Costs lost in the focus on climate

It is more than 25 years since the possibility that carbon dioxide and other human-induced greenhouse gas emissions achieved currency as possible causes of global warming.

In that period a large volume of legislation has been introduced.  The latest proposals link Australia's carbon price with that of the European Union and provide a one-way street for Australian firms to acquit part of their emission reductions by buying EU credits.  This is likely to transfer about $1 billion a year to the EU, perhaps a suitable form of aid to a political entity increasingly resembling a third world ''failed state''.

The proposed change to Australia's carbon tax/cap-and-trade will mean a lower price on carbon.  But it leaves unanswered how much Australia is currently and prospectively spending on emission reduction measures.

There are four families of such measures in place:  the carbon tax, the Renewable Energy Target, direct budgetary expenditures and standards on a range of products.

The government has never provided public estimates of the combined cost or benefits of all these imposts.

The carbon tax is unique to Australia, though the EU has a less comprehensive cap-and-trade variant.  Public estimates of its costs are $8bn a year in its present format.

The RET has been around since 2001.  It currently requires 20 per cent of electricity by 2020 to be derived from a mix of large-scale sources, dominated by wind, and small-scale installations, which include solar water heaters, heat pumps, and solar panels.  Wind requires a price of more than $110 per megawatt hour to be economically viable and small-scale systems at least twice that.  Coal-generated electricity costs $35-$40 per megawatt hour.

Together, the RET schemes, including the need for back-up systems, mean an impost by 2020 of about $5bn a year.  The third family of costs comprises direct budgetary expenditures, chief among which are those of the Departments of Climate Change, Energy and Resources, and Sustainability and Water.

In the current year's budget at least $2.7bn is clearly identifiable, added to which are the sums that every department, including Treasury, must allocate to addressing climate change.

Finally there are regulatory measures that force suppliers to feature energy-saving features in the products they offer.  Many of these standards started life as measures to conserve energy and were targeted at a previous scare — the forecasts that the world was running out of fossil fuels.

Although such forecasts were discredited, the conservation regulations remained and morphed into measures that are designed to reduce greenhouse gas emissions.  They are imposed on many domestic appliances and on buildings.

These standards are uncosted but one that has been subject to some scrutiny is the 6 Star Standard on new housing.  The Victorian Competition and Efficiency Commission accepted a cost estimate for this of at least $5000 per new house, an estimate that would translate into an annual Australia-wide cost of at least $500 million.

All in all the greenhouse emission measures therefore impose a cost of at least $15bn a year, for benefits that are probably zero.  Yet the debate on the issue has largely centred on the Coalition's opposition to the carbon tax.  The opposition seeks to replace this through ''direct action'' measures that select the most promising sources to target for reductions.

''Direct Action'', which also features in the government policy arsenal, suffers from its very selectivity.  Thus, while it might appear cheaper to target a particular source of emissions, emissions are fungible — closing down one source may see something very similar replacing it.

For example, the government's proposed replacement of the Hazelwood Power brown coal station by a gas station aims to halve the current facility's annual 16 million tonnes of carbon dioxide emissions.  At a cost of $3 billion if the life of the existing facility is 20 years, that translates into a carbon price of around $50 per tonne.  Not only is this well above the carbon tax but the operations of the National Electricity Market higher cost new facility would bring an increase in price for all electricity.

Greenhouse emission policies may well be the key issue dividing the Government and the Opposition.  But the goals of those policies have not been fully specified and the lack of costing on existing and proposed measures means there is no platform on which the desired level of emission reductions can be based.

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Romney finds momentum in moderation

A week is a long time in politics, Harold Wilson once observed at the end of a bad week, and the remark was considered so brilliantly penetrating that it was immediately entered into the Oxford Book of Quotations.  As he prepares for his second presidential debate tomorrow, Barack Obama knows exactly what the British Labour prime minister meant.

On the day of the last debate on October 3, the President appeared to be in an unassailable political position.  Holding comfortable leads over his Republican rival in several battleground states, Obama was the clear favourite to win the November 6 election.

Meanwhile, Mitt Romney was living on borrowed time, bedevilled by a series of gaffes and missteps, derided as a modern-day Gordon Gekko, and dismissed as lacking empathy and authenticity.  Most seasoned Washington observers had all but declared the race over.

Yet Romney defied the critics and, as the left-wing Guardian's Jonathan Freedland conceded, gave Obama ''such a good hiding in their first TV debate, you half expected the referee to step in and end the bout on compassionate grounds''.  The result is that Romney has come roaring back into contention for the presidency, with many polls now even putting him in the lead.  Somewhere, Harold Wilson is feeling Obama's pain.

There are still three weeks to go before America goes to the polls, and things could change.  But if the Democrats keep limping badly from Obama's wounds, many pundits are far from sure they'll heal in time.  And if the Romney momentum continues, there is every reason to believe he will be the 45th president.

So it is a good time to ponder a Republican White House.  What would be the defining characteristics of a president Romney?  And how would a new administration deal with the world?

The most important point to bear in mind is that Romney is neither a radical nor an ideologue.  Cautious, calculating, compromising — these qualities are precisely what make him suspect among those Tea Partiers who want the Republican Party to be doctrinally pure.  Recall all the conservative criticisms levelled at Romney during the primary process a year ago:  he was seen as either a serial flip-flopper or a closet liberal, which is heresy in Republican ranks.  Such concerns were understandable, given his behaviour since 1994 when he ran as a progressive Republican against Teddy Kennedy in a Senate race in Massachusetts.

After his tenure as governor of that liberal state (2003-07), Romney decided to convert himself into a ''Reaganite'', abandoning his set of moderate positions overnight and substituting the whole conservative laundry list, virtually without qualification.  From abortion and gun control to health care and emissions trading, he proved to be the political equivalent of the fictional comic-book superhero, Plastic Man.

Yet if Romney could twist himself into a conservative en route to his party's nomination, it is hardly surprising he is now turning towards the centre to win over independents who help swing elections.  In the past week, he has distanced himself from evangelical Christians on abortion and allowed some wriggle room in his tax plan in order to compromise with Congress should he win office.

This lack of ideological conviction is hardly what troubles the sleep of independents.  It also suggests that a president Romney would be the very soul of centre-right moderation, cautious to a fault and unlikely to take risky paths.  Take foreign policy, where he relies almost entirely on a disparate and fractious team of advisers (from hardline unilateralist John Bolton to moderate realist Robert Zoellick).

Romney champions a new American Century, the term coined in the 1940s to describe US global pre-eminence.  In this telling, the US will impose its will and influence across the world, increasing defence budgets, confronting China and Russia, and encouraging Israel to attack Iran.

Such a grandiose agenda, however, is fundamentally incompatible with the conservative priority of downsizing government at home.  It is also at odds with the reality that the US lacks the power to micro-manage a more plural world.

In a keynote foreign policy address last week, Romney — egged on by neo-conservatives from the recent Bush era — called for a new Marshall Plan in the Middle East.  To capitalise on the Arab Spring, he argued, the US should help build viable democratic states, a la Washington's generous support to western Europe after World War II.

But the circumstances have changed dramatically since the days of a Pax Americana.

As Stephen Walt, a professor of international relations at Harvard University has observed, in 1948 the Marshall Plan allocated $13 billion, or 5 per cent of total GDP, in grants to kick-start Europe's economy.  By contrast, in 2012, an equivalent amount would be $700 billion.  There is no way that a debt-burdened Washington could devote even a tenth of that amount.

For all his American bravado on the campaign trail, a president Romney would more likely pursue a modest foreign policy with a prudent calculation of commitments and resources.

What's the crisis in the Cuban Missile Crisis?

Fifty years ago, on the morning of October 16, 1962, the CIA delivered to John F Kennedy aerial reconnaissance photos revealing Soviet missile sites in Cuba.

Shortly after the CIA briefing, Kennedy showed the photos to his advisor Kenneth O'Donnell.

The president was alarmed.  ''You'd better believe it,'' he told O'Donnell, coming to terms with the missiles' significance.  ''We've just elected Capehart in Indiana and Ken Keating will probably be the next president of the United States''.

The Cuban Missile Crisis has become an icon of 20th century history:  the closest the Cold War came to a hot war, two great superpowers playing a game of brinkmanship that could have slipped into Armageddon.

But it was more a domestic crisis than a foreign policy crisis.  Fear of the November 1962 mid-term elections loomed larger than fear of nuclear war.

There's a lot of mythology about those 13 days in October.  It didn't take long for the tale of an heroic president pulling the world back from the precipice to take root.  But that mythology massively overstates the severity of the Cuban Missile Crisis, and, as a consequence, the likelihood of apocalyptic nuclear war at any time in the 20th century.

Put simply, the world never came to ''the brink''.

In his excellent 2010 book, Atomic Obsessions, the political scientist John Mueller demonstrates neither Kennedy nor Nikita Khrushchev had any intention of escalating to nuclear hostilities.

The Soviet premier, for all his bluster, was scarred by his experience of World War II.  One of the cables he sent Kennedy wrote of his fear of the ''death and destruction'' of total war.  Explaining himself later, Khrushchev said ''I'm not a Czarist officer who has to kill himself if I fart at a masked ball.  It's better to back down than to go to war.''

