… meanwhile in Canberra

After the storm, silence. In the Canberra press gallery, the phones have stopped ringing their heads off. A fractured government drags itself off the floor and goes on. As it must, for on May 9, 1901, the national parliament opened for business in Melbourne, and on May 9, 2001 the parliament returns to Melbourne for a commemorative sitting.


The commemorative election promises to be a brutish affair, with a discredited government resorting to low blows and an aimless, meta-cynical opposition resorting to cheap shots. There is, however, the chance of an autumn blessing.


At the Save our ABC rally in Sydney the weekend before last, Former ALP national president Barry Jones said his work on producing a blueprint for a knowledge nation was complete. He heads a committee of mega-brains working on the topic for Beazley, and he said that at their final meeting, they decided the draft had to be radicalised because the task was now urgent. The document would be presented to Beazley this month, he said, and released for public comment. Let’s hope it is. It may give us hope. It could even bring Elen Seymour’s dream of a return to Sydney’s sun from Canada winters a little closer to reality. She replies to her critics on the need for foreign investment in Australian R&D at the end of this entry.


Your reaction to the Stone incident was intriguing. Some told me to do a diary entry on it pronto, others complained when I did that I’d been seduced back into the game. Peter Gellatly in Canada wrote tartly: “Your brief stint back in Canberra hasn’t been good for your perspective. Who gives a damn about this? Isn’t public titillation adequately served by the “National Enquirer” and “Survivor”?”


Fiona Ferrari has it absolutely right: “This is the typical conflict-based story the media loves…… when are they going to grow up and allow party members to publicly express discontent?”


“Amen! And so what if Howard survives or Costello replaces him? This is not a celebrity divorce case (which would be puerile enough), its about something that should be utterly mundane: either the Libs’ record in government stands the test or it doesn’t. The career ambitions of individual party aspirants are no doubt of vital importance to them; but why should we care? Drop it – it’s not worth writing or reading about.”


Mark Halliwell was of the same mind. The question wasn’t who leaked and why but “Who cares, and Can we trust these people?”


“When I see and hear the most senior people in our government making comments about not putting pen to paper on issues concerning peoples’ opinion and the conveyance of those opinions to the Prime Minister so that he might finally get the message, I get very worried! What else is being said or done in the corridors of power that we don’t know about? The remarks of Costello and Stone et al suggest that we, the people, are to be kept in the dark at all costs. It’s a worry.”


I know the content of the Stone memo was no surprise to voters – they already know the government is mean, tricky and out of touch and they’ve said so at two State elections and the Ryan byelection. But the leak has given Beazley and co great ammo, not least in election advertising. It has also triggered the public display of what had previously been subterranean leadership tensions. Sorry guys, but you can’t take the politics out of the journalist. There’s nothing like the adrenalin hit of a Liberal leadership story.


An anonymous contributor has a diabolical theory for the leak. He says Howard leaked the memo to help him win the election! “It can be buttonholed as the classic manoeuvre that attack is the best method of defence Where is opposition leader Kim Beazley? Last weekend I scanned Saturday’s Herald and could not find one story attributed to Beazley. In a week punters following the scam will turn off and declare the coalition as being a party that listens. Howard, as already stated, is following the Peter Beattie strategy nearly to the letter. If Beattie were to lead Labor into the federal elections he would carry the nation by panels of fencing. Instead Beazley is going to lose the unloseable election and Howard will resign midway through next year.”


Well, if that’s the case, wouldn’t Howard have got Stone to type up a letter to leak which didn’t dump on Costello? Why rub a wound raw? Beazley’s silence was deliberate. Lie low, let the Liberal disunity dominate the news. DON’T make the whole thing party political. Let Liberal voters stew in their party’s juice.


Lisa Summerhayes joins Fiona Ferrari in shock at my preference for Costello over Howard.




Sometimes your views certainly surprise me. I remember you admitted that in the 93 election you voted for Hewson because you thought he was a ‘social progressive’; This was big of you to admit, as it seems somewhat naive. (MARGO: I voted Labor in 1993 and Liberal in 1996, on the ground that after 13 years, it was time for a change. I wanted to vote for Hewson in 1993, but Howard’s industrial relations policy turned me off.)


