The Government's costly mining mistake

The first mistake the Gillard Government made was on the mining tax.

The Rudd government had come undone by an audacious tax grab and Gillard needed to fix the problem quickly.  In the end the solution was too quick, with the Commonwealth agreeing to refund all state royalty charges.

It is clear that the Commonwealth meant to refund existing and announced royalty charges -- a sensible approach -- but that isn't the actual agreement that it signed with the miners.  So the Australian mining industry faces a tax increase anyway.  The real question is who gets the money?

Economists often debate the so-called incidence of taxes.  By that they mean who actually bears the economic burden of a particular tax.  They seldom ever debate who gets the tax revenue.  That is usually quite obvious.  Even the case of the GST is clear;  it is a Commonwealth tax and the Commonwealth chooses to distribute the money to the states and territories.

The mining tax is going to be very different.  The Commonwealth proposes to tax the miners.  The poor design of the tax, however, allows the states to increase their royalty charges at the expense of the Commonwealth.  As things currently stand, assuming the mining tax passes the Parliament, the Commonwealth imposes a tax and the economic benefit of the tax, i.e. the revenue, accrues to the states.  The miners are no worse off, they have to pay more anyway.

Of course this isn't at all what the Commonwealth had in mind.  The federal budget is in deficit and Treasurer Wayne Swan has promised, come hell or high water, that the budget will be in surplus next financial year.  He needs the money for his own budget.

The argument that increases in royalty charges undermines Tony Abbott's claim that miners are already over-taxed doesn't hold water.  Increases in royalty charges are not new taxes (assuming for argument sake that a royalty charge and tax is the same thing), once the mining tax is in place any increase in royalty is gouging the Commonwealth and not the miners.  Over time the states will increase their own royalties to collect all the revenue that the Commonwealth hopes to earn from the mining tax.

Wayne Swan has reacted angrily to the states increasing their royalties and placing pressure on the federal budget.  He has threatened to take money off the states in areas such as withholding GST payments or infrastructure spending.  But is this really wise?

State government is primarily about providing services.  So nurses, police and teachers are primarily funded from state government budgets.

The single largest item in the federal government budget is welfare.  By defunding state governments the Commonwealth is rebalancing public spending away from the provision of services and towards the provision of welfare.  I suspect the majority of taxpayer-voters would not support that choice.

Arguments that we see about the mining tax in the next while are going to be between the Commonwealth and the states as to who gets the loot, not about whether the tax itself is a good or bad reform.  Of course, that is how the debate will be framed but that isn't the essence of the argument.

The other complicating feature is that the mining tax is yet to pass the Parliament.  Given current uncertainties it may never pass, and the Coalition have promised to repeal it.  In that instance the States will (probably) have increased revenue from the increased royalties.  Both ways the miners get to pay more and the states end up with the loot.  (A slight complicating feature is that the Commonwealth Grants Commission will redistribute the money between the states, but still the Commonwealth may lose out).

This is not what the Commonwealth ever intended.  The mining tax was initially formulated on the run and was poorly planned and poorly executed;  the Gillard iteration was formulated in a panic and the unintended outcome has been to enrich the states at the expense of the Commonwealth.  That is good for the states, but doesn't help the federal budget get back into surplus.

ADVERTISEMENT

National curriculum: Labor's big failure

Less than two months after the Rudd government took power, education minister Julia Gillard announced her national curriculum, and announced it would start in 2011.

Just four subjects, mind you -- English, Maths, Science and History.  The rest were to follow later.

The deadline was missed, and introduction was delayed until 2012.  (Kevin Rudd nevertheless listed the national curriculum as one of his achievements in his farewell speech.)

But the replacement deadline was missed too -- bumped down the track to 2013.  Now last month New South Wales said it would hold the curriculum back until 2014 at the earliest.  And teachers' bodies have urged education ministers across the country to follow NSW's lead.

Three years seems like a short time to enact a four-subject curriculum across the country.  But for it to take six years is a debacle.

Sure, it hasn't got one-tenth the publicity of the Malaysia Solution, or pink batts, or the mining tax and health reform reversals.  Or even GroceryChoice.  But the national curriculum should be one of the Government's most embarrassing failures.

This is not the first national curriculum proposal to flounder.

In 1989 the Commonwealth government (Labor) got together with the states (also mostly Labor) and tried to forge a uniform curriculum.  Education is, of course, a state responsibility.  You can't make a national curriculum without the consent of the states.  But when the states started to turn Coalition, the deal collapsed.

That seems to be happening again.  The Commonwealth's authority to drive curriculum change relies entirely on the acquiescence of the states.  While the new Coalition state governments in Victoria and New South Wales were initially supportive, they are turning hostile.

Perhaps a national curriculum is quixotic.  But for decades it has been an article of faith among bureaucrats and the education establishment that Australia needs a national curriculum.

There are a large number of politicians and academics who seem to believe a policy is not serious unless it is a federal policy, a ''national'' approach is inherently and unquestionably better, and the Commonwealth Government is better placed to make good policy than state governments.  Those beliefs are more ideological than anything else.

No doubt some state curricula are sub-optimal.  But the Commonwealth has a less-than-absolute success rate in policy formation and implementation too.  Simply claiming you want a ''world-class curriculum'' is no guarantee you can design one.  And the slipping implementation of the curriculum does not inspire much hope.

In 2005, the academic Alan Reid argued in a Department of Education research paper previous attempts collapsed largely because they ''failed to develop a rigorous rationale for national curriculum collaboration''.

Indeed, the practical arguments for a national curriculum stretch the bounds of credibility.

Gillard -- and now Peter Garrett -- speaks of the need to provide a consistent education to the 80,000 students who migrate between states each year.

It's an old claim:  in 1968, the federal education minister Malcolm Fraser spoke of the ''very real difficulties faced by children who move from one state to another''.  And it's one which sounds convincing until you realise 80,000 is less than 3 per cent of the entire student body of three million.

Reforming the entire school system to cater for these students is absurd -- even if we grant the doubtful assumption those students struggle terribly to adjust to their adopted state curricula, and that it's a problem the Government must tackle urgently.  (There are probably simpler ways to ease the transition for these few children.)

When the Howard government was considering their own national curriculum, Julie Bishop claimed it was necessary because ''ideologues'' had ''hijacked'' the state curriculum bodies.

This makes even less sense.  It's easier for ideologues to hijack one national curriculum than eight separate ones.  And much more rewarding.

After all, under a national curriculum every single student in Australia will be taught from one song sheet.  The Australian Curriculum Assessment and Reporting Authority speaks about ''shaping the lives of the nation's future citizens'', how the curriculum must teach students to ''work for the common good, in particular sustaining and improving natural and social environments'', and ensure they are ''responsible global and local citizens''.

These are heady sentiments.  The curriculum is explicitly designed not just to teach, but to ''shape''.

So if the curriculum presents a distorted view of, say, the Industrial Revolution (an historical event which profoundly influences our understanding of the contemporary economic order) it matters.  Do markets oppress or liberate?  Is economic progress good?

Or if the curriculum suggests, as this one does, that human rights were given to us by treaty-makers at the United Nations, that strange but suggestive view will be embedded in future generations when they come to consider debates over rights in Australia.

Yet even as its implementation problems pile up, the national curriculum has still not been given the same critical examination as this Government's other policy flops.  That needs to change.

Communications regulation is a dog's breakfast

The way we regulate media and communications is a dog's breakfast.  That judgment has been blindingly obvious for more than a decade now.

But it has now been confirmed by no greater authority than the dog.

A paper by the Australian Communications and Media Authority (ACMA), Broken Concepts, was released on Monday to coincide with the Government's media convergence review.  In it the communications regulator details the complexity and contradictions of laws which regulate everything from phones to emails to subscription television.

For instance:  Australian content requirements apply to television, but not to the television-like services broadcast via the internet.  Subscription TV and free-to-air TV have totally different content standards.  Spam faxes and spam emails and telemarketing are regulated differently.  The universal service obligation seems incongruous in a world where most Australians have mobile phones and many people are going home-phone-free.

It goes on.  In the regulations and regulatory frameworks they studied, ACMA found the ''majority'' were broken or have been severely challenged.

This is not a surprise.  Regulation and technological change just don't go well together.

Telecommunications and broadcasting policy has long been characterised by rent-seeking and paternalism.

Indeed, we got off to a terrible start.  In 1905, the Commonwealth decided to take control of the radiofrequency spectrum with the Wireless Telegraphy Act.  But the Act had been delayed by the Barton government's worries that the new technology would challenge the existing telegraph companies.

For a century, governments have conspired with politically-protected firms to hold back or cripple new technologies at the expense of consumers.

It's that century of regulatory perfidy that has gifted us the inconsistency and confusion of the 23 Acts and 523 pieces of regulation ACMA oversees in 2011.

In 2000, the Productivity Commission described a history of ''quid pro quos'' which ''created a policy framework that is inward-looking, anti-competitive and restrictive.''  And the Howard and Rudd governments only prolonged this sad tale.

Communications regulation is worth cleaning up for its own sake.  Inconsistent regulation distorts investment and consumption.  It impairs innovation.

But it's doubly worth cleaning up considering the pace of technological change will only increase.  Governments will forever have to figure out how new technologies fit in.

The ACMA suggests we reframe our views about communications regulation according to a ''network layers'' model.  This model was developed in the early 2000s by communications academics who took the internet challenge to legacy media seriously.