It's now clear Khrushchev placed the missiles in Cuba to deter an American invasion — that is, not in an offensive capacity.  But even then, some historians have suggested there was agreement in the Soviet leadership to withdraw the weapons if the US responded with military force.

The USSR never even went on a general alert.

The Americans were even less eager for conflict.  Put aside the warmongering General Curtis LeMay, who was nowhere near the decision-making team and exasperated Kennedy.  David Welch and James Blight, two historians who have worked closest with the tapes of White House meetings, say the odds the Americans would have escalated hostilities were ''next to zero''.

And the gambit that ended the crisis — Kennedy's secret promise to Khrushchev that he would remove American missiles from Turkey — wasn't much of a gambit at all.  The tapes reveal the president vowing ''I don't want to go to war anyhow, but I am certainly not going to war over worthless missiles in Turkey''.

Keeping the deal secret was just good domestic politics.

Of course, neither side knew of the other's true position.  But half a dozen times during October each side made missteps which, had the world been truly on the brink, would have pushed them off.  A U-2 was shot down trying to get a closer look at the missile sites.  Neither superpower budged.  Another U-2 strayed into Russian territory and was chased out by Soviet fighters.  Neither superpower budged.

Nobody wanted war.  And as Henry Kissinger once said, ''despite popular myths, large military units do not fight by accident.''

So what was the crisis in the Cuban Missile Crisis?

As usual, domestic politics drove foreign policy.

Kennedy had beaten Richard Nixon in 1960 by outflanking him as a hawk — charging that the Republicans had no plan to topple Fidel Castro and stoking fears of Soviet nuclear superiority.

But after the 1961 Bay of Pigs debacle — where US backed Cuban exiles were routed in an invasion attempt — Cuba suddenly became Kennedy's political problem.  Cuba looked like it was going to be a big issue in November, and maybe even in the 1964 presidential race.

Two Republican senators in particular attacked him furiously over Cuba:  Ken Keating, a New Yorker with White House ambitions, and Homer Capehart, from Indiana.

These attacks had hurt.  Kennedy wanted to reassert his hawkish credentials.  The most fateful event of the Cuban Missile Crisis occurred, not in October, but in a press conference a month earlier.  On September 13 Kennedy declared bombastically that ''if Cuba should possess a capacity to carry out offensive action against the United States ... the United States would act.''

Kennedy didn't know missiles were already on their way.  This September ultimatum was for a domestic audience — to counter Republican claims he was soft on communism — but it seriously constrained his choices in October.  He'd promised action.

Throughout the crisis, Kennedy regretted his September chest-beating:  ''I should have said that we don't care''.  But it was too late.  He'd ruled diplomacy out.  Blockading Cuba was the least warlike thing the administration could think of.

Kennedy famously declared on television that the missiles were an explicit threat to American security.

Privately however the administration thought different.  ''It is generally agreed,'' said Kennedy's advisor Ted Sorensen on October 17, ''that these missiles, even when fully operational, do not significantly alter the balance of power — that is, they do not significantly increase the potential mega-tonnage capable of being unleashed on American soil.''

Defense secretary Robert McNamara was more direct.  ''I don't think there is a military problem here.''

The successful resolution of the crisis on October 28 blunted the Republican attacks.  The mid-term election was only a week away.  The Democrats picked up four seats in the Senate, one of which was Homer Capehart's.

October 1962 has become central to the JFK mystique.  It was quickly integrated into the legend of Camelot.

Not only that, but the episode defined how we think of nuclear politics;  as if we are, at all times, minutes away from global war.

But if the Cuban Missile Crisis is the closest the world has ever come to a nuclear exchange, then we've never come very close at all.

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Rose-coloured glasses make for sentimental fools

Labor used to say John Howard had a shameful nostalgia for the 1950s.  The ALP is sentimental, too.  But Labor's nostalgia is entirely about itself.

That's the lesson from two recent books:  Politics with Purpose by former finance minister Lindsay Tanner and Speechless:  A Year in my Father's Business by James Button (a former Age journalistand son of John Button, a minister in the Hawke and Keating governments).

Tanner writes of the end of ''labourism'', a pragmatic, union-centred philosophy that dominated the 20th century.  Labourism had broad community appeal.  Labourism, Tanner argues, is gone now.

Button writes of his failure to recapture what drew his father to the ALP:  a world of political combat and idealism and Trades Hall.

Labor's soul-searching about whether the party has values, a base, a purpose, is essentially about the past.  It's odd for a progressive party to be so weighed down by its own sense of history.  Yet it is.  Just before Gough Whitlam staked his own claim to Labor mythology, he, too, was rueing the ALP's decline.  Even in the 1890s there were Labor people certain that their movement had abandoned its earlier principles.

You can understand why.  The Light on the Hill, the Tree of Knowledge, the turn-of-the-century strikes — how could anybody live up to these poetic legends?  They've been so built up they're weaknesses, not strengths.

Liberals fret about their history, too.  Malcolm Fraser's ghost haunted the Howard years.  No Coalition government wants to squib market reform like the Fraser government did.

Neither major party looks as it did half a century ago.  They're no longer ''mass'' parties at all.  Membership is shrinking.  Branches are closing.  Nearly 200,000 people were members of the Liberal Party in 1950.  It's now less than half of that.  Across the aisle, the 2010 review by John Faulkner, Bob Carr and Steve Bracks showed Labor membership had declined by a quarter since the 2007 election.

Only about 1 per cent of Australians are members of any party.  Labor feels the pain strongest.  It thinks of itself as a movement.  A movement without people isn't very impressive.

The conservatives are more stoic about their shrinking membership.  A review by Peter Reith on Liberal Party reform was produced with much less fanfare than the Faulkner-Carr-Bracks attempt.

But both reviews came up with the same ideas.  Parties have to give the rank and file more influence over policy.  They should experiment with American-style primary elections.  In his book, Tanner proposed expanding the ALP's national conference to accommodate some of the lowly branch members.

Many people claim primaries will counter the rising power of party machines.  Yet those machines have probably never been less powerful than now.  In recent leadership ballots the ALP factions have split every which way.  No longer is Australian politics controlled by anonymous warlords.  The faceless men are now publicity hounds.  They run internal campaigns on Sky News.  They taunt their opponents on Twitter.

It isn't lost values or machine politics or a desire for empowerment behind the decline of the mass-member party.  It's that the mass party doesn't make a lot of sense.

In the 1950s, Australians didn't have much choice:  if they were interested in politics they would have to go to a local branch meeting.  We are better off.  We can watch Lateline and 24-hour news and argue forever on the internet.  For political types, party gatherings were once the best entertainment around.  Now, surely, they are the worst.

Parties are vehicles to shepherd politicians into seats and form governments.  Why do they also have to be debating societies, ideas factories, or social movements?

But there's a deeper issue.  Sectarianism is passe.  Choosing a political identity is not a matter of picking one side or another side.  We prefer to join lots of causes rather than one team.  We tend to take bits and pieces from everywhere, and resent parties that fail to live up to our highly specific preferences. This is healthy — Australia is a nation of individuals, not tribes — but it is a hostile environment for a mass political party.

When federal Transport Minister Anthony Albanese said earlier this year he just wanted to ''fight Tories'' it struck a weird note.  There is nobody who thinks of Australia in such sectarian terms — nobody outside the tiny, declining fraction of the population who are party members.  But that's the dead-end of political nostalgia.  Pity those who still think like that.

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Australian politics gets the British disease

For a long time we worried Australian politics would end up like American politics.  We now know that fear was misplaced.  This week in Canberra proved Australian politics is fast turning into the modern British way of politics — personal, nasty and tawdry.  And obsessed with spin.

The pomposity and primness of the British makes their politics particularly susceptible to scandal.  And the British system of government actually encourages personal attacks between political opponents in a way that doesn't occur in the United States.

Politics in a parliamentary system is centred on the leader of the government and the opposition.  There's an incentive for each party to concentrate their attack on the other party's leader.  When the leader in parliament is personally damaged the party they lead is also damaged.  Personal conflict is embedded in the mechanics of parliament.  At question time the prime minister sits directly across the table from the opposition leader.

A presidential system like that in the US does not have the same sort of focus on conflict.  The president is intended to sit above the daily political fray.  In the US, political conflict at the national level is not centred on just two people.  US presidents don't have just one direct opponent;  they have dozens, which is exactly how the Founding Fathers intended it to be.

Australia modelled its government on what was inherited from Britain.  It's a good model and it has stood the test of time.  But it does mean that politics in Britain and Australia operates in a particular way.

Britain and Australia are not just alike in their systems of government.  The way the media works in the two countries is alike, too.  Britain has basically a single and a national media market, as does Australia.  London, as the nation's commercial and political centre, and 20 per cent of the country's population decides the national media agenda.  Sydney has 20 per cent of Australia's population and probably has less influence on the rest of the country than London has on Britain, but Sydney nonetheless is the home of the nation's news.  Canberra might be the nation's capital, but for all intents and purposes Canberra may as well be a suburb of Sydney.

In Britain the coverage of politics by newspapers is handled by a handful of titles, while the BBC dominates discussion about politics on television and radio.

In Australia, it's similar — except the ABC is even more left-wing than the BBC.  The US, with five times the population of Britain and 14 times the population of Australia, has much more diversity in its mainstream media.

The US has many media markets and it doesn't have a government-funded media company regarding itself as the arbiter of the country's political discourse.

