The Chinese Capitalist Miracle

How China Became Capitalist
by Ronald Coase and Ning Wang
Pelgrave Macmillan, 2012, 268 pages

The Chinese economic miracle is the latest and most comprehensive success story since the end of World War II.  Veteran economists Ronald Coase and Ning Wang explain how in the space of three decades one of the world's poorest countries became the world's leading manufacturer and investor.  They attempt to disentangle the twists and turns of Chinese politics and economics in its voyage to success within a framework which rightly judges that no system other than capitalism (which the book calls the market economy), could ever produce such an outcome.

In retrospect the internal contradictions within Communism (absence of appropriate incentives, attenuated property rights, politicisation of business decisions and prices and so on) made its collapse inevitable.  But that was not clear in 1970 or even 1980.  Yes, communist economies in both the Soviet bloc and China were stagnating.  But there were many believing and hoping that the future was about to emerge to demonstrate that socialism actually does work.  Intellectuals in particular thought that socialism, which accorded them the status and perks they considered they richly deserved, with a little more reform would demonstrate that the bourgeoisie were unnecessary.

Though the collapse of Communism took place almost simultaneously across the world, a remarkable contrast is evident between Chinese Communism's self-control of its demise and the relatively bloodless overthrow of the system in Europe.

The Europeans delegitimised their Communist Parties and ostensibly opted for a western capitalist system that incorporated democracy and liberty ― more so in the former satellites than in the USSR successor states.  On the other hand, China's Communist Party continued to maintain its monopoly of political control, vigorously and sometimes brutally suppressing any challenges.  Chinese communists adopted capitalism shorn of the democracy and liberty that many considered to be an essential part of its makeup.  And in supervising a gradual dismantling of socialism, its raison d'etre, China's Communist Party watched over the longest and highest rate of economic growth the world has ever seen.  One indicator of this is steel production, traditionally a key indicator of industrialisation.  Having increased twentyfold in the past 30 years, China's steel output now accounts for half the world's supply, up from 7 per cent in 1980.

How did this happen?  How did a ruling political party numbering millions of apparently dedicated Marxists-Leninists retain its power in the decades following 1978 while permitting and facilitating an economic development approach totally alien to its proclaimed ideology?  And how did that same Party evolve from a proselytising socialist force to one that welcomed diversity?  Coase and Wang offer important insights but leave plenty for others to explain.  By the late 1950s, Communist China, like underperforming organised societies of yesteryear, was seeking out ways to catch up with the west.  Calls for modernisation started to become increasingly insistent on the part of China's leadership.  The first "four modernisations" program was initiated by Premier Zhou Enlai in 1964 and was aborted by the Cultural Revolution of 1971;  other modernisations were subsequently endorsed, including in 1978 (Mao died in 1976) by Deng Xiaoping, shortly before one of his downfalls.  The catch-up program sought to emulate the successes without adopting the institutions of capitalism ― free enterprise, personal ownership, and the rule of law.  Progress was therefore transient.

As well as promising a fairer society, socialism had been the supposed key to a more efficient and richer society.  But Coase and Wang note early questionings of socialism.  By 1984 when Hu Yaobang, as General Secretary of the Communist Party, had taken this further in asking, "Since the October revolution (of 1917) more than 60 years have passed.  How is it that many socialist countries have not been able to overtake capitalist ones in terms of development?  What is it (in socialism) that does not work?"

Hu Yaobang would not have been the first to voice such concerns even though they questioned the party's core beliefs.  Even so, not many people would have had sufficient information to raise such doubts partly because censorship severely limited information ― even to senior party members ― about the extent of China's backwardness and how western economies operate.  Overseas trips provided rude awakenings as when in 1978, Vice Premier Wang Zhen visited England and found his salary was only one sixth that of a London garbage collector.

While the European Communist systems pursued catch-up by having state enterprises adopt new western technologies and practices, China from the mid-1980s was looking at grafting capitalism itself onto Communism.  The proximity of China to the Asian Tigers of Hong Kong, Taiwan, Singapore and South Korea provided an object lesson for success, especially since the entrepreneurial leaders of the first three were the children of uneducated emigrants from China itself.  Not only therefore did the Chinese have the failures of socialism as an example but they also could see the astonishing successes of these newly enriched capitalist countries.

Deng Xiaoping was a key player throughout the Chinese transformation process, even eventually managing to persuade the Communist Party that Marxism was a pragmatic ideology willing to try new systems of ownership and trade.  Notwithstanding this breathtaking apostasy, the conversion of China to a fully-fledged capitalist economy involved several paths which were only loosely connected.

In the late 1970s, foreign trade and foreign direct investment became the first areas where liberalisation was introduced.  Vastly important in this was the Shenzhen (Guangdong) free trade zone adjacent to Hong Kong.  As a catalyst for the introduction of free enterprise Shenzhen had its genesis, not as a means of introducing free enterprise, but as a means to halting the flow of economic refugees to Hong Kong.  The Communist authorities were involved in considerable expenditures in trying to stop this illegal exodus of the tens of thousands of people each year, an exodus which also involved many hundreds drowning.  To their utter astonishment, in examining the cases of refugees who made it to Hong Kong, they learned that they earned one hundred fold as much as those who remained behind.

The establishment of Special Economic Zones (SEZ) operated on capitalist lines in Shenzhen and elsewhere to attract foreign investment which blossomed.  Eventually Shenzhen's SEZ transformed a village of 30,000 people into a vast metropolis which now has 14 million residents.

Agriculture led the way to domestic private enterprise.  In 1978, private farming was a criminal activity, but 1976 saw its first secret reintroduction by peasants at a Sichuan village called Nine Dragon Hill.  The success of that village and a few others in increasing production was compelling.  From 1980 the party instituted a progressive lifting of the ban on private farming.  Fairly soon virtually all land had been divided into individual plots, though remaining under state ownership.  Productivity soared.

The de-collectivisation also extended to previously moribund village industries.  The output of these industries was growing at 20 per cent a year by the end of the 1980s and accounted for 26 per cent of GDP 15 years later.  Four-fifths of these enterprises were privately owned, and all of them were subject to the dictates of the market and not any level of government.  In 1980, a rural producer and hawker of confectionary, based on watermelon seeds, became one of the first millionaires.

This liberalisation in rural villages took place at the same time as changes in major cities, where unemployment was previously solved by sending youth to rural areas.  But the youths started returning in vast numbers from the late 1970s.  With little for them to do, the party allowed small businesses to be formed.  Elements of the rule of law and contracts were introduced from 1978 initiating the path to the full panoply of property rights law, a process which was not, however, completed until 1988.

An essential attribute of a market-based economy is decontrolled prices for goods and services.  Tentative steps were taken towards this in the early 1980s, were reversed in 1983, but soon recommenced and in 1984 most manufactured goods were no longer subject to controls.  Nonetheless, even by 1995, 78 per cent of producer goods were transacted at controlled prices (though by then many of these had become much better aligned to market prices).

Share markets are important to facilitate capital accumulation and to allow investments to be traded, but the first stock exchange was opened only in 1986.  It was not until 1990 that major stock markets could operate in Shanghai and Shenzhen.  Soon after, there commenced a gradual sale to employees of state enterprises, especially those (over half of the total) which were technically insolvent.  This was accompanied by reforms that allowed surplus workers to be sacked (an unemployment insurance scheme was introduced at the same time).

Coase and Wang claim that socialism was endorsed by Mao only in the mid-1950s but, if so, this would seem to contradict the basis of the Communist Party.  Nor are they systematic in describing the astonishing growth of internal savings (which were 53 per cent of national income in 2010) that propelled industrialisation, and how this was underpinned by property rights laws.

Other intriguing questions with incomplete answers are:  how were lumbering and inefficient government-owned firms transformed into the privately owned nimble and highly productive businesses that have led China to dominate world manufacturing?  And how was it that the State Owned Enterprises (SOEs) that are still the backbone of heavy industry and infrastructure have, once corporatised, been run at a tolerable level of efficiency without which the private sector propelled growth could not have created the success observed?

Indeed, of the 31 Chinese firms in the Fortune Top 300 in 2011, only one (which is Hong Kong based) did not have majority government ownership.  Two of the three biggest were fully government owned.

Though all these firms operate under western type corporate law, according to Coase and Wang, the state firms in monopoly sectors employ 8 per cent of the non-farm workforce but account for 55 per cent of total wages.  The inferred high wages in monopoly firms suggests they are less cost-conscious than those facing competition, which, if true, makes the performance of the rest of the economy that much more impressive.

Coase and Wang examine but ultimately dismiss fears of some prominent Chinese about a dearth of entrepreneurs which could stifle growth in the future.  They are surely right in this.  Similar concerns were voiced by South Koreans when that country's growth was founded on firms doing the more menial tasks that mature businesses outsourced to them ― 40 years ago the Samsungs, LGs and Hyundais barely existed.  Coase and Wang also note that China is now the largest producer of PhDs in the world, having risen from one of the poorest nations to the second biggest economy.

Chinese Communists, while retaining the name have emasculated and even forgotten the theory on which it rode to power.  From Marxist works being virtually the only political books being available in the 1960s, Coase and Wang cite evidence that by 2008 students, even those applying to join the Communist Party, were barely aware of Karl Marx's Communist Manifesto.  The party had become one of many different career paths and was completely shorn of ideology.