Communications technologies have traditionally been regulated separately and distinctly -- in ''silos''.  But treating technologies like silos doesn't make sense any more.  The copper wire network is no longer the only way you can make a phone call.  Free to air television isn't the only place you can watch a television show.

Instead of silos, the layers model views all communications networks as consisting of a number of layers, from infrastructure (copper wire, for example, or mobile phone networks) up to content (television programs or phone calls).

ACMA suggests a model with four layers.  There are other options.  The original theorists talked about seven, others talk about five, or three.

But the idea is the same.  All infrastructure should be regulated consistently, no matter what technology that infrastructure is made of.  All content should be regulated consistently, no matter how it is delivered.

The layers model is elegant.  It's probably the only model which will accurately and flexibly describe the communications of the future.

However, ACMA may not be aware the network layers model implies something more than moderate reform.

In a regulatory environment governed by such a model, the communications regulator would probably have nothing to do.  Adopting a layers model would bring radical deregulation.

After all, if a regulator treated internet and free to air exactly the same, how would they enforce Australian content requirements on both?  ACMA would be unable to insist that a certain percentage of all websites were Australian even if they wanted to.  Same for the broadcasting standards and codes of practice -- how could a regulator insist on ''balance'' on the internet?

That's content.  If the Government wanted to regulate infrastructure consistently, would it insist every owner open its network to competitors -- as Telstra's copper lines were treated?  Or would it leave infrastructure to the market -- like mobile phone networks?  The economic logic of infrastructure investment suggests less regulation would be imposed, not more.

Of course, regulation being regulation, the current dog's breakfast has supporters.  Industries have grown up relying on this regulatory mess.  Any change is a threat to the commercial status quo.

And the hysteria we saw from the actors' union after a minor change to the Foreign Actors Certification Scheme earlier this year will be nothing compared to the outcry when the Government concludes, rightly, that Australian content requirements are anachronistic and impossible in a digital world.

Furthermore, as hostilities between News Limited and the Government increase, there's no political appetite for media deregulation.  No matter how obvious or necessary.

But credit for ACMA where it's due.  It's a rare regulator which recommends such radical change.  Especially change which could, if done properly, close that regulator down.

Union tax plan a recipe that will weigh us down

The ACTU doesn't deliver the full picture on how much we're taxed.

The ACTU's recipe for national taxation reform will merely serve to weigh down our future economic growth prospects.

In research released this week the ACTU has outlined the results of a survey of 1000 people finding that a majority of respondents favour higher tax rates on high-income earners.

On the basis that ''real tax reform is reform that is directed towards satisfying Australians' needs and preferences'', the ACTU uses these survey results to commend to governments a more progressive taxation system.

The idea behind this notion is that an increase in the degree of tax progressivity will generate more revenue to fund government services.  The ACTU suggests that there is significant scope for increasing taxes because Australia is a ''low tax country'' in comparison with its OECD counterparts.

According to data presented by the ACTU, taxation revenue as a proportion of GDP for Australia was 27.1 per cent in 2008-09, the sixth lowest tax to GDP ratio for 33 countries sampled.  By contrast the OECD average of taxation revenue to GDP was 34.8 per cent in the same year.

Such favourable comparisons are often used by interests seeking a greater role for government in economic activity, however they tend to mislead the general public about the true size of Australian government.  Accepting the figures as presented, they do indeed reveal that Australia is a tax-competitive nation state compared with small, distant European nations.

A more accurate reflection of Australian taxation competitiveness is presented, however, when we compare our tax-to-GDP ratio against our East Asian neighbours.

The comparison is less than flattering.  The latest available data shows that Hong Kong has a tax-to-GDP ratio of 13 per cent, while Singapore and Malaysia have shares of taxation revenue to GDP of 14.2 per cent and 15.5 per cent respectively.

The OECD statistics, as presented by the ACTU, tend to obscure Australia's true degree of tax competitiveness since various off budget items are excluded from measures of taxation burden.

Australia imposes a compulsory superannuation scheme requiring employers to contribute to superannuation funds on behalf of their employees, which effectively acts as a tax.  Based on an update of previous estimates, compulsory contributions in 2008-09 were roughly equivalent to 3.4 per cent of GDP lifting the Australian tax burden to 30.5 per cent of GDP.

Governments also impose a range of tax expenditures which reduce the headline tax burden.  Incorporating the $102 billion in tax expenditures reported by the Commonwealth in 2008-09 alone adds about another 8 per cent to the Australian tax-to-GDP ratio, giving an overall figure of 38.5 per cent.  Adding to this the grab-bag of tax expenditures reported by the mainland states, totalling some $13.7 billion in 2008-09, adds another percentage point to the overall taxation revenue to GDP ratio.

Given that federal, state and local budget deficits represent future taxes, it is also necessary to add the 2 per cent of GDP general government fiscal deficit.  Australia now has a tax-to-GDP figure of 41.5 per cent.  When these and other quasi-tax arrangements, such as those affecting the take up of private health insurance, are factored in, it is no longer clear that Australians live the charmed life of low taxation as the ACTU and other groups would have us believe.

The ACTU has dismissed recent episodes of Australian tax reform as being little more than an ''unending series'' of tax cuts.  This is not quite true, as governments engaged in tax swaps that purport to be ''revenue neutral'' in theory but practically deliver more revenues to facilitate increases in public spending.

But taxation burden reductions, wherever they may be found, are desirable in that they deliver benefits for residents and businesses that remain in Australia, and present this country in a more favourable light amongst global investors.

Flatter and lower income tax rates encourage greater workforce participation, including for the benefit of growing sectors of the economy in which labour shortages are said to exist.

Lower taxation also reduces impediments for entrepreneurs to generate the additional economic wealth and, for that matter, job creation that this country needs, especially outside of mining activities.  More generally, flattening and lowering tax scales reduces the economic deadweight losses providing an important basis to enliven economic activity across the board.

Therefore it is a surprise that the peak body of a movement, claiming to represent workers' interests, should oppose tax cuts that would prove so beneficial on numerous fronts.

The Australian economy is presently on its knees due to post-GFC economic stagnation, poor productivity, cost of living pressures, and the impending threat of new mining and carbon taxes.

The sensible resolution to this impasse is through reducing government intervention, with a focus on taxation reductions, and not pursuing the ACTU path toward distortionary progressive taxes that would punish private sector entrepreneurship and hamper productivity improvements.

ADVERTISEMENT

Why the West is better than the rest

Civilization:  The West and the Rest
By Niall Ferguson
(Allen Lane, 2011, 402 pages)

In 2009, I established my Foundations of Western Civilisation program to defend and extend Australians' understanding of the influential, historical role of the West in establishing many of the liberties enjoyed by members of our society.  In the preface to the UK edition of his new book, Civilization:  The West and the Rest, Niall Ferguson neatly encapsulates why there was such a gap in the market for me to fill:

For roughly thirty years, young people at Western schools and universities have been given the idea of a liberal education, without the substance of historical knowledge.  They have been taught isolated ''modules'', not narratives, much less chronologies.  They have been trained in the formulaic analysis of document excerpts, not in the key skill of reading widely and fast.  They have been encouraged to feel empathy with imagined Roman centurions or Holocaust victims, not to write essays about why and how their predicaments arose.

Already this year, the value of the program has been highlighted by the extraordinary response of education academic Tony Taylor to my critique of the proposed national curriculum, particularly the history component that Taylor helped write.  Taylor claimed that there was no reason to include the English Civil War in the curriculum, as it was ''arguably just a series of confused and confusing localised squabbles that may have a special significance for UK history, but not for anybody else (unless they like dressing up in period costume)''.  As several writers argued in response to Taylor, few events in world history have had as much lasting significance as the English Civil War.  Much modern debate about the nature of the state and its power can be traced back to 17th century England, where, as Ferguson points out, the two great rival works, Thomas Hobbes' Leviathan and John Locke's Treatises on Government, provided ground-breaking ideas on the subject.

The response to Ferguson's book in Britain shows that a similar program to mine may also be required there.  The thought that Ferguson might be providing advice on their national history curriculum to Cameron government Education Secretary Michael Gove, horrifies the UK education establishment.

Reviewing the book in The Guardian, historian Bernard Porter argued that ''it furnishes an almost perfect illustration of why children need to be taught analytical skills, more than 'big stories' or facts''.  Porter seems to think that Ferguson and Govc may get together and ensure that Ferguson's text becomes the sole element of the syllabus, hardly likely since one of the Ferguson key aims for history students is ''reading widely''.  However, if there is one ''big story'' that requires attention, it is the one Ferguson attempts to address in this book, as he goes about explaining how ''the West shrank the world''.

So what will students in the UK or Australia get from reading Ferguson's book?  They will certainly get one slightly silly gimmick.  As with four of his past five books, this work has a companion television series and perhaps to appeal to that medium, or to capture the attention of the young, Ferguson describes the factors which led to the rise of the West as ''killer apps'' and identifies six of them:

• Competition
• Science
• Property rights
• Medicine
• The consumer society
• The work ethic.

In the words of Porter, Ferguson argues that ''western predominance in the world has lasted 500 years, no less''.  Actually, Ferguson makes clear that for the first part of this period the West was still behind, but he also identifies the early signs that the West was making more rapid progress than the two civilisations, Chinese and Islamic, that had been the most dynamic since the fall of Rome.