There's group-think in the American media, on both the left and the right of the political spectrum.  But the group-think among the media in Britain and Australia is worse.  The degree of conformity in an entity is directly related to its size.  The smaller the entity the more conformity there is.  The smaller the entity the easier it is to impose conformity.

In Australia the pool of political reporters and commentators is small, so inevitably there is a lot of conformity.  If one or two or three leaders in the Canberra press gallery can be won over to a position, the rest of the gallery will follow.

Because most of the journalists who write about politics in Australia agree with each other, it's easy to get media gridlock.  Media gridlock occurs when everyone is talking about the same thing and no one is talking about anything else.

All it took to shut down the Canberra press gallery for a fortnight was a one-sentence comment about the Prime Minister from a radio host at a private function.

For days on end Alan Jones was the only thing any political journalist wanted to write about.

And just prior to the Jones episode there was also gridlock as the media pondered the consequences of a ''he said/she said'' incident involving Tony Abbott when he was a university student 35 years ago.

It might be coincidence that just at the time Julia Gillard hired as her media adviser someone from Scotland, steeped in British political strategy, the Labor Party stopped talking about policy and started attacking Abbott's alleged personal failings.  Or it might not be.

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The Essence Of Successful Nations

Why Nations Fail:  The Origins of Power, Prosperity and Poverty
by Daron Acemoglu and James Robinson
Crown Publishers, 2012, 529 pages

Tolstoy famously wrote that while happy families are all alike, unhappy families are uniquely unhappy in their own way.  In their latest book, MIT economist Daron Acemoglu and Harvard political scientist James Robinson have found the Russian novelist's adage holds true for nations as well.

As Ronald Bailey argued in his review for Reason magazine, Why Nations Fail might be better titled Why Some Nations Succeed, as its real value lies in its analysis of the conditions required for a country to develop stability and prosperity.  Their answer, institutions, is compellingly simple.

Acemoglu and Robinson coin a neat phrase to describe the respective attributes of successful and failing states ― "inclusive institutions" versus "extractive institutions".  They argue that when nations develop "inclusive" political institutions, "inclusive" economic institutions follow suit to create a virtuous circle, propelling the nation towards success.  On the other hand, if nations continue to labour under "extractive" political institutions, "extractive" economic institutions will also emerge to form a vicious circle that prevents the country from reaching prosperity.

The author's list of factors that define inclusive political institutions reads like a catalogue of the best achievements of Western Civilisation:  democratic governance, the rule of law, property rights and a degree of political centralisation.  The development of these political institutions snowballs towards open markets, free trade and the fostering of an entrepreneurial spirit ― what the authors define as inclusive economic institutions.

On the other hand, extractive institutions prevent widespread participation in the political system, block economic growth and bar the path to prosperity.  As the authors write:  "extractive economic institutions do not create the incentives needed for people to save, invest, and innovate.  Extractive political institutions support these economic institutions by cementing the power of those who benefit from the extraction."  They are named extractive because they do exactly that ― they extract wealth and political power from the majority of the population and place it in the hands of a small set of elites.

Successful, wealthy nations almost invariably exhibit the traits of inclusive institutions.  For example, a series of critical junctures, coupled with a political system with nascent democratic features thanks to the Glorious Revolution, saw Britain play birthplace to the Industrial Revolution.  The creative destruction unleashed by the Industrial Revolution not only redistributed wealth, but also political power.  More pluralistic political institutions followed.

Another striking example the authors examine is Botswana.  Unlike many other African countries, some tribes in Botswana had already developed rudimentary democratic features before European colonisation.  After independence, Botswana quickly developed inclusive economic and political institutions.  Unlike many of its neighbours, Bostwana avoided bloody civil wars and rule by robber baron, and its people today enjoy prosperity almost unsurpassed anywhere else on the African continent.

Unhappily, Botswana's success has not been emulated by her neighbours.  Zimbabwe, which shares a border with Botswana, has become a by-word for the post-colonial quagmire many African countries still grapple with.

The book helps explain why other regions have lagged in economic development too.  Most of Europe was slow to industrialise because their political institutions were still dominated by the arbitrary rule of monarchies.  South American countries remained mired in poverty for years following independence from imperial powers, and are largely still counted as developing rather than developed countries.  Asia's autocracies such as North Korea and Burma are leagues behind their liberalised neighbours on almost all measures.

Prosperity continues to evade many of these nations ― they have that much in common.  Yet each have their own unique set of economic and political woes.  Whether it be brutal dictatorship or oligarchs masquerading as democratically elected leaders, there are dozens of variations of illiberal political and economic institutions that dot the developing world.

From time to time regimes may be overthrown, but all too often this only represents the transferral of wealth and power from one group of elites to another.  The vicious cycle repeats itself, because when economic institutions are extractive ― when tariffs are high and protection and monopoly are bestowed upon political allies ― political power becomes inextricably linked to economic wealth.

The extractive versus inclusive institutions model provides a far more convincing explanation of the differences between rich and poor countries than other popular theories that have gained currency over the years.  The authors tear the "geography hypothesis" to shreds ― the idea that poor countries are poor because of where they are located on the globe ― as proposed by Jared Diamond and popularised by Jeffrey Sachs.  They similarly rebuke theories that attempt to link prosperity to cultural values, or to some sort of knowledge gap among elites in the third world that well-meaning Western economists can fill.  Theories of geography, culture or ignorance cannot explain why Botswana is not Zimbabwe, why South Korea is not North Korea, or why the neighbouring border towns of Nogales, Mexico and Nogales, Arizona are so fundamentally different.  A theory based on institutional difference can.

Six years ago former World Bank economist William Easterly published his controversial book White Man's Burden, provocatively sub-titled "why the West's efforts to aid the rest have done so much ill and so little good".  The book caused outrage in the development community for its blistering attack on the success ― or lack thereof ― of aid programs delivered by well-meaning Westerners in developing countries.  Easterly argued that aid cannot make poverty history, and that NGOs ought to have more modest agendas rather than seeking to solve poverty in one fell swoop.

In many ways Why Nations Fail consolidates the missing piece of information in the ongoing quest to eliminate poverty in the third world.  When seen through the model of inclusive and extractive institutions developed by Acemoglu and Robinson, it seems breathtakingly obvious why Western aid efforts have failed so abysmally to eradicate poverty.  Ongoing economic growth can only occur when political and economic institutions are free ― something sorely lacking in Sub-Saharan Africa and other countries that remain mired in poverty.  Without the complex incentive structures of inclusive institutions that allow people to flourish, poor people the world over are unlikely to find prosperity.

For a country like Australia, which has enjoyed the fruits of inclusive institutions for much of its history, the book still has some valuable lessons.  The authors chart how a fear of creative destruction has led leaders across the world and throughout history to turn away from the virtuous circle of free economic and political institutions, instead choosing to protect vested interests.  History is littered with examples of societies who never quite break the mould or who reverse development in the name of protection from the forces of creative destruction.  The authors argue it is possible for countries to slip out of the virtuous circle if inclusive economic and political institutions are impeded.  Australian policy-makers would do well to remember this.

Why Nations Fail can be overly technical at times, but its sweeping narrative provides a convincing explanation of why the gap between the haves and have-nots persists throughout the world today.  The book marshals a wealth of historical and other data to prove it is no coincidence that wealthy nations are also liberal democracies.  Acemoglu and Robinson provide a comprehensive catalogue of the successes experienced by countries when they adopt free markets and democracy in tandem, and the failures of those who don't.

At a time when only 40 per cent of young Australians believe that democracy is preferable to any other kind of government, this book is an important and timely reminder of why we ought to be grateful for our institutional heritage.

Canberra, Unplugged

The Marmalade Files
by Chris Uhlmann and Steve Lewis
Harper Collins, 2012, 320 pages

Australians don't normally do satire.  We're not quite serious enough.  That indispensable The Penguin Dictionary of Literary Terms and Literary Theory helpfully points out that Samuel Johnson defined "satire" as a poem "in which wickedness or folly is censured".  John Dryden believed the purpose of satire was "the amendment of vices" and Daniel Defoe thought satire should bring about "reformation".

According to the Penguin Dictionary the satirist is "a kind of self-appointed guardian of standards, ideals and truth;  of moral as well as aesthetic values".  In the end "satire is a kind of protest, a sublimation and refinement of anger and indignation."

It's hard to imagine a better subject for satire than federal politics in Australia.  And there have been few better books about Australian politics than The Marmalade Files by Chris Uhlmann and Steve Lewis.  Uhlmann is the political editor of the ABC's 7.30.  He's also the country's best interviewer.  Steve Lewis has been a journalist at the Australian Financial Review, The Australian, and he's now the national political correspondent for News Limited's metropolitan dailies.  Together they've had nearly half a century reporting on federal politics ― longer if reporting on Kevin Rudd as prime minister counts double compared to reporting on any normal PM.  They've covered all the recent and exciting bits of Canberra politics, particularly the Rudd/Gillard/Greens/minority government saga.

The book hits the mark.  It's funny and sometimes very funny.  And sometimes it's uncomfortable in the way that watching Yes Minister or The Office is uncomfortable.  The Marmalade Files succeeds because it could almost be a work of a fact, which is what makes it so effective.  The plot is outlandish but not so outlandish such that it would be impossible to claim what's described could never ever happen.