I know you are a libertarian – as many of us are – but this continued faith in social progressivism in the Liberal Party is a not only idealistic, but misguided. (MARGO: I’m not idealistic about this at all – for years my work has recorded with sadness how the moderate tradition of the Liberal Party has withered to almost nothing.)


The two guys you support in recent Libs leadership battles – Costello and Hewson – may not be the Lyons Forum-style 1950s social conservatives Howard and his ilk are, but that doesn’t mean they’re progressive by any normal standards either. Fiona Ferrari, Webdiary Friday, is right – where is the evidence for Costello’s progressiveness?


He is a religious man whose life thus far has indicated adhesion to two things – a moderate but still conservative view of society, and the belief in Friedmanite/Thatcherism style extreme dry economics.


Which leads me to point two: not only are you favourably judging these guys compared to their truly right-wing comrades, but you provide no evidence of their commitment to libertarianism. The reason you can’t provide any proof is that the whole party is beholden to dry economic hegemony.


So the important point here is that even if you could illustrate that these guys are good on some social issues, the point is moot, as such a an approach will always be overruled by the dries, who in this case are the same guys anyway. There is no automatic reason why the Adam Smith/Friedman tradition of economic freedom can’t be combined with Mill-style liberty in the social arena. As pollies like Kennett show, it can be done in part, and is more philosophically consistent.

But in federal politics it has yet to be done (the Fraser government was of the Keynsian variety, combining moderate social and economic policies). The dry part of Costello will always win against any social wetness he may harbour. (MARGO: Except on the republic and, maybe, saying sorry. And except on the Woodside decision! Stone’s memo to Howard clearly shows that Costello was doing his best to make wealthier people actually pay their fair share of tax – all his efforts since put in the bin under pressure from the core Liberal constituency.)


I can only imagine you being a “Costello supporter” in relation to the other option in the Liberal Party. If you really support him over Beazley – as your last entry implied – you are truly a perverse social progressive indeed. I know Costello looks like Bob Brown next to Howard on social issues, but let’s not kid ourselves – Labor has and has historically had more progressive social policies than the Coalition. Labor is more able to allow a little progressivism in the form of actual government programs into the equation because they are not – QUITE – as beholden to dry liberalism these days as the Libs.


Don’t let your personal dislike – and your issues with leadership weakness – of Beazley to, outweigh common sense about the political traditions these guys come out of. I know you don’t like to be seen as traditionally ‘left’ and beholden to the Labor party, but…


MARGO: This is my position. In a leadership contest between Howard and Costello, I would support Costello. The fact that he is still an enigma with regard to much social policy is in his favour. Howard is not an enigma, and I hate what he stands for.


As you know, I despair of Labor. My current voting intention is to vote for the Greens and put the major parties as low as possible on my voting forms for the Lower House and the Senate. I will put Labor before the Coalition simply because they’ve done enough damage and there’s a chance Labor will repair some of it. Given that I believe Labor will win the election, I’d like to see a replay of the Greens’ balance of power when Keating was Prime Minister. The Greens would keep Labor honest by forcing it to articulate its reasons for compromises on principle. I have invariably voted Democrats in the Senate, but believe that they would be too nice to a Labor government.


I’ll take no pleasure in voting this time, for the choices are odious. I anticipate my pleasure will lie in helping to create and maintain our online election site, which we’ll get down to seriously after the budget.


Now to our David Svenson , our crusty engineer in Ryan, a Liberal who returns to the diary with some comments on some of you.


“The egocentric who asks why he should contribute to the web diary is an obvious nut-case & needs to consult a psychiatrist before he does himself & /or others some serious damage.


David Davis is right about the loss to the Libs of Peter Nugent. He is quite wrong about small l liberals not being welcome in the Liberal Party by the vast majority of us – far more welcome than the likes of that far right winger ex Senator from WA!


“What a brilliant young lady is Elen Seymour. She has, and I hope will continue to raise the standard and soften the tone of debate in your web diary. She has obviously cast off the left wing leanings of the young and grown wise.


