" round and he said clubs should be aware of the dangers of global warming.

When the AFL adopts political causes, particularly causes more likely to be supported by the left of politics, it risks more than just the alienation of that half of the population who might have an opinion different from the officially endorsed position of the code.  When the AFL plays politics it threatens the loss of one of Australian Rules' great strengths — when it comes to the football all players and supporters are equal.  Australian Rules football is the great social, political, and religious leveller in this country.  No other sports code, and probably no other cultural institution performs such a function.  When you play or support Australian Rules it doesn't matter whether you're black or white, Liberal or Labor, Catholic or Protestant.

Australian Rules became the national game because unlike rugby it's not the product of a class structure.  Robert Menzies was just as passionate about Carlton as Julia Gillard is about the Western Bulldogs.  With a product as proud and as strong as Australian Rules the temptation for AFL administrators to co-opt it to pursue their personal political preferences is enormous.  Unfortunately, it's a temptation that in recent years those administrators have been unable to resist.

The chairman of the Sydney Swans, the club Goodes plays for, said last week the booing of Goodes was "100 per cent racist".  In fact, the reality is more complicated.

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Robert Conquest: Cold Warrior who revealed Stalin's brutality

Robert Conquest dared to tell the truth about Stalin's crimes when few intellectuals would listen.

There are those whose memory fades with time.  There are ­others whose importance only grows.  Such a man was Robert Conquest, the West's pre-eminent chronicler of Soviet terror.

Conquest, who spent his last 30-odd years at Stanford's Hoover Institution in California, had written poetry and fiction.  But it was his 20-plus books on Soviet history — most notably The Great Terror:  Stalin's Purge of the ­Thirties in 1968 and The Harvest of Sorrow:  Soviet Collectivisation and the Terror-Famine in 1986 — that define his legacy.

Both tomes exposed the true nature of Joseph Stalin's crimes and the gulag system and the suffering caused by the collectivisation of agriculture.  Both were also smuggled into the Soviet Union and eastern bloc states, influencing major dissidents.  Alexander Solzhenitsyn was so impressed that shortly after he was expelled from the Soviet Union in 1974 he asked Conquest to translate his 2000-line poem on freedom.

Born in Britain and educated at Oxford University (where for a short time he was an open member of the Communist Party), Conquest served in World War II before he got mugged by reality, discovered the error of his ways and did everything he could to make amends.  Much to the chagrin of Soviet apologists in Australia, Western Europe and North America, Conquest showed Stalin was no aberration, but a logical consequence of Marxism-Leninism and the Bolshevik Revolution.

Before 1968, the prevailing wisdom among Western intellectuals was to deny or minimise the ­extent of Stalin's devastation.  In the 1930s, when Stalin was launching murderous ­Moscow trials, socialists such as ­George Bernard Shaw, HG Wells, and Sidney and Beatrice Webb portrayed the Soviet dictator as a popular and humane leader.

Even after Stalin's death in 1953, left-wing historians such as Manning Clark and Eric Hobsbawm claimed ignorance of his reign of terror.

Such people, ­Conquest remarked, “had an ability to dupe themselves”, ­especially if “you start using the word 'socialist' ”.

Although The Great Terror was coldly received on the Left, the evidence was irrefutable:  a terror involving millions of deaths.  The book was an overnight ­sensation.

Above all else, Conquest highlighted the unprecedented reign of horror that had gripped the Soviet Union in the mid to late 1930s.  From Moscow to Vladivostok, Stalin's security thugs took victims by the millions, killing more than a 10th, and sweeping the rest into forced labour camps.  Their loss deprived the Soviet Union of its best writers, artists, academics, engineers and technicians.  On one day alone in 1937, Stalin ­approved 3167 death sentences — and then went to the movies.

Since the publication of The Great Terror in 1968, the book's significance has endured.  Shortly after the ­collapse of the Soviet empire and the opening of the ­Russian archives in the early 1990s, Conquest's publishers asked him for a new subtitle to a revised edition.  In his typically witty and quirky manner, he replied:  “How about 'I Told You So, You F..king Fools'?”  He was surely entitled to say that.

In Harvest of Sorrow, he used witness accounts and official Soviet publications to record the Kremlin's campaign to collectivise Soviet agriculture.  This was designed to gain greater control of the kulaks, or peasantry, and to transfer resources from the land to industry in urban areas.

Nowhere was this deliberate famine more evident than in the Ukraine, which, by Conquest's estimate, led to the plummeting of grain production and the deaths of more than 14 million people from 1929 to 1933.  More people were killed by Stalin's brutal collectivisation of agriculture than were killed in either World War I or Hitler's genocide years later.

“The waste was extraordinary,” he argued.  “Enough grain rotted in the fields to have saved the lives of all the millions who died in the famine.”  His evidence included the Soviet census of 1937, which disclosed the drastic decline in the population over the preceding decade, and was suppressed by Moscow.  The Kremlin, Conquest revealed, “arrested the census board and shot them”.

When he received the Alexis de Tocqueville Memorial Award from the San Francisco-based ­Independent Institute in 1992, Conquest declared:  “One of the most difficult things to convey to a Western audience is how disgusting the rank-and-file of the old ­Soviet ruling class really were:  how mean, treacherous, shamelessly lying, cowardly, sycophantic and ignorant.  Unfortunately, those concepts are unknown to 'political science'.”