Ferguson discusses China in the chapter on ''competition''.  Presenting a long list of Chinese innovations, including the mechanical clock, printing with movable type, paper, the blast furnace and iron bridges, Ferguson also explains how, by the early 15th century, the Chinese had a clear capacity to spread their geo-political dominance via admiral Zheng He's naval fleet, larger than anything assembled in the West until the First World War.  But the death of his imperial sponsor in 1424 saw his voyages stopped.  This was a precursor to the collapse of the Ming dynasty in the 17th century with a decline in population of between 35 and 40 per cent.  Ferguson ascribes the blame primarily to its status as a closed society, which worked for a time, but when something went wrong had no external resources to alleviate a problem.

In contrast, when the West began to explore, there were numerous jurisdictions all competing with each other to see who could better trade with, or better exploit other parts of the world.  While constant fighting within Europe had many negative consequences, it had potential benefits for its expansion -- improved military technology, more efficient taxation and most importantly, no monarch was ever in a position to prohibit all European exploration.

Ferguson argues that scientific superiority was a key reason why Islamic civilisation was able to establish and maintain a caliphate covering such a large area.  The caliphate produced the world's first proper hospitals and universities and made numerous important discoveries.

As late as 1683, the Ottoman army came very close to capturing Vienna.  The fact that it did not was symptomatic of the changing fortunes of the West and the Islamic world.  Just as the Scientific Revolution was gathering pace in Europe, influential Muslim clerics were asserting more and more that the study of science and philosophy were incompatible with the Koran.  They even ruled that printing was incompatible with religion, thus further restricting the opportunity for the dissemination of new ideas.  Ferguson personalises the decline of the Ottomans and the rise of the West, writing ''sultan Osman III presided over a decadent Ottoman Empire, while Frederick the Great enacted reforms that made ... Prussia a byword for military efficiency and administrative rationality''.  Plus, Frederick encouraged science, enacted freedom of religion and decreed that there would be openness to immigrants.

The third chapter, ''property'', looks at why different parts of the New World became more dominant parts of the West than others, largely by contrasting the experience of North and South America.  Ferguson argues that the difference was not democracy per se, but ''in reality, democracy was the capstone of an edifice that had as its foundation the rule of law -- to be precise the sanctity of individual freedom and the security of private property rights, ensured by representative, constitutional government''.  The key was that in North America, a system evolved based on the Lockean principle that an individual should be able to claim and then continue to own property without being subject to arbitrary intervention by government.  This decision on how to allocate land ''would ultimately determine the future leadership of western civilization''.  Even when Latin American countries achieved independence early in the 19th century, the rule of a strong leader took precedence over the rule of law, as Simon Bolivar's Organic Decree of Dictatorship ''made clear there would be no property-owning democracy in a Bolivarian South America, and no rule of law''.  In contrast, not just in the United States, but in Canada, Australia, New Zealand and British Africa, property ownership was widely dispersed, and democracy grew from it.

One must recognise that while the West may have exported many useful things to the Rest they also delivered many diseases with fatal consequences for millions.  This was something of returning a compliment, as eastern-originated disease had been a major killer in Europe in the 14th century.  Ferguson is keen to point out that Europe produced cures as well as sickness.  Work on tropical diseases from the 1880s to 1920s found cures for a number of them, and while a strong motivation was protecting colonists, it also had the potential to help natives.

The chapter on medicine is something of a paean to the medical pioneers who went into the tropics in the late 19th century seeking cures for diseases such as malaria and yellow fever, as he comments ''the bacteriologist, often risking his life to find cures for lethal afflictions, was another kind of imperial hero, as brave in his way as the soldier explorer''.  Ferguson argues that the potential medical benefits to native populations ''were often overlooked by those, like Gandhi, who maintained that the European empires had no redeeming features''.  He makes the further point that the reason life expectancy remains low in much of Africa is that many African communities still prefer to rely on traditional rather than Western medicine.  In the early 20th century, the French were particularly authoritarian in trying to stamp out traditional healing methods and replace them with modern ones and while ''it is easy today to dismiss such aspirations as insufferable Gallic arrogance'', they did extend thousands of lives.

Of course, not all science was benign.  The second half of the 19th century saw the development of the science of eugenics.  Ferguson makes the point that at that time ''racism was not so much a backward-looking reactionary ideology;  the scientifically uneducated embraced it as people today accept the theory of man-made global warming''.  The consequences of the theory arc described in all their gory detail, such as the Germans' belief that, in some cases, complete eradication of tribes was required, which led to events such as the massacre of the Herero people at Hamakari by German General von Trotha in 1904.  The fact that in the first half of the 20th century the racial ideas first applied in the colonies were then applied in Europe was a sign that Western Civilization had the potential to be its own greatest enemy.  Ferguson draws a direct link writing that ''if Auschwitz marked the culmination of state violence against racially defined alien populations, the war against the Herero and Nama was surely the first step in that direction''.

The chapter on consumption notes early on that ''consumer society is so all-pervasive today that it is easy to assume it has always existed ... yet in reality it is one of the more recent innovations that propelled the West ahead of the Rest''.  The first modern economy evolved in Britain, and Ferguson identifies two reasons, dearer labour and abundant coal, as to why the Industrial Revolution happened there first, rather than in other places in north-western Europe.

This is perhaps the most thought-provoking part of the book, with Ferguson getting onto his home turf of economic history.  He also deals with the growth of nationalism and notes the odd paradox that growth of nationalism coincided with a growing conformity of dress in emerging consumer economies.  Clothing plays a big part in this chapter for, as Ferguson argues, ''what people wear matters'' and ''the West's two great economic leaps forward -- the industrial revolution and the consumer society -- were to a huge extent about clothes:  first making them more efficiently and second wearing them more revealingly''.  Hence, he writes at some length about Isaac Singer's new sewing machine, a passage which captures Ferguson's strength as both an historian and a writer.  He recognises the importance of innovation and mechanical progress, but also makes the passage more lively by mentioning that Singer sired ''a total of twenty-four children by five different women'' and pointing out that Gandhi regarded the sewing machine as ''one of the few useful things ever invented''.

This chapter also introduces the first part of the Rest to copy the West -- Japan.  The Japanese were unable to be certain what lay behind Western success and so copied everything from the German army, British navy and American schools, to eating beef, which hitherto had been taboo.  Most importantly, in Ferguson's eyes, Japan adopted Western dress, ''realising what a potent agent of development Western clothes were'', thus unleashing that key driver of early industrialisation, the textile industry.  It was ''a pivotal breakthrough in world history''.

By way of contrast, Ferguson points out that consumerism and the 20th century's two most prominent forms of totalitarianism -- fascism and communism -- seem to have been incompatible.  Hitler was focused on destruction rather than consumption, with consumption of everything from textiles to coffee declining, and comparatively low rates of ownership of private cars.  Then there were the Communists.  Ferguson poses the question as to why the Eastern Bloc did not just allow its citizens as much rock n' roll and jeans as they wanted to overcome the chief grumbles of their young people, but he explains that ''the answer is that the consumer society posed a lethal threat to the Soviet system itself''.  Ferguson devotes a lengthy section to jeans, highlighting the irony of how sixties radicals all wore them, which more than anything else symbolised international consumer homogeneity.

In the final app chapter, Ferguson considers perhaps the most famous theory about why the West prospered -- the Protestant work ethic.  He concludes that Max Weber was right, but for the wrong reason.  The real contributor to economic development was the Protestant encouragement of literacy and printing so individuals could read the Bible.  In particular, Ferguson claims that ''recent surveys of attitudes show that Protestants have unusually high levels of mutual trust, an important pre-condition of efficient credit networks''.  He also explores why religion has continued to flourish in the United States while it declines across Western Europe.  The latter is something of a problem if, like some of the Chinese academics Ferguson quotes, you believe Christianity was one of the West's greatest strengths.

Always problematic for historians is when they try to become prophets as well as interpreters of the past.  The fact that, what Ferguson in his tech talk dubs Western Civilisation 1.0, the earlier version which climaxed in the Roman Empire, declined so quickly, gives him pause to consider whether version 2.0 might be about to head the same way quickly.  There are a number of issues which concern him.  Given his relationship with prominent Islam-critic Ayaan Hirsi Ali, it is no surprise that one of his worries is the rise of militant Islam within the West.  Yet, while he has a point, one must not forget that while large scale immigration to the West of people from former colonies has clearly changed those Western countries, the change there has been small compared to the change wrought on the colonies by the West, and that trend should continue for a while to come.  Perhaps of more pressing concern to the countries of the West is his recognition that where once the citizens of Western countries expected to live within their means, they now expect to get everything on credit.

Whether or not one agrees with all Ferguson's conclusions, one needs to recognise his ability as a writer to make his point in a clever way.  When discussing how the West was more receptive to importing new ideas, he writes:

The English were luckier in their drugs, too;  long habituated to alcohol, they were roused from inebriation in the seventeenth century by American tobacco, Arabic coffee and Chinese tea.  They got the stimulation of the coffee house, part cafe, part stock exchange, part chat-room;  the Chinese ended up with the lethargy of the opium den.

Then when assessing 1970s predictions about the future of the Soviet Union, he notes that the least accurate came from ''clueless academic Sovietologists''.

And one could say the same about the clueless academic historians who seem determined to wilfully misrepresent what Ferguson is saying.  He is not forgetting Islamic mathematics, or Chinese printing, but he is trying to establish why the West, which was clearly behind those civilisations on many criteria in the 15th century, got to be the imperialist, exporting its world view by the 20th century.