In this respect Coase and Wang refer to an interview that China's Premier Wen Jiabao had with western media where he quoted not only Adam Smith's Wealth of Nations but the lesser known Theory of Moral Sentiments.  Even though the quotation was recruiting Adam Smith in support of measures to combat income inequality in China (a dubious interpretation of Smith's own view) it is unlikely that any other world statesman would have been adequately versed in Adam Smith in these two guises.

The roots and durability of China's success remain contentious.  Many see the prominence of the SOEs as indicative of strong state guidance or manipulation of the economy.

This is difficult to square with the evidence of economic failures and successes around the world.  Government ownership ipso facto has meant poor outcomes for the businesses themselves and eventually, in the case of Eastern Europe, for the economies in which they were housed.  Even strong guidance by governments has been associated with failures as was previously the case in the "mixed" pre-1990s Indian economy when government economic manipulation was considerable.  Similar guidance and "winner picking" in the West also failed.  Where claims have been made of successes from government guidance, as in the case of Japan and Singapore, they have ― under closer scrutiny ― been found wanting.

Efficiency in China was unleashed by the opening up of the economy to entrepreneurship, the better incentives for productive work and the high rate of savings that followed from a recognition that these are secure from government seizure or wasteful usage.  State industry manipulation and even, beyond a point, favouritism by state agencies, would undermine the phenomenal growth that continues to be witnessed.

Since Mao, China has risen from one of the world's poorest nations to become the second largest economy.  It is difficult to see what will stop a continued rise in incomes to levels that may reach or exceed ― as some have forecast ― as much as 40 per cent of world GDP twenty years from now.

The Socceroos must not give this vile man a free PR kick

Sport and politics shouldn't mix.  But they do.  And that is why the Socceroos, Australia's national football team, shouldn't play North Korea as planned on Wednesday night.

North Korea's communist government has been brutalising its people for decades.  Human Rights Watch reports that North Korea is virtually an open air prison where the people are forced to work for no remuneration of any sort, the state owns all property and freedom of expression is non-existent.

Dissenters are sent to forced labour camps called gwalliso where they are tortured and executed.  The state controls food distribution and is currently in the process of starving its people with its ''military first'' policy.

And then of course there is the fact that the regime is planning to test long-range rockets capable of carrying nuclear warheads this month.

In terms of vile governments, North Korea is as evil as any in history.

But so what?  What's that got to do with a football match?

The reality is that awful governments such as North Korea's use sport to legitimise their rule — both to their own people and to the rest of the world.

After narrowly losing to Brazil in the opening match at the 2010 World Cup, the regime decided to televise North Korea's second match to the nation, in what is believed to be the first ever live sports telecast in the Hermit Kingdom.  After their 7-0 drubbing in that game, the event was simply not reported in the state-controlled media.

But the North Koreans aren't the first to understand the power of the reflected glory of sport (and the opposite in defeat).  Throughout history, nefarious regimes have used sport to consolidate their power and butter up the international community.

Famously, Hitler enthusiastically hosted the 1936 Olympics to showcase Nazi rule and Argentina's military junta spent 10 per cent of their national budget on the 1978 World Cup.

On the other hand, boycotts and bans have been shown to put a dent in the power of repressive governments.  When sports-mad South Africans describe being ''closed off from the world'' as a key factor in the downfall of apartheid, they aren't just talking about trade.

Some will argue that athletes shouldn't be punished for the activities of foreign governments and that they personally don't have any higher moral obligation, other than to do their best.

That's not quite true.  Soccer, along with many other sports, receives an enormous amount of public funding in Australia.  National team manager Holger Osieck is among Australia's highest paid public servants and the players themselves were the beneficiaries of extensive government support as youngsters developing their skills at facilities like the AIS.

Given the way any success the North Koreans have on Wednesday night will be used by the communist government, Australian taxpayers are effectively picking up the tab for Kim Jong-un's PR campaign.

This will no doubt raise questions about some of the nations Australia is regularly pitted against as a member of the Asian Football Confederation.  If we're not going to play against North Korea, then maybe we shouldn't play Saudi Arabia, given the disgusting treatment of women in that country?  Or Syria?  Or Iran?  Where do we draw the line?

That's a great question, and it's a debate we need to have.  The government, sporting bodies, the media and fans need to face up to the reality of what sport is and how it's used.

But Australia has form in this area.  In 2004, cricketer Stuart MacGill ruled himself out of a tour of Zimbabwe as a protest against Robert Mugabe's murderous regime.

And in 1971, debate raged over whether Australia should play the South African cricket team, in which black players were prohibited to play.  Cricketing icon and the Australian Cricket Board Chairman at the time, Don Bradman, flew to Johannesburg to meet with the South African Prime Minister B.J. Vorster.

When Bradman asked Vorster why blacks were banned, Vorster replied that their inferior intellect meant they couldn't cope with the complexities of the game.  Bradman asked him if he'd heard of Garry Sobers, promptly concluded the meeting and Australia didn't play South Africa again for over 20 years.

Australia's soccer players have been an incredible source of pride for the nation over the last decade.  But while their heroics in Sydney and Kaiserslautern and Nelspruit at the World Cups will never be forgotten;  they would have no finer hour than if they refused to play North Korea this Wednesday night.

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It's about more than just phone hacking ... unfortunately

If you want to know what actually happened in the British phone hacking scandal, you won't find it in the Leveson inquiry report released last Thursday.

The report comprises almost 2,000 pages;  it's spread across four volumes and has 59 separate chapters.  It has a lot of stuff about media history and ethics and philosophy;  a lot of hand-wringing about press ''culture'' and personal friendships between Fleet Street and Westminster.

But not a lot about who committed what crime and when.

For instance, the fact that Rebekah Brooks and Andy Coulson (both ex-News of the World editors) are in court this week facing charges of corrupt payments to public officials does not inform the report.

Nor the fact that at least three public officials have been arrested for misconduct in a public office — that is, corruption.

Lord Justice Leveson is recommending statutory regulation of the press before his inquiry has gotten to the bottom of the phone hacking scandal.

Even by the woolly standards of judge-led policy advocacy, this is pretty stark.  Especially considering his proposals would be a reversal of the four-century-old victory of free press over state power.

The Leveson inquiry's terms of reference are split in two.  Part 1 looks at the ''culture, practices, and ethics of the press''.  Part 2 investigates the specific allegations of unlawful conduct and corrupt payments between press and police.

This is the real issue, as I argued in July last year.  Criminal acts are a bad thing and should be punished.  But criminal acts with the assistance of police are much, much more disconcerting.  Thursday's report is Part 1.  Part 2 hasn't even started yet.

Operation Elveden — the Metropolitan Police Department's investigation into corruption in the police force — is ongoing.  Leveson writes that he doesn't want to step on its toes.  Repeatedly throughout the report, witnesses suggest serious things.  For instance, unnamed senior officers are ''rumoured to be corrupt'', but the story ends there, ''for fear of undermining what could be an ongoing investigation''.

Still, the first report reveals a litany of errors, misjudgements and bureaucratic backside-covering that allowed the scandal to build before it exploded in 2011.

Between 2001 and 2003, the Devon and Cornwall Police discovered a ring of retired and serving police officers selling information from police databases to private investigators.  The investigators were then selling that information to various clients, some of whom were journalists.

Such privacy breaches are not unusual.  Over the last decade, more than 200 Metropolitan police officers and civilian administrators have been disciplined for wrongfully accessing the Police National Database.  The current commissioner described this to the Leveson inquiry as a ''chronic problem''.

But when the Devon and Cornwall Police cases went to court, the judges let the accused go with conditional discharges.  They didn't even get fined.

When the story surfaced again in 2006 (this time the Royal family was claiming its private phone messages were being listened to) memory of the pathetic sentences given to the earlier cases meant the London police were reluctant to aggressively push their investigations.  It just wasn't worth the effort.  That, and Britain was at the height of the anti-terrorism campaign.  In the wake of the London bombings, chasing privacy prosecutions was less a priority than hunting violent Islamists.

Still, one reporter — News of the World's ''one rogue reporter'' — was prosecuted.  As part of its investigations, the police found a huge list of potential victims, but it failed to notify them.

Three years later, the Guardian and the New York Times published allegations of widespread phone hacking.  This time, the police stonewalled.  The issue had already been dealt with.  To admit that there was more to the case was to admit that they were wrong to draw a line under the rogue reporter in 2006.

The Milly Dowler story erupted in July 2011.  The police had been in possession of seized documents with her name — and Hugh Grant's name — since the first investigations in 2003.

I've dwelled on this timeline because it is the closest the Leveson report gets to an exploration of the specific failures that led to the phone hacking scandal.

It's all well and good to wax lyrical about ethics and press culture.  But if we want to link problem to solution — a basic requirement in the development of good public policy — we have to know what actually caused the events we're concerned about.

And too much of the Leveson report is divorced from the phone hacking itself.  You can understand why David Cameron offered Leveson such a wide brief — he was embarrassed about his relationship to the now disgraced Andy Coulson.  But the distance between scandal detail and regulatory proposals undermines the point of the whole inquiry.

To be fair, Leveson's effort is far better than Australia's Finkelstein inquiry.  Here, Justice Ray Finkelstein wasn't even given a scandal to work with — he had to construct a justification for press regulation out of thin air.  Where Britain had the Milly Dowler case, Australia had the vibe of the thing.