Along with other Cold Warriors such as Sidney Hook, Irving Kristol, and Australia's Peter Coleman, Conquest supported the anti-communist, pro-American Congress for Cultural Freedom.  The organisation, funded in part by the CIA, exposed Stalinist lies, promoted the principles of democracy and capitalism and destroyed communism as a force in Western cultural life, especially through its magazines, such as Quadrant in Australia and the now-defunct Encounter in Britain.  Of the former, Conquest said it “has flourished in a jungle full of pygmies with personal arrows” and Australia was fortunate to have it and “so are we in the world at large”.

Conquest was a traditional conservative.  He advised Margaret Thatcher on the Soviet Union and, according to her biographer Charles Moore, helped draft her speeches, including the one that got her dubbed “The Iron Lady” by the Red Army newspaper.  But he was also difficult to pigeonhole.  He voted for Labour leaders Harold Wilson in 1974 and Tony Blair in 1997 and he was a friend of Kingsley Amis and his son Martin.  Like other Cold Warriors, such as George Kennan, Paul Nitze and Owen Harries, he opposed NATO expansion in the 1990s lest it needlessly provoke a humiliated and wounded Russia.

In more recent times, he supported the notion of an “Anglo-sphere” in world affairs.  In 2007, he told Christopher Hitchens (who dedicated his 2002 book on Orwell to Conquest) about his great admiration for “that historic arc of law, tradition and individual liberty that extends from Scotland to Australia and takes in the two largest multicultural democracies on the planet — the US and India.”

Conquest was honoured in his adopted country of the US in 2005 when he received the Presidential Medal of Freedom.  It was a satisfying moment for a scholar who had published the most fearless and devastating accounts of the brutality of Stalinism.

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Entitlements review: this is a problem of definitions

To be a parliamentarian is to have a strange job.  To be speaker of the house in federal Parliament is to have an even stranger one.

Recall that Bronwyn Bishop's first line of defence was to say that she flew to the Liberal fundraiser in Geelong to talk about the role of Parliament.  Is that really what she is employed to do?  Does that count as party business or political business or parliamentary business?  Should we be paying for it?

It's easy to say we want to reform the entitlements system.  But it's much harder to decide what constitutes "official" business that taxpayers should support, and "political" business that taxpayers should not.  There's not always a bright line separating the two.

Yes, a helicopter to Geelong, or charging taxpayers for attending a wedding, clearly crosses the unacceptable line.  But what about arranging meetings in Melbourne to justify attending a party function the night before, as Tony Abbott did in August last year?  I challenge you to write a rule that prevents tricksy scheduling.

Unsurprisingly, a 2010 review into parliamentary entitlements concluded that there were "unclear and sometimes inconsistent definitions" of what constitutes parliamentary, party, electorate business.

So let's start with first principles.  In the business world, employees' expenses are covered on work trips.  The job of employers, or their human resources staff, is to monitor employees to ensure that the firm and its shareholders aren't being ripped off through extravagance.  Our parliamentary entitlement regime tries to ape this private sector practice.

But parliamentarians aren't employees.  They have no boss.  Yes, when they're ministers or parliamentary secretaries they report to the prime minister.  But as representatives, they answer only to voters, and they only answer every few years.

In fact, parliamentarians are much more like sole traders, who, through an election, win contracts to represent us — to act as our agent in the legislature.

This is a distinctly unromantic vision of the work of a politician.  But if we're trying to figure out what politicians are "entitled" to we should first figure out what their job is.

This subtly amusing parliamentary fact sheet tries to derive the "job description" of a parliamentarian by observing how parliamentarians exercise their time.  They do parliamentary work (voting, committee hearings), constituent work (pressing flesh, going to fetes) and political work (party conferences, branch meetings, scheming).

But just because politicians do a lot of things doesn't mean we should pay for those things.  We elect them to represent us in federal parliament, not to visit fetes.  They might enjoy being local celebrities but why should we pay for them to campaign?

A few years ago I spelled out in The Australian an alternative model for dealing with expenses.  Politicians should be well paid — probably a lot better than they are now.  But once they've received that lump sum, they should pay their expenses themselves, just like any independent contractor would.

Those expenses — not "entitlements", expenses — would then be treated as work-related deductions.  Under that model, if Bronwyn Bishop wanted a helicopter ride she would have declared it not to parliament but to the Australian Taxation Office in her 2014-15 return.

(Ministers' expenses — who actually are employees of the government — would be strictly controlled but covered in the same way employees have their expenses covered.)

This model has many advantages over the present system.

First, it would keep expenses in check.  It's easy to be loose with taxpayers' money.  It's harder to be loose with your own.

Second, it avoids the interminable debate about what counts as parliamentary or political expenses.  Either way, it all constitutes work-related expenses for tax purposes.

Third, it leaves subjective questions of whether spending is extravagant to the politicians themselves.  Bishop wants a helicopter?  Up to her.

Fourth, it leaves the question of what constitutes work-related to the tax office.  I said politics is a weird job but it is not so weird that the ATO wouldn't be able to handle these questions.  They have a lot of experience here.  Anyway, we're at the mercy of the tax office.  Our representatives should be too.