The fact that the West had been behind for many centuries clearly rules out any theory that the people of the West were intrinsically better, but some things they did must have made a difference.  Ferguson has made a valiant attempt to identify them.  He may not have provided a definitive answer, but it is a thought-provoking and challenging analysis.  Certainly, reading Civilization will enlighten young (and old) minds far more than trying to overanalyse a couple of obscure historical documents.

Classical liberalism's future

Robust Political Economy:  Classical Liberalism and the Future of Public Policy
By Mark Pennington
(Edward Elgar Pub, 2011, 302 pages)

It is a curious fact that one of the most compelling new works in classical liberalism, Mark Pennington's Robust Political Economy:  Classical Liberalism and the Future of Public Policy, has perhaps the most obscure title in the canon of freedom literature.

Nonetheless, Mark Pennington has written perhaps the most important book in classical liberal political economy in at least two decades.  It deserves to be read widely, and for those who do, a richly rewarding intellectual experience will surely be in the offing.

The phrase ''robust political economy'' is derived from the efforts of economists, particularly Peter Boettke at George Mason University in Virginia, who sought to explain economic phenomena even when relaxing some crucial underlying assumptions concerning human agency.

As any student or informed observer of economics would appreciate, neoclassical economic theory rests on the idea that economic agents of all stripes are rationally omniscient.

This implies that all information about market conditions, including current relative prices attached to goods and services, and changes to relative prices if circumstances change, are perfectly known to those who trade for mutual benefit.

Economists have also assumed that individuals are self-interested, in that they seek to optimise net benefits from the market transactions they engage in.  As Adam Smith noted, the interplay of the expression of self-interest by sellers and buyers, as if led by an invisible hand, leads to a continuous improvement in material living standards.

The neoclassical economists believe that everyone is omniscient and self-interested except, well, for politicians and government bureaucrats who are as omniscient as the traders in the village square, but are imbued with a benevolence that can only be expected of those taxing, spending and regulating in the community's interest.

As any intellectual refugee from Economics 101 might appreciate, public sector benevolence is a central aspect of the neoclassical narrative that suggests only governments can rectify inefficient resource allocations resulting from the (curiously growing) catalogue of market failures.

While neoclassical economics might be spoon-fed to undergraduate economic students and public servants on policy management short courses, it has come under intense challenge from a variety of schools of economic thought.

The Austrian school of economics has long criticised the neoclassical assumption of human omniscience, as exemplified by Ludwig von Mises and Friedrich Hayek's famous exposition of the ''knowledge problem''.

The relaxation of the omniscient agent assumption applies as much to the impossibility of centralised economic planning by government as it does to the marvel of decentralised plan coordination, guided by prices, for individuals.

It took the emergence of the public choice school of economics from the late 1940s, which culminated in James Buchanan winning the Nobel Prize in Economics in 1986, to finally break the pretence of benevolent public sector agency as a guiding star for economic analysis.

In their particular brand of ''politics without romance'', public choice theorists describe a world of self-interested politicians, budget-maximising bureaucrats, rent-seeking special interests and rationally ignorant voters in rehabilitating the Humean imperative for checks and balances to constrain discretionary political conduct.

Whereas Austrian economics and public choice once rode on parallel train tracks, Boettke and other researchers in classical liberal political economy saw opportunities for their theories to provide better explanatory power if the Austrian critique of omniscience and the public choice critique of benevolence were merged.

And so emerged robust political economy, a theory grounded on testing the ability, or ''robustness'', of alternative institutions to deliver desirable outcomes in the face of deviations from ideal assumptions such as agent omniscience and benevolence.

In the opening pages of Robust Political Economy, Mark Pennington lays the groundwork for the analysis that follows.  By contrast to the rhetorical flourishes of the political left that the modern world has acquiesced to the ''neoliberal'' agenda, the scope of the state in economic and social life has been left largely intact with new fronts opening that favour larger government in the areas of welfare provision, international economic development and the environment.

For Pennington, the objective in response to these challenges is no less than to restate the case in favour of the minimal state, and this can only be satisfactorily achieved by looking squarely at human imperfections.  Which institutions will work best if human cognition is bounded by the knowledge problem, and may people possess incentives to exercise self-interested behaviour?

The answer to this question, according to Pennington, is ''that the institutions of private or severally owned property, a market economy, and a limited government confined to the resolution of disputes between private parties, are best placed to meet the requirements of a robust regime''.

While not even hardcore libertarians would contend that decentralised markets and their supporting institutions can guarantee perfectibility in a world of bounded cognition and self-interested motivations, Pennington shows that classical liberalism provides the institutional robustness needed for individuals to experiment and learn of ways to improve their circumstances without being violated through the arbitrary application of coercion by authorities.

In simple terms, the freedoms afforded under a liberal minimal state trump the cold hard directives meted out under socialism.

Robust Political Economy provides the great service of critiquing the theoretical fashions of Rawlsian social justice and Habermasian deliberative democracy that are steadfastly worn by those who subscribe to anti-capitalist sentiments.

In response to the works of Habermas and his fellow travellers, who claim that markets are an alien construct that deny a voice to the populace at large, Pennington helpfully suggests that ''classical liberalism conceives of markets and other 'spontaneous orders' as complex communicative networks that facilitate the exchange of knowledge, ideas and expectations.''

Within this, the exit mechanism available to participants within open markets and federal states is seen as a robust method for those who want to exercise dissent from majority opinion without impinging upon the right of the majority to express theirs.

A thorough critique of neoclassical economics, particularly Joseph Stiglitz's homilies on information failures, is also presented for good measure, emphasising that economics is at its most relevant in addressing real world problems when it drops its unrealism concerning human agency.

Another appealing feature of Pennington's work is that it is not limited to a theoretical treatise on robust political economy, as important as this might be.  It presents an ambitious critique of some of the great political controversies of our time that is invaluable to the general reader and policy protagonist alike.

Robust Political Economy prosecutes a detailed case for a transformation of welfare emphasising the centrality of economic growth to lift the standard of living for all strata within a society.

However, acknowledging that some people may not be able to participate in a market economy due to loss of employment, old age, illness or disability, Pennington argues for a revival of voluntary collective action rather than a bloated tax-financed welfare state to ameliorate the strains of financial hardship.

In other words, Mark Pennington revives the notion of private welfare, including through mutual aid associations, that time forgot both in Australia and in other places such as the United Kingdom.

Next, Robust Political Economy chronicles the debate over how best to promote economic development around the world without the need to channel foreign aid through burgeoning, middle class bureaucracies such as the United Nations or the World Bank.

A focus on economic growth, facilitated through the emergence of market friendly institutions protecting rights to the acquisition and disposal of private property, is seen as a key strategy that is robust to the knowledge and incentive problems that have long complicated this area of public policy.

In perhaps one of the more interesting chapters, Pennington asks whether the classical liberal minimal state concept or a ''green leviathan'' would prove to be more effective in responding to local environmental degradation or even global warming.

Free markets, developed with the aid of exclusion technologies and the codification of private property rights for resources of an open access state, such as fisheries, may prove to be effective in discouraging their overuse.  This was a key conclusion from the work of Elinor Ostrom, who won the Nobel Prize in Economics only two years ago, and is given its due credence in Robust Political Economy.

Of intense interest to Australian readers will be Pennington's musings about how to deal with the ''dilemma of climate change''.

The merits of global governance arrangements are discounted, in part because of the extensive monitoring costs associated with ensuring that climate change agreement signatories keep to their end of the emissions pollution reduction bargain.  The knowledge problem rears its head once again.

Presuming that climate change is a real problem requiring management, Pennington suggests that ''a not unreasonable case can be made in favour of decentralised adaptation to climate change'' with remedial actions by individuals, companies and countries to adapt to problems as they arise.

While Robust Political Economy provides considerable focus on these three domains of public policy, there are many other important policy lessons available for those who take the effort to pore carefully through its 302 pages.

For example, the discussion on pages 34 and 35 of the book on the regulatory failings that precipitated the Global Financial Crisis is simply outstanding and should be carefully noted by policymakers who responded to ineffectual regulation and financial market dislocations with a damaging Keynesian inspired manipulation of aggregate demand.

In summation, the considerable buzz in classical liberal circles that has greeted the publication of Robust Political Economy is undoubtedly deserved.

Blame big government

Great Crises of capitalism
By Peter Jonson
(Connor Court, 2011, 319 pages)

It has taken a few years for the global financial crisis that led to Kevin Rudd's essay in The Monthly, blaming neoliberal institutions, to be properly analysed and considered.

In his book, The Great Crises of Capitalism, economist Dr Peter Jonson takes his stab at providing a rich and historically accurate perspective of how this crash fits in with capitalism's long running history of boom and bust, from the Dutch tulip bubble, to the GFC in 2009.

Chapter by chapter Jonson goes through the namesakes of his book, describing the foundations for booms, and then how capitalism always catches up with them, leading to busts.

Importantly, Jonson doesn't fall prey to simply dismiss boom periods and retractions as mere cycles, but highlights that each event is caused by particular circumstances, often created by underlying faults of the deceptively entrepreneurial or worse, government regulation.

The final few chapters are where Jonson provides his own insight and analysis of what lessons can be learned from history.

After all, the uncertainty of capitalism and its dynamic affects are what makes it a desirable system for economic order and growth.