Jack Robertson has exposed, somewhat laboriously, the lack of substance in the free market theory and noted that the Royal Anglo-Dutch oil men won’t desert Oz because they know that Oz is a good place to make a quid in the bucketfuls required to sustain their voracious appetite for lucre (provided, of course, that the punters are not stupid enough to allow the ALP another turn at their cookie jar in Canberra!


“We must be indebted to Con Vaitsis – a self-confessed member of the rorter’s party. In claiming that most politicians are just ordinary workers without outstanding skills, Con can only be describing his own party politicians, who were lured into politics because it is such an attractive job.


“In my view, politics is an extremely onerous calling. A good politician should really be well educated, intelligent, tolerant, patient, indeed a paragon of every virtue. Little wonder that good politicians are hard to find. We should be satisfied with those mature ladies and gentlemen who have been successful in their working lives, have demonstrated their community spirit and have secured their financial future, so as to be unconcerned about the lurks and perks of office. Unhappily all too few meet such criteria.


“Margo, your charter does you credit. Your points that the future lies in the collaboration between journalists and the readers of newspapers which have lost their connection with the readers they serve are all too true. However thinking readers (mostly the only people still reading newspapers) tend to be contemptuous of Oz Media reporters who too often lack intellect and an in-depth education – probably why they have been brain-washed by Marxists & sundry other useless socio-political-economist experts!”


Welcome back, David. I missed you. You’ll recall that Imre Salusinszky’s column of last week on M1 provoked an impassioned response from Kelsey Monroe and David Teh. This week, Don Arthur bites back at Imre’s piece today, on the dairy debate. This could become a regular thing. Then it’s onto the globalisation debate triggered by M1, with Jenny Forster, Peter Gellatly, and our politics of ideas man Don Arthur. To end, David Svenson’s wise woman in Ottowa, Elen Seymour, continues the increasingly constructive foreign investment debate.




By Don Arthur


Imre Salusinszky, scourge of moist-thinking people everywhere, has finally joined the dairy debate (SMH 7/5). Dr Dry doesn’t seem to see much difference between openly reactionary Hansonites and supposedly progressive Kingstonites like Tim Dunlop. In the desiccated world of Imre Salusinszky there are only two kinds of people – those who believe in freedom and progress and those who don’t.


The trouble is I can’t figure out which kind of person I am.


Soggy, reactionary people are supposed to be in favour of taxpayer-funded university places – free education. Instead I’m a big fan of the Higher Education Contribution Scheme (HECS). I don’t have any in-principle problem with people part-paying for their degrees (human capital) any more than I have a problem with farmers having to pay for their land and equipment (physical capital).


What I’m most against are barriers to opportunity. Education plays a huge part in establishing the social pecking order. I don’t want a funding system which selects for wealth over academic ability. It wouldn’t do a lot to promote equality of opportunity. You’ve all heard the line about med students who come from the economic cream of society – rich and thick. No thanks.


But maybe Dr Dry thinks that using government money to promote equality of opportunity is inefficient or involves some kind of infringement of personal freedom. If so it’s time to speak up. Perhaps he’d like to abolish payment of the Youth Allowance to students whose parents can’t afford to support them through school and uni. Word up Dr D – I’m listening.


Soggy sods like me are also supposed to be opposed to genetically modified organisms. My solidarity with fellow citizens of the soggysphere must be failing. I’m finding it hard to feel threatened by cotton that doesn’t need to be sprayed with quite so much pesticide. Maybe I’m missing the technophobia gene.


As a denizen of dampness I’m also supposed be against importation of books and CDs. But again I’m confused. I buy a lot of my books from the US because I can’t find a bookstore here that stocks what I want. Could it be that I’m in favour of free trade? Golly!


What about those bastards who make DVDs that won’t play on Australian bought machines – are they in favour of free trade or just in favour of high prices? They don’t want you to play US-bought DVDs on an Australian player but they refuse to press the titles the titles you want on discs coded for you zone. But they’re capitalists aren’t they – and as Big Tony says, ‘capitalism’ is just another way of saying ‘freedom.’