And fifth, it would be a hell of a lot less complicated than what we have now.  The Finance Department says there are 300 separate entitlement codes in the existing entitlement management system, belying the complexity and confusion that surrounds political compensation.

There's a deeper problem revealed by the Bishop affair.

Tony Abbott has been eager to blame the vagueness of the rules about entitlement use for the scandal.  But all that means is the current system rests largely on individual judgment.

And if our parliamentarians are unable to exercise their individual judgment in a way that accords with the expectations of voters, then we have a serious problem.

Politicians are expected to make some of the biggest decisions affecting our lives.  We place them in positions of great trust to act on our behalf.

What does it say about representative democracy if our politicians don't even have enough judgment to prudently and responsibly arrange their own travel?  Nothing good.

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The economics of the politics of the arts

The standard approach to economic analysis of arts and culture is built on the theory of market failure and the idea that arts and culture are a public good.  In essence, if left to the market, too little art and culture will be produced from the perspective of aggregate social welfare.  Accordingly, optimal arts and cultural policy will seek public support to correct this market failure.

But the market failure/public good approach is, in economic theory, met with critique from what is called public choice theory.  They point out that the above argument contains a realistic model of markets, but an idealised model of politics.  In essence, they argue that while markets may fail, governments usually fail even worse, and for reasons largely associated with the information and incentive mechanisms of democratic institutions.

Public choice economists study three interrelated problems with modern democracy.  First, majorities can exploit minorities (the "tyranny of the majority").  Second, organised minorities can exploit disorganised majorities ("rational ignorance" and "collective action" problems).  And three, voting is irrational (costless "expressive voting", weak incentives to information gathering).

You can see this in arts policy when organised minorities (such as any arts lobby) exploit disorganised majorities (e.g. taxpayers).  Or when weak majority preferences defeat strong minority preferences (e.g. suppression of queer art).  Or when voting becomes virtue signalling rather than honest preference revelation (e.g. inner city support for the ABC).

But a particularly brilliant young economist called Glen Weyl has come up with a way to fix all of this.  It's called quadratic voting, and you can read about it here, here, here in the context of corporate democracy, and in a particularly good essay discussing it in the context of ancient and modern democracy here.  Some scepticism here.

Quadratic voting gets at the idea that intensity of preferences are not counted in normal voting.  An indifferent majority can outvote a passionate minority (same-sex marriage is a good example) causing relatively small gains to the winners but imposing very large costs on the losers.

In normal voting, one person gets one vote (1p1v), and the price of the vote is zero.  The problem is that someone who cares a little has the same voting power as someone who cares a lot.

Quadratic voting is the idea to modify a simple majoritarian framework to allow vote buying according to a quadratic rule.  The total pool is then redistributed pro rata.  There are two radical ideas in there:  vote buying (and redistribution) and the quadratic rule.

A quadratic rule is that the price of a vote (under quadratic voting, you pay to vote) increases as the square of the number of votes.  So if one vote costs A$1, 10 votes costs A$100, and 100 votes costs A$10,000.  If I care a lot about an issue, I can influence a vote by paying a lot.  The quadratic rule ensures that I can't go too far with that, and that the size of the pool for redistribution also grows proportionately.

Vote buying is perhaps the one that people (who are not economists) get stuck on the most.  Giving everyone only one vote, and making it free sounds fair, but it is economically inefficient.  Any good that is free suffers tragedy of the commons, and voting is no exception.  Because you have almost no power over what you end up with, you have little incentive to gather useful information or to vote your true preferences.

The great virtue of quadratic voting is that it incentivises honesty about intensity of preference.  It was actually discovered not in retail politics, but in honey bees (bees "vote" to make collective decisions following a quadratic rule on the waggle dance).  The mathematics of the idea are well worked out and show that it is an efficient and equitable collective decision mechanism.

What would quadratic voting look like if applied in the arts?  Consider two hypothetical referenda:  one to privatise the ABC, another to expand the funding and scope of the Australia Council for the Arts.

At the core of the politics of arts funding is the critical claim that it is just middle-class welfare (a majority exploiting a minority), or an elite imposing their tastes on the masses (an organised minority exploiting a disorganised majority).  Think the ABC in the first instance, and the Australia Council in the second.

The Australia Council's clients are a relatively small number of people and supporters, with elite tastes, who care a lot about an outcome.  Against them are a majority of voters for whom this is a minor issue, yet they can be whipped into outrage.  However, on the back of this play out Australia's culture wars.

What we want to know is whether a mostly indifferent majority is actually harming a passionate minority by withholding further support in a way that in aggregate harms society, or whether it is the organised minority that is doing the exploiting, making this a pure and therefore socially costly transfer from the poor to the rich.  It's hard to tell who is actually harming who here.

Quadratic voting might fix this by subjecting an intensity-scaled measure of these minority preferences, which would ideally draw upon wealthy patrons, to a straight majority vote.  A quadratic vote mechanism then redistributes the total vote sum pro rata, potentially compensating those harmed by a win in such outcomes (e.g. taxpayers who are non-supporters of the arts).

That would probably be a better mechanism than the enormously politically charged and divisive process we currently have, as built on a one-person-one-vote mechanism.