He argues ''despite its obvious imperfections, capitalism is by far the best way to order the world's economic affairs'', but argues against a Rothbardian or Randian libertarian vision of capitalism with virtually no regulation.  Instead he argues ''sensible regulations ... are needed if capitalism is to survive and prosper''.

Despite the vagaries of such statements, there would be few free market capitalists who argue that there is no role for some regulation to save capitalism from itself and the exploitative entrepreneurial behaviour of a small group of people;  at least because in their misbehaviour, the impact is not just against themselves and those they exploit, but also in the confidence that others have in capitalism's future.

Without wanting to over-simplify his commentary, he argues for a classical liberal framework for the international marketplace where limited government provides economic and contractual certainty.  Railing against excessive and impulsive financial and economic regulation, he outlines that governments cannot remove uncertainty.

Similarly, without a level of sensible regulation that limits a capitalists' complete exploitation, it cannot deliver on one of its core benefits over the failures of other economic systems.  One of capitalism's continual benefits is its capacity to allow for economic mobility irrespective of the circumstances any human being is born into.  Economic mobility has been at the heart of capitalism's strengths and acceptance amongst the general public, even though the staircase can go in different directions.

Jonson also recognises that government has a role to play in society and identifies its capacity to design incentives that influence the behaviour of individuals, from research and development finance, to philanthropy which provides a public and commercial good.  The challenge that he partially addresses in designing governance and limitations is where lines are drawn for government influence and power to cease.

But amongst his organically conservative approach to economics, he also proposes ideas that are a radical departure from mainstream thinking resulting from global economic integration.  While not historically radical, proposing a transition to a form of ''base money control'', from individual nations setting interest rates, is a challenge to established currencies based on fiat money and state sovereignty.

Jonson argues that a serious crisis may be necessary to get such a decision to be taken seriously, but the European experiment of establishing a regional currency hasn't delivered the benefits expected and is likely to hinder the advancement of his idea.

Finally, Jonson doesn't wholly concede the point that periods of economic downturn are undesirable.  Of course downturns aren't beneficial and should be avoided, but they follow periods of spectacular growth and risk, as time series data of economic growth shows, and while some individuals take the pain, most of the benefits remain in place.

For example, while the technology boom of the late 1990s and early 2000s meant many speculative ventures collapsed, computer technology and innovation took an incredible leap that remained and was absorbed within the companies that survived.

In essence, speculative and uncertain growth and collapse are different sides of the same coin and remains the consequence of the incredible benefits of the other.  In comparison the alternative is wholly undesirable stagnation.

Relax baby!

Selfish Reasons To Have More Kids:  Why Being a Great Parent is Less Work and More Fun Than You Think
By Bryan Caplan
(Basic Books, 2011, 228 pages)

This book is targeted at a very specific demographic.  It is not aimed at someone like me who already has children.  Neither is it aimed at those who do not want children at all -- the author, Bryan Caplan, is a father of three, and happily accepts that there are some people who have no desire to be parents.  No, he is specifically targeting the types most of us have encountered -- middle class parents with one or two children who say that, in theory, they would love to have another one but, in practice, they cannot, because they cannot afford it financially, or time-wise.  Which begs the question, how on earth did previous generations raise much larger families in far less auspicious circumstances?

Of course, what modern parents really mean is not actually that they cannot afford it, but they do not wish to jeopardise the lifestyle of the existing members of the family, particularly the existing children.  They do not wish to move to a cheaper suburb to reduce the size of the mortgage, pass on a private school education, or give up holidays in premium locations.  While there may be good reasons why parents want to live in a particular suburb, mix with fellow private school parents and enjoy holidays in expensive locations, what Caplan says is, do not kid yourself that you are doing these things for the long-term benefit of your one or two existing children.  His key claim is that ''parenting barely affects a child's prospects''.

The evidence for this is adoption and twin research, which Caplan, a professor of economics at George Mason University, has studied extensively.  With the important caveat that we are talking about what might be considered broadly normal first world families, Caplan presents the work of numerous behavioural geneticists from many countries, which shows that, while nurture might have some effects during childhood, once children reach adulthood they will revert to the path their nature (genes) pre-ordained for them in matters such as financial success, health, happiness and values.  Twins, who are separated at birth and are adopted out, end up closer to each other on a range of criteria than either one does to his or her adoptive family.

The only outcome where separately adopted twins are closer to the children of their adopting families than to their biological twin is in appreciation of their parents.  So the moral of all the research is don't force your child into ballet lessons, or private tutoring, but do be nice to them.

There is some evidence that early born children suffer a minor diminution in outcomes through the birth of subsequent siblings, but children three and four are such big winners, purely by virtue of being born, that this dwarfs any minor loss to one and two in terms of outcomes, before one factors in any pleasure one and two might get from having the younger siblings.

Perhaps even more striking than the behavioural genetics is the sociological data.  The evidence shows that since the 1960s, not only have fathers more than doubled the time they spend looking after children, but mothers have increased time spent on this activity by thirty per cent.  While stay-at-home mothers still spend more time with their children than contemporary working mothers, the current working mother actually spends more time directly supervising children than her mother or grandmother spent looking after her.

''Ah ha,'' I hear the sceptic say, but while it was safe for me as a child to happily roam the neighbourhood in the sixties or seventies, we now live in far more dangerous times.  Caplan does an excellent demolition job on this nonsense.  Children have never been safer, with the annual mortality rate of 1-4 year olds in the US in 1950 having declined from 139 per 100,000 to 29 per 100,000 in 2005.  While most of that reduction is from better medicine and fewer accidents, he also points out that the rate of violent crime in the United States has halved since 1973.  Most irrational of all is the fear of child kidnapping.  Truly random child kidnappings make global news stories, precisely because they are so rare.

Spotting irrationality is a key feature of Caplan's work.  Caplan is best known for The Myth of the Rational Voter:  Why Democracies Choose Bad Policies (2007), a book named the best political book of the year by The New York Times.  When it comes to children, the main irrationality comes from over-emphasising the short-term pain, such as lots of sleepless nights, but not giving enough account to the long-term benefits, such as the increased likelihood of being a grandparent.  As he writes, ''today's typical parents artificially inflate the price of kids, needlessly worry, and neglect the long-run benefits of larger families''.

The media have presented a contrast between Caplan's work and that of Amy Chua, who earlier this year created something of a sensation with her book, The Battle Hymn of the Tiger Mother, which described how through a draconian parenting regime she turned her daughter into a Harvard student and concert pianist.  As a recent feature in The Australian commented, ''everybody argued about the sanity of her methods, but no-one argued that her methods did not work''.  Caplan did.  He argued that with a pair of Yale law professors as parents, Chua's daughters would have succeeded on genetics alone, without the extra priming.

However, while that may hold true for success in careers as an adult, one area which Caplan does gloss over is that in many fields of endeavour you do have to start young.  Your child is not going to become a concert pianist, or tennis professional, if they take it up at 18.  It might be your genetic make-up which determines whether you stick with it, and deliver on that other well-known modern theory about success -- Malcolm Gladwell's observation that 10,000 hours of practice is the key to success -- but children need parental encouragement to begin the process.

The other thing which Caplan touches on, but perhaps does not consider enough, is sibling difference.  Same parents, same nurture, but very different outcomes.  Others who have written in the field have ascribed some differences to birth order, an idea which Caplan does not discuss.

While Selfish Reasons to Have More Kids can be read as not much more than a parenting self-help book, urging frazzled parents to just lighten up, the book does at times have some serious things to say about public policy.  As well as the selfish reasons to have more kids, Caplan demonstrates quite clearly that there are also strong altruistic reasons for doing so.  Caplan is quite explicit that your extra kids, provided they are not homicidal maniacs or inveterate bludgers, will be net contributors to society.

Caplan also does not believe that governments should be stopping the use of new technologies to enable reproduction.  He finds particularly illogical the argument that one of the threats of the technology is authoritarian governments using if for nefarious purposes.  As he writes, ''If government abuse is the real danger, the smart line to draw in the sand isn't government prohibition.  It's reproductive freedom.  Insist that parents, not governments, decide if, when and how to make babies''.  And if technology still cannot deliver children, he suggests prospective parents consider adoption from the third world, because while adopting a first world baby will not alter its life outcomes all that much, adopting one irom the third world should deliver a massively improved life outcome to that individual.

In Australia in the past year, we have seen journalist Jacinta Tynan get pilloried for saying having an infant was not too hard, while the likes of businessman Dick Smith and Labor MP Kelvin Thomson continue to want a third of us to disappear.  Hopefully, plenty of people will read Caplan and realise that there are plenty of good reasons, both selfish and altruistic, to ignore the naysayers.

Overlooked atrocities

Bloodlands:  Europe Between Hitler and Stalin
By Timothy Snyder
(Basic Books, 2010,524 pages)

Does the world really need another book on the mass killings and crimes of the Second World War?  After reading Timothy Snyder's new book Bloodlands:  Europe Between Hitler and Stalin the answer is a definite yes.  This powerful new book argues that there is more to understanding the mass killings of World War II than just the murder of Jews at concentration camps such as Auschwitz.  This engaging and well-researched piece of scholarship offers us a survey of the killing fields where more than 14 million people lost their lives as victims of both the Nazi and Soviet regimes between 1933 and 1945.  As Snyder states;  ''the image of the German concentration camps as the worst element of National Socialism is an illusion, a dark mirage over an unknown desert.''

