Category: Economy

  • Mack Madahar. Nurse Practitioners: Challenges and Opportunities.

    Nurse Practitioners were provided access to the MBS in November 2010. Besides limited access to pathology/radiology, nurse practitioners were provided with four time-tiered MBS item numbers for professional attendances. While most nurse practitioners have established themselves in public hospitals, primarily because of the relative financial certainty it provides, there are a handful of NPs trying to establish a niche in primary care.

    There is tremendous amount of debate in primary care about burgeoning Medicare costs and the ability to offer fully subsidised primary care. Whilst GPs are well placed in primary care, primary health care nurse practitioners have demonstrated to be an excellent resource in providing care that is safe, effective and affordable. Besides improving patient satisfaction, primary health care nurse practitioners facilitate a focus on complex and chronic care needs, which may increase patient throughput and productivity. Such services provide excellent examples of nurse practitioners offering value-added service at little cost. Nevertheless, primary health care nurse practitioners face daily challenges, some of which are worth mentioning. This in order to gain better understanding of these problem/s and convert such challenges into possibilities for change into the future.

    Challenges:

    • Access to only four MBS item numbers out of 5,500 items is limiting growth of nurse practitioners in primary care at a time when there is an increase in ageing, chronic disease and mental health populations. Limited ability to earn a living is turning nurse practitioners away from collaborating with GPs in the provision of primary care.
    • Primary health care nurse practitioners are unable to make MBS-reimbursable referrals to allied health professionals and have limited access to MBS diagnostic imaging items. This contributes to duplication of care and practice inefficiencies.
    • There are no after-hour MBS item numbers for nurse practitioners working in primary care. This means that running such services from an administrative standpoint make it financially unviable.
    • Lack of incentive payments for bulk-billing children, elderly and health care cardholders prevents primary health care nurse practitioners from focusing on the marginalized populations they were designed to serve.
    • Primary health care nurse practitioners can independently perform simple procedures such as insertion of contraceptive implants, as well as spirometry and ECG interpretation. Unlike GPs, primary health care nurse practitioners have no access to procedural MBS item numbers. This means the full costs of performing such procedures are passed on to patients and/or GP practices, which provides a financial barrier to essential screening and diagnostic services. This also means that GPs have to foot the bill for consumables when nurse practitioners have performed such services. The cost must not be passed on to practices as part of a collaborative system.
    • There is a lack of knowledge of the primary health care nurse practitioner role. The AMA has done an excellent job in muddying the waters by confusing the nurse practitioner role with that of the practice nurse. Nurse practitioners are independent practitioners who work beyond the contemporary registered nurse scope of practice. They are able to prescribe medicines, order and interpret diagnostic tests, and make referrals to medical specialists. They perform their functions above and beyond the practice nurse role.

    Opportunities:

    Minister of Health Hon Sussan Ley recently announced a new payment model that encourages General Practices to provide after-hours services. Though specific eligibility has not been announced, it is hoped that nurse practitioners working in collaboration with GPs are included in this arrangement.

    At the same time an MBS Review Task Force has been announced. This taskforce will examine the relevancy of 5500 MBS item numbers and align them with clinical evidence. While this is encouraging there are no nurse practitioners on the review panel. This presents a missed opportunity to provide informed financial consideration of the nurse practitioner role in general practice.

    The Primary Health Care Advisory Group (PHCAG) is another excellent announcement and shows the Minister’s commitment to support patients with chronic and complex health conditions. Except for the inclusion of the chair from the Australian Practice Nurse’s Association, nurse practitioners are missing from the advisory group. Perhaps it is time for a change of heart.

    Nurse practitioners are underutilized in primary care due to financial constraints. This missed opportunity places added burden on GPs, and contributes to strain on the public health system. Small increases in government spending to improve access to existing MBS item numbers (at a reduced rate, e.g. 85%) will encourage nurse practitioner numbers in primary care and provide an impetus for practice nurses to enroll in nurse practitioner programs. While practice nurses work tirelessly, nurse practitioners provide an advanced level of expertise that can support general practices in a greater cost-effective manner.

    Conclusion:

    The current government is committed to cost savings in health and primary care is proving to be one of their toughest challenges. Primary health care nurse practitioners working together with GPs offer real support to all aspects of chronic and complex health problems, with the potential to contribute to real health systems savings. New payment initiatives and advisory committees demonstrate the government’s commitment to cost savings and evidenced-based care. Greater consideration of the primary health care nurse practitioners role can help support this Government’s aspirations. This valuable resource should be allowed to work to its full potential to demonstrate the potential of a cost saving alternative in the long term.

    Mack Madahar is a PHC and MH nurse practitioner. He acknowledges the valuable input of Chris Helms, RN, NP, MSN, ANP-BC, FACNP, in writing this paper.

  • Cathy Alexander. On climate change, the states may yet save the day.

    Climate campaigner Al Gore has been in Australia again – but this time he didn’t share a stage with a beaming Clive Palmer. He didn’t go anywhere near Canberra. And he had good reason.

    Gore, the former US vice-president who travels the world spruiking action on climate change, wanted to meet with state governments and city councils instead. He has jumped on an emerging trend: a broadening of responsibility for addressing climate change.

    Under the United Nations system it is national governments that are supposed to make emissions pledges and enact policies. Some are doing so.

    But the reality is it’s often provincial governments or city councils who are the most ambitious, especially where national governments leave a policy void.

    From the ground up

    A global patchwork of thousands of provinces and councils enacting separate climate policies may sound messy, and it’s very much Plan B for the UN Framework Convention on Climate Change. But this bottom-up mish-mash might just prove efficient at reducing greenhouse gas emissions – while some national politicians grandstand and dither on the sidelines.

    Gore, a Nobel laureate who gave his trademark slideshow to 1,000 staff and students at the University of Melbourne on Monday, talked about states that are “moving” on climate change: California, Washington and Oregon in the United States, and Canada’s British Columbia.

    “I have a feeling that some parts of Australia are thinking of moving,” he added in his breezy Tennessee accent. “I’m stoked about that.”

    Earlier in the day Gore met with ministers from the Labor states of Victoria, Queensland and South Australia, plus senior public servants from New South Wales and the ACT.

    Later he told the university event, organised by the Melbourne Sustainable Society Institute, that those state governments “understand this crisis and the nature of the opportunity” (such as renewable energy).

    It’s a different approach to Gore’s memorable joint press conference with federal MP Clive Palmer in Parliament House a year ago. The pair announced that Palmer would vote to scrap the carbon price, while saving the furniture (the Renewable Energy Target, the Clean Energy Finance Corporation etc).

    This time around, Gore didn’t target federal politicians – he could hardly show his slide of a Hawaiian wind farm surrounded by flowers to Prime Minister Tony Abbott, who finds them “ugly”. (Gore did have a quick lunch with Opposition Leader Bill Shorten.)

    Instead, Gore looked to the states to ginger up Australians ahead of the major UN climate summit in Paris in December.

    Top of his mind was California, the example he cited frequently on this trip. Former Republican Governor Arnold Schwarzenegger got an emissions trading scheme through state parliament and it started under the Democrats in 2012. (The design is fairly similar to Australia’s first emissions trading scheme under Kevin Rudd.)

    California now has bills on the table to cut transport emissions and increase renewable energy, as well as a legislated emissions target. The Victorian government is particularly interested in the Californian example.

    Gore also name-checked the Canadian province of British Columbia, which has had a carbon tax since 2008, introduced by the centre-Right Liberal Party. Petrol pumps in Vancouver now show the carbon tax ticking over.

    British Columbia has relatively strict energy-efficiency regulations on buildings and their contents, a requirement that 93% of new electricity supply be renewable, and all government agencies offset emissions.

    Gore didn’t mention Chinese provinces but there are seven state or city-based carbon trading schemes in China; the Beijing ETS covers everyone from Microsoft to news agency Xinhua.

    The climate see-saw

    So can Australian states follow suit? They already have. NSW had an ETS, which was scrapped in 2012 to avoid duplication with the (now defunct) federal carbon tax.

    Victoria’s Labor government passed a bill in 2009 to cut emissions by 20% by 2020 and had a plan for the staged closure of the Hazelwood coal-fired power plant. The Liberals won government in 2010 and reversed those plans.

    So there’s an Australian policy pattern best described as messy, regardless of one’s view on climate change. Sometimes the states act, sometimes the federal government does, but governments keep changing. Climate change has been caught in a federal-state see-saw which has left little policy intact.

    That’s why Gore’s list of frontrunner states doesn’t include any Australian examples.

    That’s also perhaps why no premiers met Gore on Monday. They face a tough choice – are they really ready to ramp up climate ambition, and cope with the risks of a hostile media campaign and a possible voter backlash?

    Climate policy has helped see off three Australian prime ministers and two opposition leaders since 2007. The temptation to back away quietly is real.

    South Australia and Queensland are talking up their climate ambition, while Victoria is formally reviewing its climate options, including an energy efficiency campaign, new emissions targets, and more renewable energy. (They’re all Labor states.)

    Meanwhile, insiders are closely watching the Liberal NSW government, which is a different beast ideologically to the federal Abbott government. Watch to see if ministers from any state go to the UN Paris summit.

    So it was perhaps the state premiers, and not the Melbourne University students present, that Gore had in mind when he called for “moral courage” on climate change, as he stood in front of a huge slide of the planet.

    Cathy Alexander is Research Fellow. Melbourne Sustainable Society Institute at University of Melbourne. This article was first published in The Conversation on 28 July 2015.

  • Jon Stanford. Climate Change Policy: a wedging opportunity for the ALP?

    For those who believe that Australian elections should be based on a contest of ideas about public policy, developments at the national conference of the ALP in July 2015 will provide some basis for optimism. In contrast to some previous Opposition leaders who have been content to maintain a small target strategy, Bill Shorten is starting to make himself quite a large target in policy areas such as the republic, gender equality and climate change.

    Why has Shorten taken this risk? It certainly helps to be opposed by a prime minister who is a high conviction politician, driven by a conservative ideology that many on the progressive side of politics would characterise as swimming hopelessly against the tide of history. Yet Tony Abbott’s ideological self-indulgence only goes so far. There is a warning signal for the opposition in the long list of issues, mainly economic, where the Prime Minister appears to have no particular conviction and is ruthless in his willingness to play politics with those who do. The corollary is that the few issues where his ideology does dominate may not be that significant. To be sure, they make for lively debate around the barbecue and may even give Tony Abbott the look of a ‘mad uncle’, but they do not threaten the punter’s hip pocket. They are not, therefore, likely to be issues where elections are won or lost.

    But one of Abbott’s high conviction issues may be different. Climate change is at the forefront of global policy concerns and is highly challenging for national governments encompassing, as it does, complex problems around science, diplomacy, technology and economics. Notably, the Prime Minister has managed to place himself on the wrong side of the debate, not just in one or two of these areas, but in all four. He has lampooned climate science as “absolute crap”, identifying instead a conspiracy to attack the fossil fuel industry. In diplomatic terms, since 2013 Australia has run dead on climate change in international forums, with Abbott not allowing Ministerial representation at UN conferences and thereby eliminating any chance of Australia securing a better deal in the upcoming negotiations. His attitude to new energy technologies is that of a Neo-Luddite; he eulogises coal as “king” while deriding renewable energy and cutting funding for the development of low emissions energy solutions. His economic policy response to climate change has been to move as far as possible away from an efficient, least cost approach to reducing emissions and instead, extraordinarily for a conservative, draws on taxpayers’ money to pay polluters not to pollute.

    Little wonder then that the ALP would place climate change at the Schwerpunkt of their political assault on the Coalition leading up to next year’s election. The strategic attractiveness of the issue is also strengthened by the fact that Abbott is not in a position to downplay its significance or remove it from the front pages. With the key Conference of the Parties (COP21) on post-2020 emissions reductions to be held in Paris in December this year, it has developed a transparency and momentum that is all its own.

    In the lead up to COP21, nations are required to propose emissions reduction commitments beyond 2020 that are consistent with the agreed international objective of containing global warming to a maximum of two degrees Celsius. These commitments were formally due by end-March 2015. Every other developed country has now published its proposed commitment, but Australia is again playing the laggard. Australia’s commitment, we were originally told, would be published in June this year. Then the date slipped again, first to July and now to August.

    These delays might lead one to speculate that the Cabinet is having difficulties in reaching an agreed position on an acceptable commitment. This would not be surprising, because the split in the Coalition on climate change extends beyond the idiosyncratic views of the Prime Minister. On the one hand there is a strong element in the Ministry that is progressive on the issue – and reflective of the attitudes of most conservative parties around the world. On the other hand, there is also a vocal rump of climate change deniers and strong supporters of Australia’s coal industry who, encouraged by the overthrow of Malcolm Turnbull’s leadership on this issue, are waiting to claim their pound of flesh.

    Nevertheless, as a nation that has acceded to the two degree target, in practical terms Australia cannot put forward a weak abatement target that is seriously out of kilter with the ambitions of other countries. Responsible Ministers such as Julie Bishop and Greg Hunt would be particularly strong on this issue and would point to the ambitious approach of other conservative governments such as those headed by David Cameron and Angela Merkel. Not only would the government be pilloried by other countries, including its allies and friends, but it also seems likely that the domestic reaction would be highly unfavourable.

    Pledges by other developed countries to date include:

    • The US, with a commitment to reduce emissions by 26 to 28 per cent below 2005 levels by 2025
    • The European Union, committing to reduce emissions by 40 per cent by 2030 relative to 1990 levels
    • Canada, proposing a 30 per cent reduction in emissions from 2005 levels by 2030
    • New Zealand, with a similar commitment to Canada.

    In this context it seems unlikely that Australia would be able to get away with a commitment below those of Canada and New Zealand, particularly since emissions reductions of this magnitude, while substantial, still fall well short in aggregate of the abatement required to limit global temperature rises to two degrees Celsius. As Ross Garnaut has suggested, a 30 per cent reduction by 2030 from 2005 levels would be at the bottom end of what Australia could “get away with”. Nevertheless, it may well be a reasonable initial position while providing some comfort to the Prime Minister that he can march bras en bras with his Canadian friend and fellow climate sceptic Stephen Harper. Also, in the context of insufficient ambition overall and the consequent pressure that will be applied to all parties to up the ante in Paris, from a diplomatic perspective it may not be a bad initial negotiating position.

    But the big problem for Tony Abbott will be in delineating the policies he will employ in meeting the target. Even a 30 per cent reduction from 2005 levels by 2030 would require significant policy intervention. Abbott has been very successful in the past in demonising almost every approach to emissions abatement by characterising it as a carbon tax or some other sneaky impost that will increase electricity prices and thereby destroy the world as we know it. For example, he was quick this week to attack Shorten’s suggestion that the renewable energy target could be increased (“we’ve got quite enough renewables”) by pointing to the significant increase in electricity prices that would be required.

    So what is left? Direct Action may have been acceptable in achieving a minor reduction in emissions at a time when electricity prices were increasing, and thus driving down demand, and energy efficiency was increasing rapidly mainly thanks to LED lighting. But it could never bring about a reduction in emissions on the scale being discussed here without a substantial increase in tax revenue to fund higher subsidies. It would be very difficult to argue that increasing income tax or the GST to pay polluters to reduce emissions would provide a better outcome for the average punter than taxing polluters’ emissions directly.