A referendum on privatising the ABC could also benefit from a quadratic vote.  What we seem to have is a smallish number who passionately support the ABC, a small number who passionately oppose it, and a large number for whom it is really hard to tell whether they actually support it in a willingness-to-pay sense, or because it is a nice thing to say to someone doing a survey, or whether they mildly oppose it but don't really care enough to get upset about it.

No 1p1v majority vote will never answer that question, but a quadratic vote would.  And whatever way the result broke, it would reflect a genuine social welfare maximising outcome.  And that would be a lot better than where we are now.

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Please, just give us a real growth strategy

Every once in a while something brings the nonsense of daily politics back down to earth.

Last week Reserve Bank governor Glenn Stevens suggested that the slow growth we have seen over the last few years might not be a temporary post-Global Financial Crisis aberration.  It might, actually, be the new normal.

Rather than the three or so per cent growth each year we've come to expect, we might have to get used to 2 per cent GDP growth.

For Stevens, this lower growth is a hypothesis, not a prediction.  But even so it's a big worry.  In the long term, lower GDP growth means lower living standards for everyone.  There is nothing more responsible for our historically unprecedented prosperity than our relentlessly growing economy.  Growth is critical.  Growth is fundamental.  A richer society is a happier, healthier society.

Even if your taste in economic philosophy is less free market than mine, growth is the foundation on which government social services are built.  Growth pays for the National Disability Insurance Scheme and helicopter flights to Geelong alike.

We can debate how much tax the government should impose.  But you can't tax income that doesn't exist.

Yet neither party has any idea — let along any proposal, plan or program — for how to boost Australian growth back up to three, let alone four per cent per year.  They're not even talking about it.

Given that the most effective way to bring the Commonwealth budget back to balance is to increase growth (and therefore tax receipts) this silence is all the more stark.

A quick survey of the economic proposals on the political table is disheartening.  Labor wants to boost taxes on savings (cracking down on so-called superannuation "concessions").  The Coalition wants to boost taxes on consumption, by raising the GST and imposing it on online and digital transactions.  Labor wants to tax greenhouse gas emissions again.  New taxes are not pro-growth.

Tony Abbott was widely ridiculed a few weeks ago when he responded to a question on the Greek turmoil by referring to the Government's grocery code of conduct.  This was all very funny but Abbott's tone-deaf response hinted at the much deeper issue facing the Government:  it has no central economic agenda.

That the Government can propose higher taxes and proclaim its desire for lower taxes in the same breath isn't a failure of messaging, it reveals an absence of purpose.

The deregulatory drive of the Coalition's first year, as inadequate and insubstantial as it was, is now a memory.

And abolishing the carbon and mining taxes was good.  But somebody is going to have to pull the Abbott Government aside and quietly tell them economic management is about more than righting the wrongs of the Rudd and Gillard governments.

What would a pro-growth strategy look like?  It's not like there isn't any low-hanging fruit for governments to grasp.

Our absurd and anachronistic restrictions on foreign investment should be eliminated.  Competition law should be liberalised and reformed to allow firms to take advantage of economies of scale.  The four pillars policy — which prevents mergers between the big four banks — is unjustifiable on any grounds apart from populist anti-bank sentiment.

Business formation is a proxy for economic dynamism.  We need regulatory and workplace law to encourage business start-ups, rather than hinder them.

Some of our largest and most potentially-innovative sectors are held back by bureaucracy and regulation.  A pro-growth political platform would have healthcare reform at the centre.  Innovation policy needs serious change so innovators can bring ideas to market sooner.

And given the importance of education to growth it is embarrassing that the debate over education policy has devolved into a squabble over a shrinking pool of government money.  The last big idea implemented in education was the introduction of HECS in 1989.

A pro-growth platform would liberalise Australian trade barriers without waiting for multilateral or bilateral trade deals to endorse them.

And a pro-growth platform would look at the teeming mass of skilled and unskilled labour around the world and see opportunity, rather than threat.  Economic powerhouses have been built on immigration.  Australia, with our abundant space and stable institutions, is uniquely placed to attract their entrepreneurial energy.

The economist Mancur Olson once described the progress of human society as an accumulation of special interests who defend the status quo.  A country slides into stagnation as more and more groups grab privileges that hold back necessary structural change.

Olson's is a pessimistic story.  Let me amplify that pessimism.  Australian policy debate is constrained most by the tyranny of the status quo — a refusal by the political class to consider anything but the most moderate, marginal adjustments to existing policy settings.

It's obvious that Canberra still believes it has the broad strokes right.  After all, they think a grocery code of conduct counts as reform.

Perhaps in the parliamentary triangle it looks that way.  Right now, all special interests are being nicely catered for.  Rents are sought in an orderly fashion.

But, from outside Canberra, it looks like the economy is slowly grinding into stagnation, and our political class is apparently powerless to do anything about it.

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Regulatory thicket exacts a high price

It's not just miners who are stung by regulatory settings.  As the ongoing Liverpool Plains coal mine saga illustrates, regulators are frustrating Australia's ability to join global efforts in eradicating energy poverty.

Through a rather severe winter this year Australians have taken for granted their ability to flick on a switch providing extra light, or to turn on an electric heater to keep warm.

Much of this lifesaving energy, in fact more than 70 per cent of the total domestic energy available, is provided by electricity generation plants fuelled by black or brown coal.