Despite the countless investigations into Nazi mass killings and Soviet atrocities during World War II, Snyder feels that a central element in explaining such events has been underexplored.  This concerns the lives and deaths of the victims of mass killing who were not soldiers, or even concentration camp victims, but instead innocent and unarmed civilians in lands occupied first by the Soviets, then by the Nazis and again by the Soviets.  They died as a result of the deliberate Ukrainian famines, the Great Terror of 1937-38 against the educated classes, and the mobile German hit-squads hunting in league with local militias.  It is these lands that Snyder defines as the Bloodlands:  more or less central and eastern Poland, St. Petersburg, Belarus, Ukraine and the Baltic states.

By focusing on human geography rather than political geography, Snyder seeks ro replace the political uses of history with a humanistic account of the terrible sufferings that occurred there.  Bloodlands brings together Soviet and Nazi history, Jewish and non-Jewish history.  It is the story of the passage of 14 million people from life to death at the hands of two brutal authoritarian regimes.

Bloodlands offers us a chilling account of what happens when people lose control of their own destiny at the hands of tyrannical and ruthless government bureaucracies.  Snyder's diligent research offers us hundreds of emotionally wrenching individual snapshots of suffering, such as the story of the Polish children who begged their German captors not to unnecessarily cane them before being loaded onto the mobile death trucks which were waiting to take them to their graves.  Despite the massive numbers of dead, Snyder offers us not an abstraction, but a collection of personal stories, lives led, and then lost, under the assault of tyranny.  ''People were alike in dying and in death, but each of them was different until that final moment.''

One of Snyder's key intentions in the book is to shatter what he calls the ''myths'' and ''overtheorising'' that has taken hold of World War II scholarship.  He wants us to understand the millions more deaths in the Bloodlands alongside those at Auschwitz.  He wants us to forget about comparing whether Stalin was worse than Hitler.  He wants us in the West to encounter the victims between the two regimes so that these myths will not distract us from understanding the lives and ultimately the deaths of a forgotten people.

On the whole he succeeds.  For example, unlike the suffering of Jews in films such as Schindler's List, most people who arrived at Auschwitz were never interred as labourers.  Instead, they were sent immediately on arrival to the gas chambers.  It is because of the harrowing survival stories of some survivors that the Holocaust registers as the apex of evil.  Yet the majority of Auschwitz victims never had a chance to tell their stories.  Neither did the half a million Poles and Ukrainians killed during Stalin's Great Terror.  Nor the three million Ukrainian peasants starved during Stalin's drive for collectivisation.

For Snyder, the preeminence of the Holocaust overshadows even more horrific forms of conceived mass killing -- the destruction of Poland and the Soviet Union as states, and the extermination of Slavs who had the gall to live on German agricultural ''lebensraum''.  They were not casualties of war as such, but in fact victims of their own regimes who sought to master history in pursuit of utopia.

The deadliest part of the Soviet Union was not the gulags of Siberia but its non-Russian periphery.  The well-known siege of Stalingrad starved thousands but was less deadly than the shootings and gassings in the Ukraine carried out by the SS Einsatzgruppen.  The concentration camps (as distinct from death facilities) are not where most of the victims of Nazism and Stalinism died.  Most people who laboured in the concentration camps and the Gulag actually survived.  Such ''misunderstandings regarding the sites and methods of mass killing prevent us from perceiving the horror of the twentieth century''.  None of the mass shooting sites and none of the gassing facilities were liberated by Americans.

These histories were consigned to obscurity as the Iron Curtain fell over Europe.  As the fourteen Soviet states began to reorganise themselves after the Cold War, they called upon their own national histories of victimhood for inspiration and strength.  These however were political stories.  Less well explained are the stories of the lives of the anonymous dead.  Bloodlands takes us on that journey.

Snyder successfully attempts to overcome the notion that the Nazis were efficient and industrious killers from the outset of the war.  It was only when the Germans could not transport Jews and other undesirables to the east following the unsuccessful Operation Barbarossa that German priorities changed definitively from military victory and transportation to racial extermination.  Industrial killing is too ''clean'' an image of mass killing, he says.  The giant crematoria did not arrive at Auschwitz until 1943 and most of its victims died in 1944.  In the Bloodlands the methods were more primitive.  Half of the 14 million victims died because of starvation.  The next most likely cause of death was shooting, then gassing.  Jews in the Holocaust were about as likely to be shot as gassed.  It was not just the SS but also the Wehrmacht and local militias that hunted down civilians.  Stalin's purges before the war were far more destructive than the well-known Kristallnacht pogrom of 1938 in Germany.

Since World War II there has been a growing and controversial trend to incorporate other viewpoints in ''the history'' of nations.  These include women's histories, indigenous histories and other ''histories from below'' in the words of the famous Brirish historian EP Thomson.  Historians have proudly proclaimed themselves to be ''revisionists'', whilst others have lambasted attempts to ''rewrite history''.

''Subaltern histories'' often use oral sources and other ''fragments'' of documented information from victims to piece together an appreciation of life in a given time.  Often labelled ''selective'' by critics, memories of victimhood have not had the same esteem amongst scholars as more traditional sources such as archives and contemporaneous written accounts.  In selecting which memories to include in a work of history, writers such as Snyder choose what becomes history based on what best fits their line of argument or what is most convenient for their narrative.

The influential American literary theorist Hayden White even wrote that ''if it is not written, it is not history''.  To overcome such objections Bloodlands invites us to imagine that each and every victim of Nazi and Soviet atrocity had a personal story, regardless of whether it has been put to paper.  Rather than 680,000 people being killed in the Great Terror, Snyder refers instead to the 681,690 victims plus one.  Bloodlands harrowingly takes us through just a few hundred.  The identification of victimhood for each nation is consequently one of the central themes of the book, although Snyder becomes explicit on this point far too late in the book to give us sufficient time for reflection.

The well-documented historical memories and powerful activism of the Jewish community have helped place the Holocaust at the forefront of people's minds as the epitome of evil in the 20th century.

Recognition of suffering has also been a topical issue here in Australia ever since the 1997 Bringing them Home report into the separation of Aboriginal children from their mothers.  Scholars such as Raymond Gaita and Inga Clendinnen have argued that the dispossession of Aborigines should be considered genocide for a number of reasons, among them the recognition that would come from comparison with what is considered the ultimate genocide, the Holocaust of the Jews.

Critics of the ''genocide project'' have questioned however, whether such classifications would actually improve our understanding of what took place.  History seeks to explain the past, whilst politics uses history in the pursuit of power.  Some scholars have argued that the crimes of the Nazis were so horrendous that they should ''stand outside of history'' and historical comparison.

Bloodlands argues this is inappropriate given another ten million people died at the hands of Nazism and Stalinism and have had fewer advocates to tell their story.  More people died brutally at the hands of Stalin than did those cut down by Zyklon-B in the gas chambers, yer such stories do not register as clearly in the collective memory of the Second World War for us in the West.

Bloodlands successfully helps us recognise that if Hitler's war against the Soviets had gone to plan, some thirty million more lives would have been cut short.  This is the major achievement of this book.  For the political purpose of reconstituting nations such as Poland, Ukraine and the Baltic states after both the Second World War and the Cold War, the ledger of horror has been kept alive in the fragmented accounts and stories of the victims.

Credit must go to Snyder for overcoming the limitations of individual ethnic or national histories in telling the stories of a region devastated by two horrendous alternative visions of the future.

Forget compassion -- our better angels aren't listening

With its Malaysia solution the Gillard government is about to implement one of the most illiberal asylum seeker policies since mandatory detention was invented.  But the response from refugee advocates has been tired and musty.

In The Age on Monday, Malcolm Fraser said the major parties' approach was an ''appeal to meanness''.  Earlier, John Menadue, a former immigration department secretary, urged politicians to ''make the case for compassion and humanity''.

Releasing a report to ''break the stalemate'' over asylum seekers last week, the progressive Centre for Policy Development called for ''constructive bi-partisanship''.  If there's anything the last decade of debate over refugees has shown us, calling for leadership and our ''better angels'' has failed.  The policies have, if anything, become harder.

And that's not entirely the fault of political demagogues;  it's because nobody's willing to admit just how intractable the refugee problem really is.

In June, the SBS reality TV show Go Back to Where You Came From showed this clearly.  If you already support asylum seekers, it was one of the television highlights of the year.  Yet the producers failed to convince some of the program's participants.

Certainly, those who had enthusiastically admitted their views on asylum were racist had softened by the end of the three episodes.  But the participants who were originally worried soft border policies create an incentive for people to travel on dangerous boats remained unmoved.

If relying on compassion for refugees couldn't convince people who were shown first-hand the hardness of refugee camps, then what hope does it have for the rest of the country?  No doubt there are people who oppose boat people because they just don't like foreigners.  But the majority seem to have serious questions about the unintended consequences of the government's policy.

Even the Centre for Policy Development's report quietly granted the premises of the refugee sceptics:  that we must focus on how we can deter asylum seekers from travelling on dangerous boats.

Yet no serious study has found domestic policy can have more than a marginal impact on refugee flows.  A 2009 paper in The Economic Journal found that, at most, countries could deter perhaps a third of potential refugees.

Evidence suggests asylum seeker flows to Australia are largely out of our hands.  But governments don't like to admit they're subject to forces beyond their control, and oppositions won't let them try.  It's hardly a surprise that professional legislators think legislation is both the problem and the solution.  This is also why another major argument -- that our asylum intake is so small we shouldn't worry about it -- is counterproductive.