    One option would be for Australia to participate in an international emissions trading system (ETS) that would allow the purchase of emissions permits from overseas, often from developing countries. This option was taken to the 2007 election by the Howard government, of which Tony Abbott was a member. It also consistently featured in the modelling by Treasury of the Rudd and Gillard governments’ carbon reduction policies, which demonstrated that the economic cost of emissions reduction to the Australian community would be substantially reduced by this approach. By purchasing cheaper carbon abatement from overseas, this option would also enable some coal plant to be retained in Australia’s power generation network out almost to 2050 while at the same time we met challenging emissions reduction targets. All this would be balm, one might think, to Tony Abbott’s ears. But no; the Prime Minister has already ruled this option out on the grounds that an ETS is the equivalent of a carbon tax and hence a proscribed instrument under his ideology.

    There are, therefore, significant problems, largely of their own making, for the government both in putting forward a commitment for COP21 and then in designing the policies to deliver it. The opportunity for the ALP is clear. But now that Bill Shorten has initiated the debate about climate change policy and invited the Prime Minister to “bring it on”, where should he go from here?

    First of all, although he may reasonably criticise the government for a lack of ambition in its commitment and a failure in diplomacy in the process leading up to COP21, Shorten does not need to propose any abatement targets at this point in time. These are subject to negotiation at COP21 and it would be premature for an Opposition to intervene at this stage. Should Australia be regarded by the international community to be a “leaner” rather than a “lifter” during the Paris negotiations it may be appropriate for Shorten to indicate that he would consider a more testing target were the ALP to win government. He may also remind Abbott that a sustained and clever diplomatic effort in the lead up to Kyoto enabled the Howard government to obtain for Australia by far the most generous abatement targets for any significant developed country under that protocol. Australia’s minimalist, if not surly, diplomatic engagement in the lead up to COP21 may well make a repeat performance impossible.

    In this context it also needs to be remembered, however, that while it is in Australia’s interests for the world to agree to significant action to counter climate change and even for our delegation to punch above its weight in that discussion, there are no prizes for Australia in exceeding the commitments made by other countries. The impact on climate change from an excess of zeal on Australia’s part would be negligible while the costs to our industry in terms of carbon leakage could be significant.

    Secondly, Shorten should propose a policy framework for achieving substantial emissions reductions at least cost to the Australian economy. He has already taken a major step in that direction by endorsing an emissions trading system with the capacity to gain access to international abatement opportunities. But almost immediately Shorten then proposed a policy, fortunately at this stage only as an aspirational goal, in direct contradiction to his ETS, namely a 50 per cent renewable energy target by 2030. Such a target would override the least cost approach of the ETS, negate many of the benefits of buying emission permits on the international market and, according to Danny Price of Frontier Economics, have a major impact on electricity prices by requiring a carbon price of up to $200/tonne.

    Finally, this illustrates that one lesson Shorten can learn from Abbott is that relying on ideology is unlikely to be effective in determining the most efficient policy solutions. For example, in pursuing carbon abatement, what we need is the most economic lower emissions energy solutions that can be made available. These may be renewable, they may be lower emissions fossil fuel technologies or may even be nuclear. There is no need for religion here. Only the Greens believe that there is anything particularly wonderful about renewable energy and this belief is based not on science but ideology. Managing a grid with half of its generation being provided by interruptible sources would be extremely difficult. Of course it could be managed – but only by simultaneously investing in open cycle gas turbines (OCGT) to provide instant reliable power to the grid when the wind is not blowing and the sun isn’t shining. Overall, by virtually doubling the cost, this can be a very expensive solution and the emissions footprint of OCGT is not far short of coal.

    While the punters like renewable energy in the abstract, they clearly don’t like higher electricity prices. Rather than succumbing to simple populism, it would be worthwhile for the ALP to do the hard yards here, such as in working out ways to increase gas supplies so as to bring the price down and thinking about how to respond down the track to the South Australian Royal Commission into nuclear energy. In the latter case, a finding in favour of small modular reactors (think plug-in nuclear submarine power plants) would merit a more considered response than the knee jerk reaction that ideology is likely to dictate.

    Jon Stanford headed climate change policy while with the Department of Prime Minister and Cabinet in the 1990s and was chair of the CoAG taskforce that delivered national gas industry reform.

  • John Menadue. Our health system is sustainable.

    To justify an increase in the GST, Premier Baird has joined the long list of conservatives who keep telling us that our health system is unsustainable. Earlier the Treasurer, Ministers for Health and the Commission of Audit warned us in one way or another that the Australian health service is unsustainable, particularly with an ageing population.

    The fact is that it is sustainable. .

    We need to keep modernising Medicare but by almost any international comparison we have one of the best and most sustainable health services in the world. We need to keep our problems in perspective.

    The Commonwealth Fund publishes a regular research report on health systems in major countries. The Commonwealth Fund is a highly regarded private US foundation that compares major systems around the world to stimulate innovative policies and practices in the US and elsewhere.

    In its 2014 report ‘Mirror, mirror on the wall’ it compares the performance of healthcare systems in eleven major countries. The comparisons cover quality of care, access, efficiency, equity,‘healthy lives’ and health expenditures per capita.

    Its overall health ratings for these eleven countries were as follows:

    1. UK
    2. Switzerland
    3. Sweden
    4. Australia
    5. Germany and Netherlands (equal)
    6. .
    7. New Zealand and Norway(equal)
    8. .
    9. France
    10. Canada
    11. US

    On almost all the measures the UK with its National Health Service is a stand-out performer. . Grounded in primary care and with a single payer it has well and truly stood the test of time. The regular laggard in almost all these rankings is the US. It tells us a great deal about the failure of a health service based on multiple private insurance payers. Our private health insurance lobby is trying to take us down this disastrous US path.

    When one looks at the break-down of these rankings, the UK ranks at the top in quality of care, access, efficiency and equity. US ranks last in access, efficiency and equity. What is more, the UK system is the cheapest at $US3,405 per capita in 2011 compared with the US, the most expensive at $US8,508 per capita in that same year.

    As indicated, Australia stands at number four in overall rankings amongst the eleven countries. In particular areas we ranked as follows

    • In quality of care we ranked number 2.
    • In access, we are well down the list at number 8. This reflects in part our high level of co-payments or out of pocket costs. The Abbott Government plans will make this worse.
    • In efficiency, we rank number 4.
    • In equity we rank number 5, which reflects in part our failures in mental health, indigenous health and in remote healthcare.
    • In ‘healthy lives’ we rank number 4.
    • In health expenditure per capita in 2011 at $US3,800 we were the third lowest amongst the 11 countries.

    Another measure of our success of course is our high life expectancy.

    It is quite clear that by world standards we rank quite well. We are behind the UK, but far ahead of the US. . Medicare has served us well but is 40 years old without major review.

    But there are ways that we could improve our health services.

    • Mental health, indigenous health and remote healthcare are major shortcomings.
    • Our co-payments are confused and inequitable.
    • Subsidised private health insurance makes it harder for Medicare to control costs.

    There are many ways in which the efficiency of our system could be improved and costs better managed.

    • Can we afford the funding we commit to IVF and end of life services at the expense say of indigenous and mental health?
    • The split of commonwealth and state responsibilities adds to costs and hinders integration of hospital and non hospital care. We have in reality two stand-alone health systems, primary care and hospital care. There is little incentive for the Commonwealth to improve primary (GP) care in order to reduce pressure on expensive state run public hospitals. We need joint funding and planning of all health care that I have proposed for many years.
    • The remuneration of doctors, pathologists and radiologist through fee-for-service is a perverse incentive which encourages over-servicing and over-prescribing. It also hinders the treatment of long-term chronic sufferers.
    • The government subsidy to private health insurance adds $10 billion per annum to government costs benefits the wealthy and weakens Medicare.
    • Australian drugs cost at least $2b. Per annum more than similar drugs in NZ because of the clout of Medicines Australia in negotiating prices with the Australian government.
    • With its lobbying power, the Australian Pharmacy Guild protects pharmacists from competition.
    • Our health workforce is riddled with demarcations and restrictive work practices. Nurses are not properly encouraged and employed. Yet they hold the system together.
    • The Productivity Commission has drawn attention to great variations in productivity between public hospitals and between private hospitals.
    • There is no accountability in any meaningful way for what the health industry produces particularly in general practise. There is little effective peer review in private hospitals. Where are the service bench marks in patient outcomes, the use of preventive strategies, and integration of care or even waiting times?

    There is clearly a lot we can do to improve healthcare in Australia and better manage costs. But overall, we have a very good and sustainable health service which ranks well against comparable countries.

    Sorry if I keep repeating myself on health care but the myths about our unsustainable health care are recycled time and time again and seldom contested.

  • David Holmes. Tony Abbott, Rupert Murdoch and coal.

    As the latest State of the Climate report reaffirms 2014 to be “the hottest on record”, the NSW Liberal Party is pressing ahead with plans for a “Carnival of Coal” in August. The party’s upper house whip, Peter Phelps, has appealed to members to download a sticker for MP office doors in support of the upcoming carbon love-in. It says:

    I loved carbon before it was coal.

    The Liberal paleo-love for coal, which Tony Abbott has declared “good for humanity”, is at least a point of differentiation with Labor. Labor does not promote such slogans at all – even if, in Victoria, the Andrews Labor government is still issuing coal exploration licences.

    Both parties are capable of romancing the coal industry. But Liberal parties around the country have had much more success in convincing voters that either coal is more important than climate, or have decided that – with a population drip-fed on attention-deficit-consumerism and its reality television advertorials – their connection can be comfortably sublimated.

    Whatever its form, the love for coal in Australia is going to end badly, like all relationships based on fantasy. To slightly misquote a 19th-century philosopher: the demand to give up the illusion that coal is good for humanity is the demand to give up a condition which needs such an illusion.

    The condition I am referring to is the way our half-formed social democracy has become so captive to the ugliest form of corporate-servicing statism. It is not that the state has completely merged with corporate interests. Australia still has incredibly strong and progressive civic institutions such as its public broadcaster, its schools, universities, bureaus, museums and aspects of the legal system that do not serve capital’s interests.

    It is that our governments have become servile – not to voters, but to a conjunction of multinational mining, energy and media interests, who have as their dating agencies the far-right silos of the capitalist class, such as the Institute for Public Affairs, which do not disclose their corporate donors.

    Many believe, including perhaps Abbott himself, that he retains his power base at the pleasure of an ageing octogenarian who is well known for obtaining amusement from playing the Freudian Fort-Da game with entire democracies – the power to give and take away power – as long as he has also received something in return.

    The same newspaper group that managed to squeeze a “toxic” “carbon tax” through the consciousness of millions of tabloid readers by means of slogan and cartoon did so when it was threatened by the Australian Tax Office (ATO) with having to repay almost A$900 million it had received on the eve of the last federal election.

    The infamous “Kick this Mob Out” election blitzkrieg on Labor that started on August 5, 2013, was launched precisely at decision time for the ATO to appeal the Federal Court ruling on the windfall payout News Corp reportedly received by titanic-scale profit-shifting.

    Global profit-shifting activities are routine for multinational empires such as Murdoch’s. But, not all have the ability to pressure governments at election times. And it is clear that at least the two major political parties believe they need a media mogul to gain office.

    But political parties also need big donors. The largest to the Coalition are the energy and mining companies, who receive the greatest benefits in corporate welfare.

    The examples are quite grotesque. Fuel rebate subsidies that mining companies receive run at A$2.2 billion per year. Meanwhile, the Clean Energy Finance Corporation (CEFC) is asked to cancel its A$2.1 billion in subsidies directed exclusively to windfarms – which have the ability to hurt coal.

    Before it moved to neuter the CEFC, the Coalition has proposed what has been dubbed the ”Dirty Energy Finance Corporation” for Northern Australia. It will bewilderingly make up to A$5 billion available to subsidise infrastructure projects in northern Australia and Queensland in particular.

    A source has suggested to me that the fund is actually an elaborate financial smokescreen to helping out the coal mines in the Galilee basin – particularly the Adani Enterprises mine, but also the GVK Alpha Coalmine. GVK Alpha, the largest coal mine in Australia, was approved 2 months after the Coalition assumed power, is part-owned by Gina Rinehart – and also stands to benefit from billions in taxpayer-funded subsidies. Ms Rhinehart attracted satire in 2011 for flying liberal MPs to India to attend the wedding of the granddaughter of mine co-owner GV Krishna.

    With the coal price diving worldwide, the mines – are unlikely to be economically viable without a huge subsidy. They might also surpass the viability threshold if they were able to sell the coal to a nearby newly proposed coal-fired power station that has been endorsed by Abbott personally.

    However, competition from renewable energy company Windlab for an adjacent 1.2 gigawatt combined solar and wind farm would be an enormous threat to Alpha and Adani. It is pledging to undercut the price of the coal station by $30 per megawatt hour.

    Time for my readers to draw a diagram to figure out which proposal will get funded. A diagram might picture the coincidence that the CEFC was directed to cease subsidising windfarms – for which it actually returns a profit to Australian taxpayers – just as it was realised the Windlab proposal posed a threat to the coal-fired power station.

    It is worth considering that, according to Bill McKibben from 350.org, the Galilee basin alone has so much coal that if it is all burnt, it would take the world 30% of the way to getting to 2 degrees. You couldn’t invent a more tragic case study on how destructive the Abbott government is on climate.

    But then there is Direct Action. This is a government marketing exercise that disguises a further A$2.5 billion giveaway to corporate Australia that works with targets so small as to guarantee Australia’s status as having fallen off the climate action map.

    Detailed analysis shows that Direct Action won’t even meet its miniscule targets. It has led to a demonstrable increase in Australias Co2 emissions since the carbon tax was repealed, according to the government’s own figures.

    Given the Abbott government’s ongoing love affair with coal, it is little wonder that Australia was publicly scrutinised at climate talks held in Bonn last month about the impact of its domestic policies. The UN talks, attended by representatives of 190 countries, were an important stepping stone to the much-anticipated Paris summit to be held in December.

    While the Coalition’s reckless disregard for addressing climate change may not get scrutiny by the tabloid media in Australia, it certainly will in Paris.

    David Holmes is Senior Lecturer, Communications and Media Studies at Monash University.  This article was first published in The Conversation on 18 July 2015.

  • Shiro Armstrong. A risky Trans-Pacific Partnership deal.

    The largest hurdle for the 12-member Trans-Pacific Partnership (TPP) agreement — the US president’s ability to get Trade Promotion Authority, or fast track — has been cleared. Many people think that the TPP can be wrapped up in a few months.

    There are still difficult issues to resolve, but they are trivial compared to the ability to get a straight up-or-down vote in the US Congress, without which the deal would be a non-starter. The remaining issues can easily be horse-traded at the political level and compromises can be made in order to complete the deal.

    The temptation will be strong to rush across the finish line for what will be a major political trophy — but the risk is that the TPP will be an agreement that does more harm than good for economic and political relations in the Asia Pacific.