Not only does this electricity sustain us during unforgiving climatic conditions, but it serves as a vital input keeping much of our national machinery and equipment capital stock, valued at about $606 billion last year, in working order.

Without the ability for workers to combine their skills and talents with electrically charged capital to produce valuable goods and services for Australia and the world, our wages and hence material living standards would be years, if not decades, behind their relatively lofty standards today.

While the radical alleviation of absolute poverty in the world over the past two or three decades is an achievement to be greatly admired, we shouldn't rest on our laurels knowing that about one in seven people on our planet still live without electricity.

It is estimated that about 1.3 billion people remain without access to electricity, with Africa and Asia accounting for about 97 per cent of the deficit in energy access.

Even in the emerging economy of China, now our largest trading partner, it is estimated that about 3 million people lack an effective power supply.

And if numerous households in some parts of the developing world are lacking in cheap, reliable electricity sources, one could be certain that the energy deficit means businesses in those regions are limited in their capacity to produce even more.

That so many people around the world are deprived of cheap, abundant sources of electricity, which help underpin healthy, safe, comfortable, and productive lives, is nothing short of an economic and moral travesty.

This is why Australia can ill afford to delay the onset of new natural resources production by dragging out environmental and other regulatory approvals for mining projects.

The Shenhua Watermark coal mine, proposed to be established in the NSWs Liverpool Plains agricultural area, is a case in point.

It is forecasted the mine would extract 10 million tonnes of coal per annum over 30 years, most of which would be metallurgical coal for use in steel production and about 15 per cent thermal coal to be extracted for electricity generation.

The $1.7 billion mine is estimated to support a local workforce of up to 600 employees during the mine construction phase, and in excess of 400 people employed during the mine's operation, which could prove most serviceable in a region with above-average unemployment rates.

In addition to extraction activities to take place at the mine site, the Shenhua Watermark project proponents intend to develop rail infrastructure to load 5500 tonnes of coal an hour to the Port of Newcastle.

Despite the economic benefits, numerous local farming and conservation groups claim the project would impose an ecological "Armageddon", with local federal member and Agriculture Minister Barnaby Joyce bitterly opposing the federal approval decision.

The recently concluded environment impact assessment process merely one component of an extraordinarily intensive amount of regulatory scrutiny since the company was granted an exploration permit in 2008.

The scrutineering has included four expert reviews and two reviews by independent scientific committees, which in addition to exploration licenses and farmland acquisitions has entailed a seven-year process costing the company, thus far, more than $800 million.

In the most recent development, the Commonwealth government imposed 18 environmental amenity conditions upon the project, including strict water limitations and a prohibition of mining on the alluvial soil plains currently being farmed, and with an insistence of ongoing rehabilitation of the mine site.

Amid the chorus of protests against the proposal continuing unabated, Environment Minister Greg Hunt appeared to rekindle the fires of uncertainty by invoking regulatory policy on the run.

Publicly commenting on a morning radio program, Hunt undertook to refer future water management plans for the mine to an independent scientific committee, with the minister reserving to right to veto the project should the committee be dissatisfied with the water management plan.

Noting he is "not required to under the law" to invoke this additional test in environmental regulatory approvals, Hunt has effectively signalled an overturning of due process with potentially significant ramifications for future resources investment projects in this country.

Of course, even if Shenhua Watermark are to successfully jump through the federal regulatory hoops they still must gain an environmental protection licence and mining lease from the NSW state government.

Mining projects can remain economically and financially viable even in the presence of structurally declining commodity prices, but the key is to ensure that exploration and development costs are minimised from project conception through to actual production.

This implies that regulatory burdens and other costs imposed by governments on major projects are minimised to the greatest extent possible, however there are numerous anecdotal reports to the effects that regulation-induced project delays, at least, are worsening.

Submissions to a Productivity Commission inquiry into mineral and energy resource exploration have indicated that approval time frames for major projects have stretched out from a few months, on average, in the early 2000s to between 18 and 36 months in 2012.

In a joint industry submission on streamlining environmental regulation, it was reported that assessment of one major resources project took more than two years, involved more than 4000 meetings, briefings and presentations to interest groups, and resulted in a 12,000 page environmental assessment study.

Commonwealth and state governments imposed more than 1500 conditions on the approved project, with those conditions containing an additional 8000 sub-conditions therein.

Project delays affect our position as a cost-effective, low-risk investment destination, with consultants Port Jackson Partners showing the typical Australian thermal coal project endured an average extra 3.1 years in project delays compared with 1.8 years elsewhere.

Regardless of whether the Shenhua Watermark project eventually becomes a reality, it seems the clear losers from our overly prescriptive regulatory settings are the countless people in developing countries needing more Australian coal, right now, to lead better lives.

History is not what it used to be

Greece is where Australians now look to discover the consequences of unsustainable government spending.  But you do not have to go half way around the world to find out what happens when the government cannot or will not pay back its loans.

Instead of Alexis Tsipras, the left-wing populist prime minister of Greece in 2015, we can look to Jack Lang, the left-wing populist Labor premier of New South Wales in 1931.  Tsipras refuses to repay the Germans, while Lang refused to repay the British.  The Greek crisis is the product of two decades of deliberate government policy, while Lang faced the Great Depression.  Lang was actually smarter than Tsipras.  Lang proposed New South Wales create its own currency that could have been devalued to make his state's exports more competitive.