The book is self-described as "an explosive novel of lies, lust and political bastardry".  Harry Dunkley, "a press gallery veteran with an instinct for trouble", receives an anonymous tip-off about a corrupt politician.  As he hunts down the story and the web of intrigue that inevitably follows anonymous tip-offs, Harry confronts trade union thugs, obstreperous and self-important ministerial advisers, and the national security establishment.  And around Harry's story Uhlmann and Lewis weave a cast of characters and present some brilliant cameos.  There's the breakfast TV program the Morning Glory and its hosts Thommo and Janny.  There's the Greens leader on Q&A who, amid delirious cheers from the live audience, proclaims "we must de-industrialise and de-capitalise" and "ending the enslavement of non-human animals is the next great liberation.  We humans are only a small part of Gaia."

There's GetSet! the online campaigning organisation ― "members could log into the state-of-the-art website, sign a petition on anything from live exports to climate change, watch their name and their issue appear on the front page, and then log off and get on with their day ... Activism and outrage now came free, with minimal effort and instantaneous gratification."

And then there's the politicians.  Not all of the politicians in the book are grasping, foul-mouthed, media-obsessed egomaniacs ― but most of them are.  Uhlmann and Lewis have got the process of modern-day politics in Australia pretty accurate.  The politicians no longer preside over the process, they are merely part of it.

Someone wanting to find out about early Georgian politics in England will learn more from looking at Hogarth's pictures and from reading Swift's Gulliver's Travels.  Likewise someone seeking an understanding of what happens in Parliament House in Canberra, and what passes between the media and politicians could well start with The Marmalade Files.

John Bright: A 19th Century Freedom Fighter

John Bright:  Statesman, Orator, Agitator
by Bill Cash
I.B. Tauris, 2011, 328 pages

John Bright's fame was so high in the middle of the 19th century that early settlers in the village of Morse's Creek in north eastern Victoria decided to rename the place, Bright.

One imagines that few of the town's current population of 2,200 could tell you how it got its name.

They would not be alone.  According to his new biographer, Bill Cash, Bright is "almost forgotten" in England as well.  Cash implies that this forgetfulness is particular to Bright, but, with the possible exceptions of Gladstone and Disraeli, all 19th century British political figures have largely been forgotten by the general populace, as the teaching of political history has become less fashionable in recent decades.

In works of political history, however, Bright is still accorded a rightfully prominent role.  And so he should be.  Bright was a key figure in all the great debates of his time, many of which still resonate today.  Along with his great friend Richard Cobden, he was one of the leaders of the Anti-Corn Law League, whose ultimate success in 1846 delivered cheaper food for generations of the British working class.  It remains the iconic political triumph for free trade.

Bright's other great campaign was for parliamentary reform.  His campaign began in the late 1850s and ultimately led to the Second Reform Act of 1867, which extended the franchise to include much of the working class.  He was also a vigorous opponent of British participation in the Crimean War;  an advocate of more humane policies towards India;  and a key international supporter of the North in the American Civil War.  To emphasise Bright's prominent standing in the United States, Cash relates how, when Abraham Lincoln was assassinated, the items in his pockets included a letter from Bright.

There is no doubt that Bright is worthy of a new biography and Cash released his work to coincide with the bicentenary of Bright's birth last November.  Cash brings to the task both a personal connection to his subject (Bright was his great-grandfather's cousin) and an understanding of politics, gleaned from being a Tory MP for 27 years.

Politicians often make very good political biographers and in England excellent examples include Roy Jenkins and William Hague.  Cash's work does not quite have the polish of some others and also suffers a little from his decision to write issue-based, rather than chronological, chapters, necessitating some repetition and making the narrative occasionally feel disjointed.  And, while Cash's assessment of Bright is generally sound, it is impossible to disagree with one British newspaper reviewer, who commented that the book "starts from the wrong place" in repeated attempts to claim Bright for "the Tory camp".  Bright was rightly known as a radical in his time, yet Cash constantly seeks to bring out what he terms Bright's "innate conservatism".  Other than Bright's opposition to Home Rule for Ireland late in his career, there was very little about Bright which was conservative.  Uncompromising support for free-trade was a radical position in the 1840s and it still is today.

However, the book has more strengths than weaknesses.  Cash neatly categorises politicians, using Bright and Disraeli as examples, between those interested in achieving "objectives and principles" (and rarely holding ministerial office), and those focused on "personal ambition".  Cash clearly sees his own career, which includes being one of the leaders of a rebellion over the Maastricht treaty that almost brought down John Major's government, as an attempt to emulate Bright's approach.

The book also lets readers appreciate how views of what entails good policy have changed.  While in modern times reform has often meant a shift to indirect taxes, in the 19th century it meant the opposite, as Cash makes clear in relation to Robert Peel's 1842 Budget:

"It was one of the most significant budgets of the nineteenth century, representing a huge tilting of the economy towards free trade and, consequently from indirect taxes on trade to direct taxes on income."

Another important issue Cash raises is what happens when two policy principles come into conflict.  The example he gives is when, on obtaining self-government, the Canadians used their new found democratic control to shift from a policy of free trade to protection.  The question arose of whether the Imperial government should intervene.  Bright plumped for democracy.

Cash sensibly does not attempt to boost Bright at the expense of Cobden, pointing out that historians have often tried to manufacture differences between the two men.  They had complementary talents.  Bright was a magnificent orator.  He put his talent to great use, gaining support for such great causes as free trade, democracy and opposition to slavery.

Hopefully, Cash's work will go some way towards ensuring that the achievements of this great freedom fighter are brought to the attention of a new audience.

The Population Conundrum

Bigger or Better:  Australia's population debate
by Ian Lowe
Penguin, 2012, 208 pages

The false dichotomy offered in the title of Ian Lowe's book Bigger or Better:  Australia's population debate hints at the one-sided polemic contained within.

Lowe puts a forthright case for "stabilising" Australia's population at or near current levels by cutting migration, particularly skilled migration.

But Lowe's argument for lowering skilled immigration to a point where Australia's population stabilises is utterly confused.

Firstly, it is never clear throughout Bigger or Better? whether Lowe's main gripe is against global population growth in general or Australian population growth in particular.  Apart from Australian society's "wastefulness" compared with poorer societies, the arguments he puts forth only apply to global population growth.

Using his own favoured method of economic and demographic analysis (back of the envelope calculations), if the global population is 6.97 billion and Australia's population 22.6 million, and Australia's net migration rate is 180,000 a year, that net migration rate affects the world's population exactly zero.

But even if net migration to Australia is the source of the world's woes, what exactly is Lowe suggesting?

Lowe seems to suggest that because Australians use more resources than those in poor countries ― including raw materials, fossil fuels, water and food ― the 180,000 people who might otherwise call Australia home should not be introduced to our resource-intensive lifestyles and instead be kept in the less wasteful state they are in.  In other words, in order to ensure the planet's resources are not overused, it is important that we safeguard our own wasteful, prosperous way of life and keep others in poverty.

As you might expect, Lowe is never so bold as to put it in these terms, but it is the only logical end-point of his opposition to population growth and his preferred policy solution of low migration to Australia.

Secondly, a problem that plagues Bigger or Better? is its inability to grapple with basic economic concepts.  He never canvasses the advantages of economies of scale, never supposes that prices can manage scarce resources or that necessity leads to efficiencies and innovation.  He worries about Australia's terms of trade when our endowment of natural resources, like iron ore and coal, run out sometime next century, never supposing that we, that is to say the market, might find a solution or a substitute without central planning.

Thirdly, Lowe argues that because humanity is endowed with the capacity for reason, it should decide its population and pursue it through policy.  He ignores the other side of reason;  that humanity is able to adapt its surroundings through the very faculties Lowe says compel humanity to choose a no-growth future.

Lowe should visit Israel.  He could see how nearly 8 million people live affluent lives in what is mostly arid desert using innovative irrigation practices and water conservation.  Israel's area is one third of Tasmania's, is largely uninhabitable, but has one third the total population of Australia.  Despite this, Israel's population growth rate remains higher than Australia's.

It is not hard to imagine the incredulity of an Israeli if they chanced upon Lowe's book;  they'd probably think the idea that Australia is under threat of overpopulation a neat joke.

Although it isn't central to Lowe's thesis, it is worth mentioning his eagerness to argue that stopping immigration will lessen racial strife in Australia.  Despite Australia's overwhelming success as a immigrant society, Lowe sees imminent Cronulla Riots wherever he looks.  If Australia continues to allow hundreds of thousands of migrants to enter Australia, Australia's "social fabric" and "social cohesion" will come under threat, according to Lowe.

Dog-whistling?  The Australian left spent years accusing conservative politicians like John Howard of using such tactics.  But Lowe ― the President of the Australian Conservation Foundation ― unwittingly demonstrates there is more similarity in views between no-growth greens and One Nation-style protectionists than he might like to admit.

Lowe is also needlessly partisan.

The book is peppered with references to the "Murdoch Press".  Tony Abbott is described as "generally supporting a population growth agenda", which is, unfortunately, not strictly accurate.  After gleeful accounts of Greens dominated local councils stopping growth throughout the country, Lowe even finds space to attack me for pointing out the common ground between greens and ultranationalists on immigration.