    A completed TPP will be accompanied by grandiose statements about the deal covering 60 per cent of global GDP and half the world’s trade. This sounds much less impressive when you compare it to groupings like APEC, which includes China and Indonesia, that have even higher global GDP and trade coverage. But the numbers like these don’t tell us anything about what kind of deal it will be or what gains and costs it will bring. The most optimistic estimates suggest trivial increases in GDP.

    The TPP aims to write rules for international commerce in the 21st century and includes a large number of chapters that go beyond 20th century trade issues.

    There are three major flaws, though, that will likely overwhelm any positives the deal may deliver.

    The first is that the core of the new rules involves aspects that further private interests (read: large multinationals) at the expense of general welfare in member countries. The most egregious of these is stronger intellectual property (IP) rights protections, which are anti-development and simply transfer wealth to US pharmaceutical companies and Hollywood. Stronger intellectual property protections stymy innovation. This means a net reduction in trade and a loss in global welfare. If ! countries like Australia think stronger IP protections are in their national interest, they do not need an international treaty to introduce them.

    The second flaw is who the TPP leaves out. China, India and Indonesia, among others, are not party to the TPP nor will they be able to join anytime soon. The hurdles to membership are unreasonably high for non-advanced countries, who will pay a cost from being left out with strict rules designed to divert trade from them.

    The third major flaw is that even in the win-win trade enhancing areas, the TPP will either entrench protection in some areas — chiefly agriculture — or, where it succeeds in liberalising, will do so at the expense of non-members. Inefficient and unproductive sectors are a drag on economies, and liberalising them would produce real gains. But many countries in the TPP are bringing an overly defensive stance — think Japan and its rice and other ‘sacred’ produce — or are starting with that sector off the negotiating table altogether, as is the case with US sugar.

    More egregiously, the TPP will complicate trade and impose serious costs on non-members.

    Vietnam is a case in point. The country is paying a high price for entry by adopting standards and rules inappropriate to its stage of development, but it will benefit from increased market access in the United States for its garments exports. Yet Vietnamese exporters will only enjoy that preferential treatment if it procures raw materials from another TPP member instead of from cheaper, more efficient suppliers like China. These and similar provisions that derive from the way TPP has been negotiated bilaterally make it a particularly complex and costly agreement. The trade diversion that will result imposes economic costs on members and non-members alike — and some of the latter are even poorer than Vietnam.

    To make matters worse, the trade- and welfare-reducing IP rights provisions are being traded off against and bundled with market access provisions. And some provisions could be disruptive and costly when onerous standards, institutions and reforms — to state-owned enterprises, for example — are imposed and countries are expected to leapfrog stages of development.

    As TPP members sprint towards the finish line, they will need to introduce measures to enhance the positives of the agreement — the genuine trade and investment liberalisation that occurs — and over time minimise the negatives. A first step is to limit the scope and reach of the welfare reducing IP protections.

    The agreement needs to be expansionary on the win-win trade and investment liberalisation aspects. That involves limiting the complicated preferential deals within the TPP and making it easy to expand membership. That is no easy task given the design of the agreement is to punish non-members into compliance on terms set by the advanced economies. A more productive way forward would be to help build capacity in lower income countries so that they can reach those standards. That is how to further productive economic interdependence and win friends.

    If progress can be made in reform and liberalisation unilaterally or through the help of other regional initiatives — and if the WTO and multilateral system can be strengthened — then the benefits of the TPP can be accentuated and some of its more pernicious costs averted.

    Shiro Armstrong is co-director of the Australia-Japan Research Centre and co-Editor of East Asia Forum at the Australian National University.

    This article was first posted on the East Asia Forum website on 26 July 2015.

     

  • John Dwyer. An increase in the GST or efficiency gains to fund our hospitals. Which would you prefer?

    Premier Baird has announced that he will require a 15% GST to fund our public hospital system in the coming years. It is certainly true that with present policies, revenue won’t match the cost of the anticipated future demand for hospital care. Hospital admissions climb steadily each year (average increase 3%) and the additional patients tend to be sicker and older. Our current health system puts pressure on our State and Territory governments to constantly find more beds and provide new hospital stock. Without financial restructuring his government will not be able to provide us with the quality service we need and expect. The better targeted suggestion from Victoria that we increase the Medicare levy won’t provide the money needed. The current levy only covers about 50% of the cost of Medicare.

    However financial restructuring can involve two, not necessarily mutually exclusive tactics. In the policy vacuum that has absorbed Australian politics like a black hole, the easy tactic is for government to ask Australians for more money. A far better approach would see us at last addressing the structural inefficiencies in our health system that would provide savings that at least for health care, would make this huge increase in a regressive tax unnecessary.

    Premier Baird’s problem is that the structural levers that need to be pulled to improve the health of the nation and its budget are in Canberra. It’s the Federal government that funds the majority of our primary (GP) and community care and it’s the inability of both, as currently structured, to reduce the demand for hospital care that so frustrates State and Territory governments. Any review of the benefits or otherwise of our federal system will reveal that it has created rather than solved many problems for cost-effective, equitable delivery of health care.

    Our taxpayer funded public health system spends more than 55 billion dollars a year on hospital care but only 19 billion dollars a year on primary care. However, wearing federal blinkers, the federal government looks at Medicare as if it was a stand-alone health system and State and Territory governments are forced to focus on hospital care. Health economics 101 and much reliable international evidence tells us that if we spend more money on a structurally reformed primary care system we would save far more than these reforms would cost by significantly reducing the demand for hospital services. This is the “win, win” path we should be taking, not an increase in the GST.

    Premier Baird and his fellow Premiers are looking at escalating fiscal problems for hospital funding over the next ten years. What we need is to take a reform journey through that decade that would see us still spending about 10% of our GDP on health but having a healthier population requiring far fewer trips to hospital. At least eight OECD countries are well advanced on that journey and many have evidence of reductions in hospital admission rates of 20-35%.

    Available evidence tells us that the most important change our health system needs would see us introduce a model of primary care known as “Integrated Primary Care”. This model places an emphasis on prevention of disease (only 2% of our current health budget is spent on prevention), early detection of changes that could develop into chronic conditions if not treated in time, in house “team management” of all the health needs of those who have an established illness and outreach services from the practice into the community to treat individuals who otherwise might need hospital care. Research reveals that more than 600,000 admissions to our public hospitals each year could have been avoided with an appropriate community intervention. Around the world the model is increasingly referred to as a “Medical Home”. One enrols in this entity wherein multidisciplinary teams of health professionals can provide the above services. International experience shows us that patients and health professionals enthusiastically embrace the model.

    As our federation is reviewed and our health care costs are wrestled with, consider the following inefficiencies that should also be addressed before considering an increase in the GST. We have nine departments of health for 23 million people. Duplication costs us 2-3 billion dollars a year. We spend over 6 billion dollars a year subsidising private health insurance using the false argument that such spending will see private hospital care reducing the demand for public hospital services. It doesn’t. The money would be much better spent on improving primary care and reducing admission to both public and private hospitals. My profession is steadily tackling the very unprofessional expenditure of up to 10 billion dollars a year on low value or no value procedures and tests. Australians spend 3 billion dollars a year buying vitamins and “supplements”, not needed by the vast majority of us, as they are led to believe you can neutralise an unhealthy lifestyle with something out of a bottle.

    Tackling these problems as we progress along our health reform journey will provide us with a health system for the future that is second to none, equitable and cost effective. Even if we could afford a massive increase in the GST it would be money poorly spent on a health system calling out for reform. Now where oh where is the political leadership to take us on this productive journey?

     

    John Dwyer is Emeritus Professor of Medicine at UNSW.

  • Bob Kinnaird. More government dishonesty on China FTA

    Now that Federal Labor Leader Bill Shorten has publicly stated his opposition to the China FTA labour mobility provisions, the Coalition is ramping up its attack on union and political critics of the deal.

    Trade Minister Robb lead the charge this week, with allegations of union ‘falsehoods’ and a ‘racist scare campaign’ over the China FTA that do not stack up (‘Don’t give credence to union scare campaign’, AFR, Letters, 21 July 2015).

    The main alleged union ‘falsehood’ is ‘that Chinese companies will be allowed to bring in their own workforces at the expense of Australian jobs’.

    The fact is that Chinese companies will be able to do exactly this under the FTA package that Mr Robb negotiated. Under the terms of the China FTA, any China-based enterprise with ‘a contract for the supply of a service within Australia and which does not have a commercial presence within Australia’ can bring in an unlimited number of its own Chinese employees as skilled workers on non-concessional 457 visas, without ‘labour market testing or any economic needs test’ (ChAFTA, Chapter 10, Annexe 10-A, Clause 10(a)).

    This includes Chinese companies with contracts on ‘significant infrastructure projects’ of $150 million or more under the Investment Facilitation Arrangement (IFAs) in the China FTA package.

    This means a China-based enterprise contracted to perform say all the engineering and design work on a project in Australia, or all the welding work, can bring in unlimited numbers of Chinese engineers or welders to Australia on non-concessional 457 visas, with no obligation to even look for skilled Australian engineers or welders, let alone prove that none are available.

    Chinese companies with these contracts can access unlimited numbers of 457 visas for their Chinese employees in all ‘skilled’ occupations – meaning all 651 occupations currently on the non-concessional 457-eligible list (known as the Consolidated Sponsored Occupation List or CSOL), and any added to the list over time. ‘Non-concessional’ means the Chinese workers must meet all the standard minimum requirements for a 457 visa, including minimum English language skills (which the Coalition has reduced), qualifications and salary.

    The FTA also grants the exact same 457 visa privileges to China-based companies transferring their staff to Australia as ‘intra-corporate transferees’ moving ‘to fill a position in the branch, subsidiary or affiliate of the enterprise in Australia’. These include Chinese and other foreign nationals ‘with advanced trade, technical or professional skills’, who can be moved to Australia in unlimited numbers with no 457 LMT, for any reason including to perform work associated with ‘significant infrastructure projects’.

    Mr Robb’s China FTA also permits unlimited numbers of Chinese workers as ‘installers and servicers’ of machinery and equipment where installation or servicing by the supplying Chinese company ‘is a condition of purchase of the machinery or equipment’. These Chinese workers enter on shorter-term 400 visas also with no labour market testing, like the non-concessional Chinese 457 visa workers mentioned above. Chinese project investors in Australia will preference suppliers of cheaper Chinese machinery and equipment, so we should expect many Chinese 400 visa workers under the FTA.

    Coalition Ministers say nothing about these outrageous FTA concessions but instead deflect attention solely to the Memorandum of Understanding on Investment Facilitation Arrangement (IFAs), alongside the formal China FTA treaty.

    Chinese companies can also bring in their own workforces of concessional 457 visa workers under these IFAs. ‘Concessional’ 457 visas mean Chinese and other foreign workers in semi-skilled occupations, and those in skilled occupations who do not meet the standard minimum requirements for a 457 visa, such as minimum English language skills. The government tries to conceal the fact these are concessional arrangements for lower-skill workers, with Ministers like Mr Robb saying IFAs are for ‘skilled’ overseas workers.

    The arrangements for concessional 457 visa workers under IFAs are different to those for the non-concessional 457 workers covered by the FTA itself. The government has surrounded these IFAs with the fog of obfuscation since they were first announced back in November 2014 and has done little in nine months to clear that fog and persuade Australians that these are in the national interest.

    Unlike the non-concessional 457 visas for Chinese workers, there will be negotiated limits on the numbers of concessional 457 visa workers on IFA projects. The number of concessional 457 visa workers and ‘guaranteed occupations’ on an IFA project will be set in an umbrella IFA project agreement, from which individual direct employers on the project will then draw down under concessional 457 ‘labour agreements’. The MOU expressly rules out any requirement for labour market testing for a project company ‘to enter into an IFA’, which will be valid for at least 4 years.

    It now seems that the total number of concessional 457 visas approved for an IFA project will be determined based on consultants reports and similar speculative data as to projected future ‘shortages’ of Australian workers in up to 4 years time, provided to the Immigration Department (DIBP) by the project owner. On this basis, the IFA project owner will get approval for say 1,000 concessional 457 visa workers over the life of the project. IFA project employers can then ‘bid’ for a share of the 1,000 concessional 457 workers.

    To access these 457 workers, there is no legal obligation for these IFA project employers to undertake 457 labour market testing (LMT) as legislated in the Migration Act 1958. The legislated LMT obligation does not apply to sponsors of concessional 457 visa workers under labour agreements, only to sponsors of non-concessional 457 visa workers. Labor must surely regret this oversight in its 2013 legislative amendments on 457 LMT which the Coalition will not remedy. Its policy is the abolition of legislated 457 LMT entirely.

    The MOU says that direct employers on IFA projects may be required to undertake some form of labour market testing (LMT) before accessing concessional 457 visa workers. The MOU also states that ‘where labour market testing is required, employers may satisfy this requirement by demonstrating that they have first tested the Australian labour market and not found sufficient suitable workers. DIBP will make publicly available information on how any labour market testing requirements could be met’ (MOU on IFA, clause 8 and footnote 6 – emphasis added).

    On 22 July, Assistant Immigration Minister Cash said DIBP Project Agreement guidelines for companies seeking to recruit overseas workers will give effect to IFAs. These guidelines, dated May 2015 but strangely not mentioned in DFAT’s ‘Myth-busting’ Fact Sheet on the FTA issued in mid-July, state that employers: “must provide a comprehensive written statement of the labour market need for the requested occupation(s), demonstrating ongoing shortages …. as well as evidence that you have made significant efforts to recruit workers from the Australian labour market within the previous six months.” Furthermore: “The department will only enter into a project labour agreement where it has been satisfied that Australians have been provided first opportunity for jobs.”

    This is a much lower standard than the legislated 457 LMT obligation where sponsors must prove to DIBP that no suitably qualified Australian is available to do the job, at the time of each 457 visa nomination, where the LMT condition applies. Like most obligations and provisions in concessional 457 labour agreements, it also is embedded only in Departmental ‘guidelines’ and policy, not legislation or regulations.

    The Minister’s attempt to assure that these ‘guidelines’ offer adequate protection for Australian workers also conveniently ignores the fact that these applications for concessional 457 visa workers by individual IFA project employers will be made in a context where the project owner has already secured approval for large numbers of these workers, in the umbrella IFA agreement.

    This places undue and unfair pressure on DIBP officers to approve 457 visa applications from individual IFA employers, especially operating in a high-profile visa program area with no legislative framework and far too much room for Ministerial and political intervention.

    The Coalition government will not admit that these IFA arrangements are unprecedented. Australia has never before in an FTA package deal permitted concessional 457 visas for even skilled workers, let alone for semi-skilled workers (like concreters, scaffolders, truck drivers, even office workers). It is also unprecedented for any Australian government to allow foreign companies access to concessional 457 visa workers under labour agreements. Until the China FTA package, only Australian businesses could access these concessional 457 visa workers because these arrangements are too high risk for abuse and exploitation.

    Time for government honesty about the China FTA labour mobility package.

    Bob Kinnaird is Research Associate with The Australian Population Research Institute and was National Research Director CFMEU National Office 2009-14.

     

     

     

  • John Menadue. What a dreadful week.

    Last week an important public debate on key issues facing Australia was sabotaged by Tony Abbott, Joe Hockey and News Corp. The old scare campaigns were back again. Bill Shorten’s timidity did not help. Paul Keating commented ‘We have a political culture that has the ambition of a gnat’. He is right.