As yet we don't know how Greece will play out.  But we do know what happened in New South Wales.  In 1932 Lang was sacked by the governor Philip Game after Lang attempted to repudiate the debts of the New South Wales government.  At the subsequent election Labor was thrashed and went from 55 MPs out of 90 in the lower house to just 24 MPs.  Lang was fiercely anti-communist, and because of this he was expelled from the ALP in 1943.  Lang was re-admitted to the Labor Party in 1971 and became a hero to the young Paul Keating.  Lang died in 1975, six weeks before another Labor leader was sacked.

Of course the problem with politicians talking about Jack Lang instead of Alexis Tsipras is that so slight is our knowledge of our own history, that most people wouldn't have a clue who Jack Lang was.  And for this we can blame our universities.

Last week I released a report The End of History ... In Australian Universities.  The report analysed all of the 739 history subjects taught in 2014 by the history departments of Australia's 34 tertiary institutions.

Economic history is literally non-existent in the history departments, while political history has all but disappeared.  It is almost impossible for an undergraduate at an Australian university to study the economics and politics of the Great Depression — one of the seminal episodes in this country's history.

ORIGINS IN BRITAIN

Australia's political and cultural institutions have their origins in Britain.  But out of the 739 history subjects taught last year, only 15 covered British history.  More Australian universities offered film studies as part of their history program (13 universities) than offered anything on British history (10 universities).

The vast bulk of history subjects offered by our universities are about late twentieth-century Australian and world history.  In our universities Australian history only started in 1972.

An analysis of the specialist history subjects offered is even more depressing.  Academic history increasingly revolves around sociology and popular culture.  There's no space for economic history in any history department, but there is room for 15 film studies subjects, 14 feminism subjects, and 12 sexuality subjects.  And these are only the subjects included in history degrees.  There are dozens more gender subjects in other arts departments.

There's been much bemoaning over the quality of the political and policy debate in Australia.  Some of that criticism is overstated.  But if there has been a decline in the condition of public discussion, it might be because an understanding of context and the background to our current policy challenges is almost entirely lacking.  The absence of a common historical knowledge means our political leaders can only talk to the public about what's on the radio at the moment and what's on the front page of the morning newspaper.

This is not the first time in 200 years of white settlement we've faced a fall in commodity prices and the prospect of declining living standards.  Economics has decisively shaped Australia's politics which is why it is such a tragedy economic history no longer exists in history departments.  It's no coincidence that our three greatest historians Edward Shann, Keith Hancock, and Geoffrey Blainey are all economic historians.

History students might know the name Blainey, but in all likelihood, there is as much chance of them knowing who Shann and Hancock were as there is of them being taught about Jack Lang.

The most successful anti-poverty movement in history?

It is erroneous for the UN to claim that the Millennium Development Goals (MDGs) has been "the most successful anti-poverty movement in history".  The extraordinary reduction in the number of people living in extreme poverty over the last 25 years has been caused by market-led economic growth.  We must re-cast foreign aid and charity to reflect this reality.

Between 1990 and 2015 the number of people living in poverty fell from 1.9 billion to 836 million.  This drastic improvement is something we should all be ecstatic about.  But the UN is incorrect in judging the MDGs as contributing significantly to this extraordinary achievement in its final report into the 15-year goals released a fortnight ago.

According to The Economist, in the first decade of this century, developing countries increased their GDP by 6% per year on average — 1.5 points more than between 1960 and 1990.  Since 2000 annual growth in household consumption in developing countries grew by 4.3% per year on average — it grew by only 0.9% annually in the preceding decade.

These gains largely occurred because of market liberalisation which boosted trade between and within countries.  In their Economic Freedom of the World report for 2014 the Cato Institute in the US found that global economic freedom has increased significantly since 1980 based on security of property rights, freedom to trade internationally, the rule of law, regulation and other factors.  They also found almost without exception, that countries that were more economically free were more prosperous.

An obvious example is China.  Throughout the late 70s and early 80s China instituted free market reforms such as opening itself up to trade with the outside world, removing the barriers to private enterprise and allowing agricultural markets to emerge.

These reforms meant that 680 million people have been lifted out of poverty since 1980.  Indeed, China accounts for three quarters of the people moving out of poverty over the last three decades.  It's worth noting China has never shown any interest in the MDGs.

But China is not the only one.  Growth in other developing countries has lifted 280 million people out of poverty since 2000 according to former World Bank economist Martin Ravallion.

There is a lesson in this for foreign aid and charity.  If free markets are lifting so many hundreds of millions of people out of poverty, foreign aid must re-cast its role as enabling poor people to participate in markets.

One way to do this is by enhancing individuals' economic rights.  A prime example are property rights.  Hernando de Soto estimates that $US 10 trillion of assets owned by poor people aren't protected by formal property rights therefore restricting grassroots entrepreneurship.  Ensuring that women have the same property and inheritance rights as men would drive economic empowerment and equality for women.

Another crucial economic right is the right to engage in free trade.  Bjorn Lomborg estimates that removing the despicable trade barriers that prevent developing nation producers from selling their wares in developed and developing markets would make each person in the developing world on average $US 1000 richer per year by 2030 and lift 160 million people out of extreme poverty.