Our hydrophobic columnist also gives a useful definition of ethnophobia – it’s the opposite of free trade. Bob Menzies might have wanted to keep funny coloured foreigners out of the country but he was all for selling pig iron to the Japanese – no ethnophobia there obviously. Am I ethnophobic if I get nervous about selling uranium to countries that make nuclear weapons? I guess so. I must be an illiberal bigot.


And before Con Vaitsas writes in telling me not to bother with crazed columnists like Dr D or Mr PP I’ll come right out and admit it – I love reading these guys. I want them to keep writing. Every now and then they push my buttons and I get to find out where they are.





By Jenny Forster


I’ve been outside for a few months, tie-dying some sheets, growing some plants and scraping the rust off my fondue set, and notice David Davis from Switzerland is still on the site.


David, I’m amazed to see you have become disenchanted with the Liberal party’s laissez-faire capitalism, where the user pays for everything and if you can’t afford to pay then bad luck. It seems the global expansionist policy spreading across the world is leaving a lot of pain and misery in it’s wake. Governments keep telling us “There’s no gain without pain”, but people in rural Australia and the working poor in the outer suburbs of the large cities are screaming ‘Ouch’ and looking around for someone to blame.


David, you and I might yet end up in voter limbo together because I think the other mob is going to be just as stuck for money and answers.


Take the pharmaceutical benefits scheme (PBS) . During the capitalist boom times of the 50’s 60’s and 70’s it was a great safety net. Now it’s costing a fortune due to the price of drugs and the pressure from drug companies to get their product on “the list” .


Late last year the Liberal government disbanded the PBAC which monitors what goes on the PBS and appointed 10 new members (including a former industry lobbyist), thus removing the ‘memory’ of the PBAC . The multinational drug companies want to see our PBS disbanded as it is too good a model for developing countries – the population is provided with appropriate drugs at appropriate prices. The South African government was taken to court by a group of global drug companies to prevent the supply of generic HIV Aids drugs at a fraction of the original cost.


John le Carre has abandoned the cold war and taken up the multinational drug companies as the bad guys.


For an old left-leaning, green, feminist, Fairfax and ABC loving hippie like myself it is very complicated as the argument seems to have moved off shore.Very far out.


Here’s a free kick for you David: in the 60s and 70s when capitalism was still in expansion mode it was easy for us to demand health care, abortion clinics, child care, free universities and women’s rights, and to drop out (with our records, stereos, vans and plentiful cheap share houses). The system could accommodate us .


As the song says, I can see clearly now. Seems we both can.




I wanted to illustrate Don Arthur’s point about economic theory and values. Don said: “Economics is great for creating the kind of world many economists seem to want to achieve, but the theory doesn’t even mention the variables I really care about.”


A week or so ago an article in the Economist lauded moves towards retail spot pricing of electricity in the UK. The intent apparently is to install new electricity meters which continuously display the retail spot price – thus enabling consumers to alter their electricity consumption patterns to minimise cost.


Of course no-one wants to sit staring endlessly at the meter, so this initiative will no doubt spawn a new market for computer controlled appliance timers, thus fraudulently adding to GDP.


What a crazy perspective. If this wacky scheme is implemented, instead of the smooth clockwork of Monday to Friday drudgery, chaos shall reign. Home at six, but wait: dinner’s not ready because the oven timer has sensed a price peak and not switched the oven on. The roast is still raw!


The whole point, surely not so easily forgotten, of building a national electricity grid was to provide the populace with reliable and price-stable energy, thus permitting people to attend to their other needs. Ditto for other utilities: using these is not in any way akin to taking a discretionary vacation during the low season, or buying a new stereo at an after-Xmas sale.


How much GDP shall be lost (ie if we count the unnecessary diverted activity as negative, which we should) by this deliberately crafted mayhem? And in any case, why is the solution to fluctuating electricity demand not the responsibility of the supply industry?


Imagine McDonalds pricing its breakfasts at a premium between 8am and 8.30am because that’s when most people want to eat. What’s next? Such insanity only makes sense on pretty, full-colour supply and demand graphs. I’m with you, Don!



F2 on economics


By Don Arthur


Fiona Ferrari is amazed at “how straight economics has come to infiltrate all our powerful institutions- the media, the bureaucracy and political parties- and to become the dominant ideology strangling our thinking.”