So it is not insignificant that the Finkelstein and Leveson recommendations were so similar:  statutory regulation of the press disguised as ''self-regulation''.  In the UK this is apparently the solution to widespread criminality.  In Australia it is apparently a solution to ... well, what exactly?  The strongest case Finkelstein could come up with was that newspapers gave an unbalanced presentation of climate science.

But there's a vocal group of people who want a new regulator backed by government, so that's what gets recommended.  Is there anybody who didn't think Leveson or Finkelstein would call for new regulation?  The only suspense has been for the details.

Last week David Cameron rejected those details — he would not cross the Rubicon into press regulation.  Hopefully, Julia Gillard and Stephen Conroy will do the same.

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Failure to extend Kyoto agenda will mean pain at home

Over the next week the fallacy that our carbon tax is in line with international action to cut greenhouse gases will be exposed, and with serious consequences for Australia.

Last Monday the latest round of international negotiations to cut global greenhouse emissions started in Doha, Qatar.

The December ministerial-level negotiations are designed for ministers to attend, get their photos taken as they sign the conference outcome and recommitment to the next year's agenda.

Where big breakthroughs are expected, presidents and prime ministers turn up to claim credit.

This year Julia Gillard and Climate Change Minister Greg Combet are staying away, instead sending Combet's junior.

The reason is simple — the only expected outcome is the superficial extension of the failed Kyoto Protocol.

The 1997 protocol remains the only treaty to cut global emissions.

On December 31 this year, Kyoto expires and afterwards there will be no binding international framework obliging countries to cut emissions.

Not that Kyoto was a success.  The journal, Nature, recently argued:  ''In practice, the 1997 treaty did little to curb emissions of greenhouse gases''.

Countries that met their targets did so because of its preferential design and caveats.

Data from the European Union shows that its preaching for emissions cuts was matched with action only because of declines in industrial activity following from the global financial crisis.

And a recent UN Environment Program report concluded that future commitments to cut emissions were insufficient to achieve the stated objectives that countries agreed to at past climate negotiations.

For years countries have been negotiating to extend Kyoto into next year and up to 2020.  So far they have failed.

Even if countries do agree to extend Kyoto by the end of the week, there will still be a legal gap until it is enforceable.

Three-quarters of countries need to ratify the change.

It can take months, and even years, for each country to officially work through the bureaucratic and political process of ratification.

It's quite probable that countries may sign up in front of the world's media in Doha to changes and then never deliver on them when they get home.

That's what Bill Clinton did to Kyoto.  His vice-president, Al Gore, signed Kyoto but then never even sought its ratification through the Senate.

But this time it's likely to be broader-based.  Already the US, Canada, Russia, Japan and others have signalled that they don't intend to ratify.

The reason that countries are not following is simple.  Kyoto does not oblige developing countries to cut their own emissions.

Since Kyoto was negotiated developing countries have become the key source of emissions growth.

In 1997 the US was the world's largest emitter.

Today it is China, and its emissions are still growing.

For developed countries the domestic political support to increase costs for their struggling economies while giving developing competitors a legally free ride is negligible.

Based on the draft text circulated before the Doha meeting, countries are still haggling on how long the extension will be for, how countries can count their emissions cuts and the extent that they are prepared to do so.

It's really only Europe and Australia that are pushing hard to save policy and political face after imposing domestic carbon schemes on the grounds that the rest of the world will follow.

Despite the decline in political toxicity of the carbon tax, for Australia and the Gillard government there is a lot at stake.

For global action, anything other than a full recommitment to Kyoto by the end of the week will be as significant as the collapse in efforts to secure a new treaty in Copenhagen in 2009.

The only difference is this time expectations are so low.  But Qatar's failure does translate into pain for Australia.

The Gillard government imposed the world's largest and most broadly applied carbon tax on the argument that other countries were taking similar action.

Apart from Europe, countries that are considering domestic schemes have their policies and timeframes tied to outcomes in international climate talks.

China, for example, moved any domestic emissions trading scheme until after the timeline for a post-Kyoto treaty and will be heavily influenced on whether it is bound to act.

So far, at the Qatar talks China has been talking down obligations in a post-Kyoto treaty.

Considering Australia's carbon pricing regime is built on the architecture of Kyoto, by the end of this year it will operate outside of an international legal operational framework.  But in practice minimising the economic harm of the carbon tax and a post-2015 emissions trading scheme requires other countries to take on equivalent costs.

The Treasury's strong growth, low pollution modelling assumed that other countries would have carbon prices by 2015 and that Australia would be buying cheaper emissions reduction from all over the world.

The pain won't just be economic.  The absence of commitments to equivalent emissions cuts means there won't be any environmental dividend either.  Pity Australia's national interest.

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Addicted: the medicalisation of bad behaviour

Our ancestors used religion to ward off the things that scared them.  We use medicine.  There are few better illustrations of the perverse ''medicalisation'' of society than the claim that ''video game craving is as bad as alcohol''.

We're taking the human condition (passion, obsession, desire, pleasure) and trying to turn it into a medical condition.

The story is as follows:  a PhD candidate at the Australian National University recruited 38 gamers who played an average of 10 to 15 hours of video games a week.  Those who reported feelings of withdrawal or cravings to keep playing their favourite game were classed as addicts.

All participants then did a simple test:  they were shown a series of differently coloured words and asked to name the colour, not the word, as quickly as they could.  Some of the words were related to video games, and with those words the ''addicts'' took longer to name the colour than the casual gamers.

The conclusion?  Gaming addicts are as consumed by games as alcoholics are consumed by drinking.  This is apparently ''some of the first scientific evidence that video gaming can be addictive''.

But let's back up a bit.  Ten to 15 hours of gaming a week isn't very much.  The Australian Communications and Media Authority says Australians watch about 20 hours of television a week.

Sometimes we might even suffer negative consequences from this indulgence.  (''One more episode of Homeland?  It's already 10.30, but ...'') We may get emotionally involved in a show.  We might even crave it.

But you could say the same thing about any hobby.  And nobody is suggesting the average Australian is addicted to television or fishing or woodwork.  At least, not in any meaningful, medical sense.

Addiction is a notoriously slippery concept.  In a 2000 study published in the journal Addiction Research, 20 senior addiction experts in the American Psychological Association were asked to define what they meant by the word ''addiction''.  The answers differed wildly.

Only half the experts could get on board a definition that included ''physical dependence''.  And that was the closest they came to consensus — except for a general dissatisfaction with the way addiction has come to mean more than dependence on chemical substances.

Yet this is the muddy, vague, uncertain, ill-defined concept that we seem desperate to stamp on every sort of abnormal behaviour.  Without any firm foundation, the popular use of the word addiction is creeping into the scientific world.

Excessive shopping?  Addiction.  Excessive internet use?  Addiction.

Yes, people can make a lot of money treating the choices as pathology.  There's always a pill available, or a specialist spruiking their professional services.  But we're as guilty as the medical profession here.  The medicalisation of everything is comforting.

First, there's nothing more appealing than a scientific veneer.  If someone has a few too many boozy nights in a row, they don't go easy for a while, no — they ''detoxify''.  All those cultish detox diets offer little more than clean living.  But they're dressed up in pseudo-medical jargon.

Second, if something has a medical cause, it has a medical cure.  This is an era of expertise and technological fixes.  There is no problem that money and experts cannot fix.  In January, a British MP called for the government to pay for the treatment of ''those who suffer from internet or gaming addictions''.  (But that's not remotely silly compared with the Swedish heavy metal fan who is on disability support because of his heavy metal addiction.)

Medicalisation comforts because it suggests that our bad decisions are not our fault.  Describing self-destructive behaviours as addictions is the ultimate way to shirk individual responsibility.  Rather than agents of our own choices, we become passive recipients, preyed on by our surroundings.  This is utterly dehumanising.  One could ask why we're so eager to dehumanise ourselves.

Sure, video game addiction looks a lot like a bog-standard moral panic.  When someone dies from playing a game 40 hours straight — as a teenager did in Taiwan this year — commentators pontificate about video games, not, say, depression.  Every pleasure has to have its dark side.

But society's fear of addiction — our desperation to turn everything into a medical condition — goes to something deeper.  We no longer burn witches;  we diagnose them.  Either way, we're still chasing witches.

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Liberals' legacy of mass migration is at stake

If Tony Abbott becomes Prime Minister next year, he is going to have to make a decision:  what to do about immigration?

Not asylum seekers:  immigration.

After all, the size and composition of the total immigration intake is certain to shape our nation much more than the few thousand people who arrive by boat.

While the parties shout themselves hoarse over refugees, we're at a unique juncture in immigration politics.

For the past 70 years, the party that has most embraced permanent migration in government has been the Liberal Party, not Labor.

Permanent and long-term arrival numbers vary every year;  and not all of those variations are driven by Commonwealth government policy.  But most are.

(For those interested in playing along, the Immigration Department offers a spreadsheet of historical migration numbers since 1945 here.)

The largest declines in our migration intake have occurred under Labor governments.

When Gough Whitlam, that darling of the progressive movement, came into power, immigration plummeted.  In 1970, the Liberal government of John Gorton had admitted 185,000 migrants.  The Whitlam government shrunk that to just over 50,000.

This was a deliberate policy decision.  Whitlam even shut down the Department of Immigration, placing migration under the Department of Labour and Immigration.