At one point, Lowe links transport congestion to the pro-natalist policies of the former Howard government (such as the baby bonus).  Personally, I'm yet to see a primary school age kid driving in heavy traffic.  Sure, the mini baby boomers born in the 2000s will eventually add to traffic congestion.  But since 2011 there are now more Australians leaving the workforce due to age than entering it, so our transport issues will need to be blamed on something else.

Worst of all, Lowe is incapable of looking beyond Green shibboleths.  This is most plain during his feeble rebuttal of nuclear power.  Echoing Bob Brown's National Press Club speech of 7 April 2010, Lowe revives the classic Greens Party non-sequitur that because the ingredient of nuclear power can also be used for nuclear weapons, we should not pursue nuclear power.  This is probably Lowe's biggest insult to the intelligence of his audience.

The range of logical errors like this, things taken as assumed and feeble rebuttals of major counter-arguments suggests this book was never meant to reach outside the green belt-way.  For Lowe's sake, he should hope it isn't.

Power And The Years of LBJ

The Years of Lyndon Johnson:  The Passage of Power
By Robert Caro
Random House, 2012, 761 pages

There is almost a cult amongst readers of political history and biography:  those who count down the years until the release of the next volume of Robert Caro's totemic biography of Lyndon Johnson.

Commencing with The Path to Power in 1982, followed by Means of Ascent in 1990 then Master of the Senate in 2002, the latest volume, The Passage of Power released earlier this year was a full decade in the making.  This latest volume covers the period leading into the 1960 election, when Johnson competed with Kennedy for the Democrat nomination, through to early 1964, the assassination of John Kennedy and its aftermath.

Caro has been working on this project since completing his first book, the Pulitzer Prize winning biography of Robert Moses, The Power Broker, published in 1974.  For an author of only 5 books over more than 40 years, Caro has an exceptional series of awards ― two Pulitzers and a clutch of National Book Awards and the National Humanities Medal and Presidential Medal of Freedom.

All the LBJ volumes are titled "The Years of Lyndon Johnson" and this is an important distinction.

These are more than simply a biography;  they are a history of the United States seen through the prism of the activities of one of its most influential figures.  Through Caro's extraordinary ability to paint word pictures, a different period of time is brought vividly to life.  This applies equally to his descriptions of the life of African Americans in the Deep South under Jim Crow as it does to the grief of Robert Kennedy following the assassination of JFK.

In an interview two decades ago, Caro outlined his aspirations for his writing:

"I don't regard my books as biographies so much as I do as history.  That's why I call them 'The Years of Lyndon Johnson' and I feel that in order to endure, a work of history has to be written, the prose, has to be at the same level as a novel that will endure, and I don't think there's enough emphasis in the writing of a lot of history, on the fact that this is a book."

The introductions to each of Caro's LBJ works invite the reader to continue into the large volumes, giving not only a taste of what is to come, but reminding a reader of past volumes as well.  This is just as well, with the almost decade-long average between publication.

His introduction to the third volume, Master of the Senate is the best short history of the US Senate yet written.  One hangs on every word of its almost 100 pages as it builds to the arrival of a man who would dominate it like no one had before.

The introduction to The Passage of Power is similarly enticing to the reader.  The key theme of Caro's work is about detailing the use of political power ― for good and ill.  In his introduction to The Passage of Power, Caro argues that power reveals the true nature of the person.  While one conceals characteristics in order to rise in political power, the elevation to supreme power reveals the true person.  This is as true in a presidential system as it is in a parliamentary one.  While the character of John Howard was revealed as he served as Prime Minister, so was that of Kevin Rudd and their respective longevity says something about both.

The Passage of Power moves away from the focus on legislative power outlined in Master of the Senate and his fight for office in Means of Ascent.  It focuses on Johnson's humiliation upon taking office as Vice President and his subsequent assumption of office amidst the first televised national tragedy.  It should not be forgotten just how momentous Johnson's ascension was.  Kennedy was the first television president, a signal of generational change, and this was the first assassination of the modern media era.

Johnson taking office also represented something profound ― the first President from the South, the old confederacy, since Andrew Johnson assumed the office following the assassination of Lincoln.  Apart from the fissures in the Democratic Party itself, which sometimes existed in name and banner only, the very notion of a President from the segregated South was anathema to much of the nation.

Yet, in the aftermath of the assassination, Johnson seized power in an extraordinary fashion.  Through what some may consider craven actions, he took control of Congress in a manner that had not been done since the very early days of FDR.

He smashed the conservative coalition of the Republican Party and Southern Democrats of which he was formerly a leader.  He passed the largest tax cut until that point, along with the pivotal civil rights bill that had both been bottled up in Congress with no prospect of proceeding.  In the words of Caro from a previous volume "it was Abraham Lincoln who struck the chains from black Americans, but it was Lyndon Johnson who took them by the hand, led them into the voting booth, drew democracy's curtain behind them and made them once and for all and forever a part of American political life."

This achievement can never be underestimated.  Bringing about the end of Jim Crow was the final step in removing a stain upon the Great Republic.  Despite many attempts, no-one else had even got close.  But LBJ did, and did so in such a fashion that the Southern Caucus was stunned.

When reading about these events, one at the same time admires LBJ's capacity to work and his insights into what makes his fellow politicians tick, but at the same time is repulsed by his seeming lack of moral boundaries.

The other main feature of this volume is Johnson's war with Bobby Kennedy.  One can learn a great deal about the Kennedys from this book:  the family project to get to the White House, the vanity of JFK, the Clinton-like ability to create a myth simply through allowing others to project their hopes onto you.

Robert Kennedy, long romanticised, is described in a manner that one cannot come away without being a little more sceptical about he and his Presidential brother.

If Caro is not the greatest writer of biography then he at least earns himself a position on the podium.  Regardless of what one thinks about LBJ, any student of history can learn a great deal about the United States, its government and this era through reading this latest volume.  It is not my favourite volume, that remains the previous volume about LBJ's time in the Senate.  But The Passage of Power greatly adds to understanding of those days in late 1963 and early 1964 following the Kennedy assassination.  In Caro's unique style, it does so by looking at past events as well as through an extraordinarily detailed description of the period itself.

Now the countdown begins for the fifth and final volume.

We do not need an internet overlord

At first glance, the United Nations' International Telecommunications Union (ITU) seems benign.

The agency helps coordinate global telephone interconnections so we can make overseas phone calls.  It manages radio spectrum and satellite orbits.  All tedious and technocratic work.

But the ITU is holding a meeting in December to decide whether it — and by implication, the United Nations — should take over the internet.

This meeting in December will be the culmination of a long contest between the decentralised, private internet and the leaden hand of state control.

A UN takeover of the internet could be incredibly bad.  Bad for liberty and free speech online.  Bad for technological innovation.

Why would we want to hand the basic structure of the internet to a committee of governments — many of which censor the internet at home?

ITU chief Hamadoun Touré pleaded in the Guardian earlier this year that only his organisation had the ''depth of experience'' to regulate the online world.

The ITU is an agency in decline.  It was founded in 1865 to negotiate connections between national telegraph lines, set technical standards, and manage the fees each network would charge each other.  Over time, it gathered more responsibilities, dealing with telephone networks from the end of the 19th century, and broadcast frequencies from the 1930s.  When the UN was founded in the 1940s, the ITU was wrapped in the blue flag.

This top-down control over telecommunications had a perverse effect.  As a paper in the journal International Organization argued in 1990, the ITU ''created one of the most lucrative and technologically significant international cartels in history''.  It picked winners and entrenched technological monopolies.

It is the last organisation we would want to govern the dynamic, bottom-up internet.

The political economy of communications has completely changed in recent decades.

During the 20th century, governments dominated telecommunications.  Telephone networks were state-owned.  Even in the United States, which avoided fashionable state socialism, telephone companies were legally-backed monopolies.

The ITU thrived in this environment.  When governments controlled the telephone system, negotiating a connection between two national networks was more an issue of diplomacy than private commercial contracts.

Then along came neo-liberalism.  Public utilities were privatised.  Monopolies were exposed to competition.  The need for a diplomatic body to manage the planet's spidering communications infrastructure dissipated.

It's been a quarter of a century since the ITU's mandate was renewed.  As such, the ITU has no authority over the internet.  Network companies have developed diverse interconnection contracts with each other, and have done so independently.  Technical standards have developed voluntarily and organically and in response to market demand.

Above all, the internet is largely decentralised.  It is a product of civil society, not government.  And what few centralised functions the internet does have — for instance, the management of domain names and IP addresses — are managed by non-government organisations based in the United States.

(This is not without problems.  The Bush administration intervened to stop the introduction of the .xxx domain, an own goal which undermined American claims of neutrality.  But for the most part, the internet still governs itself.)

The advantage of decentralised self-governance means internet architecture is mostly out of the reach of traditional politics and statecraft.

That's what the ITU power grab is all about.

The ITU doesn't want control over the internet's foundations merely to deal with technical issues like interconnection and standards.  No, ITU wants policy control:  to have a hand in regulating cybercrime, child pornography, even spam.  It wants to pursue social goals.  Hamadoun Touré talks about creating ''a fully inclusive information society'' — a phrase which would be easy to dismiss as meaningless if it didn't reveal an extraordinary mission creep.

Some countries want the UN to control what network operators charge each other.  Other countries even want to tax internet telephony firms like Skype to protect the revenue of their old national telephone monopolies.