I’ve been pretty impressed too at the way the economic mindset has been making ground over the past couple of decades.


Just to get things straight – I’d leave the country if all the economists in treasury were replaced by innumerate cultural studies graduates or the place was taken over by green-tinged professional ethicists like Peter Singer – I’m not going to argue for that. I’m not calling for a war against economics and economists and I don’t want to abolish capitalism.


It’s interesting that Milton Friedman (the most famous of all neo-classical economists) agrees with Fiona about the falseness of economic assumptions. He thinks it’s a good thing. He disagrees with Cathy Bannisterthat false assumptions necessarily lead to false predictions (and I think he’s right). All Friedman demands from economic theory is that it make accurate predictions. On this account we don’t need to actually believe that people are rational and selfish, we just assume they are when we’re making economic predictions.


So far so good. I don’t know what all this ‘correspondence to reality’ business is all about anyway – if theories make good predictions about things I care about then I’m for them.


It’s in the next step where I start to have a problem with ‘positive’ economics – it’s just a short move from assuming that ‘if people were rational utility maximisers…’ to suggesting that they actually are or ought to be. One of the things rationalist technocrats like to do is to improve the fit between theory and reality by simplifying reality so it’s more theoretically manageable.


For example, in agriculture it is easier to predict outcomes when fields have a regular size and shape, where all the plants are genetically identical, and where the inputs are uniform (sun, water, nutrients ). Technocrats are frustrated by the messiness of reality – they want to make it simpler, more predictable and more tractable. Econocrats are no different.


Economic thinkers have moved into the law (Richard Posner), into public administration (William Nihkanen) and into political science (James Buchanan). All these domains are now at risk of becoming simpler and more manageable for economists.


Economic theorists argue that if we assume that people are rational and selfish in the economy we ought to assume they are the same way everywhere else. Since they are rarely encouraged to study psychology or sociology they are often unaware that people can and do behave differently in different social roles.


It’s a short step from making assumptions about people’s behaviour to creating institutions which actually demand that people act in this way – reality starts to change to fit the theory.


One example is where a public service moves towards performance-based pay. The idea is that bureaucrats will try to serve their personal interest rather than the public interest. The new more-money-for-meeting-targets plan is an attempt to bring self interest and public interest together (eg managers could make money by cutting programs that don’t work). Pretty soon bureaucrats get the idea that they’re mugs if they don’t go after the cash and promotions. After making that mental leap it’s not such a big step to meeting targets by undermining your colleagues – er, sorry – internal competitors. After all, it’s not your job to look after the department’s larger goals if senior management are too dumb to connect those goals to your interests. Your job is to look after yourself – senior management said so.


So the end result might be simpler and more manageable, but there’s no guarantee it will deliver more of what we value.



MARGO: Excellent! I’ve never seen performance pay so ruthlessly exposed for what it is – in the public and private sectors. I shall test the thesis of making people fit the program when welfare reform is announced in the budget.





Going Global


The story so far: The Woodside decision has appeared regularly in the webdiary but debate heated up after Costello turned down Shell. It begins with my comment in “Costello Toasts Woodside”. In “A loss to Liberals”, the Herald’s resources writer Jane Counsel analyses the decision and Marc Pengryffn thought it was all about Costello’s leadership ambitions. In “What’s the point?” Jack Robertson analysed media coverage of the issue and Elen Seymour, a tax lawyer, made the case for more foreign investment. In “Dairy, drugs and David Davis”, Marc strongly disagreed strongly with Elen’s stance. in “Taking it to the streets”,Tim Dymond and Paul Pagani tore strips off Elen, who engaged most constructively with Marc. In “M1” Tim and Mart returned the compliment.


I am motivated to respond through fear that people will think they have vanquished me, the capitalist pro-globalisation demon!


If my arguments seem economic determinism it is because I thought I was discussing economic issues. I reject the idea that just because I drone on in a “rationalist” manner that I am attempting to distance my economics from my politics. Instead I thought I was displaying my political leanings quite clearly!