That might seem a minor institutional change but it wasn't:  when merged with labour, immigration policy came under the influence of a traditionally pro-union bureaucracy.  And unions don't like it when the government imports foreign workers.

There's long been a debate about whether it was Whitlam who ended the White Australia Policy or Harold Holt.  Both did their part.  But even though Whitlam proclaimed the end to the infamous policy, the sharp decline of total immigration on his watch meant that few non-European migrants could come to Australia regardless.

In March 1974 The Age pondered whether Gough Whitlam was doing as every government had done:  ''preaching tolerance while still practicing discrimination''.

Bob Hawke described himself as a ''high immigration man''.  But when he took government in 1983, the immigration intake dropped by more than a third.  To Hawke's credit, migration crept up over the next decade.  But when Paul Keating took over, it plummeted again.

The Liberals have a much more impressive record.

Post-war immigration was at its peak under John Gorton.  And Malcolm Fraser reversed the Whitlam backslide.

Under John Howard — that bête noire of pro-migration progressives — immigration jumped up well above the Gorton heights.  In 2007, the number of permanent migrants arriving on our shores hit 191,000 — the largest cohort since the Second World War.

As George Megalogenis wrote in The Howard Factor, the real story was how ''the former Hansonite belt ... think Howard is keeping out all the foreigners, when he is bringing them here at a rate Paul Keating never contemplated''.

Yet Howard's record-breaking immigration intake is apparently an awkward truth.  In the standard text on this subject, From White Australia to Woomera:  the Story of Australian Immigration, the academic James Jupp briefly acknowledges the Howard record — in one sentence.  But the real issue for Jupp is that Howard was considering a temporary guest worker scheme, and such a scheme would hurt unions already battered by WorkChoices.

But then came the Rudd government, and the partisan pattern broke.  Rather than immediately shrinking the intake, Rudd continued the trend upwards — hugely.  More than 224,000 migrants entered Australia in 2010.  And that terrifying guest worker scheme?  A pilot program was eventually introduced not by the union-hating Liberal Party, but by the ALP.

Even Julia Gillard's government — she of small Australia fame — has not appreciably reduced the number of migrants we take.

Given the showy anti-population rhetoric of the 2010 election, it is remarkable that we're taking nearly twice as many foreigners than we did under the government of Bob ''high immigration'' Hawke.

There's one obvious lesson here.  Don't trust what politicians say about immigration.

But when Rudd broke the pattern, he also broke the Liberal Party's cover.  After Labor prime ministers had lowered the intake, Liberal prime ministers were free to raise it;  they gained no political benefit from doing otherwise.  The Coalition could bang on about multiculturalism and refugees, but it would still bring in many more people than Labor.

Thanks to Kevin Rudd, Tony Abbott faces different incentives to his predecessors.  And the 2010 election demonstrated the Coalition's willingness to play the anti-population card.

So there is perhaps an added significance to the Abbott's announcement last week that he would reduce the Gillard government's refugee intake by 6,000 places.

It's one thing to call for temporary protection visas and off-shore processing.  It's another thing to actually reduce the refugee intake.  His announcement was reported through the standard stop-the-boats prism but it hints at something deeper:  the Coalition may sense an opportunity to rehash the 2010 themes in 2013.

Abbott has previously said that he would like to make skilled migration — that is, 457 working visas — the mainstay of a Coalition's immigration program.  But he has framed it in a peculiar way.  Businesses should be able to bring in workers, ''provided there aren't Australians who could readily fill particular jobs''.

This sees immigration as a mechanism to solve problems, not way of building Australian economic strength in and of itself.  And remember, 457 visas are temporary visas — not permanent ones.

Admittedly, this is like reading tea leaves.  History cautions us to not take anything politicians say too seriously.  The real story of immigration is only ever found in statistical appendices.

But should Abbott win government next year, immigration will be a major question for his new government.

Does he want to continue the Liberal legacy — a legacy of mass migration and population growth?  Or, as he has at times unfortunately suggested, does he want to repudiate it?

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Gillard is right about GST

At last Julia Gillard can be congratulated for something.  She's ignored Rob Oakeshott's call to review the GST.

On Tuesday the PM said there'll be no review and there'll be no change to the rate.  Yes, promises like that have been heard before about the carbon tax — but this time hopefully the PM will keep her word.

Tony Abbott also promised not to change the GST.  He said ''I invite Rob Oakeshott to campaign in his seat for changes to the GST, if he thinks they are necessary.''

The last thing the country needs at the moment is the Prime Minister with her hands on more money.

In theory the GST rate should be increased, and the GST exemptions removed.  A broad-based consumption tax has numerous theoretical advantages over taxes on income or capital.

But reality is different.  The Treasury Department assured Kevin Rudd that in theory there'd be no problem implementing the mining tax.

The reality is that if the GST goes up the chances are almost zero that the additional revenue will be used to cut other taxes.  All that will happen is that the government will keep the cash.

Even if somehow an increase in the GST rate is used to cut other taxes, it's likely the wrong taxes will get cut.

The taxes that the business associations and the politicians like to talk about cutting are the corporate tax rate and the so-called ''inefficient'' taxes levied by state governments.  It's funny how business and government always put personal income tax low on the list of what should be cut.

There's no lobby group in Canberra for cutting personal income tax.  The problem is also that because the federal government collects twice as much in income tax from individuals as it does from companies, reducing personal tax is much more expensive than reducing company tax.

But, the main reason why left-of-centre governments don't want to cut personal income tax is simply because left-of-centre governments generally have an aversion to people keeping and spending their own money.  The Gillard government is no exception.

Left-of-centre governments especially dislike people keeping their own money if they are wealthy enough to no longer be regarded as ''middle class''.  In the United States, Barack Obama's tax increases are targeted at anyone with an annual income of more than $250,000.

An increase in the GST shouldn't be used to fund a cut in the corporate tax rate.  It's naive to suggest Australia would become a substantially more attractive destination for international investment if the company tax rate was cut by a few percentage points.

The mining tax, the carbon tax, and the broader question of sovereign risk are bigger issues for overseas investors than insignificant cuts in company tax.

The very worst thing that could happen is raising the GST and then having the federal government pay state governments to abolish state taxes like their mining royalty and transaction-based tax regimes.  ''Inefficient'' state taxes are basically the only sources of revenue the states have left that they control.  Abolish those taxes and the states as viable political entities virtually disappear (an option that unfortunately is quite palatable to many people).

Instead of the commonwealth using GST payments to alternate between bribing and blackmailing the states to get them to eliminate their inefficient taxes, the GST should become a tax exclusively used to fund federal government activities, and state governments should be able to levy their own taxes on the income of individuals and companies.

If state governments were able to use their tax systems to genuinely compete against each other, their transaction taxes would be the first taxes states would abolish.

One of the prevailing assumptions of Australian politics over the past few years is that as the population ages and demands for government spending grow, taxes must therefore go up and the overall tax burden must increase.  And it's automatically assumed that raising the GST is the answer to the problem.

For politicians, one of the least politically painful ways of raising taxes is to increase the rate of the GST, which is why in the wrong hands the GST is so dangerous.  It should be as hard as possible for governments to raise taxes.  When Julia Gillard ignores what Rob Oakeshott says about the GST, she is doing the taxpayers of Australia a great service.

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Proposed law a further attack on free speech

The law that was used to silence Andrew Bolt has been supercharged by the Gillard government's proposed changes to anti-discrimination laws.

Bolt was found to have breached section 18C of the Racial Discrimination Act, which says it is unlawful to offend or insult someone on the basis of racial or ethnic characteristics in a public space.

But Attorney-General Nicola Roxon's proposed changes massively expand the list of characteristics people can be offended by, expanding the jurisdiction into shops, workplaces and sporting clubs.

The regime will provide a new weapon in the war on free speech by even including ''political opinion'' as a ground on which people can be discriminated against.

This extraordinary change makes even innocuous political expressions subject to the law — a person need only be offended or insulted in order to make out a claim.  Shop owners displaying signs in support of a political candidate may now be legally discriminating against employees who want the other guy to win.

By now we're used to politicians undermining our legal rights.  But rarely is it as blatant as the Gillard government's changes to anti-discrimination laws.

Not only do the changes represent an extraordinary attack on freedom of speech, they also undermine fundamental legal principles derived from 800 years of common law.  They would reverse the onus of proof, forcing employers to prove that they are innocent of discrimination.

English lawyer William Garrow coined the term ''innocent until proven guilty'' in 1791.  That statement has become one of the most famous and enduring terms in the legal sphere.  Garrow was referring to one of the most important principles of our legal system in the context of legal proceedings, a person is entitled to a presumption of innocence.

Central to this principle is the idea that the burden of proof rests with the person bringing the legal claim to the court.  This ought to be the norm in all cases:  whether it is the state attempting to prosecute an individual for alleged criminal activity or an individual suing another in civil proceedings.  Placing the onus of proof on the prosecution or plaintiff is the hallmark of a mature and just legal system.

The rationale behind this principle is simple:  it is difficult, even impossible, to produce evidence of a thing that does not exist.  In a free society, it is a principle of utmost importance that we protect the innocent even if it makes it harder to punish the guilty.