It is precisely Australia's tiny numbers of boat people that create an impression we can do something to change them.  Almost every national border in the world is porous.  Ours is easily monitored.  For Europe or the United States, the sheer volume of refugees getting in makes any belief that domestic policy change could halt the flow seem faintly ludicrous.

Yes, there are a lot of popular myths and misconceptions about refugees.  There is no queue for boat people to jump.  It is not illegal to seek asylum.

Nevertheless, those myths are beside the point.  Asylum seekers are a subset of a bigger issue.

There are millions of people who could have a better, more productive life in the West but are prevented from doing so by immigration policies.  This is the real issue, but it suits no one to raise it.  By preferring silly rhetoric about the ''essential goodness'' of Australians, the refugee lobby is shooting itself in the foot.

We could embrace a renewed policy of mass migration to Australia, yet refugee advocates avoid over-thinking Australia's immigration philosophy.

The only alternative is to admit there probably is no sustainable policy that would keep asylum numbers limited and manageable.  So governments will just keep stumbling through, cyclically hardening and softening their approaches.  And, if past form is any guide, our debate about asylum seekers will go nowhere.

The Sunday Debate: Are juries a waste of time?

A convincing case for dumping juries simply hasn't been made.

After many years of pondering, I am still not a believer in an Australian Republic.  I can not find there is sufficient benefit from toying with our Constitution over the simple conservative reality that our current system works.

And the same is true of jury trials.

Currently jury trials are required under the Constitution built on the traditions we inherited from England and the United States.

Juries aren't perfect.  They don't always deliver desirable outcomes.

They're open to manipulation and can delay justice.  But their imperfection isn't enough to have them scrapped.  Juries can be biased and prejudiced and that bias can swing either way.

But the reason juries are fallible is because they're human.  Not necessarily because of their design.

If we applied such a loose test universally to our institutions we'd probably abolish our Parliamentary democracy with all its shortcomings.

Juries play an important role in the extension of natural justice -- that everyone is innocent until they are proven guilty.

A court finding someone guilty is a judgment that should not be made lightly, especially in serious criminal trials, because of the potential penalties that can apply.

Agree or not, in our judicial system it is morally accepted that it is better to allow reasonable doubt to allow a guilty murderer to go free rather than to convict someone who is innocent of the same crime.

Juries ensure that the number of people who need to be convinced beyond reasonable doubt is risk-pooled, reducing the likelihood that the poor judgment of one individual can have a disproportionate impact.

It's far fairer for a wrongly accused innocent person to face the majority judgment of a dozen of their peers than a well-educated but similarly fallible individual.  No one disagrees that judges have strengths;  not least knowledge of the practice and application of the law.

But in cases where establishing that certain events occurred without clear facts, the judgment of the many is more comforting than the few.

But the primary reason juries should be supported is for the same reasons they were created in our modern judicial system.

While we currently live in an age where the independence of the judiciary isn't really questioned, we haven't always lived in that world.

There was a time when judges were often perceived as the extension of those in positions of influence, particularly the monarch.

The division of powers in our parliamentary system of governance between executive government, the parliament and the courts is a system designed to ensure power is never centralised and cannot be abused.

The point is to make sure that no single agency ever has too much power because, in our democracy, the people have a government, not the other way around.

Especially since the government has the power to force its will upon the people.

Juries were introduced to reduce the tyrannical concentration and reach of those in power and ration it back to the people.

The check and balance against this abuse of power is the right to pass judgment on our government through universal voting.

Juries operate in the same spirit, devolving the power of an arm of government towards the people by allowing them to make judgments.  While Her Majesty isn't likely to attempt to seize back control of our dominion, every component of decentralised government power decreases the likelihood that the sovereign could ever try.

We aren't at the end of history.

Australians should be passing the structures of democracy on to future generations instead of the consequences of rash abandonment of an imperfect component of a working judicial system.

ADVERTISEMENT

What matters more: stability or Question Time?

The little we see of parliament isn't the true measure of our political culture.

Nobody who has ever sat through a full session of Federal Parliament's Question Time would argue that it is an edifying spectacle.  But the introspective angst that followed Australian journalists' first exposure to the UK parliamentary Question Time was completely over the top.

Australian Twitter feeds usually scroll slowly in the early hours of the morning, as few updates are sent while most Aussie tweeters sleep.  Not so on one night in late July.  Twitter was alive with activity, as Australians sat up and watched an engrossing special session of British Question Time amid the News of the World hacking scandal.

Superlatives flew as Australian tweeters, many among them Canberra Press Gallery journalists, marvelled at Prime Minister David Cameron's performance.  He was, in the words of many, ''serious'', ''mature'', ''intelligent'' and ''sophisticated''.  His answers were to the point and did not avoid the question.

The questions themselves were hard-hitting and relevant, and there was little sign of the ''Dorothy Dixers'' to which we are all too accustomed in Australia.

Indeed, it didn't take long for unfavourable comparisons to be drawn with Australia's own Question Time.

The Age's national affairs correspondent, Katherine Murphy, quickly distilled the Press Gallery's collective view.  In an opinion piece a week later, Murphy obviously made full use of her thesaurus, describing Australian Question Time as ''pathetic'', ''rubbish'', ''banal'', ''pointless'', ''timewasting'', ''confected'', ''aggressive'', ''spiteful'', ''gladiatorial'', ''soporific'', ''bitchy'' and ''a joke''.

Murphy was joined by a chorus of her colleagues -- many of whom approvingly shared her article on Twitter -- in bemoaning what has become of our Question Time.

Canberra Times editor-at-large Jack Waterford remarked that watching PMQs that week was ''an occasion for genuine colonial cringe'' because ''politicians [asked] actual questions and politicians actually [answered] them''.

ABC Radio Brisbane presenter Christopher Welsh said watching Australian parliamentary proceedings made him want to ''stick skewers in [his] eyeballs'' and that he was ''enthralled'' by the UK parliament's Question Time, because it is ''so much better than ours''.

Of course, there was nothing new about last month's PMQs.  It has long been fast-paced, free-flowing and entertaining.  But it seemed that the Australian parliamentary Press Gallery had discovered it for the first time.  Only a cynic would suggest that this had something to do with the subject at hand.

Maybe they are right.  Perhaps our Question Time really is the worst in the world.  But who cares?

Appearing on Mornings with Jon Faine on ABC Melbourne's 774, former Monthly editor Sally Warhaft was aghast to hear me say that I thought the operation of Question Time had no bearing on how the country is governed.

Katherine Murphy argued in her piece that Question Time ''symbolises everything that's wrong with political discussion in Australia''.  Really?

After all, Question Time only showcases a tiny slice of our politicians' activity, and an unrepresentative one at that.  Just because it dominates media coverage doesn't mean it's accurate.

Question Time receives disproportionate attention because it is much more entertaining than the minutiae of policy development.  Headline-grabbing clashes, witticisms (of highly variable quality) and the theatre of political combat make for much better footage and copy.

Try enlivening an earnest exchange between an academic witness and a genuinely inquisitive senator at a committee hearing, or a dedicated local MP's five-minute oration about a great charity in their electorate, and you'll see why Question Time is a tastier proposition for a journalist.

Recent events highlight the absurdity of holding up parliamentary behaviour during Question Time as any way representative of the quality of a nation's governance.  Britain's politicians may use well-rounded vowels and speak in crisp sentences, but British streets have also been ablaze with thousands of rioters and looters.

While the Left and the Right disagree about the cause of the riots -- some say it's inequality, others lax policing -- it's clear that poor government policy played a role.  Nor is it Britain's only problem.  The country is mired in record debt, unemployment is nearly nine per cent and, according to some studies, social mobility has rarely been worse.

The US, too, has always had a much more serene and cerebral parliamentary culture.  There is no Question Time at all, members are highly deferential to each other on the floor, and speeches, while partisan, are most often respectful.  The most controversial recent departure, when a Republican Congressman yelled ''you lie'' during President Obama's State of the Union address, was remarkable because it was almost unheard-of in US Congressional history.

Contrast this with the daily insults and even expletives hurled across the floor whenever the Australian Prime Minister rises to speak.

But like Britain, the US is neck-deep in debt, and more Americans than ever believe their country is heading in the wrong direction.  But hey, at least their parliamentary behaviour is classy.

The truth is that at this moment, Australia stands almost alone as the most trouble-free and best-governed country in the western hemisphere.  Our economy is strong, employment is at near record highs and even the Rudd and Gillard governments haven't been able to drag us down to European levels of national debt.  Thanks to a sensible bipartisan policy consensus in favour of free trade, open markets and (relatively) limited government, Australians have never enjoyed greater prosperity.

So tell me again why Question Time matters?

ADVERTISEMENT

Handouts favour the few

Craig Thomson isn't Tirath Khemlani -- but he may as well be.  A government clinging to office by a seat engulfed in a scandal involving trade unions and prostitutes is almost as interesting as a government trying to get billions of dollars in loans from Arab financiers using a dodgy commodities dealer.

At least Gough Whitlam cut tariffs.  It's anyone's guess how the Gillard government will be viewed in 35 years' time.  While the fate of the government hangs by the length of a credit card receipt, there's a few other things happening in the country.