    Instead of a sensible discussion on climate change and carbon pollution, News Corp, via The Australian and the Daily Telegraph picked up a draft options paper on climate change which was being prepared for the ALP Federal Conference. This options paper suggested that the ALP is considering an emissions trading scheme. The paper apparently did not propose a carbon tax and it should be quite clear that an emissions trading scheme is not the same thing as a carbon tax. But that didn’t concern the Daily Telegraph which attempted to derail any sensible public discussion by depicting Bill Shorten as a zombie crawling from the carbon tax grave.

    It is worth noting that The Australian, together with the Australian Financial Review, is sponsoring a summit next month on policy reform. But what hypocrisy it is for News Corp to be sponsoring a summit whilst it is a major contributor to debasing public debate on climate change in Australia as it does also consistently in the US and the UK.

    Of course Tony Abbott couldn’t help joining in the ‘debate’ on an emissions trading scheme and a carbon tax when News Corp, as is the usual practice, gave him the lead in he wanted. We saw again the one-liners. He said ‘We’ve always said … that if Labor came back the boats would be back, the mining tax would be back and now we find that if Labor came back the carbon tax would be back’. He didn’t rerun his old one-liners on Labor increasing the deficit and the debt because his own policies have done just that.

    It was John Howard who first proposed an emissions trading scheme in 2007. Malcolm Turnbull supported Kevin Rudd’s carbon pollution reduction scheme in 2009 and crossed the floor to do so. Almost every reputable economist believes that a market mechanism like an emissions trading scheme is the best way to reduce carbon pollution. It is the lowest cost and most efficient way and one would think that it would appeal to a government that espouses a belief in market mechanisms. Neither News Corp nor Tony Abbott can help themselves in their politics of demolition on climate change. Only the previous week Tony Abbott had stepped up his attacks on renewable energy.

    The public wants something better in public discussion on climate change. The Business Council of Australia, the Australian Industry Group, the Australian Conservation Foundation and the Australian Council of Social Services have established an Australian Climate Round Table. They called for a ‘civil and constructive’ discussion on the subject. Clearly Tony Abbott and News Corp are not interested in such a discussion.

    It is ironic that last week The Australian and Australian Financial Review also announced that they would be sponsoring a summit ‘to fix Australia’ The agenda includes ‘reforms to the federal and state taxation systems that taken as a whole are both efficient and fair’. Yet Neil Chenoweth reported in the AFR on May11 this year the ‘the Australian Tax Office has only one company in its highest risk category for tax avoidance- Rupert Murdoch’s News Corporation’. On April 9 this year Michael West in the Sydney Morning Herald wrote ‘Rupert Murdoch’s US empire siphons $4.5b from Australian business virtually tax free’. That may be efficient for News Corp but it does not sound fair for other taxpayers.

    Last week Joe Hockey told us once again that we needed tax reform. But he has already ruled out key reform measures like changing superannuation deductions and payouts. He has also ruled out negative gearing that even the Reserve Bank now says we must consider. The ALP has made some timid proposals in both these areas, but instead of treating them as a useful contribution to a public debate on tax reform, both Tony Abbott and Joe Hockey seized on it an opportunity for attack and ruled out reform in both these areas.

    Joe Hockey said again last week that we needed to reform the GST, but then ruled it out unless all the states and territories agreed. Surely national leadership on tax reform must come from the Australian Treasurer and not run for cover as soon as the states disagree. Joe Hockey shirked his responsibility.

    The only tax change that is now in prospect is bracket-creep which is increasing government revenue.

    During the week the Business Council of Australia president, Catherine Livingstone said

    ‘Within hours of the Treasurer outlining a compelling case for the need for fundamental tax reform and balancing of the tax mix, both major parties began ruling out key elements of sensible tax reform, including changes in the GST. Our political representatives are elected and paid by the community to implement policies that will best serve the country. Their leadership responsibility is to ensure that there is a constructive, well informed debate, leading to implementable outcomes; it is not to undermine the debate in the cause of party-political posturing. Leadership requires being open and honest with the community about the challenges we are facing. It requires the energy and conviction to take on difficult and complex reform imperatives.’

    Catherine Livingstone spelled out very clearly that we have had a very bad week.

    See link to the policy articles that Mike Keating and I have edited on the need for policy reform in Australia. https://publish.pearlsandirritations.com/blog/?p=3719.

    As Ken Henry said in the foreword to the series

    ‘I can’t recall a poorer quality of public debate on almost any issues, that we have had in recent times in Australia.’

    Perhaps it is always darkest before the dawn!

  • Peter Blackrock. Germany in control.

    What is happening in the European Union and Eurozone? Clearly, there is a seismic shift underway. Here is one interpretation of what is happening.

    The key driving force behind the shift is the German Finance Minister, Wolfgang Schaeuble. He is the number two in the right-wing Christian Democratic Union, behind Chancellor Angela Merkel, although many say he really calls the shots. He is 72.  He’s a nationalist. He is a fiscal conservative. He doesn’t believe Germans should keep paying for the sins of their fathers by prostrating themselves before the European Ideal. He wants to leave behind a legacy.  Time is short.  He must move fast.

    His plan is to winnow out the dead-beat nations in the Eurozone (e.g. Greece) and create a Northern European Co-prosperity Sphere with close political integration and one fiscal czar. This will be a taut and terrific team under the control of a German coach and German captain.

    Indeed, the main reason why Germany refuses to give Greece (or other struggling Euro-nations) serious debt relief is because debt gives Germany tremendous political control.  It can squeeze out any nation it doesn’t want on the team (e.g. Greece) and force other states to agree to greater political integration (under the German coach and captain).

    In the recent negotiations over Greece’s debt, Schaeuble made it very clear that he wanted Greece to exit from the Eurozone. He was not bluffing or posturing. Indeed, he must be very surprised that the Greek Government (full of lefty types who believe much more strongly in Europe than Schaeuble does) were so desperate to accept the Carthaginian Peace on the table.

    However, Schaeuble will not be denied. He knows that, if he keeps squeezing, Grexit is inevitable, sooner rather than later. Then Germany will move on to expel any other weaklings in the Eurozone. Then those nations will be off the Eurozone’s books and there will be no more bail-outs or whining about diktats from Brussels.

    The French and Italians, of course, are desperate to join the first team that Schaeuble is building. That’s why, in the last few days, the French President, Francois Hollande, has started talking about greater political integration in Europe.  He can see the writing on the wall and wants to look like he led the charge to closer integration rather followed it.

    The United Kingdom is a separate case. It won’t be on the new team because it has an unruly democracy and isn’t a team player. It will soon drop out of the European Union all together.

    Greece should accept it will never be invited to join the first team and accept its inevitable demotion to the second division.  However, if it plays smart (and uses a pegged currency to maintain discipline) it might do rather well, eventually.

    Thus ironically the Eurozone, which was originally designed to control Germany, has become an instrument of Germany control.

     

     

     

  • Bruce Duncan. Pope Francis calls for a global economy with a conscience

    In his July trip to Ecuador, Bolivia and Paraguay, some of the poorest countries in Latin America, Pope Francis has voiced the anguish and concerns of millions of people struggling to rise out of severe poverty and marginalisation, yet are “exploited like slaves”.

    Speaking to a crowd of two million people in Santa Cruz on 9 July, Francis attacked a mentality that “has room only for a select few, while it discards all those who are ‘unproductive’, unsuitable or unworthy, since clearly those people don’t ‘add up’.”

    It is a world Francis knows well from his own extensive personal experience in Argentina but also from his role as one of the key figures coordinating the ten-yearly meeting of the bishops of Latin America at Aparecida in Brazil in 2007. Not only did he help Pope Benedict prepare his speeches to that conference, but as then Cardinal Bergoglio, Francis supervised the writing of the 160-page final document, reaffirming the role of the Church in confronting poverty and injustice as an essential part of its mission. This document is a forerunner for Pope Francis’s major statements and policies, including the new encyclical, Laudato Si’: on care for our common home.

    A high point of his visit to Bolivia was his hour-long speech to the two thousand delegates to the Second World meeting of Popular Movements in Santa Cruz on 9 July, when he demanded “real change, structural change” to reform “intolerable” conditions for farm-workers, labourers, communities and the earth itself.  He warned that time “seems to be running out” to save the planet from “perhaps irreversible harm” according to the scientific consensus. “Do we not realise that something is wrong in a world where there are so many farm-workers without land, so many families without a home, so many labourers without rights, so many persons whose dignity is not respected?”

    He condemned the “unfettered pursuit of money” as “the dung of the devil”. When “capital becomes an idol” and “greed for money presides over the entire socioeconomic system”, they ruin society and put “at risk our common home”.

    Francis said he had no “recipe” for a social program or a monopoly on truth, but everyone, governments, popular movements and other social forces had to find a way forward together.

    First he insisted on the moral principle that the economy be at the service of peoples, not people at the service of money. “Let us say NO to an economy of exclusion and inequality, where money rules, rather than service. That economy kills. That economy excludes. That economy destroys Mother Earth.”

    It was not enough to offer a “decent sustenance”, but people needed rights to land, lodging and labour, he said, along with access to education, health care, technologies, art and cultural activities, sports and recreation. “A just economy must create the conditions for everyone to be able to enjoy a childhood without want, to develop their talents when young, to work with full rights” and enjoy a dignified retirement. He insisted this was not utopian thinking, but was possible and ‘an extremely realistic prospect”.

    “Working for a just distribution of the fruits of the earth and human labor is not mere philanthropy. It is a moral obligation. For Christians, the responsibility is even greater: it is a commandment.” He urged the popular movements to strive for “the common good to be achieved in a full and participatory democracy”.

    Secondly, he called for peace and justice internationally, and attacked what he called the “new colonialism”. “At times it appears as the anonymous influence of mammon: corporations, loan agencies, certain ‘free trade’ treaties, and the imposition of measures of ‘austerity’ which always tighten the belt of workers and the poor.” He criticised monopolistic media that “impose alienating forms of consumerism” as “ideological colonialism”.

    To a roar of approval from the crowd, Francis also said that “many sins were committed against the native peoples of America in the name of God.” He called on Catholics to beg forgiveness for these past crimes, and to commit themselves to supporting the struggles of the indigenous peoples of Latin America.

    Thirdly, he lamented that “Our common home is being pillaged, laid waste and harmed with impunity.”  “Cowardice in defending” our common home “is a grave sin.” He said they cannot allow certain global interests “to take over, to dominate states and international organisations, and to continue destroying creation.” “I ask you, in the name of God, to defend Mother Earth.”

    Many commentators have been critical of Pope Francis for these views, and the question is how will he manage when he arrives in New York to address the US Congress on 24 September and the United Nations General Assembly. On the flight back from Latin America, Francis said he would study what his critics had been saying to see what he could learn.

    He will certainly not resile from his call for global responsibility to address the threat of ‘catastrophic’ global warming, as well as urging a revolution of conscience about our moral obligations to the millions of impoverished and excluded people. He will not reject capitalism in principle, since he knows there are many forms of capitalism, some with strong social and communitarian features.

    Nor is the Pope opposed to a type of economic growth needed to lift people out of hunger and poverty, as long as this is done equitably, encourages more modest lifestyles and does not damage the environment for future generations.

    But he is strongly opposed to the neoliberal versions of capitalism, the dominance of financial capital, and the belief that free markets of themselves will resolve most problems of distribution and poverty.

    No one familiar with Catholic social teaching, going back to Pope Leo XIII’s social encyclical On the Condition of the Working Class (Rerum Novarum) of 1891, should be surprised at this. The Church has long taught that the earth is given by God for everyone; the right to private property is not absolute but conditional on benefiting the common good, by maintaining productivity in goods and services for the benefit of all. Since Leo, the Church has consistently urged that property be distributed as widely as possible, so everyone had a share sufficient to provide for their family and for security against sickness and old age.

    The neoliberal ideology, on the other hand, exalts the rights of wealthy individuals over and against the common good, and propagates the extreme inequality that has left millions destitute. Francis is calling for worldwide resistance against this ideology, and for reforms to economic systems and business practice to ensure far more equitable distribution of wealth and opportunity. He will undoubtedly appeal for business leaders and governments to help refashion the global economy so that everyone has a place at the table. He is highlighting the moral imperative to build a more just global economy, an economy with a conscience.

    Bruce Duncan is a Redemptorist priest who lectures in social ethics at Yarra Theological Union within Melbourne’s University of Divinity. He is one of the founders of the ecumenical advocacy network, Social Policy Connections.

  • Miriam Lyons. On inequality of opportunity

    The myth of meritocracy is today’s version of the divine right of kings, and it is playing much the same political function. Call it the divine right of King’s School alumni.

    Another week, another report on the growing gap between rich and poor. The latest, from ACOSS, reminds us that the top 10% of households has been racing ahead of the rest, with the result that almost half of Australia’s wealth is now in their hands.[1] Housing wealth is particularly skewed, a finding unlikely to surprise any first-time buyer who has tried to find a house in Sydney or Melbourne without bankrupting themselves. If Charles Dickens were to reincarnate in Australia, he’d probably make Ebenezer Scrooge a small-time property magnate from Mosman or Toorak, with a penchant for penning angry letters to The Australian in defence of negative gearing.

    The Coalition has made its position on this situation quite clear. Hockey’s latest advice[2] to those locked out of the housing market – “get a good job that pays good money” – is only the latest in a string of pearlers. It follows the same logic as last year’s helpful explanation of how he expected out-of-work young people to survive without an income: “I would expect you’d be in a job”.[3]

    Welcome to the world of lifters and leaners, where the haves and have-nots are all equally deserving of their fate. In this world it is pointless to mention that there are five people out of work[4] for every available vacancy[5]: when one of them does find a job they are to be congratulated for ‘lifting’ and the remaining four condemned for ‘leaning’.

    What does it mean when Hockey and others say that “governments must pursue equality of opportunity, not equality of outcome”[6] while vigorously pursuing greater inequality on both fronts? Last year NATSEM modelling[7] showed that the federal budget would significantly worsen income inequality, with the disposable income of the bottom fifth of households down 6.6% (for couples with kids) or 10.8% (for single parents) by 2017/18, while the top fifth would barely be touched.

    But the government backed down[8] this year right? Ahem. As of this year’s budget, NATSEM’s modelling[9] finds that Coalition policies would hit the disposable income of the bottom fifth of households by…wait for it… 7.1% (for couples with kids) or 8% (for single parents) by 2018/19, while the top fifth will still be pretty much unscathed. Our political conversation is so stunted[10] that a slight slowdown in the rate at which we’re screwing over single parents has been welcomed as progress.

    In this context, the real appeal of equality of opportunity as an idea lies not in its implementation but the aura of moral legitimacy it confers upon inequality of outcomes. As Bill Garner put it in his response[11] to the lifters and leaners speech, it is “the version of equality you claim to believe in when you do not believe in equality at all.”