A reversal of the onus of proof tends to result in absurd and unjust outcomes.  And this is precisely what the Gillard government's proposed changes will achieve.  Section 124 of the draft legislation reverses the onus of proof in the case of a plaintiff providing some evidence that discrimination could perhaps have occurred.  After jumping this small hurdle, it is then up to the defendant to prove otherwise.

For some reason the Gillard government doesn't see this as a reversal of the burden of proof, but a ''shift''.  It at least gets points for creativity.

Discrimination claims will also cost the complainant nothing even if they lose.  The laws have been designed to create a no-cost regime (at least for those who allege discrimination).

This is not how civil cases are usually run.  Sure, free lawsuits may sound appealing but generally the losing party must pay all legal costs, which helps discourage any frivolous claims from making it to court.  Instead, the already struggling court system will be burdened with a flood of new litigation from people who no longer have to take any financial risk.

Indeed, the new law creates a regime that skews so heavily towards plaintiffs that it actually encourages false allegations.  Most employers, faced with potentially substantial costs in terms of time and money, will settle even spurious claims out of court.  Smart lawyers already know how to squeeze ''go away'' money out of employers.

Transferring the lessons learned under the present industrial relations regime to a new anti-discrimination regime is a recipe for huge problems.

Current definitions of discrimination vary among the five pieces of commonwealth legislation that govern this area of law, including the Racial Discrimination Act 1975.  The new anti-discrimination law will have just one definition:  ''unfavourable treatment''.

Harmonisation of all the various laws aimed at reducing discrimination is a good idea in principle but the method used by the government in this case is to draft a definition of discrimination that is broad in the extreme.

Unfavourable treatment could cover almost anything, and simply ensures an increase in the number of discrimination claims being made.

The proposed legislation also makes just one defence available to employers.  The defence of ''justification'' is an important one in the context of discrimination law, and it is right that it has been included, but there are a range of defences that should be available.  Mistake, duress and a range of other defences also could have been included in the legislation.

The reversal of the onus of proof only increases the importance of having a robust defence framework if claims can be made out so easily;  the legislation should at least allow employers and others accused of discrimination a number of grounds on which to defend themselves.

We've already seen the consequences of the Racial Discrimination Act for freedom of speech.  If you thought that was a miscarriages of justice, just wait until you see the extraordinary wave of free speech litigation Roxon's new laws will unleash.

The politics of consensus has a dark side

Memory is a funny thing.  ''In the days of the Accord,'' Business Council head Tony Shepherd told an audience last week, ''different sectors were able to agree on a common purpose and a plan to foster productivity, competitiveness and growth ... there is no reason we cannot do this again.''

Shepherd is not alone.  Hardly a week goes by without another CEO recalling the ambitions of past governments, and lamenting the timidity of current ones.

Their story has been repeated so often it's become a banal cliché:  in the days of Bob Hawke and Paul Keating, businesses, government and unions put down their swords, held hands, and made beautiful microeconomic reform together.  We need to rediscover the politics of consensus and conciliation.  It's time for an end to partisanship and to get on with ... anyway.  It's boring to write, let alone read.  Imagine hearing it in a speech.

But let's be clear about what that cooperation would be in practice:  institutionalised collusion between big business and big government.

This is the unacknowledged truth behind the business lobby's complaints that Australia has left its reform era behind, or that politics is too divided to make the big historical changes.

Getting business and government around a board table isn't necessarily a good thing.  In politics, cooperation can be dangerous.

Big businesses are no fans of the free market.  They only like competition in the abstract.  In the real world, competition is traumatic.  So when they are given the opportunity to set the rules of the game, they always try to fix it in their favour.  That's why we talk so much about lobbyists.  That's why we talk about crony capitalism.  And that's why we talk about regulatory capture — when a business promotes regulation to shut down its competition.  The politics of consensus has a dark side.

One of Adam Smith's most famous quotes comes from his Wealth of Nations:  ''People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public.''

Most people citing Smith's warning leave it there.  You can see the appeal.  Business cartels are bad, said the neoliberals' favourite economist.

But he went on:  ''Though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies;  much less to render them necessary.''  That is, cartels are bad — so the government should be careful not to create them.

On Monday, Julia Gillard announced that she wanted to do just that.  Writing to the Business Council and the Australian Council of Trade Unions, she proposed a National Economic Reform Panel.  This new body would encourage Australia's biggest businesses, largest unions, and most well-connected community groups to build a national consensus on reform.

Happily, it won't go anywhere.  Remember Kevin Rudd's relationship with Sir Rod Eddington, announced in a flurry of publicity in the 2007 election?  It's not clear that Eddington gave any advice, or that Rudd took any.  The post-election Business Advisory Group didn't seem to go anywhere, either.  Similarly, it is doubtful historians will mark Julia Gillard's tax summit in June this year as a key moment in Australian economic history.

We are haunted by memory of the Accord.  When Hawke and Keating convinced the ACTU to restrain wages in return for social reforms in 1983, they created one of the few hero moments in Australian history.  In our national mythology, the Accord was a necessary first step for the liberalisations of the next decade.

But the Accord was explicitly corporatist.  It was a way to buy off the unions and (although they did not formally sign the Accord) a fair chunk of the business sector.  It may have brought these bodies inside the tent, but it also gave them new influence and power over government.

Yes, many special interests gained from the Accord.  But it does not follow that the Accord was in the general interest.

For instance, given Keating's later efforts liberalising the labour market, we forget that the Accord constituted one of the most significant increases in industrial relations control in Australian history.  To their credit, some unions recognised this.  Not all unions signed up.

By the end of 1980s, advocates of liberalisation were arguing that, by locking the biggest unions within the policy system, the Accord was actually holding back reform.  Privatisation, tax changes and tariff reduction were made harder, not easier, by the government's newfound special relationship with labour.  As Des Moore wrote in 1988, the Accord had granted unions a ''privileged position ... to defend their own narrow, short-term interest at the expense of the Australian community and of their own members''.

The politics of consensus is really the politics of privilege.  It's easy to understand why special interests want control over the levers of power, but it's hard to see why we would give it to them.

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The Coalition's impressionist platform paints the wrong picture

The Queensland state election was only held in March.  But it feels like such a long time ago.  Nobody would feel the distance between then and now more keenly than Tony Abbott.

After Campbell Newman's extraordinary landslide, Abbott and the federal Coalition were being told by polls and commentators that they, too, were looking at a record win.  Julia Gillard would lose Queensland-style.

It made sense.  Labor was crippled by leadership questions, multiple scandals, and the imminent introduction of the carbon tax.  The polls even suggested the Coalition could win the Senate.  If not, then a quick, comfortable double dissolution would sort that out.

Eight months later, the polls are back roughly where they were at the last election — the one the Coalition didn't win.

Tony Abbott is increasingly unpopular.  Colleagues are telling the press he should cut down media appearances.  His disapproval rating is the highest of any opposition leader since Alexander Downer.

Is this comparison unfair?  Of course.  Abbott has had Labor on the back foot almost continuously since 2009.  Under Malcolm Turnbull, the Coalition would have been on the receiving end of a Queensland-style wipeout.  But it's not true to say Abbott is the most effective opposition leader in history.  The only mark of success in opposition is becoming the government.  And Tony Abbott is going to have to change tack if the Coalition wants to remain competitive at the next election.

Sure, if an election were held today, the opposition might win it.  But an election is probably a year away.  Victory requires more than optimism.  Ask Mitt Romney.  The Coalition has long believed it can win government on an impressionist platform:  a few bold, strong strokes (stop the boats, axe the tax, pay back the debt) that, if voters step back and squint, offer a picture of what an Abbott government might look like.  Those strokes are looking worn and colourless.

Asylum seeker policy has been so fudged that it's not clear which party is promising to be toughest any more.  More boats are arriving than ever.  But in retrospect Julia Gillard irretrievably confused the whole issue with the Malaysia solution back in 2011.

The carbon tax no longer resonates as it once did.  It will do nothing to halt climate change.  It is designed to get more costly every year.  But people are already forgetting about it.  Voters tend to tolerate policies — even intensely hated ones — once they've been introduced.  It still should be repealed, but it's hard to see the Coalitionwinning on that alone.

And certainly, it seems unlikely the government will soon bring the budget into surplus.  But few people care about the deficit, per se, they care about a government being so reckless with the public purse that it goes into deficit.  So, until the opposition offers an alternative plan, the government just has to pretend it is sweating blood to fix the problem.

Yes, offer an alternative plan.  Impressionism isn't working.

One alternative would be to roll out a series of clear, detailed, and memorable policies that will stand alone long after Julia Gillard has left the stage.  Nothing makes an opposition look more like a potential government than policy debate.  Drafting policy is risky without the bureaucracy backing you up.  It is a necessary risk.  Or the Coalition could embrace abstraction, and present a fresh, philosophically driven vision of government.  Even today, politics is still about ideas.

Abbott is better placed than most politicians for this latter approach.  His 2009 book Battlelines is a manifesto of a modern, activist, big-government conservative philosophy.

Joe Hockey offered a different direction in his ''End of the Age of Entitlement'' speech in April — a wholesale rethink of how government relates to its taxpayers.

But Abbott steers clear of the philosophy of Battlelines.  And nobody grasped Hockey's nettle.  This lack of story about what would drive an Abbott government is why Coalition supporters are wrong to blame character assassination for their troubles.  The polls were heading down long before Julia Gillard made the misogyny speech.

Every government says the opposition is being negative.  Negativity is only a problem if it looks opportunistic.  A cohesive philosophical vision is a shield against such charges.