BlueScope Steel announced this week it would cut 1000 jobs.  The company said the decision had nothing to do with the carbon tax, a point gleefully seized on by the government.  BlueScope can hardly say anything else.  Its future is in the hands of the Minister for Climate Change and it still has a business to run with 18,000 employees.

Estimates vary of what a carbon tax will do to BlueScope's financial performance but on some estimates, if the company was not compensated for the tax, its earnings could be cut by half.  Carbon tax compensation is entirely a gift of the government.  It can be taken away as easily as it's given.  Julia Gillard promised BlueScope it would have early access to $100 million of payments under the ''Steel Transformation Plan''.  No doubt that money would still have been forthcoming had BlueScope come out and said that maybe, or possibly, or perhaps, the carbon tax had something to do with its decision.

Thankfully these days, no Labor or Liberal government would ever consider nationalising the steel industry.  While in a technical sense the industry is not in government hands, the carbon tax has in effect made steel companies the plaything of ministers.  BlueScope Steel now knows what it is like to be Telstra, Qantas, or a bank -- a company nominally owned by shareholders but subject to ministerial whims.

Two days ago, Transport Minister Anthony Albanese threatened to veto any potential private equity bid for Qantas on the grounds of ''national interest''.  Under the Qantas Sale Act, as long as the company remains majority Australian-owned, the structure of Qantas's ownership is irrelevant.

Shadow treasurer Joe Hockey noted that the Transport Minister seemed to be suggesting that some forms of domestic ownership of Qantas are acceptable to the Labor Party (that is, Qantas as a listed public company), but other forms of domestic ownership are not acceptable (that is, Qantas owned by a private equity firm).

Government and opposition politicians have been quick to point out that industry protection is not the solution to the problems of Australia's manufacturing sector.  That's a welcome development and a marked improvement on the situation from 10 and maybe even five years ago.

Former Queensland premier Peter Beattie, who was appointed this week to help manufacturing companies get contracts with resources companies, acknowledged that Australians can't afford to return to protectionism (Industry Minister Kim Carr likened Beattie's role to training elite athletes.  ''The least we can do is to train our companies to be able to compete,'' he said.  Just how many companies will want to take lessons on competitiveness from the Gillard government remains to be seen.)

Treasury secretary Martin Parkinson followed the lead of the politicians when he said the future of manufacturing rested with innovation.  As he put it, companies don't move up the value added change ''by handouts''.

If only the government followed his advice.  Unfortunately, the policy of ''no handouts'' is applied selectively.  So steel makers don't get protection, but car makers do.  Book producers get protection, but shoe manufacturers don't.  Then there's the ''clean energy'' industry.  This industry wouldn't exist if not for government handouts and subsidies.  As part of the carbon tax package, there'll be a Clean Energy Finance Corporation with $10 billion of taxpayers' money to spend.

According to the government's advertising, the corporation will ''drive innovation through commercial investments in clean energy through loans, loan guarantees and equity investments''.

If such investments are indeed ''commercial'', there's no need for government handouts.  The corporation was one of the perks the Greens demanded in exchange for supporting the carbon tax.  The government's industry policy is one not so much for picking winners as picking favourites.

ADVERTISEMENT

Make-up solutions wear thin

Blaming mining and the high Australian dollar for manufacturing's recent woes risks missing the point of what is really needed to get the troubled sector back on its feet.

With BlueScope Steel announcing that 1000 jobs will be cut from its NSW and Victorian operations, politicians, industry groups and unionists have proposed strategies to stem job losses.

But much of what has been proposed so far will hinder, rather than promote, the national economic interest.

Leading figures within the Left faction of the Labor Government have called on mining magnates to direct more of their capital towards manufacturing, or, in other words, do less mining.

If miners were to do this, however, Australia's flagging productivity performance would worsen, since the productivity of manufacturers is considerably less than that of miners.

This would mean the longer-term living standards for all Australians would decline.

For that matter, a shift in economic activity from mining to manufacturing would impede manufacturers, such as steel makers and services industries with close links to mining companies.

Others have called for governments to buy more products manufactured locally to offset reductions in demand for Australian manufactures overseas because of the high dollar.

But taxpayers would be worse off if governments were forced to buy more expensive, Australian manufactured goods rather than overseas alternatives.

Another option being considered, but would also be wasteful, is boosting the profile of Buy Australian, taxpayer-funded campaigns promoting local manufacturing sales.

Perhaps the most audacious policy suggestion has come from Prime Minister Julia Gillard, who stated the carbon dioxide tax will assure a ''bright future'' for manufacturing.

The idea behind this claim is manufacturers will build renewable technologies, such as windmills and solar panels, once Australia imposes a tax penalty on coal-fired electricity generation.

But this ignores the fact that manufacturing capital is highly specialised and cannot be shifted from one form of production into another as if by magic.

The replacement of cheap, coal-fired electricity by costly renewable energies will only dilute the competitiveness of manufacturers and other businesses reliant on energy to produce goods and services.

Governments should instead promote deregulation, tax reductions and other reforms, encouraging manufacturers to discover new sources of value at home and abroad.

The creeping growth in regulation in recent years has imposed significant burdens upon manufacturers doing business in domestic and international markets.

In particular, labour market re-regulation has built up input cost pressures for manufacturers as wages growth increasingly outstrips productivity performance at the firm level.

The threat of new federal taxes has not helped manufacturing businesses, either, as consumers hold tight to their wallets in fear of depredations to come.

A reformist policy approach would be more worthwhile than a throwback to pre-1970s protectionism.

ADVERTISEMENT

Europe's doomed euro

Few people predicted the global financial crisis.  Everybody predicted the crisis of the eurozone.

Read almost any critique of the euro from just a few years ago and you'll be struck by their foresight.  The euro will encourage government profligacy -- tick.  The euro will be extremely vulnerable to a housing bubble -- tick.  It will rely on the willingness of stronger economies to bail out weak ones -- tick.  And it will do nothing to buffer Europe from an American downturn -- tick.

These objections were raised by everyone from Paul Krugman to Milton Friedman.

So how on Earth did Europe get its doomed euro -- an idea which was viewed with deep scepticism if not outright hostility by some of the finest economic minds of the age?

As Romano Prodi, the European president said in 2002, ''The introduction of the euro is not economic at all.  It is a completely political step''.

Europe switched its currency for geopolitical purposes and got burned.

In his Euro On Trial (written well before the financial crisis) the economic historian Brendan Brown argues that the European monetary union was a power play between French policymakers and German monetary authorities.  Germany is Europe's largest economy and the Deutschmark was its strongest currency.  The influence of the Deutschmark was seen as a threat to both France's strategic interests and its moral leadership of Europe.  French politicians worried that bolstered by monetary strength Germany could act independently of Europe, forging a unique relationship with the United States and even the Soviet Union.

So for the French, a common currency offered glue with which Germany could be stuck in Europe.  German foreign policy interests could be overcome by French ones.

Of course, the Germans knew this.  French politicians actively raised the spectre of German nationalism when campaigning for the common currency.  But these days the only country which fears German power more than France is Germany.  For historical reasons, Berlin wanted a deeper European Union.  If that meant sacrificing the Deutschmark for French support, so be it.

In adopting the euro, both France and Germany were subordinating economic policy to foreign policy, each trying to bind future German politicians.

The economist Philipp Bagus also argues that prudence of the Bundesbank, the German central bank which dominated Europe, restrained other European countries from excessive spending.  This discipline was, needless to say, unwanted.  Get rid of the Bundesbank, and the spigots of government largess could open freely.

No wonder that in 2004 the Czech president Vaclav Klaus argued that the euro creates a perfect environment for fiscal irresponsibility.

Certainly, there was an intellectual case presented for monetary union.  The theory of optimal currency areas suggests that, at the very least, the size of some currency jurisdictions are better than others.

Then there are the intuitive benefits of currency consolidation.  Single currencies reduce the costs of trade, at least a little bit.  One currency makes it easy to compare prices across the continent.

But there was no reason to suggest that Europe was such an optimal currency area.  (Europe's economies are, obviously, different.)  Even if it was, which countries opted in and opted out of the monetary union was, again, dictated by political considerations, not economic theory.

And the mild convenience of being able to compare prices between Barcelona and Berlin without using a currency converter seems to be a very mild benefit considering the costs of monetary union.

One of the more reasonable polemics in support of the European project was by the British author Mark Leonard -- Why Europe Will Run The 21st Century.  Social democratic Europe would retake world leadership from liberal democratic United States.  And in Leonard's view, a common currency would be a core foundation in Europe's revitalisation -- luring the centre of global finance back across the Atlantic.

Leonard's book was published in 2005.  How times have changed.

In 2011, we can read in the Guardian that ''the monetary union, unlike the EU itself, is an unambiguously right-wing project''.

It's hard to see why.  The European ideal is a long way from its classical liberal origins in a free trade and migration alliance.  The 1957 Treaty of Rome set up a simple union of free movement in goods, services, capital, and people.

That early classical liberal vision is very different from the vision of Europe which informed the euro -- one in which not only borders are being eliminated but policy differences as well.  The monetary union sought to eliminate inter-state competition for the most stable currency.  In the Europe of the 21st century, taxes are being harmonised.  Regulations are being increased.

The Spanish prime minister said in 1998 that ''The single currency is a decision of an essentially political character ... We need a united Europe.''

Unfortunately, the only people who have been surprised by the euro's failure have been the politicians who thought monetary policy should be a weapon for international diplomacy.

ADVERTISEMENT