    As a thought experiment, imagine the likely response of the Coalition (or most other parties for that matter) to the following proposals:
    *100% inheritance taxes (any leaner can be lucky enough to be born to rich parents – unequally distributed windfalls are a clear example of unequal opportunity)
    *Mandating anonymous shortlisting of job applications (one study found that candidates with a Middle Eastern name, for example, have to submit 64% more applications to get the same number of interviews as candidates with an ‘Anglo’ name,[12] while another found that a female fellowship applicant had to be 2.5 times more productive than a male applicant to be deemed equally competent.)[13]
    *Switching to 100% needs-based schools funding, with punitively high luxury taxes on fee-charging schools (surely equality of access to education from birth is ground zero for equality of opportunity?)

    Perhaps Milton and Rose Friedman had policies such as these in mind when they wrote “No arbitrary obstacles should prevent people from achieving those positions for which their talents fit them and which their values lead them to seek. Not birth, nationality, colour, religion, sex, nor any other irrelevant characteristic should determine the opportunities that are open to a person…”[14]

    If we genuinely believe that every human has equal worth at birth, then paying lip-service to social mobility is not enough. There is more than enough evidence to show that we live in a decidedly unmeritocratic world. In fact, this evidence is so strong that it justifies a shift in the burden of moral proof. Rather than assuming that an unequal world is fair unless proven otherwise, let us assume that an unequal world is unfair unless proven otherwise.

    Miriam Lyons is the former Executive Director of the Centre for Policy Development. With Ian McAuley, she has just co-authored ‘Governomics’ which has been published by Melbourne University Press. 

    
    [1] http://www.acoss.org.au/wp-content/uploads/2015/06/Inequality_in_Australia_FINAL.pdf
    [2] http://www.smh.com.au/federal-politics/political-news/joe-hockeys-advice-to-first-homebuyers–get-a-good-job-that-pays-good-money-20150609-ghjqyw.html
    [3] http://www.theguardian.com/world/2014/may/15/joe-hockey-tells-australians-doctor-fee-cheaper-beer
    [4] http://www.abs.gov.au/ausstats/abs@.nsf/latestProducts/6202.0Media%20Release1May%202015
    [5] http://www.abs.gov.au/ausstats/abs@.nsf/mf/6354.0
    [6] http://www.joehockey.com/media/speeches/details.aspx?s=133
    [7] http://www.natsem.canberra.edu.au/storage/2014-15%20Budget%20Research%20Note.pdf
    [8] http://www.afr.com/news/policy/tax/joe-hockeys-budget-backdown-20150204-136ebw
    [9] https://theconversation.com/worst-off-hit-hardest-by-coalition-policies-natsem-modelling-42300
    [10] http://www.canberratimes.com.au/business/the-economy/how-the-abbott-government-stopped-us-talking-about-natsems-modelling-of-their-budget-20150611-ghjm1u.html
    [11] http://www.theage.com.au/comment/lifters-and-leaners-why-the-idea-of-equality-of-opportunity-is-a-big-con-20140617-zsa6d.html
    [12] http://www.canberratimes.com.au/comment/job-hunt-success-is-all-in-a-name-20130303-2feci.html
    [13] http://www.albany.edu/~scifraud/data/sci_fraud_3943.html
    [14] Friedman & Friedman (1980), Free To Choose, p. 145

     

  • John Menadue. London Postcard-some impressions.

    We have just spent three weeks in the UK in Bath and London. But I kept the blog going with the help of friends.

    For years I have largely avoided the UK. When I first visited London in 1963, I was very conscious of social and economic class. It seemed quite unhealthy. Most people knew their place, particularly working people. In 1963 I found it quite a relief to go to Ireland that did not show the same obsession with class. That initial impression in 1963 was followed by the harshness, in my view of the Thatcher years.

    I sensed in my recent holiday that things have changed, at least in the places I visited. There seemed a new social mobility and vibrancy, greater openness and certainly more multiculturalism. The black kids were lively and attractive. There were many East Europeans working in restaurants and shops and they were much more helpful than I recall my experiences of British customer service back in 1963. People on trains were much more courteous than I am used to in Sydney. In short, I have had to revise my views on the UK somewhat.

    I enjoyed the National Gallery more than the Louvre. It was not as overpowering. The art was well selected and the gallery much less crowded. The British Library had a superb Magna Carta exhibition. The impact at the time of the Magna Carta has been exaggerated but it has had a substantial long-term influence around the world.

    With the Greek crisis I was keen to see the Elgin marbles at the British Museum. I hadn’t realised that the British Library was formerly housed in the British Museum where Karl Marx had researched and studied in the Reading Room for years. But the Elgin marbles were my main interest. They were more remarkable and stunning than I expected. I stood in a vast hall with the Elgin or Parthenon marbles on every wall’. And in the next room there were Greek sculptures that I felt were even better than those in the Louvre. .

    Not surprisingly, Gough Whitlam was a campaigner for the return of the Elgin/Parthenon marbles to Greece. The British Museum presents a threadbare argument that the ‘marbles’ in the British Museum ensures even better public access to them than would have been possible had they stayed in Athens! And to add to this threadbare defence of the British, the Museum asserted that they were obtained legally. That might be technically true, but in the early 19th Century when the marbles were removed, Athens was occupied by the Ottoman Turks.

    The early 19th Century was a period of enormous art theft particularly by the British and the French. When considering Greek debt today perhaps the British and French might consider how much they really owe the countries of the Mediterranean that they plundered 200 years ago.

    I have always been an admirer of the National Health Service and in London I found it as good as I had always believed it to be. As a university student in the 1950s, Nye Bevan had been a political hero of mine. The NHS has outlived and outperformed its self-interested critics. It was no surprise that the NHS was the prime feature at the opening ceremony of the recent London Olympics

    In London the public transport system is in good shape and carries an enormous number of passengers each day. We could learn much from the London underground. But despite public transport, London still has major road traffic problems. It illustrated to me again that more and more express and toll roads will largely induce more traffic and will contribute little and at great cost to improving urban living. That is the experience of all major cities but the motor and construction lobbies want us to waste more and more money for their benefit. Good public transport must be associated with effective road-user charges that reflect the real cost, particularly in peak periods that we each impose on other users of the road system. Road tolls and road congestion taxes may be difficult politically but they are essential for urban living in big cities. More and more roads are not the answer.

    Our UK visit was just a few weeks after the general election with the return of the Conservative Party to government with a narrow majority in its own right. The Conservative Party gained 36% of the vote but with the vagaries of first-past-the-post polling, it won 51% of the seats in the House of Commons. The real wipe-out was the Liberal Democrats across the country and the Scottish National Party taking 56 of the 59 seats in Scotland with massive swings. Scotland, had always voted overwhelmingly Labour until this election. The UK Independence Party, which campaigned against continued UK participation in the European Union polled 12% of the vote but only won one seat.

    The Cameron Government may yet reap a bitter harvest from the last election. It has promised a referendum by the end of 2017 on whether the UK should exit the EU. This will give vent to the parochialism that I had hoped the UK had left behind. For the next two years, the issue of UK remaining or leaving the EU will be the focus of political attention and distract from many other key issues. If the UK decides to turn its back on Europe, I think the UK and Europe will be the losers.

    Additionally, if the UK decides to exit the EU, that is likely to trigger a new referendum in Scotland and encourage a Yes vote for Scotland to leave the UK.

    The Scots have little to thank David Cameron for. A major thrust of his recent election campaign, encouraged by his Australian advisers, was to warn the English that if they voted Labour, they could finish up with a Labour Party/Scottish coalition government. Cameron strongly played the anti-Scotland card in England. That deliberate and successful tactic meant that the Conservatives won well in England. The message was clear. Beware of the Scots.

    History may yet reveal that the significance of the UK election was that the UK left the EU and that was followed by a breakup of the UK itself. The Scottish Labour Party is committed to the United Kingdom but the Scottish National Party seeks separation from the United Kingdom. Gordon Brown, a Scot and former UK Prime Minister has warned that as a result of Conservative tactics the United Kingdom may be on ‘life support’

    In London there was understandable outrage over the deaths of over 30 UK tourists in Tunisia. In response and like Tony Abbott, David Cameron described IS as an ‘existential threat’. Clearly it is not. The existence of neither the UK nor Australia is threatened by IS. It is one thing for David Cameron and Tony Abbott to promote fear about the terrorism threat for political purposes. It is much harder to combat the causes of terrorism and IS in particular. Yet it is the policies of the UK, Australia, the US and others in Iraq, Afghanistan and Libya that have mainly served to worsen the terrorism threat. The history of Western aggression, exploitation and colonisation over centuries in the Middle East has played into the hands of extremists. Our policies have created anarchy in the region. We side with the despots like Saudi Arabia and the Gulf monarchies. Australia and the UK recruits to IS are transiting through Turkey. But we don’t want to offend Turkey by insisting that it closes these transit routes.

    I was reminded again in the UK that we will not begin to contain IS unless we first accept that our policies in the region have been counter productive to our own security as well as the security of the people in the Middle East. We need to build strong partners in the region and that includes Iran.

  • Michael Keating. Greece’s Predicament

    The front page news story for weeks now has been what is happening to Greece and what will happen. The markets, the various authorities and the media all treat Greece’s predicament as if it were solely a matter of excessive debt. Therefore austerity is justified as being essential to bringing the debt back under control, and gradually paying it back.

    But this is very much a financier’s view of Greece’s problems and those Governments whose views are coloured by their involvement in arranging and/or guaranteeing the finance. What has so far escaped attention is how Greece, while locked into the Euro, has become completely uncompetitive.

    Competitiveness is best represented by what has been happening to Greece’s unit labour costs, and since 1990 unit labour costs have risen by almost 300 per cent in Greece compared to only 36 per cent in Germany. Even if we assume that Greece was fully competitive when it entered the Euro in 2001 – and it almost certainly wasn’t – then between 2001 and 2010 Greece’s unit labour costs rose by 48 per cent compared to only a 4 per cent rise in Germany. These are massive differences in the evolution of costs between the two countries, which have now made Greece completely uncompetitive.

    Furthermore it has been this loss of competitiveness that has mainly been responsible for driving Greece into debt. Thus as imports became less expensive relative to Greek products, the higher Euro denominated wages that Greeks were paying themselves allowed the Greeks to buy more than they were able to sell. And the sad fact is that this loss of competitiveness and markets not only led to increasing debt but also to rising unemployment as both Greek and foreign customers switched away from Greek products.

    So where to from here? One thing we can be certain about is that while Greek costs continue to be uncompetitive there is little hope that full employment and stability can be restored.

    Instead the present policy response with its focus on increased “austerity” is intended to reduce consumption by the Greek’s, and their living standards, and in that way reduce the Greek national debt. The burden of this strategy, however, falls almost entirely on those who don’t have jobs – be they pensioners or workers and their families who can no longer gain employment.

    Over time there is of course a chance that the rising unemployment may lead to lower costs and thus a slow improvement in Greek competitiveness. Indeed since 2010 unit labour costs have fallen a little in Greece and risen a little in Germany, thus reversing a small part of the previous loss of Greek competitiveness. But as Keynes pointed out in a similar situation in the Great Depression, in such a long run we will all be dead before full employment is restored.

    Frankly as was discovered a long time ago, the reality is that fixed exchange rates usually cannot be maintained indefinitely , and they have no hope of working unless there is much more policy coordination than has been apparent in the Euro Zone to date. Instead Greece would be much better off if it devalued and thus restored its competitiveness. The resulting reduction in Greek costs would enable Greece to sell as much as it can produce, while imports would become less affordable. The overall result would be lower debt and an increase in employment.

    This devaluation would, however, only work if it led to a genuine reduction in Greek labour costs, which implies a comparable reduction in living standards. The difference between this and continuing austerity is that the reduction in living standards following a devaluation would be widely shared instead of falling largely on the increasing number of Greeks who do not have a job.

    The sad thing is that the Greek Government having won a referendum against the austerity package, still seemed determined to avoid a Grexit, although that is the only strategy that will actually succeed. Nevertheless, a Grexit is not without its dangers, but these dangers multiply if preparations for it are postponed. The worst outcome would be for a Grexit to effectively be forced by markets after a disorderly capital flight, and the longer the delays the greater the risks.

    Finally for those who regard a major devaluation and a writing-down of a country’s debt obligations as akin to a disaster, it is worth remembering that this is what Argentina did not so long ago, and it was generally conceded to have worked then. But it only worked while the authorities maintained a strong discipline on costs and accepted the loss of borrowing capacity and the implications for living standards. This is the message that the Greek leadership should be delivering, and again the delays are not propitious.

     

     

  • John Menadue. Is the European Project finished?

    Perhaps the Greek crisis will force a fundamental rethink and Europe will find the way to rekindle again the idealism and hope that gave rise to the European Project in the aftermath of WWII.

    By any means ‘Europe’ has been a remarkable success in social development, human rights, economic growth, the mobility of people and capital – but most importantly of all, a seventy year period of peace. After centuries of war, mainly religious wars, followed by WW1, Hitler, the Holocaust and Stalin, Europe has been at peace.

    The founders of the European Project spoke with great idealism of ever-closer union in Europe.

    But the signs are not good today. This is highlighted particularly by the political and moral gap between the ‘hard-working’ Germans, the ‘lay-about’ Greeks, with France looking more insipid every day. The early success of Europe depended on France to balance the power, strength and even threat of Germany.

    Germany’s reputation and its development in almost every way have been remarkable since WWII. That success has been in part due to its own efforts, but also through the generosity of the US and others in forgiving Germany its sins and its debt. The allies learnt from Versailles after WWI that punishing a defeated Germany only produced more tragedy.

    Unfortunately today Germany shows all the signs of bullying Greece for its mistakes and repeating the mistakes of Versailles.

    In an interview a few days ago with German newspaper Die Zeit, Thomas Picketty called for a major conference on European debt and emphasized that Germany in particular should not withhold help from Greece. Picketty said

    ‘My book (Capital in the 21st Century) recounts the history of income and wealth, including that of nations. What struck me while I was writing is that Germany is really the single best example of a country that, throughout its history, has never repaid its external debt. Neither after the first nor the Second World War. However, it has frequently made other nations pay up such as after the Franco-Prussian war of 1870 when it demanded massive reparations from France and indeed received them. The French state suffered for decades under this debt.’

    In the current fevered atmosphere the signs are not good with the European Union, the European Central Bank and the IMF, together with Germany, bullying Greece to comply with their austerity program.

    The European Project has been littered in recent years by serious mistakes and problems

    • The Euro is a major problem. It is very difficult to envisage how a monetary union can work effectively without a fiscal union. The result has been that Germany and Northern European countries have benefitted from a weak Euro at the expense of Greece and other Southern European countries.
    • There is widespread unemployment particularly in Southern Europe which has been foisted on the Greeks, Spanish and others in the name of budgetary reform and austerity. The message has been clear both explicitly and implicitly to the Greeks – change your policies or we will destroy your government.
    • In the last few days the European Central Bank has cut off Greek access to additional funds and helped precipitate the panic in Greece. The Greek Central Bank has worked in league with the European Central Bank.
    • It wasn’t just irresponsible borrowing by the Greeks that caused the problems. Ther was irresponsible lending by the banks and companies such as Goldman Sacks that helped Greek debt-managers manipulate the debt figures. The financial sector must be contained.
    • Political extremism on both the Left and the Right is today flourishing in Europe. It is no surprise.
    • Quite contrary to what Presidents Regan and Gorbachev agreed, NATO has extended itself eastwards to the Ukraine and the border with Russia with inevitable dangerous consequences. Have Europe and NATO forgotten WWII and the tragedy and losses on the Eastern Front?
    • The ‘Little Englanders’ in the UK are now reasserting themselves with David Cameron proposing a referendum in 2017 on possible UK exit from the European Union and with the UK Independence Party polling 12% at the last general election.
    • Hungary is planning to build a fence along its border with Serbia.