And claims that Abbott is unpopular because he is too effective a critic of the government ... well, that's like saying in a job interview that your biggest weakness is you care too much about your work.

Personal unpopularity is not a barrier to success.  Australians don't want to be seduced by their politicians.  We are not romantic about the prime ministership.  Quirks are appealing.  Gaffes are easy to forgive.

But right now, the Coalition has to start looking like a government, not a pressure group.

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Privatised power cheaper and better than alternatives

Energy issues are rivalling political scandals as a preoccupation of the news cycle in both America and Australia.

In the US, reduced costs of extracting gas and oil from shale are delivering cheap domestic oil and gas — with implications for renewable energy policy, global gas prices and the US Navy in the Persian Gulf.

Cheaper US fossil fuels have also increased the fretting about greenhouse gas emissions, including by the Paris-based International Energy Agency's climate change activists.

Global energy developments have unpredictable implications for Australia, where electricity prices have risen 72 per cent over the past four years (50 per cent more than general inflation) and the industry's productivity has declined.  These experiences have triggered a cascade of reviews including an Energy White Paper and a Productivity Commission inquiry.

Australia's electricity price increases stem from a combination of regulations, carbon taxes, increased demand for peak power and overdue replacements of poles and wires.

Productivity declines owe much to regulations, including excessive reliability standards and requirements to use high cost renewable energy and the paper burden costs associated with this.

Victoria generally comes up smelling of roses in its handling of all three components of electricity supply:  retailing, networks and generation.

This is largely due to the reforms that the Kennett government implemented 15 years ago.

Although bitterly opposing these reforms at the time, once in office the Bracks/Brumby government embraced them.

This was partly because they delivered a debt-free Victoria, providing scope for increased spending, although this did not prevent the ALP in government from eventually once again racking up net debts.  With regard to retailing, all other state governments interfere in setting final consumer prices.  These prices were deregulated in Victoria by the Brumby government.

The regulators in the other states have suppressed retail prices at below costs (though NSW is trying to unwind this).

THE wash-up has been losses imposed on two of the nation's major energy companies, AGL and Origin Energy.  Such losses, if sustained, will rebound on consumers by bringing reduced competition or even market exit.

As well as a privatised retailing sector, Victoria has fully privatised its networks and generation.

By any standards, Victoria's Latrobe Valley generators have achieved legendary heights in reducing costs.

With regard to network businesses, Victoria's privatised firms outperform their interstate government-owned counterparts:  they have lower costs and, on balance, a better reliability record.

Even so, Victoria could go further in reducing regulatory costs from electricity regulations.

First, it could abandon the subsidies of $75 million on coal R&D — even if there were a potential for breakthroughs, such publicly funded R&D is seldom successful.

Secondly, Victoria could abandon the obligation it places on retailers to buy, at consumers' expense, the surplus energy from rooftop photovoltaics;  the subsidy level was previously exorbitant and, although it is being wound back for new installations, considerable costs remain.

Thirdly, the Victorian Government should ditch its scheme involving cross-subsidies to encourage such outcomes as lower energy lighting.  Consumers are perfectly capable of trading off cost for economy in choosing their own light bulbs.

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The art of telling the truth

Getting political journalism to focus on fact checking is appealing in principle.  It is disappointing — even futile — in practice.

You can understand why people find fact checking seductive.  Our politicians pander to prejudices, fudge policy details, vilify their opponents, and exaggerate their own virtues for votes.

But as good democrats we put the winners of this squalid electoral contest in charge of the levers of government.  So it would be nice to know which politician lies least.

And there's clearly frustration with journalism as it is practiced today:  why not make its new duty to judge political untruths?

Fact checking was a feature of the 2012 Presidential campaign.  One frustrated Mitt Romney advisor said he wouldn't ''let our campaign be dictated by fact-checkers''.

But, in a column over the weekend, Australia's Laurie Oakes unintentionally demonstrated how faddish and illusory the fact checking idea really is.

Writing that he expected fact checking to become a central part of Australian journalism, Oakes identified two recent falsehoods:  Julia Gillard's ''there will be no carbon tax under a government I lead'', and Tony Abbott's claims about the future economic cost of that tax.

If only it were so clear.

Did Julia Gillard lie about the carbon tax on 16 August 2010?  Well, yes.  And no.

She probably thought she wouldn't introduce a ''carbon tax'' in the next term of government.  But that didn't mean she wouldn't introduce an emissions trading scheme.  And what we call a carbon tax in 2012 is actually the latter with an initial fixed price.

Yet free market economists have long insisted that, contrary to popular wisdom, there's not a big conceptual difference between a tax and a trading scheme.  They both price carbon.  A tax could be described as a ''market mechanism'' too.

The point is these are terms of art, not science.

The idea that a journalist — or scientist, or economist, or philosopher — would be able to provide anything near a definitive statement of whether Julia Gillard was being factually accurate is nonsense.

Anyway, how on earth could the press gallery fact check a prediction?  Tony Abbott's claims about the carbon tax's economic impact are almost entirely rhetorical.  Yes, he understates how much of recent electricity price rises have been due to the changes in the energy industry — an understatement which is regularly pointed out in parliament and the press.  But as to the carbon tax's real cost?

Models of future economic costs merely reflect the assumptions they're built upon.  We don't know how much a policy hurts until long afterwards.  Even then it's still quite hard to tell.  Fact checking of such predictions is just arguing the toss.

This problem is clearly illustrated in the latest piece on The Washington Post's Fact Checker blog.  Run by a veteran correspondent, Glenn Kessler, Fact Checker is apparently the gold standard in the field.

The story goes like this.  Republicans have been citing an Ernst & Young study saying tax increases on the rich would ''destroy nearly 700,000 jobs''.

Kessler notes that a) the jobs are lost over a decade or more, b) 700,000 jobs is only a tiny fraction of total employment, c) the study ignores the benefits of reducing the deficit, and d) there's a different study that says otherwise.

For their ''misleading'' analysis, he awarded the Republicans three out of four Pinocchios.

But who is being misleading here?  The Republicans aren't wrong.  At best they are guilty of an ungenerous presentation of the evidence.  The Ernst & Young study says 700,000 jobs will be lost — just not immediately.  You can't refute rhetorical excess.

What Kessler isn't doing isn't fact checking, really.  It's just more argument.  Which is fine, but let's not pretend that more argument is a journalism revolution.  And it's definitely not new.

Even apparently clear falsehoods — for instance, Mitt Romney's ad saying Barack Obama ''sold Chrysler to Italians who are going to build Jeeps in China'' — are more subtle than they've been presented.  In a confusingly worded Bloomberg article, Chrysler was reported to be considering exactly that.

Kessler gave Romney four Pinnochios for his Chrysler ad, but his actual conclusion was more modest.

The ad was ''a series of statements that individually might be factually defensible, but the overall impression is misleading''.

In the hands of partisans this has become a classic Romney ''lie''.

Certainly, Romney had confused the Chrysler issue in an earlier speech in Ohio.  But senior politicians are usually very clever with their words.  They don't lie.  They dissemble.

Kessler to his credit is relatively even-handed.  He goes after both left and right.

Such non-discrimination is unusual.  Fact checking is more common as a political attack than journalistic technique.  Hacks of all sides push their own fact checkers.  It's just another weapon in the partisan's armoury.  Smugly purporting to be on the side of ''reality'' is a fashionable way to hit your opponent.

There's a more critical problem with the fact checking fad.  Political journalism is a business of generalists not experts.  The best reporters know a little about a lot, not a lot about a little.

That, indeed, is why the ''he-said, she-said'' model of journalism was developed.  He-said, she-said has a bad reputation these days — it is often used unthinkingly — but it exists for a reason.  It reflects a modesty that generalists cannot rule definitively on all issues.  Sometimes you need to call a specialist.  If something is controversial, you may need to call two.

Political rhetoric is rarely true or false.  When an issue is simple, politicians will fudge it.  When an issue is complicated, it requires experts to unpack.

Either way, self-conscious and self-satisfied ''fact checking'' is no magic bullet.

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Attacks on free speech

The Tasmanian Government is the latest to join the growing anti-free speech movement.

The most recent attack comes in the form of the State Government's proposed amendments to Tasmania's anti-discrimination laws.

Some of the proposed changes in the Bill before State Parliament this week will have a crippling effect on Tasmanians' freedom to express their opinions in workplaces, businesses and even at local sporting clubs.

Currently, it's unlawful to ''offend, humiliate, intimidate, insult or ridicule'' someone based on six traits listed in the Act.  The Tasmanian Government wants to add 16 new traits to that list.

Some of the characteristics being added include political affiliation, religious belief and race.

This is ridiculous.

Democracy can only be effective when we have the freedom to offend others.

How else can we debate each other and, in the end, ensure that worthy ideas spread?

Taking topics of conversation off the table only results in bad ideas thriving in secret, and never allows controversial but important ideas to grow.

If these changes are passed, Tasmania's anti-discrimination laws will become the most onerous in the country — no other state has as many grounds on which individuals are able to sue each other for discriminatory unlawful conduct.

And although Tasmania will go further down this path than any other jurisdiction, it is not the first to move in this general direction.