What I am trying to do is widen the political debate beyond simplistic ritualistic fights between good and evil. Additionally, I am sorry if people believe that national pride means fanatically keeping things at the status quo of what it means to be Australian. One of the things I love about Australia is how Australian it is to be ever-changing and to have many faces!


I get the sense that quite a few of you think I am promoting a free for all into Australia for corporations, to come in, exploit us then nick off once our ground is empty and our people slaves. Quite often the spectre of exploited “third world” countries is raised in the hope of spooking me and presumably other people from agreeing with me.


However, being the devil incarnate myself (I did mention a law degree did I not?) I am not so easily frightened. My rebuttal is this.


First – how come no one ever talks about the revival of the economy in Ireland in this debate? Ireland has a roaring economy – so much so that the IMF in its recent report World Economic Outlook has commented that the recent downturn in the global economy is likely to be a good thing for Ireland, to stop it being burnt by inflation. How did Ireland become this economic powerhouse? It lowered its corporate taxes and offered massive R&D concessions.


Canada too offers huge R&D concessions to companies which has been so successful that they now have “Silicon Valley North” in Ottawa. As a flow on result the housing sector is booming, franchises are panting to get in the door, service jobs are advertised everywhere and although there are (as in Ireland) some social upheaval to do with dealing with massive population explosions and some of the usual “bloody immigrants”, no one is talking about raising corporate taxes to stop the flow of capital and people into Canada.


I concede there is some truth in the apocalyptic vision of a stripped, bare-bones Australia at the ravenous hands of multinationals. This is because like so many of third world countries we are a commodities based economy – we sell what we dig up or grow.


Where this becomes problematic is that organised co-operative nations party to agreements such as the European Union and NAFTA seek to control the entry of commodity products into their protected regions. As mad cow/foot and mouth has shown, almost nothing can force the US or Europe to lower such barriers.


So sticking to what we do best *now* in the name of national interest – and not doing anything else – we achieve the opposite effect to our intentions. We are at the mercy of groups who will be able to dictate to us how much we sell and at what price and to whom.


It is this path that may force us into prostitution to the big players. It might be that we will then have to disband our labour laws and sell our children to corporations at any price or be the hole in the ground the US takes its commodities

from and craps in when its done.


By taking action now we may be able to avoid this hellish path. It is better to dictate some terms than none! This is my optimism, Marc, that if we act soon we will fare better in the globalisation game. If we act too late we may become the third world nation people tried to avoid by refusing to let multinationals in!


So what I am advocating is not free trade. It’s a mistake to confuse free trade with taxation-based corporate incentives ? They are opposites. Can I suggest that Australia is hurting now because it picked free trade instead of protectionist policies combined with low tax?


The US understands this point and defends voraciously its right to be a low tax regime. The US sees this as being in its national interest and a question of national sovereignty. Why is it Australia sees its national interest and sovereignty as being tied to discouraging capital from flowing into Australia?


It does not have to be about tax. I just happen to understand tax and how it affects corporate decisions. I agree with Tim Dymond when he says “To conclude on the basis of a single decision to keep an important resource in local hands that Australia no longer welcomes foreign investment is ridiculous”.


It’s not that any single decision by Costello leads to decisions by multinationals to not invest in Australia, it’s the old thousand cuts scenario.


Australia has an aggressive tax authority. Australia has expensive labour. Australia has a small market. Australia has a high corporate tax rate with little relief by way of subsidies. Australia has a government that wishes to keep things ‘Australian’. Each on its own is insufficient to deter a multinational, but cumulatively its just ‘too hard’ to invest.


I would rather see tax incentives than cheap labour incentives. If this is kotowing to the forces of globalisation (ok, it is!) then so be it. By embracing the devil maybe we can get some devilish powers ourselves!


And really, how many of you would still be against globalisation if it was MeatPies TM rather than McDonalds TM or the rivalry was between Apple computers and MicroAussie computers?


How many of you would instead be whinging about countries that won’t allow BigAussie Pty Ltd to buy up its national resources?


And how many of you will refuse to work at the Australian branch of BigAmericaCo or stop your kids from working there?


Or is it that you think that to be truly an Australian means never being global?

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