It gets worse from there.  A coalition Russia, China, Tajikistan and Uzbekistan want the UN to regulate online speech by curbing:

The dissemination of information that incites terrorism, secessionism or extremism or that undermines other countries' political, economic and social stability.

Of course, their idea of what information undermines ''stability'' may differ from ours.

Will that authoritarian coalition get its way?  Probably not.  But the absurdity of this last proposal simply demonstrates the risk of UN control.  Under the ITU, the internet will be a geopolitical plaything.

It's hard enough protecting online freedoms from the national security excesses of liberal democracies.

Imagine vesting the power to tinker with the basic structure of the internet with as discreditable a political body as the United Nations.

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Government's creeping hand

The federal government's proposed data-retention regime deserves every bit of the immense amount of public criticism that has been heaped upon it.  But focus on the Orwellian citizen spying program could allow the government to push through its other troubling proposals unchallenged.

There are more than 40 proposals in Attorney-General Nicola Roxon's discussion paper Equipping Australia against emerging and evolving threats.  The government has desperately tried to assert that it is attempting to strike a delicate balance between national security and individual rights.  But just one of the 40-odd proposals would move us in the direction of freedom:  the sensible suggestion that there should be a reduction in the number of government bodies that have access to otherwise private communications information.

Of course, not all proposals are created equal.  The reduction in the number of security agencies with communication access powers would have a positive, but relatively small, impact on liberty.  On the other hand, the gargantuan data retention regime would have a significant and thoroughly negative impact on online privacy.  It seems the government needs to spend much more time striking that balance:  currently it's less ''delicate'' and more ''horribly disproportionate''.  Another dangerous proposal is to make it an offence to withhold passwords from law enforcement.  The Attorney-General's Department has asked the committee to consider ''establishing an offence for failing to assist in the decryption of communications''.  Making crimes of a refusal to hand over passwords is outrageous.  It strikes at the heart of our legal system by removing our right to silence.

The proposal is deserving of heavy criticism.  But Roxon thinks we're all overreacting.  She thinks those of us who are concerned about losing our right to silence need to take a ''cold shower''.  Last week, she even uploaded a YouTube video in which she defended the contents of the discussion paper and said there was no proposal ''to force people to give up passwords''.  Yet decryption of communications necessarily involves the use of encryption keys or, in common parlance, passwords.

But there were also some striking omissions from Roxon's video.  For instance, the proposal to give the attorney-general the power to unilaterally vary ASIO warrants was left out.  The suggestion is that a variation should be allowed where it can be justified on grounds of ''operational flexibility''.  Such a test is absurdly broad and could be used to legitimise variations in almost any circumstance.  That these decisions would be made without any oversight from the courts is extraordinary.  The proposals relating to warrants don't stop there.  Currently, ASIO has 90 days to carry out their search after having obtained legal authorisation to do so.  But the discussion paper proposes increasing that period to six months.  This change requires significant justification.  Why can't Australia's top security agency get it together in the already generous three-month period?

This isn't the only generosity extended to the security agency under the legislation.  If ASIO makes a request of the attorney-general and they don't receive a response, they get to simply issue themselves with a warrant.  It must be one of the only cases in law where silence operates as sufficient acceptance.  Good luck using the same approach in contractual negotiations.

Apart from the dangerous and the extreme, there are also proposals that border on the bizarre.  The proposal to allow ASIO to add, delete or alter data clearly falls into this category.  This goes far beyond ordinary espionage — it would allow ASIO to plant files on your computer and modify existing ones in total secrecy.  One of the first chapters in the collection of evidence manual is on the importance of avoiding tampering.  Data obtained in this manner are likely to be inadmissible in legal proceedings.  And quite apart from the issue of evidence, it's shocking that we would give law-enforcement agencies that kind of power.

Government asking for more authority and more influence is not a new thing.  We have now had over 10 years of a continuously expanding system of security powers.  This most recent wave of proposals should be rejected.  Proposals that undermine the rule of law, trash civil liberties and erode privacy have no place in a free and democratic society.  There will never come a time when government agencies thank us for giving up our liberties and contentedly say ''now we have enough''.  The erosion of freedom will only stop when it is resisted by us all.  Benito Mussolini famously said:  ''The truth is that men are tired of liberty.'' Perhaps the federal government is tired of liberty;  Australians are not.

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Don't just tinker with government — reduce it

There are few concepts more nonsensical in Australian politics than the ''efficiency dividend''.

Yet in the politics of public service cuts, few are more heavily relied upon.

You'd think that an efficiency dividend was a financial benefit that came once efficiencies were found.  That's what it sounds like, after all.  Nope:  it's the other way around.  By cutting the public sector, governments take the dividends first — in the form of reduced payroll costs — and just hope the efficiency comes later.

The reasoning is pretty crude:  with fewer staff, the public service will simply have to be more efficient.  How, exactly?  They'll figure it out.  Efficiency through adversity.

Of course, there's nothing wrong with reducing the size of the public service.  It's worthwhile.

The Commonwealth employs 160,000 people;  the states and territories around 1.2 million.  These are huge figures.  So while it sounds pretty extreme that the Federal Coalition might cut 12,000 jobs over two years, that's a small part of the whole and roughly the pace of natural attrition.

Campbell Newman's target of 20,000 jobs is more ambitious, but even then that comes out of Queensland's public service pool of 207,000.

In any organisation, labour costs are among the biggest costs.  Governments that need to balance budgets tend to look at public service size first — particularly conservative governments, who don't see bureaucrats as a voting constituency.

Public service cuts have their own little ritual.  ''Frontline staff'' will be fine, assures the government.  ''Essential services'' will disappear, counter public sector unions.  Bureaucracies — for whom size is a measure of success — shift around staff and threaten to eliminate their most politically popular functions.  The press speak of promises broken and everybody tries to divine in the entrails of Newspoll and Essential what it all means.

By the end of this, the poor old government will be lucky if it gets its dividend.  It certainly won't get any ''efficiency''.

Because these big job cuts — a dozen thousand here, a dozen thousand there — are like taking a baseball bat to a photocopier:  briefly satisfying, perhaps, but it won't make it copy better.

The only way to meaningfully reduce the size of government is to reduce what government does.

There are, no doubt, inefficient elements within the public service.  But those inefficiencies will not be identified through orders from on high about across-the-board workforce reductions.

Cutting jobs without cutting the tasks which those jobs exist to perform will — in every likelihood — undermine service delivery, without sustainably lowering the burden on the taxpayer.

This is an uncomfortable reality.  Far easier to insist the public service goes on a diet.

The vast majority of public finances are tied up in health and welfare.  Take the Commonwealth, for instance.  Its largest agencies are Centrelink, the Taxation Office and Defence.  These agencies harbour between 20- and 27,000 staff each.  The next largest agencies are substantially smaller:  immigration has a labour force of around 7,000, Medicare just over 5,000.

You can see why for new governments, it is appealing to shave these departments by a fraction.

But they are also the departments most closely integrated within the political system.  Welfare and defence are two of the central features of the modern state.  You can tell how serious an opposition is about reducing the size of government by whether they talk about these biggies, or whether they just rabbit on about marginal things like foreign aid, which are, in truth, a tiny fraction of the budget.

So if governments want to reduce the public sector permanently they'll have to be creative and courageous.  Want Centrelink to be a lighter load?  Then your priority has to be welfare reform, not public service cuts.  Want the Defence Department to be less of a money pit?  Then reassess our defence strategy, or our wasteful acquisitions program.  Simplify the tax system if you want to shrink the tax office.

It's not completely hopeless.  There are many things that could be done.  For instance, a truly cost-cutting government could get the Commonwealth out of education — that is, return education to the states where it is constitutionally allocated.  (And, because they actually run schools, the states have a far better idea than Canberra about where money should be spent.)

In other words, find the efficiencies, and then take the dividend.

Of course, there is no government or opposition in the country that wants to seriously rethink what the public service does.  There's a lot of tinkering planned, but no reform.

Targeting the bureaucracy mistakes the symptom for disease.  If you really want smaller government, you need to reduce its functions.

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It's not about ''cranks'', it's about tax rises and high spending

You wouldn't know it from the media coverage, but Wayne Swan's foray into US politics showed a profound misreading of Washington's economic debate on the eve of the presidential election.

According to the Treasurer:  ''The biggest threat to the world's biggest economy are the cranks and crazies that have taken over a part of the Republican Party.''

How so?  Because their opposition to high spending could prevent Congress from resolving its budget problems, known as the ''fiscal cliff''.  That would mean a major withdrawal of government spending, which — in Swan's telling — could drive the US economy into recession.

Just what a debt-burdened US needed:  a lecture from an Australian Labor politician not to cut spending.

To understand the US economic debate properly, one needs to recognise two different fiscal cliffs.  The first cliff is the rise in tax rates because Bush-era reductions are set to expire at the end of the year.  The second cliff is the $1 trillion-plus in cuts in defence and domestic discretionary spending during the next decade as part of last year's compromise to reduce the debt.

Like most Keynesians, Swan misdiagnoses the real threat to the US economy:  it's the taxes, not spending, as The Wall Street Journal consistently editorialises.  Take some history:  in the past three decades, Washington has made two major efforts to cut federal spending.  The results:  long booms.