Federal racial discrimination laws prohibit offensive behaviour if it is directed at the race of an individual or group.  These laws were infamously used last year to silence Andrew Bolt.  The popular journalist was hauled before the courts and forced to publish ''correction notices'' in the name of ''public vindication''.  It's disturbing to hear that kind of language used by courts in a liberal democracy.

And all Bolt did was publish two opinion pieces on the issue of racial policy in Australia.

Restricting the free expression of opinion is a growing problem.  And it's happening on the grounds that a person's feelings might get hurt.

Until recently, legislators weren't concerned with how opinions might impact on the emotional states of individuals.  But ''I'm offended'' has become a tool of incredible potence.

In Australia, governments are now consistently choosing to prefer a right not to be offended over the right to free speech.  In fact, the proposed Tasmanian law highlights just how powerful this idea has become.  The changes to the Anti-Discrimination Act move the state closer than ever to a general law against hurting someone else's feelings.

The fact that it is now unlawful to offend someone on the basis of 22 separate attributes is significant enough.

The logical next step — removing the attribute requirement altogether — is even more outrageous.

To its credit, the Coalition has recognised the idiocy of such restrictions.

In a significant victory for supporters of freedom of expression in Australia, Opposition Leader Tony Abbott promised during a speech made earlier this year to repeal the law that muzzled Bolt.

But restricting free speech based on hurt feelings is not the only threat to this cornerstone of democracy.

The Gillard Government is currently considering media restrictions, including licensing of the press.

Two inquiries into media regulation — the Finkelstein Inquiry and the Convergence Review — have recommended higher levels of government control over the content and ownership of Australia's media.

Among Finkelstein's recommendations was the setting up of a tribunal that would have the power to censor sections of the media.

Current threats to free speech are extremely concerning.  It is far too valuable a right to give up because someone might be offended, insulted or humiliated.  Nor should governments ever get to decide what ideas we see, hear and talk about.  Freedom of speech is more important than that.

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US vote: where left isn't right

A British conservative website captured the story of the United States election.  ''Disastrous for the Republicans or simply disappointing?''  The result was closer to the former for anyone committed to economic freedom and private enterprise.

On a scale 1 to 10, with 1 being the election of Ronald Reagan in 1980 and 10 being the election of Franklin Roosevelt in 1932, the re-election of President Barack Obama is an 8.3.

It's hard to disagree with Salon, the journal of the American left:  ''President Obama's re-election represents a victory for the Democratic ideal of activist government and a mandate for more of it.''

The trouble is that activist government doesn't actually work.  The US unemployment rate of nearly 8 per cent proves activist government doesn't work in the short term.  Europe proves activist government doesn't work in the long term.

Conservatives may talk about the popular vote being close, and the Republicans holding a comfortable majority in the House of Representatives and so on, but when it comes to the presidential race, a loss is a loss.

Obama may have had 131 campaign offices in Ohio compared with Romney's 40.  And a hurricane may have stalled Romney's momentum.  However, none of this overcomes the reality of a failing economy that should have handed victory to the Republicans.

Much has been made of the demographics of the youth, women, African-Americans and Latinos favouring the Democrats.  That's true.  However, a lot of white males still voted for Obama.  The President easily won New Hampshire.  As that state's most famous resident, commentator Mark Steyn, put it:  ''But New Hampshire is overwhelmingly white — and the GOP [Grand Old Party] still blew it.  The fact is a lot of pasty, Caucasian, non-immigrant Americans have 'shifted', and are very comfortable with big government, entitlements, micro-regulation, ObamaCare and all the rest — and not much concerned with how or if it's paid for.''

There's a paradox about the political left of the 21st century.  Its members claim they care deeply about future generations when it comes to the environment.  Yet when it comes to government spending, the left has no qualms about future generations paying for the demands of the current generation of voters.  British historian Niall Ferguson was right.  ''If young Americans knew what was good for them, they'd all be in the Tea Party.''

It's hard to disagree with Steyn.  ''I wish we'd at least had a big picture election — the motto of the British SAS is 'who dares wins','' he says.  ''The Republicans chose a different path.  A play it safe, don't frighten the horses strategy may have had a certain logic, but it's unworthy of the times.''

Prime Minister Julia Gillard will be a lot happier with the US election result than Opposition Leader Tony Abbott.  If Obama won, Gillard can.

Our PM will have learned three things from Obama's victory.  The first is that politicians who pass unpopular taxes for which they have no mandate can still get re-elected.  Obama had ObamaCare.  Gillard has the carbon tax.  The second is that relentlessly negative advertising works.  Romney allowed his opponents to define his public image as a multi-millionaire leveraged buyout merchant.  Abbott is at risk of being defined as a woman-hater.  The third point is related to the second.  The Democrats claimed the Republicans would launch a ''war on women''.  Whether true or not, the claim helped swing female voters to Obama.  Gillard has already played the gender card, and she'll keep on playing it.

For Abbott the worry is that maybe voters in Western liberal democracies have stopped worrying about where the money is coming from.  If Americans don't seem concerned by their national debt of more than 70 per cent of gross domestic product (twice the level it was five years ago) it's difficult to believe Australians would be any different, particularly as we face a comparable debt figure of less than 10 per cent.

With the Gillard government promising to create a national disability insurance scheme and more funding for schools and dental care, it comes across as mean-spirited to ask where the money is coming from.  And the pressure will be on the Coalition to match whatever Labor pledges — because more government spending is what people say they want.

After Obama's re-election, William Voegeli, one of the US's leading conservative writers, said:  ''In our system, the people are sovereign.  That does not mean they're infallible.''

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Cometh the storm, cometh the climate lies

By circulating commentary that suggests hurricane Sandy was exacerbated by human-caused global warming, the Climate Commission is wilfully misleading the public.  Let us be clear, Sandy was barely a category 1 hurricane as it crossed the densely populated north-east United States.

The enormous damage resulted not from wind, but from flooding and inundation over low-lying areas where housing and commercial development was not designed to cope with such an extreme event.  Compounding the issue, vital infrastructure such as levees, public transport systems and power stations were not adequately hardened.

The flooding resulted from heavy rain and a large coastal storm surge at a time of spring tides, all eventualities that could have been predicted.

Many scientists, and now the Climate Commission, have suggested that in a warmer world tropical storms will be more frequent or more dangerous than those previously experienced.  This assertion is contentious, and evidence for it is lacking.

As has already been stressed by senior scientist Martin Hoerling from the US National Oceanic and Atmospheric Administration, and many other scientists, no evidence exists for any influence of global warming, let alone human-caused warming, on the intensity of hurricane Sandy.

Sandy was a decaying hurricane whose wind intensity was decreasing as it moved north across subtropical waters.  Importantly, the presence of a second large weather system in the north-east Atlantic Ocean and Canada blocked the passage of the hurricane and caused its impact and storm surge to be focused in the New Jersey-New York area.

The coincident alignment of a hurricane and a large extra-tropical storm is what gave Sandy its extra intensity.

In a broader context, the lack of recent global warming is also an impediment to those who argue that Sandy was influenced by industrial carbon dioxide.  There has been no significant atmospheric warming since 1996 and no ocean warming since the Argo buoy network was deployed in 2003.  In consequence, global atmospheric and oceanic temperatures are now close to their average over the past 30 years.

Suggestions that higher concentrations of atmospheric carbon dioxide have somehow influenced the formation and development of Sandy are therefore simply untrue.

The Climate Commission appears to consider it opportune to use the harrowing Sandy event, with its loss of lives and immense destruction, to push its political agenda.  But in favouring action to try to ''prevent'' global warming, the commission is propagating a wrong and costly message.

For most parts of the world, there exist 200-year documented records of severe weather events and their impacts.  Nowhere should we be taken by surprise by a severe storm and its attendant impacts.  Our understanding allows accurate estimates to be made of the frequency with which particular weather-climate hazards will recur.

Regrettably, over the past 50 years such knowledge has often been ignored as development has encroached onto flood plains and low-lying coastal margins.  There are exceptions, such as the long-established levees that protect many inland river cities.  Counter to that, building is now often approved within sand barrier dune systems that, before modification, protected coastal communities from flooding.

It is both costly and futile to try to minimise climate hazard through global engineering.  In particular, reducing atmospheric carbon dioxide does not reduce climate risk.  Instead, the cost-effective approach to dealing with all climate hazard, both natural and possibly human, is to prepare better for, and adapt better to, damaging events as they occur.

The wilful misuse of science by lobby groups to support their agendas has now become an epidemic.  The view that more frequent or extreme climate events are occurring, as advanced by many commentators, directly contradicts the considered advice of scores of climate experts, including all those who wrote the reports of the Intergovernmental Panel on Climate Change (IPCC) and the Non-governmental International Panel on Climate Change (NIPCC).

That formal government advisory bodies such as the Climate Commission are supported in their flagrant disregard for scientific principles and facts by senior CSIRO and university research managers is cause for severe national concern.

A Climate Commission that had the safety and welfare of Australians at its heart would be advising Parliament to expend resources on community infrastructure that mitigates the hazards associated with climate extremes.  It would resile from opportunistic attempts to link human tragedies such as Sandy with speculative anthropogenic global warming.

About 70 per cent of natural disasters are weather and climate related.  Building resilience by ensuring early warning and planning robust infrastructure will enhance the safety and amenity of our communities.  Sensible planning will also ensure that economic loss is minimised and that there is quick recovery in the aftermath.  These are positive actions that carry a guaranteed benefit.