    The fraying of Europe is obvious. It shows not only in political but also has a moral dimension. The Italian Prime Minister, Matteo Renzi, recently commented on Europe’s failure to properly address the difficulties of thousands of refugees coming to Europe. He said ‘If this is your idea of Europe, keep it to yourself … You do not deserve to call yourself Europe. Either we have solidarity or we are wasting our time.’

    The Germans seem to have ignored the advice of former German Chancellor, Helmut Schmidt, three years ago when he said ‘If we Germans allow ourselves to be seduced into claiming a political leading role in Europe or at least playing first among equals, based on our economic strength, an increasing majority of our neighbours will effectively resist this. The concern of the periphery about an all too powerful European centre would soon come racing back. The possible consequences of such development would be crippling.’ That crippling is occurring today and Angela Merkel doesn’t seem to understand.

    Can we dare hope to see again the moral and political leadership that we saw from people like Helmut Kohl, Helmut Schmidt , Francois Mitterrand and many more. None of them had forgotten the horrors of WWII and set about with idealism and hope to build a new Europe. The current generation of leaders has never known the travail that these earlier leaders experienced.

    This is about much more than Greece and its debts and austerity. But hopefully this crisis will force European leaders to show the courage and foresight that its forbears showed decades ago. The European Project is in trouble, but it is worth renewing. Will the bankers and small-minded get out of the way? With no vision from their leaders, the people of Europe are suffering.

  • Greek Crisis

    See below links to two interesting articles.

    The first is by Paul Krugman, ‘Ending Greece’s Bleeding’ in the New York Times.

    The second is by Thomas Picketty ‘Germany has never repaid’ from the German newspaper Die Zeit.

    http://www.nytimes.com/2015/07/06/opinion/paul-krugman-ending-greeces-bleeding.html?rref=collection%2Fcolumn%2Fpaul-krugman

    https://medium.com/@gavinschalliol/thomas-piketty-germany-has-never-repaid-7b5e7add6fff

  • John Menadue. The Greek crisis and regime change.

    Current Affairs

    A lot of the blame for the present crisis should be borne by many countries and institutions, but the one group that is least responsible is the present left-wing government of Greece, Syriza.

    The major blame must rest first with the previous Greek governments that mired the Greek people in corruption and cronyism. The second group that must bear immediate responsibility is the incompetence of the Troika – the EU, the European Central Bank and the IMF, led very much by the German Government. The austerity campaign inflicted on Greece has resulted in the GDP shrinking by 25%, accompanied by unemployment of 25%, and youth unemployment of 50%. Such a situation is unacceptable and is likely to result in extreme outcomes. Something just has to give in Greece.

    In this situation there are now suggestions reported by the London Times that ‘Germany will demand the Greek Prime Minister, Alexis Tsipras and Finance Minister, Yanis Varoufakis, resign as a condition for a new Eurozone bailout.’ If this is correct it sounds very much as if regime change is being engineered. Is the object of such a plan to break the Greek Government so that the austerity plan of the northern European countries can continue? Such a plan is outrageous. These austerity plans have caused not only major social problems in Greece, but also in Spain where an election is due in December this year.

    In retrospect, the Euro looks a bad idea, particularly when it links such diverse economies as Germany and Greece. Germany has gained economically from a weak Euro caused largely by the weak economies of southern Europe. It may not be overstating it to describe the Euro as really the Deutsche Mark in disguise. The Euro has given considerable benefits to German business and exporters. In turn, it has made southern European countries less competitive.

    The austerity driven by the Troika with German leadership has resulted in political extremism of both the Left, as in Greece, and the Right, as in France.

    For over a decade sensible economic management in Greece has been frustrated by widespread corruption and cronyism. Tax avoidance on a wide scale became acceptable by previous Greek governments. Urging Greece today to raise taxes to meet its budget deficits does not make a great deal of sense when so much tax is avoided. The crony friends of previous governments have become rich at the expense of the Greek economy and society.

    The banks in Europe and in Greece have behaved irresponsibly with their loose lending. Just as it was incorrect to blame low paid Americans for accepting sub-prime mortgages, so the blame for borrowing by the Greek people cannot be sheeted home to poorly paid Greeks who needed credit to survive. It is noteworthy that in the present negotiations the banks have refused to include debt-relief as part of a settlement package.

    Escalating public debt has been made worse by the irresponsible behaviour of that doyen of international finance, Goldman Sacks. In 2002 Goldman Sacks helped Greece to mask its true debt. Goldman Sacks persuaded the Greek debt managers that they could avoid Maastricht rules on budget deficit limits. The result of the Goldman Sacks device was that $1 b. did not show up in the Greek debt statistics.

    The overbearing attitude of the victors after WWI imposed a severe burden on the defeated Germany which it never forgot, with appalling consequences. In the US, the US Treasury decided to let Lehmann Bros fail to teach the market a lesson. The Troika in northern Europe seems intent on teaching the Greeks a lesson.

    Instead of their resolve to crush the Greek upstart government, the Troika in Germany should look at their own failures and also the long-term future of Europe. What has happened to ‘European values and solidarity’ that inspired Europe in the past? The Troika has a lot to answer for in the current crisis. Hopefully a resolution can be found that respects the rights of the Greek people and places Europe on a continuing path of development.

    Surely in the cradle of democracy the Greeks will want more control over their own destiny!

    See link below for an account by Jeffrey Sachs. He describes the behaviour of the Troika and others as ‘petulant, naïve and fundamentally self-destructive’. He adds that many of Greeks citizens are hungry, with conditions reminiscent of those in Germany in 1933.

    Jeffrey Sachs is Professor of Sustainable Development and Professor of Health Policy and Management, at Columbia University. He is also Special Adviser to the UN Secretary General on the Millennium Development Goals.

    http://www.spiegel.de/international/europe/greek-debt-crisis-how-goldman-sachs-helped-greece-to-mask-its-true-debt-a-676634.html

     

  • Bob Kinnaird. China FTA ‘labour mobility’ fight looms

    Current Affairs

    The ALP National Conference at end-July will likely have before it an urgency motion demanding changes to the foreign worker provisions in the China FTA as a condition for supporting the agreement, according to The Australian (‘Change or block unjust trade deals, MPs told’, 26 June 2015).

    Driving the move is a cross-factional group of eight unions concerned about the impact on Australian workers of FTA provisions mandating easier access to Chinese 457 visa workers, in some cases unrestricted access.

    On top of that, it has now emerged that an FTA side-letter removes mandatory skills assessments for Chinese 457 workers in ten trades including electricians and the main construction trades. This directly contradicts Abbott government assurances in November 2014 that Australia had committed only to ‘improving access to skills assessments” in the China FTA.

    Opposition Leader Bill Shorten wants Parliament to scrutinise the FTA and “the government to come clean on potential downside for Australian jobs and Australian safety and labour standards” (‘Union trying to cause a diversion: Robb’, The Daily Telegraph 29 June 2015).

    Trade Minister Andrew Robb has said the government would not change the provisions in the deal “one wit” (sic) – presumably The Daily Telegraph meant ‘whit’. He was sure that unions opposing the deal ‘don’t understand’ the China agreement.

    The unions increasingly understand what the China FTA labour mobility provisions actually mean for Australian workers, blue-collar and white-collar alike, but no thanks to Mr Robb. Instead of explaining and justifying these momentous provisions, Mr Robb and other Coalition Ministers have done everything to conceal the truth from the Australian community.

    Immigration Minister Dutton or Assistant Immigration Minister Cash issued three media releases on the China FTA between 17 June when the deal was signed and 26 June – ‘New pilot visa to boost Australian tourism’, ‘New visa measures generate international buzz’ and ‘Minister Cash to visit China’.

    In none of these statements do the Immigration Ministers even mention the momentous immigration concessions by Australia in the China FTA or their broader implications. The 457 visa program does not rate a mention, let alone that the China FTA removes the ability of all future Australian governments and Parliaments to apply labour market testing to all Chinese citizens in the standard 457 program.

    Nor do the Ministers bother to even mention two other unprecedented immigration concessions by Australia in an FTA, or even outside an FTA: the ‘Infrastructure Facilitation Arrangements’ (IFAs) agreement with China allowing concessional 457 visas for skilled and semi-skilled Chinese workers, and the non- reciprocal ‘Work and Holiday’ visa agreement that provides ‘up to 5,000’ 462 visas each year for young Chinese to live and work in Australia for a year (extendable) with no reciprocal visa arrangement allowing any young Australians to visit and work in China, let alone 5,000.

    These releases instead are mostly puff-pieces about the benefits for the tourism industry of changes to visitor visa rules for Chinese people, making it easier for Chinese tourists to visit and stay in Australia.

    Minister Cash’s latest release informed us that in China this week she ‘will undertake meetings with Chinese government counterparts, industry stakeholders, and China-based Australian businesses’. This ‘is particularly timely given the historic China Australia Free Trade Agreement’ (among other things), her release said.

    No further information was given about the Minister’s agenda for these China discussions. It may be that Australia’s Assistant Immigration Minister is, cap in hand, seeking Chinese approval for how the Australian government proposes to implement its FTA commitments on the IFAs in favour of Chinese 457 workers. The Australian Parliament will surely have a view about governments making Australian immigration laws in this way if it is presented with a fait accompli by the Minister when she returns.

    Hopefully before the ALP National Conference the government does ‘come clean about the potential downside for Australian jobs’ in the China FTA, as the Opposition Leader has called for. If this was an honest government, it would admit two more downsides to its China FTA concessions that are fatal to its claims to be in Australia’s national interest.

    First, the FTA 457 concessions give China increased scope to export some of its unemployment to Australia if things go bad in the Chinese economy, eg by pressuring Australian firms wanting Chinese market access or investment to take on Chinese workers over qualified Australians. By removing any legal obligation on employers to even look for Australian workers, the Abbott government is opening the door wide to this abuse of the 457 visa program.

    Second, removing the ability of all future Australian governments to legislate in favour of Australian citizens and residents over Chinese citizens in the standard 457 visa program greatly increases the risk of future Australian job losses. It removes a vital policy tool Australia will need to manage future economic shocks including those arising from our increased exposure to China. On this ground alone it is reckless and irresponsible.

    Bob Kinnaird is Research Associate with The Australian Population Research Institute and was National Research Director CFMEU National Office 2009-14.

     

  • Europe’s attack on Greek democracy.

    See below link to article by Joseph Stiglitz in Project Syndicate. Joseph Stiglitz is a Nobel Laureate in Economics and University Professor at Columbia University. He was also Senior Vice President and Chief Economist of the World Bank.  John Menadue.

     

    http://www.project-syndicate.org/commentary/greece-referendum-troika-eurozone-by-joseph-e–stiglitz-2015-06

  • Is the European Central Bank looking after the Greek people or the banks?

    Current Affairs.

    In London I have been reading this interesting piece in The Telegraph, by Ambrose Evans-Pritchard, (link below) on the ‘Greek problem’. It was published on 19 June 2015.  John Menadue.

    http://www.telegraph.co.uk/finance/economics/11687229/Greek-debt-crisis-is-the-Iraq-War-of-finance.html

  • John Menadue. Triple-dipping by Big Pharma.

    Current Affairs

    The major pharmaceutical companies in Australia, almost all foreign owned, keep pushing their luck at the expense of Australian consumers and taxpayers.

    In my series on health reform, I pointed to a minimum of $2 b. p.a. that we could save in drug costs if we had a government purchasing system like the New Zealanders. In the last budget the Minister for Health made a few changes around the edges but the high prices charged by Big Pharma will continue.

    It is the same story around the world. Many American consumers find it worthwhile to cross into Canada to buy pharmaceuticals.

    It is no surprise to know that Big Pharma is also highly influential in the secret negotiations for the Trans-Pacific Partnership (TPP). It is quite a scandal that we are kept in the dark on a trade arrangement which could have quite serious consequences for Australia.

    Apart from the secrecy there are major concerns. As Choice Magazine has pointed out ‘The leaked chapters of the TPP indicate that the agreement may contain an investor-state dispute settlement clause(ISDS), which allows foreign corporations to sue Australia’s government for loss of future profits.’ Dr Matthew Rimmer, Associate Professor at the ANU College of Law, has said ‘Australian consumers have been betrayed. The intellectual property chapter of the TPP is a monster. The proposals in respect of copyright law, trademark law, patent law and data-protection would hit Australian consumers hard’.

    There is major concern that the Australian government could become more vulnerable to law suits from multinational companies and particularly, Big Pharma. As Choice has pointed out, after the introduction of tobacco plain packaging rules in Australia, cigarette companies unsuccessfully challenged the new laws twice in the High Court and lost. Philip Morris then announced its decision to challenge plain packaging again, this time under international law by invoking a 1993 bilateral investment treatment that included ISDS provisions between Australia and Hong Kong.

    And we know from experience, that US corporations have massively disproportionate lawyering power compared to our legal defence resources in Australia.

    Joseph Stiglitz, the Nobel Prize winning economist, told us recently on the ABC about the benefits to the drug companies of TPP. He said ‘I talked to all the other trade negotiators involved in the drug provisions [of the TPP] and we know that the US is negotiating for a position that would make it much more difficult to get access to generic medicines and that would drive up drug prices.

    Then there is the problem of tax avoidance. The Australian Parliamentary Library told a recent Senate Committee that in total the top five pharmaceutical suppliers to the PBS in Australia received $2.8 b. in public money. Their total Australian sales were $4.8 b. But research found their combined profits were only $50 m. They paid $53 m. in tax between them, or roughly one cent in tax for every dollar earned in Australia. For a full report by the SMH for June 15, see link here. http://www.smh.com.au/federal-politics/political-news/pharmaceutical-companies-called-on-to-explain-tiny-tax-contribution-20150602-ghf59s.html

    We are really in triple-dipping country here – high prices for Australian consumers, attempts through TPP to weaken Australia’s bargaining position and widespread tax avoidance.

    I think we are being taken for a ride.

  • John Menadue. Facts on the $11b per annum private health insurance industry subsidy.

    The Minister for Health and Ageing, Sussan Ley has said she wants to canvas community and expert views on PHI (private health insurance).

    If she does consult the community on this issue that will be a welcome change, for consideration of the PHI is usually a private discussion with the vested interests – the PHI industry, doctors and private hospitals.

    I am not holding my breath about real consultation with the community. So much ‘consultation’ is purely token. Furthermore the community is genuinely confused about the range of look-alike policies that are very hard to understand until the patient has to pay. (more…)

  • Peter Hughes. Subsidising foreign investment with visas.

    Current Affairs

    Visas which give wealthy business people and investors a pathway to permanent residence and Australian citizenship through various forms of investment have been around for many years. The new twist, under the Government’s recently announced ‘complying investments‘ for the Significant Investor Visa, is to channel some money out of safe investments and into venture capital and start-ups.