In the 1980s, a combination of tax and spending cuts led to a decade of economic expansion.  After the Republican Congress and Democrat Bill Clinton implemented budget reforms in the mid-1990s, spending began to fall as a share of gross domestic product until the early 2000s.  The economy and stocks boomed.

In the Bush and Obama eras, however, federal spending has increased from 18.2 per cent of GDP to 24 per cent.  In early 2009, White House advisers predicted the $830 billion stimulus package would deliver less than 6 per cent unemployment by now.  Obama himself declared his presidency would be ''a one-term proposition'' if he did not turn around the economy.

It's been more than three years since the recession technically ended.  Yet the economy is limping at less than 2 per cent growth and 8.1 per cent unemployment.  Meanwhile, real incomes have declined nearly 6 per cent, the US deficit has doubled and the debt has increased by more than $5 trillion.

Contrary to Swan, what could push the US off the fiscal cliff is the scheduled tax increases by year's end.  That may explain why 19 congressional Democrats have supported House Republicans to extend the current rates for another year.  (Memo to the Treasurer:  are these Democrats ''crazies and cranks'' too?)

But neither the President nor the Democrat-controlled Senate is co-operating.  That means liberals are essentially backing a gigantic tax increase in the New Year, which would put the brakes on the most sluggish recovery since the Depression.

There are, of course, other risks and uncertainties involved.  As Federal Reserve board member Richard Fisher conceded last week:  ''Nobody really knows what will work to get the economy back on course.''

But if a recession occurs next year, it's a fair bet the Democrats' refusal to pass the Bush-era tax cuts, taken together with taxes on capital gains, dividends and estates on January 1, will cop a lot of blame.

All of this is crucial to understanding how Swan misunderstands the legislative debate in the US.  It also helps clarify the stakes of the 2012 election.  Above all else, the Obama-Romney contest represents a philosophical debate about the size and scope of the federal government.

This debate has been raging since Barry Goldwater's failed bid against LBJ's Great Society in the mid-1960s.  It accelerated in the '80s with the Reagan agenda of tax cuts and deregulation.  Then the mid-1990s brought us the Republican takeover of Congress, which pushed Clinton into declaring ''the era of Big Government is over'' (welfare reform, balanced budgets, the North American Free Trade Agreement).

But the past decade has hurt the cause of smaller government and the US has gone down the road to higher levels of spending and regulation.

That is why Mitt Romney's running mate, Paul Ryan, the Tea Party and a new breed of Republican governors represent a refreshing change.  They repudiate Obama's let-government-solve-it liberalism, and Bush's don't-rock-the-boat Republicans.

That means reforming entitlement programs (Medicare, Medicaid, Social Security) that are on an unsustainable trajectory as well as proposing tax reforms that reduce rates in exchange for closing tax loopholes.  It also means finding a way to cut indecently high spending and insanely high debt while reviving a lacklustre economy.

A choice, not an echo.  Get ready to hear Romney make that pitch in the first presidential debate.

Should the government restrict super-sizing junk food?

There's a lot of competition for the most stupid Nanny State proposal.  But if forced to choose, plans to restrict serving sizes would have to take the cake.  They should be rejected outright.

Like all paternalistic attempts to change other people's lives, it is condescending and it is elitist.

And like all grand government initiatives to modify behaviour, it is highly unlikely to work and will almost certainly lead to many unintended consequences.

There's no surprise these proposals are targeted at fast foods.

After all, it is a well-known fact that it is impossible to get fat from expensive high-class food like foie gras and French cheeses.  No, the only way to gain weight is by eating fast food.

Deep down, the idea that the government should restrict how large your hamburger should be comes from people who believe that everyone else is not smart enough to run their own lives.

They target fast food outlets because they think the people who frequent them are incapable of eating in moderation.  It's deeply concerning that this kind of elitism pervades much of the public health community.

But let's assume they're right.  How could such a proposal possibly work?

Let's take pizza as a starting point.

Do we ban the family size?  Or should there be a limit on the number of pizzas you can order?  Should customers have to prove they're not eating the whole thing on their own?

It doesn't get any easier at McDonald's.

What if someone orders a Big Mac and chicken nuggets?  What if they come back for seconds?

Of course, almost no one in the country would do the majority of their eating in fast food restaurants.

If someone is obese, it's their entire lifestyle that's problematic, not just their weekly excursion for fried chicken.  And even the most ambitious Nanny Staters don't propose controlling what people eat at home yet.  Previous attempts to shift Australians' lifestyles through regulation have failed dismally.

The alcopops tax not only failed to reduce youth drinking, but it also led young drinkers to shift from pre-mixed spirits to buying hard liquor outright.

Now, instead of knowing exactly how much alcohol they are drinking, they're mixing their own concoctions that are much harder to measure.

Paternalism rarely works as well as its supporters hope.

It's these sorts of unintended and unexpected consequences of Nanny State policies that should lead us to reject them.

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Get rid of secret deals

There's a simple way to stop governments and businesses going to court to keep their deals between each other secret.  This week The Australian Financial Review has been in the NSW Supreme Court trying to get the federal Industry Department to reveal the details of the government's subsidies to the car companies.

Put simply, the Gillard government is using taxpayers' money to pay lawyers to argue that taxpayers should not be told why taxpayers' funds are being handed over to Ford, General Motors and Toyota.

The way to overcome this is easy.  It should be mandatory for all governments (federal, state and local) to publicly disclose all payments to external parties.  And the terms and conditions of those payments would also be disclosed.  External parties would include corporations, trade unions and non-government and international organisations.

There are laws against what's called secret commissions which aim to stop companies paying bribes.  But if the bribe is big enough and obvious enough the rules that apply to everyone else don't apply to government.  And in Australia there's no bigger bribe than the $1.2 billion paid last year by the government to the automotive manufacturing industry.

The main objection to disclosure of government payments is that commercially sensitive information about the recipients may be made public.  It's quite possible that if the Financial Review wins the right to publish the advice that the public service gave to Industry Minister Greg Combet, information could be released that the car companies would prefer to keep confidential.  But that's bad luck.  If a company doesn't want commercially sensitive information to be disclosed then they shouldn't take taxpayers' cash.

Governments have been allowed to hide behind the convenient phrase ''commercial-in-confidence'' for too long.  State politicians are serial worst offenders.  For years successive Victorian Coalition and Labor governments refused to reveal how much they paid Bernie Ecclestone for the privilege of holding a car race.  Two days ago we found that this year's Formula One Grand Prix cost the Victorian government $56 million.  When the figure was announced the sky didn't fall in.

In a liberal democracy like Australia, secret deals between governments and business have no place.  One of the reasons liberal democracy works is because by making the activities of government transparent, government is held accountable.  Even if there's no outright corruption, there's the possibility that without accountability for what they do, public servants and ministers will be more generous in handing over taxpayer funds than they would otherwise be.

Secrecy now pervades a growing range of government activities.  The secret negotiations on the mining tax between the federal government and BHP Billiton, Rio Tinto and Xstrata were an appalling abuse of the legislative process.  The government secretly disclosed to these three companies the details of the tax, yet did not reveal this same information to any other company liable to pay the tax.

A few months ago, the Prime Minister wrote to Australia's media proprietors offering them the chance to negotiate with her over the government's proposals to regulate the media.  This letter has not been made public.  I had made a request to get that letter under freedom-of-information laws.  So far the request has been refused.

When the head of the Business Council of Australia complained last week about out-of-control ministerial advisers she made headlines.  However, on the list of problems of public administration, that ranks about 77th.  If a deputy secretary of a department with 25 years' experience in the public service can't handle a 23-year-old press secretary shouting at them over the phone at seven o'clock in the morning then that deputy secretary is in the wrong job.

Secret deals between government and business are a far bigger threat to democracy than the behaviour of ministerial advisers.  But business leaders aren't going to speak out about secrecy because so many of them are beneficiaries of their own secret deals with government.

As this newspaper said earlier this week, Kevin Rudd pledged to end the ''culture of secrecy''.  That promise has gone the way of those other promises like taking a meat axe to the public service, and stopping all the reckless spending by the federal government.

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Romney had a point: shift balance from takers to makers

The recent statement by United states presidential candidate Mitt Romney that 47 per cent of Americans is dependent on government has created a media maelstrom in the US and drawn international attention, including in Australia.

While the conventional view is that the Romney statement has firmly switched the tide of American electoral sentiment back to incumbent President Barack Obama, the statement shouldn't be dismissed as the self-serving grumblings of a wealthy venture capitalist.

In fact the statement made by Romney raises serious questions concerning the fiscal sustainability of modern government.

Growth in the numbers of people receiving public service salaries, welfare payments and other government handouts, other things being equal, increases the amount of taxes that governments must forcibly acquire in order to commit to such spending.

If the growth in numbers of direct recipients of these government expenditures outstrips the numbers of people receiving their incomes from market transactions, then the tax burdens imposed on the latter will increase, perhaps by economically intolerable proportions.

Governments could also exercise the option of borrowing to fund spending enabling those people dependent upon it to maintain their upkeep, but that merely translates into tax burdens imposed sometime in the future.

As has been witnessed throughout the Western world over the past century or so, when the numbers of people reliant upon government payments continue to grow the nature of political discourse fundamentally changes.

The political discussion becomes increasingly less about what political representatives should do to uphold and extend basic liberties and freedoms, to how they should best satisfy the whims of those constituents who wish to vote for a living.