Why cannot Canberra politicians and their advisers work out for themselves that climate hazard is most effectively handled using prudent and cost-effective policies of preparation and adaptation for extreme events?

Barack to the future

Barack Obama and his supporters in America and abroad are understandably thrilled after winning a remarkable electoral victory.  They are entitled to gloat over those of us who doubted he'd win or deserved to win.

Throughout the year, Obama seemed in danger of following Herbert Hoover in 1932, Jimmy Carter in 1980 and George H. W. Bush in 1992 as a one-term president.

He presided over skyrocketing levels of national debt and the most sluggish economic recovery since the Great Depression.  Polls showed that between 60 and 70 per cent of the American people believed the US was heading in the wrong direction.

But yesterday the President won far more than the 270 electoral-college votes needed to win the election.  Republicans and conservatives are already blaming hurricane Sandy, which helped freeze the Romney momentum in October.  Perhaps.  But there are more fundamental explanations for Obama's victory.

So, how did a US President win re-election at a time of widespread anxiety and even widespread dissatisfaction across the nation?

Well, it will take time to study the exit polls in detail.  But here are a few preliminary observations.

• Changing demographics:  Whereas Republicans predominantly represent middle-aged and older whites, Democrats are increasingly making bigger inroads among Hispanics (a rapidly rising minority) and African Americans as well as younger voters, who are consistently well to the left of their elders (abortion rights, gay marriage, less interventionist foreign policy).

  Democrats did a good job of encouraging these groups to turn out to vote, and more than enough did in the all-important battleground states to swing the contest in Obama's favour.

  Such trends could portend big dangers for the Republicans:  as the minority populations increase (especially in Colorado, Florida and even Texas), the share of the white vote will continue to decline in future presidential elections.  This is especially the case so long as Republicans continue to adopt a hardline stance on illegal immigrants from south of the border.

• Mitt Romney:  The former Massachusetts governor, by temperament a moderate, always seemed uncomfortable with the conservative and Tea Party agenda.  When he addressed social issues or championed entitlement reform, he seemed insincere, and people sensed it.  Since the divisive primary contest a year ago, the Republican base had always been suspicious that Romney was not one of them.

  To be sure, conservatives were more energetic in 2012 than 2008, just as many Republicans had predicted.  But it was not nearly enough to match the enthusiasm of young predominantly Democratic voters (aged between 18 and 29) and minorities (especially Hispanics and African Americans).

  Meanwhile, Obama's auto industry bailout, and Romney's equivocal response, influenced enough white, working-class voters in Michigan as well as Ohio, the battleground of battleground states, to win the rust belt.  These are the so-called Reagan Democrats — or, in Australian parlance, ''Howard battlers'' — and they help swing national elections.

  In fairness, it's a fair bet Romney's cautious and reasonable demeanour helped attract more independents in the political centre than any of the other more conservative Republican primary candidates — Santorum, Gingrich, Paul, Perry — whom he faced in a bitter primary contest earlier this year.

  Indeed, the available polling evidence indicates that Romney drew even with Obama among independents.  Ultimately, it did not matter, because the rank-and-file Democratic turnout remained nearly as strong as it was four years ago.

• Republican brand:  The spectre of George W. Bush haunts the Republican Party.  Despite his best efforts to distance himself from the Bush era throughout the campaign, Romney failed to convince enough crucial battleground state independents, who straddle the political centre, that today's Republicans mark a repudiation of the war party that dominated Washington during the Bush era.

  The Bush reputation is tainted by two costly wars, big spending policies and the Federal Reserve's housing and mortgage mania, which led to soaring debt, budget deficit and the financial crisis.  US economic growth has been lacklustre ever since, and there is little hope of a rapid return to vigorous growth.

  The exit polls suggest that by a margin of 53 to 38 points, Americans are far more likely to blame Bush than Obama for today's economic ills.

  To add insult to injury were a couple of divisive Republican Senate candidates in Missouri and Indiana, whose strident remarks on abortion and rape aggravated political centrists, especially small-l liberal women, and cost the Republicans two Senate seats.

  In coming days, the twin flanks of the party's conservative base — the free-market Tea Party as well as social conservatives — will be subjected to a great deal of criticism.  By adopting a doctrinally purist stance on economic and social issues, both groups alienate rising segments of middle America that is increasingly more progressive.

So what now for Barack Obama?

The history of second-term presidents is sobering.  Some such as George W. Bush are early lame ducks (post-hurricane Katrina);  others such as Richard Nixon (Watergate), Ronald Reagan (Iran-contra) and Bill Clinton (Monicagate) are prone to scandal.  In fairness, Reagan redeemed himself, for he primarily focused on legacy (tax reform, winning the Cold War) and history records him as one of the greatest or at least most consequential presidents.

That is why Obama is unlikely to sit on his hands, even though he still faces a Republican House of Representatives.  Whatever you think of the 44th President, he can hardly be accused of thinking small.  His first term was all about large projects (big spending stimulus, nationalised healthcare).  He will continue down the path of vastly expanding the size and scope of the federal government.

In 2008, he campaigned that he would be a ''transformational'' president.  Translation:  just as Reagan had presided over an ideological realignment in the 1980s and in the process made America a more conservative place, Obama would reshape the political landscape a generation later and move the US in a more progressive direction.  Expect the re-elected President to try to complete that course.

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Grandstanding about mobiles won't reduce the road toll

It's an old principle of policing — if you can't enforce the laws on the books, demand more laws.

More than 55,000 people in Victoria were booked for using their mobile phones while driving last year.  That's around 150 people a day.

So on Monday, the front page of the Herald Sun reported that Victoria's chief highway patrol cop wanted the government to force drivers to switch their phone off in cars.

Never mind that a ban on phones in cars would be completely unenforceable.

Victorian road rules are clear.  The Road Safety Act bans mobile phone use while a car is running.  The only exception is receiving calls or using navigation functions with a commercially fitted holder.  Even then, the driver cannot touch the phone at any time.  The fine is $300 and three demerit points.  New South Wales enacted similar laws last week.

Yet one survey suggests around 60 per cent of Victorians still use their phone while driving.  That 55,000 people booked isn't a lot, considering more than two million of the state's 3.7 million licensed drivers are breaking the rules.

The Herald Sun article said ''thousands of rogue motorists flout the law''.  No — millions do.

First things first:  it is incredibly stupid to use a mobile phone while travelling at speed.  Driving is a complex task.  Sending a text message on a phone increases the risk of accident up to 23 times.  That much is easy to demonstrate in simulations and in-car experiments.

But things get less certain from there.

The ''while driving'' data is a bit misleading.  They include a lot of circumstances we wouldn't usually call driving — like checking your phone while stopped at a traffic light.  But if the engine is running, it counts.

The NSW government commissioned a study into the extent of the problem earlier this year as part of a parliamentary inquiry.  The results were striking and counter-intuitive.

Seven per cent of accidents in NSW in the last decade involved driver distraction.  And within that 7 per cent, only 1 per cent involved a handheld phone.

Don't get too hung up on the specific numbers.  There are many complicated definitional issues.  There's a large body of academic research on driver distraction but it's not all comparable.  And, obviously, the ideal number of accidents is zero, whether related to phones or anything else.

Yet it still remains that mobile phones are extremely small proportion of the causes of distracted driving involved in accidents.  The majority of distractions come from outside the car.  Then there are those within the car — like fellow passengers, grooming, or eating and drinking.

There are even three times as many accidents involving police pursuit as mobile phones.

The overwhelming majority of accidents involve exactly what you'd expect:  speed, fatigue, and drink.  Mobile phones hardly rate.

But you wouldn't know that from the press.  Phones dominate the popular discussion of car accidents.  Using a phone while driving seems to be the ultimate in recklessness.  It is terrifying to imagine there are people speeding down the freeway while tapping out text messages.

Smart phones are a novelty, and novelty makes news.  Stories about how mobile phones cause accidents has all the characteristics of a moral panic — a disproportionate reaction to a small problem.  Drivers face worse distractions.  There are more disconcerting risks on the road.

For instance, one 2005 study found in-car entertainment systems are a far bigger real-world distraction than phones.  You have to take your eyes off the road to change a CD or radio station.  Handheld phones are problematic not because they impair drivers physically, but because talking while driving takes extra mental effort.  It's the conversation which is dangerous, not the phone.  (This explains why some studies have found hands-free phone systems are no safer than hand-held ones.)

These are uncomfortable findings.  No politician wants to challenge the right of drivers to chat with passengers or listen to the radio.  Anyway, that's why we have careless driving laws, and take recklessness and negligence into account in criminal accident proceedings.

Nevertheless, there has been a remarkable decline in car fatalities over the past few decades.  The Commonwealth government has been tracking road deaths since 1925.  Deaths have reduced from 30 per 100,000 population in 1970, to seven in 2008.  If anything, that understates the decline:  we're driving twice as much as we did 40 years ago.  And the death toll is still going down, even as more people buy more complicated phones.

A society should try not to have too many unenforceable laws.  They breed contempt for the law as an institution.  If people get used to disobeying one law, they may become comfortable with disobeying others.

As the American writer Radley Balko has argued, calls to increase restrictions on mobile phones in cars aren't about safety;  they're about symbolism.

It's already illegal to use phones in the car.  Lots of people do it anyway.  But political grandstanding about mobiles is not the same as reducing the road toll.