    The $5 million worth of investment that a foreign investor must make in Australia to qualify for a visa must now include at least $500,000 in eligible Australian venture capital or private equity funds investing in start-ups and small private companies. The Government expects to increase this to $1 million for new applications within two years. In addition, at least a further $1.5 million of the $5 million total must go into in eligible managed funds or listed companies that invest in emerging firms.

    Some commentators, including venture capitalists, have applauded the move. On the other hand, migration agents reportedly have concerns over whether their clients will see this requirement as too risky and turn their attention to other countries. The Government has tried to manage this by only requiring 10% of the total investment to go into the highest risk investments.

    One wonders why, if these investments are truly desirable, they cannot stand on their merits and attract sufficient capital without the need to effectively subsidise them by offering visas and a pathway to Australian citizenship as an incentive to foreign investors. Alternatively, why aren’t broader-based non-visa options being pursued to attract venture capital, such as a HECS-style loans scheme?

    The changes also raise the broader question of the effectiveness of migration schemes to attract wealthy business people and investors.

    Australia has experimented with variations of such schemes over several decades. State and Territory governments are attracted to them in the hope of bringing foreign business talent and money into their economies.

    The traditional migrant ‘bargain’ with the host country is that he or she contributes their skills, resources, physical presence and family to that country’s future in return for permanent residence and access to citizenship and its benefits. However, because of their wealth, business and investor migrants have a lot more scope and flexibility to gain benefits without making much contribution.

    The Australian Parliament’s Joint Standing Committee on Migration, in its March 2015 Report of the Inquiry into on the Business Innovation and Investment Programme, struggled to find any substantive benefits, noting in the Foreword that ‘the data provided by the Government was limited and furnished little evidence that the programme was actually meeting any of its objectives.’

    And yet the risks are substantial. Migration schemes for business people attract a disproportionate number of applicants from a small number of countries, usually countries where it is difficult to verify all aspects of the background of the individuals and the sources of their wealth. China was by far the largest source country for the over 6000 visas granted in the Government’s Business Innovation and Investor programs in 2013-14.

    There is an ever present risk of attracting people of character concern who will, down the track, be the subject of criminal investigations in the source country and embarrassing extradition proceedings. There is also the risk of attracting ‘hot’ money, borrowed money and dubious financial arrangements.

    Then there is the underlying public suspicion about wealthy people ‘buying’ their way into Australia. One of the earliest schemes, the ‘Business Migration Program’, was terminated following a critical report of the Joint Committee of Public accounts in 1991 , including concerns about the role private migration agents had been given in the system.

    Despite all these dilemmas, Australia probably has to compete with other countries and have at least a limited facility for interested business people to migrate permanently. It is untenable to say that a genuinely interested wealthy business person cannot settle here in the way that a skilled migrant can.

    However, policy and administration in this area need to be tightly controlled and the results closely monitored to ensure there is a real benefit for the country. The trick for governments is to find a set of rules that lock in the benefits for Australia without scaring away most of the genuine migrants. Scams that undermine the integrity of this element of the immigration program must be quickly identified and terminated.

    Without careful scrutiny, there is a good chance that any new arrangements will end in tears, like some of their predecessors.

    Peter Hughes was formerly Deputy Secretary of the Department of Immigration and Citizenship. This article was first published by the Lowy Interpreter.

  • Geoffrey Harcourt. Piketty, flawed, but not a light that failed.

    Current Affairs

    A review of Thomas Piketty, Capital in the Twenty-First Century.* Translated by Arthur Goldhammer, Cambridge, Mass and London: The Belknap Press of Harvard University Press, 2014. viii + 685 pp. ISBN 978-0-674-43000-6*

    *This is a smaller version of a review article to be published in the next issue of Economic and Labour Relations Review. The article contains a bibliography on which this version draws.

    At each end of the spectrum of responses to Thomas Piketty’s best seller are those of Paul Krugman and Deirdre McCloskey. Krugman pronounced it “the most important book of the year – and maybe of the decade”. McCloskey graded it as mistaken on most fronts. Bob Solow supports Piketty – “Thomas Piketty is right” – and provides the clearest account of the issues without leaving the realm of simple arithmetic.

    The book is nearly 700 pages long; it has been 15 years in the making. Piketty handsomely acknowledges his collaborators and his mentor, Tony Atkinson, who has devoted his working life to understanding inequality of income and wealth; Solow dubs Tony, “the pioneer and gray eminence of modern inequality studies” (2).

    Piketty started his career as a promising young French mathematical economist who was head-hunted to an American department. Tiring of American life and the narrow American approaches to economics, he returned to France where he is a Professor at the Paris School of Economics. He is both an economic historian and an economist who favours multi-disciplinary approaches to social sciences issues.

    The driving force behind his research is the tremendous growth in the last 40 years of inequality in income and wealth in advanced capitalist economies. Seeing this as a return to normal developments after a blip for part of the 20th century, Piketty went back to the preoccupations of the classical political economists and Marx with distribution and growth. He assembled long periods of data, from tax returns, including estate duty data, for a number of advanced economies. Piketty is inspired by their example, and by Simon Kuznets, to do for the 21st century what they did.

    His comments on how we should “do” economics could be the blueprint for the French and other undergraduates campaigning for pluralist approaches. But he uses an aggregate production function model to explain the Kaldor-like stylised facts his data revealed. He wants to be heard by the mainstream whose approach of choice it still is.

    To use it he conflates his concept and measurement of wealth with those of capital in his theoretical arguments. Wealth thus includes land, housing, financial asset holdings as well as capital goods.

    Piketty’s explanation of his findings is presented as three “laws”: 1) the rate of profits is greater than the rate of growth; 2) the capital to income ratio tends to rise; 3) the share of profits in income tends to rise. Together, they imply greater and greater concentration of wealth amongst relatively fewer people, a cumulative causation process leading to “the resurgence of patrimonial capitalism”, and “the triumph of the rentier”, as opposed to Keynes’s prediction of that class’s euthanasia.

    His theories do not imply inferences that match his main findings. To do so, the value of the elasticity of substitution between capital and labour must be greater than unity, for him reasonable, but most empirical studies suggest it is usually less than unity.

    So what of the use of the aggregate production function and the marginal productivity theory of distribution? Piketty is aware of the polemical debates between the two Cambridges about capital theory. His reading of the issues and the outcome is wrong. First, Piketty does not correctly identify the theoretical and empirical issues at stake. Secondly, his claim that MIT eventually won is wrong. Alas, the profession subsequently chose to pass by on the other side.

    The most serious theorists moved onto a different terrain – can the initial results vitiate the most rigorous form of mainstream theory? What has happened so far suggests “Yes”.

    Piketty does not understand that the principal issue is not capital’s measurement but its meaning, i.e., what ‘vision’ of the economy has the analyst in mind? There are two main claimants: the mainstream, whereby the consumer queen is the driving force of development with all other agents, and institutions serving to help her maximise her life-time expected utility. The other “vision” arises from the classical political economists and Marx: the ruthless swashbuckling capitalist class rules the roost; other classes in the economy and its institutions dance to its tune as it endeavours to achieve the behavioural requirements of money-making and accumulation.

    The economists involved in the debates were clearly aware of this distinction. Economists on the Cambridge UK side who early on perceived what was at stake include Amit Bhaduri and Anwar Shaikh. Anwar criticised the arguments and practices of Solow’s 1957 article, which spawned the literature on the relative contributions of deepening and technical progress to the growth of overall productivity. There have also been internal critiques on how stringent the conditions are for aggregation and how inappropriate such an endeavour is because the empirical specifications are manipulation of identities.

    Piketty attached himself to a Say’s Law world over the long term, ruling out the insights of Marx, Keynes, Kalecki and Pasinetti being brought to bear on historical findings. Some base their criticisms of Piketty’s approach around this. Properly worked out, Piketty’s model may result in the euthanasia of the rentier, or a steady-state, or the triumph of the rentier, Piketty’s claim. Including the gang of four provides a rich, relevant analysis of Piketty’s findings.

    Keynes has shown us that there is no automatic tendency for capitalism to attain and sustain full employment. Marx argues that the capitalist class will always take steps to make sure there exists a reserve army of labour, to “discipline” the wage-earners by making the sack an effective weapon.

    This argument came into the modern era through Kalecki’s classic 1943 article, “Political aspects of full employment”. Balogh and Kaldor pointed out in the 1970s that Monetarism was “the incomes policy of Karl Marx” — the shift in economic, political and social power from capital to labour over the long boom ceased to be tolerated by the capitalist class the world over. Add to this the inexorable rise of large multinational oligopolies dominating markets (and governments) and we may understand recent events as a concentrated attempt to create worldwide, cowed, quiescent work forces to allow large increases in the spheres of production of potential surpluses available for accumulation in the spheres of distribution and exchange.

    An unintended consequence of this was often sluggish overall demand.“Animal spirits” were dimmed and the potential surplus was not realised because of sluggish rates of accumulation, or was only realised if governments stepped in with increased government expenditure. The actual outcomes of these factors at work in conjunction with Taylor’s analysis constitutes a more plausible narrative with which to interpret Piketty’s findings than does Piketty’s neoclassical fairy tale.

    Piketty is a progressive social democrat who wants, like Keynes, to save capitalism from itself. He is not a member of any political party, he is first and foremost a scholar deriving evidence-based accounts of the motions of society and suggesting, for others to take up, positive policies with which to tackle malfunctions uncovered. He advocates a world-wide wealth tax and/or for individual countries, progressive income taxes, measures any non-militant progressive would agree with. They would also agree with Piketty that, in the current world political climate, they are utopian proposals. Piketty does also point out that major historical reforms have not come about primarily by well-trained civil service technocrats designing them, that often wars and revolutions were the necessary impulses needed to get them off the ground; and that people like Piketty have to start the debates going.

    His admirable highlighting of the extent and causes of growing inequalities the world over have, because of its timing, struck a responsive chord, resulting in his rise to mega star status, with reviews of his book by many leading economists and a symposium in the Journal of Economic Perspectives (2015). There, Piketty defends his major themes but does have some second thoughts. There have been also many discussions in media outlets around the world. His data base and the full accounts of its sources and limitations, within the book and on his website, are major contributions of enormous help to like-minded researchers.

    I close with comments and criticisms, including limitations associated with his data sources. First, his concept of wealth includes not only houses and land but also financial assets. Because of double entry bookkeeping, financial assets reflect real capital goods which are also included in the totals, of necessity valued at market prices. Does this mean that double-counting may be part of the overall totals?

    Secondly, if the distribution of income is to be explained by the use of ‘capital’ and ‘its’ marginal product, this requires that ‘capital’ be measured in a unit independent of distribution and prices. But outside an all-purpose one commodity world, valuation is required and the prices used include profits and rate of profits components, leading to arguing in a circle.

    Thirdly, there are limitations associated with use of taxation reports and the impact on them of historical cost accounting conventions and procedures. This issue was discussed in the 1960s to 1980s. If an accountant were to be let loose in a Golden Age where expected and actual rates of profit coincide because expectations are always realised, the accountant, using his/her tools, could give very misleading answers as to what the rates of profit were; the discrepancies between the accountant’s measure and the true figure could be very large indeed. As there are no rough rules of thumb to correct for these effects, we can only take Piketty’s findings on trust.

    To sum up: McCloskey goes far too far in her negative evaluation and her asymptotic approach to a Panglossian view of the merits of capitalism even when it is red in tooth and claw. The profession and countries world-wide are much in Piketty’s debt for raising in a readable way fundamental issues facing the modern world and providing much of the necessary empirical material for others to use in alternative approaches to understanding what has been discovered and what is likely to happen. Capital in the Twenty-First Century cannot be classed as a light that failed but as vital illumination for us all to get on with it.

    * Translated by Arthur Goldhammer, Cambridge, Mass and London: The Belknap Press of Harvard University Press, 2014. viii + 685 pp. ISBN 978-0-674-43000-6*

    G.C. Harcourt is Emeritus Reader in The History of Economic Theory,Cambridge 1988,Professor Emeritus,Adelaide 1988;Visiting Professorial Fellow UNSW Australia.

     

  • Max Bourke. Northern Australia – the fantasy continues

    Current Affairs

    The White Paper on Northern Australia. ( www.northernaustralia.dpmc.gov.au accessed June 19, 2015)

    The cover of this Report features, a slightly sick (ironically seems to have a fungal disease), young seedling growing in rich black soil. The seedling well reflects the issue, the black soil does not.

    When white settlers landed in Australia at the end of the 18th century they brought the techniques and understandings they knew from Europe to farming, the climate and the environment. What else could they do? It has taken over 200 years for many Australians, and some clearly still do not, to understand that the climate, soils, landscapes of Australia are profoundly different from Europe or Asia. The recently released “White Paper on Northern Development” June 2015, suggests we still have a long way to go.

    In 1839 the Kew Gardens appointed a plant collector and vegetable gardener who tried growing crops on the Cobourg Peninsula, which sadly failed quite quickly. Since then there has been a long history of hubris about agriculture and development in northern Australia. Boosters almost invariably ignore two major and fundamental problems, soils and temperatures of northern Australia.

    Yes there is a lot of “undeveloped” land there but the dry tropics (most of the region) are largely, lateritic soils in a very, very hot climate. So hot that very few of the crops either westerners or people of Asian background currently eat, can be grown there. There are a few limited exceptions to these generalisations but nothing on the scale that is usually trotted out by the boosters.

    In 1965 Bruce Davidson in his The Northern Myth, traversed many of these issues. Davidson, an economist with CSIRO, was prevented from publishing his work and resigned. But his core arguments persist, that only with heavy government subsidy, could intensive agriculture succeed in northern Australia (such as on research stations) and now even that seems dubious.

    Two extremely well written papers have traversed the issues and both are utterly ignored, not even cited, in the current White Paper. History sadly, and perennially repeats itself.

    In 2002 John Woinarski and Freya Dawson surveyed the sorry tale very well, see reference 3. They worked hard to get to the root causes of the problems mitigating against northern agricultural and forestry development. Reviewing 150 years of agricultural developments in the north they concluded, p 104, “Although these developments have inevitably led to personal and environmental casualties such losses have been deemed bearable in the context of a government drive to dominate or stake a claim on these lands, and the pervasive perception that environmental costs weigh little against the land’s limited value and its excessive extent”.

    In 2009 a superb review of the science of research in the north and its outcomes, was written by Dr Garry Cook of CSIRO (ref 1 below). It is worth reading alone for its photos of Parliamentary Inquiries and other matters over the last 100 years.

    But reviewing the scientific agricultural research over the last 150 years Cook concluded: “At the same time as food and production security concerns are causing growing pressure on the north, there is also growing pressure for land managers to reduce greenhouse gas emissions and increase carbon sequestration. The outworking of these factors is by no means certain, because they will be driving the system in differing directions. Concerns about food security will create pressure for land clearing and agricultural development, as happened throughout the 20th century, but concern about carbon emissions has already led to changes in tree clearing legislation and limited the ability of land holders to develop land. Climate change itself is likely to increase variability in an already highly variable climate and increase the risk to agricultural enterprises. Currently a growing tide of extinctions and range reductions are affecting native fauna across the north (99). Strategies to ensure their conservation will add further complexity to the outworking of development pressures.”