For that matter, when government benefits become a major source of income for a substantial number of people questions of handout redistribution, rather than economic growth and expanding private sector employment, become a focus for electoral contests.

Since people dependent upon government payments have their effective tax price of public services greatly diminished, a core voting bloc emerges in society pushing for extensions in the size and scope of government regardless of its economic consequences.

Given the substantial increase in the numbers of Australians dependent upon government largesse for their livelihoods, this problem ought to be discussed openly and frankly here as well.

Taking a sample of data from 1983 to 2010, which mainly coincides with the 1983 2007 era of so called ''neoliberal reform'', it is possible to build a partial but representative picture of growth in government dependency.

Public sector employment by all levels of government grew from 1.63 million people in 1983 to 1.84 million in 2010, even with government privatisation of financial, telecommunication and transportation assets during the late 1980s and 1990s.

In spite of generally prosperous economic conditions until recently the numbers of people receiving some form of welfare payment has also risen, from 2.75 million people to 4.87 million.

The numbers of people on unemployment benefits have fluctuated with changes in the business cycle, with increases in recent years as the post GFC-economic stagnation has dragged on.

However, it is the growth in the age pension (from 1.39 million to 2.16 million), disability support pension (from 220,300 to 792,600) and parenting payments (224,500 to 333,500) which have substantially driven growth in overall welfare dependency.

Combining these two sets of figures provides a total of 6.71 million people, or 30 per cent of the total population, directly dependent upon Australian governments in 2010.

This is up from 4.38 million in 1983.

While these figures only provide an indicative account of government dependency in Australian society, they highlight that this country confronts a net tax-providing ''makers'' versus net tax-consuming ''takers'' dilemma similar to that found in the United States and Europe.

Successive Intergenerational Reports released by federal Treasury show, in the absence of reforms to reduce government size, the economic and political balance risks being tipped further in favour of government dependents.

This is why the Hugo Chavez-style outbursts by Treasurer Wayne Swan against wealthy entrepreneurs in the mining sector and the chop-and-change tax and regulatory policy disposition of the government are so detrimental to Australia's economic interests.

The future prosperity of Australia hinges on more entrepreneurs and other makers selling quality goods and services to satisfied customers around the world.

By doing so they will earn profits and generate wealth.

Scaring entrepreneurs into taking their capital elsewhere or not setting up business at all, through anti-business rhetoric or policy uncertainty, will hurt the post-mining-boom economy.

And, ironically, it will deprive governments of revenue needed to fund basic protective services.

Putting limits on our economic aspirations will also reduce options for people who currently live off government handouts from finding more productive pursuits within the private sector.

We in Australia shouldn't dismiss Romney's core message to shift the balance back from takers to makers in economic and fiscal policies.

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Free speech? ''Whatevs,'' says the United Nations

UN Secretary-General Ban Ki-Moon last week expressed concern about free speech because sometimes it can be ''used to provoke or humiliate''.

God forbid we allow lively debate to take place.

With the advent of this proposal the UN has nailed its colours to the mast — it is unmistakably an anti-freedom of expression organisation.

Australia decided last century to erase these heretical laws from our statute books.  We recognised they have no place in a society that values free speech and religious plurality.

Today, the only Commonwealth remnant is the Australian Maritime Safety Authority-enforced law that disallows the registration of blasphemous ship names.  That, too, should be repealed.

Throwing a person in prison for insulting someone is wrong.  Doubly so when the law can be used as a tool by governments and religious majorities to crackdown on minority groups.

Overwhelmingly, blasphemy laws have been used as an often-deadly weapon in long-running sectarian disputes.

Pakistan is the most obvious example.  Christians have been persecuted for decades under laws that allow the Muslim majority to attack the religious minority over allegations of defacing the Koran and insulting Muhammad.

Recently, a young Christian girl was accused of destroying the Koran.  She was accused of blasphemy and imprisoned for three weeks.  It has now been revealed that an Islamic cleric burned pages of a Koran himself and framed the girl for the crime.

The Catholic minister for minority affairs was assassinated last year after criticising the country's blasphemy laws.

And it's now countries like Pakistan that are pushing for blasphemy laws to be implemented around the globe.  Political leaders from Egypt and the Organisation of the Islamic Conference have also spoken out in favour of international blasphemy laws.

Momentum for these restrictions is being driven in the context of a worldwide backlash to a stupid but utterly amateur film criticising Islam.

Pakistani Prime Minister Raja Pervez Ashraf has said in response:  ''We would go to the UN and OIC and get a law passed to stop anti-Islam activities, including blasphemy, forever.''

Turkish Prime Minister Recep Tayyip Erdoğan had this staggering addition:  ''Freedom of thought and belief ends where the freedom of thought and belief of others starts.''

This revelation is extremely concerning.

Turkey's political power is potent — it currently heads the OIC.  This is alarming because it is voting blocs like the OIC that will use their influence in the UN to push for blasphemy laws and decide which expressions will be outlawed.

Imagine the kind of radical limits to freedom of expression that would satisfy Erdoğan.  It goes way beyond restrictions of expression and probes the beliefs and values of individuals.

The proposal is disturbing and irrational.  Such a reality would invite the UN to police the thoughts and feelings of seven billion.

The UN's push for the criminalisation of blasphemy perfectly exemplifies what an artefact the organisation has become.  It is a soapbox for extremists and bigots and its orthodoxy should be dismissed as such.

It's weird that Australia would want a seat at the table of such an illiberal organisation.  Yet Prime Minister Julia Gillard is in New York all this week arguing for just that — she wants Australia to occupy one of the non-permanent UN Security Council seats.

We should abandon the attempt.  The UN should be left to the extremists and bigots who want to crush freedom of speech through relics like blasphemy laws.

It is beyond salvation.

A crackdown on illegal immigrants. Interested? Anyone?

Last week Immigration Minister Chris Bowen introduced a bill into parliament.  Had we been any other country on the planet this would have been extremely controversial.

Columns would have been published.  Talkback callers would have been enraged.  Television panels would have pontificated.

But our immigration debate is peculiar.  The Migration Amendment (Reform of Employer Sanctions) Bill 2012 will in all likelihood be ignored.

It shouldn't be.  This legislation significantly increases the penalties for employers who hire ''illegal workers'' and gives a whole range of new inspection and police powers to the Immigration Department to enforce them.

The bill erodes the right to silence, for one, and establishes powerful search warrants with which immigration officers can enter premises to hunt down evidence of illegal workers.

More broadly, the bill puts meat on a new and punitive immigration regime:  it is now the legal responsibility of employers to find out whether the people they hire are entitled to work in Australia.

So yes:  a crackdown on illegal immigrants!  The stuff tabloid dreams are made of.

Or not.  In the Australian consciousness, immigration politics is purely about asylum seekers.

By definition, asylum seekers want authorities to find them.  Illegal workers do not.  They are people who are working in breach of their visa conditions.  They may have overstayed their temporary visas, they may be here on tourist visas, or they might be working more hours than their student visas permit.

It's hard to measure, but we know there are at least 50,000 illegal workers in Australia.  A Government report (PDF) in 2010 suggested it could be as many as 100,000.

That figure is a lot more than the few thousand who have sought asylum in Australia by boat.

Why the disconnect?

Immigration politics is not about quantity but visibility.  And our borders are uniquely secure.  The twentieth century fantasy of full state control over who enters and exits a country has only come close to realisation in Australia.

Those dinky boats may seem like a threat to our ''sovereignty'', but they are actually a demonstration of it.  Our high-tech Navy picks them up, and our bureaucrats ploddingly process each one in turn.  Every migrant interacts with the system at some point.  There are no exceptions.

In almost every other country, borders are far too porous to imagine a government could be this diligent.

So in the United States, the United Kingdom and the richest nations in Europe, it is illegal workers who bear the brunt of the political and public attention.  We obsess about the people who want to come here.  The rest of the world obsesses about those who already are there.

This focus on asylum seekers means we ignore the great issue of our time:  the clash between national borders and an increasingly global employment market.

The Government's new illegal worker bill is evidence that we are not as isolated as we think.  One hundred thousand people is not trivial.

But the Immigration Department's arguments for why we need to crackdown on illegal workers are unfortunate.

First:  if we allow illegal workers to work, our immigration controls will be weakened.  In other words, immigration restrictions are needed to maintain immigration restrictions.  It gets even more circular from there.  Illegal workers are a problem because of ''costs associated with locating and removing illegal workers''.  Read that one again.

Second:  illegal workers ''deny Australian citizens and permanent residents the opportunity to obtain a job''.  It would be nice if the Immigration Department didn't endorse the claim that foreigners crowd residents out of the employment market, but, well, there you go.  Likewise, we might put aside the claim that illegal workers ''may not meet ... stringent health and character tests''.

One final argument is the most convincing, but perhaps not in the way it is intended:  illegal workers are susceptible to exploitation.

This is undoubtedly true.  But it is because those workers face the threat of deportation that they are so vulnerable.  The stricter we are about visa overstayers, the more we increase the chances that they will be exploited by unscrupulous employers who threaten to call Immigration if they complain.

We know from international experience that an aggressive pursuit of illegal workers and their employers can create as many problems as it tries to solve.

So that this crackdown on illegal workers is likely to sail through unexamined has nothing to do with its desirability.  It is, instead, a window into the strangeness of the immigration debate in Australia.

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