Furthermore, enhancing economic rights by fighting endemic corruption that cripples entrepreneurship is extremely impactful.  As is ending the obtrusive industry policies that are rife in the developing world and crowd out entrepreneurship such as the Pakistani government's price-setting practices in the country's wheat sector.

The other way foreign aid can help poor people take part in transformative free markets in a sustainable way is to identify and facilitate the development of markets that are beneficial for the most deprived.  For example, the Human Capital Project in Cambodia utilises a unique financing mechanism called personal equity finance which enables impoverished students to pay for university without the risk of a standard bank loan.

Proponents of this type of free market poverty alleviation scheme is what development economist William Easterly calls "searchers" — people who develop market-based local solutions for local problems.

That's not to say there is no room in global foreign aid for targeted government social programs.  Brazil's Bolsa Familia and Mexico's Oportunidades are successful conditional cash-transfer schemes that have put a dent in poverty.  Furthermore, foreign aid is also helpful during natural disasters.

But the UN must realise that the most successful anti-poverty movement in history is called "the free market" and it's something that thankfully, most people in the world now participate in every day.

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Hockey's ''grand deal on tax'' is just wishful thinking

Joe Hockey is looking for a "grand deal" between government and the community on tax reform.  On Wednesday last week he addressed a PricewaterhouseCoopers audience calling for a discussion about big, long-term changes to the tax system that might set us up for coming economic changes.

There's no reason to doubt his sincerity.  Hockey seems genuinely interested in the structure of the tax system.  He was recently speculating whether the GST has a future in a global economy, where transactions are digital and borderless.  It's not hard to imagine the blue sky conversations he's enjoyed with Treasury boffins where they ponder such imponderables.

But his hope for a grand deal on tax is folly.  Tax reform is easy to talk about.  It's very hard to implement.  It's even harder to implement in a way that prevents the political system from undermining the virtues of the reform in question.  And it's almost impossible to implement when your government has no political capital.

Australian governments levy more than 100 separate taxes.  Each of these interact in complicated ways, introducing incentives for us all to rearrange our affairs, to work, spend and save differently.  No real-world tax is perfect, perfectly fair or perfectly efficient.  They all bias economic activity somehow.  (Sometimes this bias is intentional.  So-called "sin" taxes are designed to stop us buying the product that is being taxed.)

Over time, governments have amended the system to reduce the most obvious biases and distortions.  Many of those policies that are today fashionably described as tax loopholes or concessions exist because, in their absence, some activity would be penalised.

On The Drum last year, for instance, Alan Kohler criticised dividend imputation for making Australian investors obsessed with collecting dividends.  But if we didn't have it, income earning through corporate investment would be taxed twice — first in corporate tax, then when it is returned to investors through income tax.

The tax system is an evolved formula that reflects decades of lessons, errors and political compromises.

So designing a more efficient tax system than what we have now is relatively easy.  Everyone has their own ideas.  Yesterday John Daley and Brendan Coates of the Grattan Institute were pushing for property levies.  NSW Premier Mike Baird proposed a 50 per cent increase in the GST.  Tony Abbott likes that one.

But there's a big difference between tax design and tax reform, as the Harvard economist Martin Feldstein noted four decades ago.  Tax systems can be designed on a blank sheet of paper.  But tax reform has to be done in an existing political system, underpinned by existing political institutions, coordinated with existing political compromises, and against the backdrop of a welter of political interest groups with political influence and media friends.

All that politics inevitably leaves its mark.  All economic reform is the result of bargaining between the most powerful interest groups.  What looks like a beautiful, clean, theoretically-efficient tax on paper is distorted and damaged when the political class try to enact it.  Not all laws come out looking like firmly-cased and richly-coloured sausages.  Sometimes what falls out of the legislative meat grinder is just a coarse pile of mince and broken pieces of pig intestine.

Hockey should know this.  Remember the mining tax?  The idea of a resources rent tax was, as so many economists said at the time, an elegant and efficient tax compared to the royalties system.  But imposing such a tax on top of the Australian landscape was, it turned out, a hopeless task.

First of all, the mining tax was introduced by the federal government.  But state governments owned the resources and charged the royalties.  So the designers had to work around that problem by crediting back royalty payments.  Second, it had to be introduced into an existing landscape where decisions about mining investments had already been made — hence another round of compromises and transitional arrangements.

And all this happened before the Rudd government learned it was not strong enough to resist a publicity campaign by mining companies.  The replacement mining tax, introduced by the new prime minister, Julia Gillard, was even worse.

The last real tax reform success was 15 years ago, when the Howard government introduced the GST.  But that success is easy to overstate.  Parliamentary negotiations meant that large swathes of consumer products now fall outside the GST net.  The original intention was that states would eliminate stamp duties on mortgages and other loans.  That didn't happen.  And the way the GST is distributed means states bicker over their share and generally act like mendicant clients of an autocratic Commonwealth.

Hockey wants big picture thinking and long-term reform.  It is good we have a Treasurer thinking such thoughts.  But Hockey is not a theoretician.  He is a parliamentarian.  And what can be imagined on paper and what can be negotiated in politics are very, very different.

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Why we value the old school tie

It's a very Melbourne thing to be horrified by school fees — and there is much to be horrified about.  The fees at Melbourne's most expensive schools are pushing $30,000 per child.

But take a step back.  These big fees are a positive sign of the financial seriousness that society takes educating the next generation.  Before we get to discussing equality or standards or choice, let us agree, please, that spending money on education is good.

There's a real sense in which anti-private school hostility has nothing to do with education, per se, in that some people are richer than others.

What is the hypothetical alternative to wealthy parents investing in their children's education?  That they splurge on holidays and cars?  Hand the money over as inheritance?  Buy property?  Surely we can welcome the money being used to develop human capital.

The returns on education are vast.  A better secondary education experience leads to more choice of tertiary education, which in turn can translate into higher earnings over a lifetime.

No wonder parents want to buy as much schooling as they can possibly afford.

Individual students reap most of the benefits from their education.  But as education advocates constantly point out, society benefits too.  A more educated population is a more innovative, productive, and ultimately prosperous population.

Thus some investment by wealthy parents on private education — over and above what is churned back to them through the taxation system — flows through to society as a whole.

All this makes the hyperventilating about private schooling that forms such a fundamental part of Melbourne's intellectual life more than a little ridiculous.

In an Age column on Thursday, Julie Szego suggested private schools seem a little like a "con" for those parents who are "bleeding money on private school fees on the assumption this buys their child a competitive advantage".

Perhaps if you imagine modern Australia as a dog-eat-dog fight for prestige, then every attempt to increase human capital formation looks like a brutal feeding frenzy.

But it's true:  there's a puzzle here.  While private schools get better year 12 results, a whole host of evidence shows that once researchers control for things such as family background, the education level of parents, peer performance and so forth, many differences in results between private schools and public schools substantially decrease.  Educated and engaged parents are likely to have educated and engaged kids, regardless of what school those kids are sent to.

So are parents being irrational when they send their kids to private schools?  Of course not.

In many ways, by paying for private education, parents are buying their children friends.  Who you go to school with matters.  It is better have classes with peers that brag about doing too much study than too little.  In his new book, Our Kids, social scientist Robert Putnam argues that in the United States peer effects cause a large part of education disparities.

Also, education is about more than test scores.  All we know about why parents choose individual schools relates that choice to a school's values, facilities, extracurricular activities, location, or how nurturing or driven the staff are.  In other words, how good a fit it is for their child.

Rather than obsessing about the riches hidden behind the private-school fence, why not focus on how to make public schools more appealing?

Public schools would be more competitive against private schools if governments allowed more variation between schools, granted them more independence, and made it easier for more children to attend schools outside their geographic school zones.  Remember, it isn't just money and test scores driving demand for private education.

The obsession with the most expensive schools ignores those smaller, cheaper private schools blossoming around Melbourne, offering marginal improvements and more choice than that offered by the public system.

Funny how the debate about equality is always focused on the lifestyles of the rich, rather than the living standards of the poor.

The Age reported last week some private schools are taking legal action against families who fail to pay fees owed.  But by all accounts private schools go out of their way to be lenient on payment.  If you're going to be in debt to anyone, you'd want it to be a school.

After all, it's hard to imagine much sympathy for families that, for instance, did not pay a builder for a renovation and were subsequently taken to court.

Such is the moral baggage around private schooling that recouping debt fairly incurred is seen as some sort of ethical violation — yet another black mark against these malevolent institutions.

All that fury, all that outrage, directed towards what?  Too much money spent on education?

Should Labor cut ties with unions?

Union control of the Australian Labor Party is a significant obstacle to economic reform and will remain so as long as unions enjoy special legal privileges which reinforce their political power.

The royal commission has brought to light the many questionable deals made by union leaders.  But less examined is the main reason why these deals are made:  to expand influence within the ALP.

The right to join a union is a fundamental principle in a free society.  But it is unhealthy for an interest group representing a small and declining proportion of Australians to have such an unprecedented level of influence over policy.

Unions have always been an influential force in Australia.  In 1990, union membership was at 41 per cent of the workforce, making them an important stakeholder for governments of all persuasions.

But as union membership has fallen to 17 per cent of the total workforce, unions have sought other means to maintain their political influence.  The modern trade union ­leader is now often as much a factional powerbroker as an organiser for workers.

The most significant foundation of union control in the ALP is the requirement that 50 per cent of delegates to state conferences come from affiliated trade unions, which leads to a similar representation at national conferences.

This then extends throughout the organisational and parliamentary wings of the party.  As a result, 19 of the 26 National Executive members are current or former union officials and half of all ALP MPs have held a paid position in a trade union.  This includes 23 of 55 lower house MPs, and 17 of 25 senators.  More than half the ALP front bench, 22 of 43, are former union officials.

In effect, unions have been handed a veto over any policies which threaten their interests, such as the sale of electricity assets or labour market liberalisation.

Perhaps most importantly, Labor has also allowed unions to gain special legal privileges not available to other civil ­organisations, such as extraordinarily broad rights to enter workplaces.

These powers make it easier for unions to recruit and retain members and thus exercise more votes within the ALP.

The internal structure of the ALP is a matter for them.  However, the special privileges granted to unions which serve to entrench union power should be removed.

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