    The current White Paper appears to totally ignore history. Maybe that is our fate.

    Twenty pages of the document are devoted to listing projects, reports, studies that might, though not necessarily, have some bearing on northern Australia and which are already under way. Either this is padding for the report or an exercise in advanced cynicism!

    Fifteen years ago the author attended a northern Australia research conference in Darwin representing one of the Federal agricultural R&D corporations. Many fine words were said then about “moving Australian R&D to the north”.

    In 2009 the Commonwealth Government produced another report, “Sustainable Development in Northern Australia” (ref 2). In the conclusion to that paper it was stated:

    “The north is not a vacant land. It needs to be actively managed for resilience and sustainability, based on a contemporary and informed understanding of the complexities of the landscape and its people. Contrary to popular belief, water resources in the north are neither unlimited, nor wasted. Equally, the potential for northern Australia to become a ‘food bowl’ is not supported by evidence.” Joe Ross, 2009, Chair Northern Australia Taskforce.

     

    Max Bourke AM has a background in agricultural research and public administration. As well he has been Chairman of one of Australia’s largest farming investment businesses and manager of the New Crops programs for the Rural Industry Research and Development Corporation. He has spent much time in Northern Australia in various roles.

    Refs:

    1.Cook, G “ Historical perspectives on land use development in northern Australia: with emphasis on the Northern Territory, Northern Australia Land and Water Science Review full report October 2009

    1. “Sustainable development in Northern Australia”. Northern Australia Land and Water Task Force. Department of Infrastructure, Transport, Regional Development and Local Government, 2009
    2. Woinarski, J.C.Z., and Dawson, F. (2002).Limitless lands and limited knowledge: coping with uncertainty and ignorance in northern Australia. Ecology, Uncertainty and Policy: managing ecosystems for sustainability. (eds J.W. Handmer, T.W. Norton & S.R. Dovers) (Prentice-Hall.)

  • John Menadue. A night with the Vice Chancellors – the export of education services.

    Current Affairs

    Education services earn an export income for Australia of over $16 b. p.a. Those export services are expected to increase to $31 b. p.a. by 2020 from about 600,000overseas students. Education is now our fourth largest export behind iron ore, coal and natural gas. It is our major services export, ahead of tourism.

    The benefits from our export of educational services have been spread across Australia. It is estimated that each international student spends over $40,000 p.a. in fees and living expenses. Chinese and Indian students represent over 30% of overseas students. The top 10 source countries for overseas students are all from our region. The growth has been extraordinary and is likely to continue.

    This spectacular increase in education exports is far beyond anything that we imagined when we first considered this subject in the Department of Trade in 1984.   As a percentage of total exports they hardly appeared on the graph.

    With our export of education services in its infancy we examined in the department our poor performance in exports generally and how we could respond. We continued to rely on resources booms every decade or so. The inflated dollar had put our manufacturing sector under great pressure. Between 1965 and 1982 we had not created one new job in manufacturing. Our economy as well as our society was insular and inward looking.

    Whilst we had a large services sector in Australia, particularly in education and health it was overwhelmingly focused on the domestic market. Our exports of services were very low in world terms. Yet we had world-class education institutions and the middle class of Asia was growing. We were not taking advantage of that opportunity and we compared very unfavourably with educational institutions in the US and UK who were performing much better than we were in expanding their role in our region.

    In the Department of Trade we could see clearly that we were missing out and we focused our attention on how we could lift our exports from our well-reputed institutions and particularly our universities.

    In addition to seeing the possible economic benefits of expanded education exports, I also saw increased numbers of Asian students as a way to improve Australians attitudes to Asia. As a student at a university college in Adelaide, I had roomed with students from Malaysia. They changed my attitudes on White Australia and relations with our region. My experience with these and other students who came to Australia under the Colombo Plan was I believe an important factor in helping to transform community attitudes about Asia and opposition to White Australia. Until those Asian students came to Australia there was a fairly widespread view of Asians as poor and unskilled and a threat to our living standards. But the Asian students studying here in the 1950’s and 1960’s were young, well educated, spoke good English and not at all threatening.

    So I saw Asian students at our universities and schools as offering both economic and social benefits.

    But to get the ball rolling we had to convince Australian universities about the possibilities of substantially increased Asian students on their campuses. In my autobiography in 1999, ‘Things you learn along the way’, I wrote about my first approach to Australian Vice Chancellors.

    ‘In the department in 1984, we commenced a study on the export of educational services. After we had completed the study, I spoke at a dinner with 19 vice-chancellors of the major Australian universities in the Scarf Room at the ANU about our thinking and plans for the export of educational services. I outlined ways in which I thought we could promote education services offshore and encourage more Asian students to come to Australia. The Americans and British had been doing it very successfully. We were not serious competitors. With the universities under financial pressure, this was a commercial opportunity for them. It would also transform university campuses and, hopefully, student attitudes towards Asia.

    The dinner turned out to be a frost. The vice-chancellors were not impressed with my commercialism. My main critic was Professor Peter Karmel, Vice-Chancellor of the ANU. He had been my mentor from Adelaide University days. We held similar views on most public issues but we didn’t agree on this one. He was upset at commercially exploiting educational services on such a scale. After the dinner, Karmel buttonholed me on my proposal. His concerns also came back to me through an old friend, Frank Hambly, Secretary of the Vice-Chancellors’ Committee: ‘What is Menadue up to in advocating selling overseas educational services in this way?’, he had asked his colleagues.

    You always remember the speeches that don’t go well but in retrospect it helped quicken reform. In the mid-1980s education exports were minimal. They now have grown to $3 billion annually with almost 150,000 foreign students in Australia each year, mainly from Asia. The Australian International Education Foundation estimates that educational exports will be worth $5 billion in 2001.’ (p.245-6)

    In fact in recent years there have been over 600,000overseas students in Australia each year, earning $16b pa for the Australian economy.

    The remarkable growth in education services has not been trouble free. With cutbacks in government funding mainly for our universities, institutions have become too dependent on fee-paying overseas students. In some cases I think academic standards have been compromised.

    But in 1984, when I spoke to the 19 Vice Chancellors, I could not have envisaged the dramatic changes that were to come. The seed I sowed with the Vice Chancellors fell on stony ground but it survived and flourished.

    John Menadue was Secretary Department of Trade 1984-86.

  • John Menadue. Early tax avoidance: the window tax

    window_taxHolidaying in Bath, I came across an early example of tax avoidance. A window tax was introduced in the UK in 1696. It was believed to be a progressive tax on the assumption that the wealthy property owners had larger houses and more windows. But the tax avoiders found a way around the problem…fill in the window spaces with masonry and avoid the tax even if it looked very ugly. Wealthy property owners don’t often have good taste or care about neighbours. The tax was abolished in 1851.
    Tax avoidance is now largely conducted in secret and the scale of it by such companies as News Corp, Westfield Glencore, Google, Apple and the Big Pharma multinationals puts the tax avoiders in Bath in the shade.

     

  • John Menadue. Risk-averse business.

    Current Affairs

    The Reserve Bank has pushed interest rates to record lows but business continues to be reluctant to invest.

    Capital investment will fall by a record 25% to $104 b. in 2015/16 compared with what companies expected to spend a year earlier. In the March quarter of this year spending by companies on new equipment and buildings fell 4.4%, the sharpest fall since the global financial crisis.

    In this blog on 30 October last year, see below, I wrote about how Australian business was becoming risk-averse – rather than investing in new ventures it was handing money back to shareholders in share buy-backs and generous dividends. This was at a time when corporate profits were high, but apparently the animal spirits of business was in short supply.

    The Reserve Bank governor, Glen Stevens, has been repeating his frustration about the timidity of Australian business.

    The head of Corporate and Investment Banking at Citi said in the AFR on 21 May this year that the Australian share market has shrunk considerably over the last decade. He said that the All Ordinaries market capitalization had fallen from 1.2% of GDP a decade ago to 0.9%. He commented ‘Australian shareholders focused on getting their money back rather than reinvesting it. … There has been a loss of mojo in Australian boards. There is a conservatism compared to what we see in the US but also a short termism of our fund management industry. … The Australian Bourse is now a capital returns exchange and not a capital raising exchange.’

    It is also significant that a lot of money is being made in property and not in areas such as manufacturing, services, transport, biotechnology and telecommunications. The recent 200 Rich List showed that almost half of our 200 most rich people were in property, retail and financial services. Almost a quarter of the richest 200 were in property. Clearly a lot of money is being made in the low value-added end of the business spectrum. It is often easy pickings for the rent seekers in the property sector to secure favourable zoning outcomes.

    Business will claim that political uncertainty is the problem. And there is some point to that with the lack of credibility in the government’s budget repair policies and the highly political nature of so much of its infrastructure funding.

    But a real problem is the short termism and lack of risk in large parts of our business sector. The frustration of the Reserve Bank is understandable that having pushed interest rates so low, the business sector is not responding with investment.

    Repost: Australian business is ‘too risk averse’ (posted 30/10/2014)

    In August this year the Governor of the Reserve Bank of Australia, Glen Stevens, told a Parliamentary hearing that Australian companies were being ‘too risk averse’ by focusing on sustaining a flow of dividends and returning capital to shareholders rather than investing in future growth.

    Research by Credit Suisse shows that non-financial companies in the ASX increased dividends by $5 billion in the twelve months to June 2014 and cut capital expenditures by $7 billion in the same period. This month the Boston Consulting Group in a new report said that ‘Australian companies paid out twice as much in dividends as their global peers in 2014’. It also commented that ‘Australian companies have been increasingly paying higher and higher dividends over the last four years and therefore investing less over time in their businesses’.

    But these higher dividend payouts are only part of the story. Instead of investing in future growth major Australian companies are engaged in large scale share buybacks. Companies like Telstra, Suncorp and Westfarmers have all been handing back money to shareholders in buybacks.

    These trends in increased dividend payments and share buybacks suggest too much of a focus on short-term returns and lost opportunities for growth.

    A major driver of these increased payouts to shareholders have been executive pay schemes in which remuneration packages are linked to short term business performance and share options. The same phenomenon has been occurring in the US. In the Harvard Business Review of September 2014, Professor William Lazonick at the University of Massachusetts said

    ‘Five years after the official end of the great recession, corporate profits are high and the stock market is booming. Yet most Americans are not sharing in the recovery. … The allocation of corporate profits to stock buybacks deserves much of the blame. Consider the 449 companies in the S & P 500 Index that were publicly listed from 2003 through 2012. During that period those companies used 54% of their earnings – a total of $US2.4 trillion – to buy-back their own stock. … Dividends absorbed an addition 37% of their earnings. That left very little for investments in productive capabilities or higher incomes for employees. … The Chairman and CEO of BlackRock, the world’s largest asset manager wrote in an open letter to corporate America in March “too many companies have cut capital expenditure and even increased debt to boost dividends and increased share buybacks…. Why are such massive resources being directed to stock repurchases? Stock based instruments make up the majority of the pay of [senior] executives and in the short term buybacks drive up stock prices. As a result the very people we rely on to make investments in the productive capabilities that will increase our shared prosperity are instead devoting most of their companies’ profits to uses that will increase their own prosperity.”’

    The showering of shareholders with increased dividends and share buybacks is not helpful to the long term development of new capital investment and new jobs, but it provides enormous benefits to senior executives with shares or share options.

    It is called CEO capitalism.

     

     

     

  • Ian McAuley and Miriam Lyons – Governomics.

    Current Affairs

    Governomics

    Melbourne University Press have just published Governomics. The book is about the role of government and the importance of the public sector.

    The day after Governomics was launched Geraldine Doogue interviewed Miriam Lyons and Ian McAuley on the ABC Radio National program Saturday Extra.

    The case for government

    In a fightback against the “small government” obsession, Ian McAuley and Miriam Lyons have written Governomics: Can we afford small government?

    It was published on May 1 by Melbourne University Press, and, and was covered in an extensive interview on Geraldine Doogue’s Saturday Extra on the following day.

    In their words:

    “This book emerged from the authors’ many years of collaboration at the Centre for Policy Development, Miriam as executive director and Ian as an external fellow.

    In our work together we have seen two strong trends in Australian public life: one is the dominant idea that the best possible government is an emaciated one; the other is that many who seek change struggle to make their case in economic terms.

    In the din of political slogans about the supposed need to cut public expenditure it is easy to lose sight of the sound economic reasons for investing in public education, for resisting the sell-off of public assets, for taking strong action on climate change, for public funding of health care, for regulating to protect safety standards, for providing decent support for aged pensioners and the unemployed, for allowing modest levels of public debt, and for collecting enough tax to fund these services.

    But while there is no shortage of public passion about these issues, such sound economic arguments are rarely articulated. If the economic debate is left to those who stand to prosper from ‘small government’, the community will lose out.

    In our shared and separate work—supervising researchers and interns at the Centre for Policy Development (CPD), teaching students at the University of Canberra and engaging with diverse communities through ideas festivals—we have worked on ways to help people engage with economic issues.”

     

    It’s a timely reminder in this budget period, where the prevailing assumption, largely unquestioned by the media, is that the task of “budget repair” (a term coined by Hockey and repeated by a partisan media) is to be through cutting expenditure.

    McAuley and Lyons remind us that “small government” comes at a cost. The private sector can fill some of the space vacated by government, but we pay dearly for adhering to that ideology.

    We can fund health care through private health insurance, but as I and others have pointed out that’s a very expensive and inequitable way to achieve what Medicare achieves much more fairly and efficiently.

    We can let the public education system run down, and rely on private schools to fill the gap.  But the costs are enormous. As those who can afford to abandon shared health and education services and enclose themselves in their own “gated communities” of private schools and private hospitals, those government services slowly become transformed into services for the poor or “indigent” (to use the demeaning American term). And parents who value sharing, who value social inclusion, find their choice constrained. McAuley and Lyons, drawing on the work of the economic philosopher Thomas Schelling, show how shared services such as health and education systems can unravel into something resembling segregation.

    Their work is a vigorous defence of the “mixed economy” that has contributed so much to our prosperity in the past. It’s a reminder that when Australia federated we deliberately chose the word “Commonwealth” to describe our new nation. McAuley and Lyons present a strong case for defending the common wealth.  John Menadue

     

     

  • Bruce Duncan. Pope Francis and the Abbott government

    Current Affairs

     Pope Francis has repeatedly called for greater social and economic equity in the world, and reiterated the critique of neoliberal economics very strongly. Now he is about to issue an encyclical, the highest form of Church teaching, on the need to reduce carbon emissions and global warming. What will our pollies make of this, especially Catholics in the Coalition government?

    Many observers are deeply puzzled by Abbott’s metamorphosis from being lampooned as ‘Captain Catholic’ into an advocate of neoliberal policies. What has happened to the man who called BA Santamaria one of his mentors?

    Whatever about Santamaria’s politics, he was strenuously opposed to neoliberalism, and all his life argued for the more equitable distribution of wealth and property, believing that this would spur a more responsible democracy, resulting in the wide dispersal of political power through cooperatives and forms of economic democracy.

    Pope Francis has renewed the moral critique of economics and politics. He has highlighted the Church’s opposition to neoliberalism, as it is termed today, which exaggerates the role of market mechanisms and minimises considerations of equity, social justice and fairness.

    Stigliz’s critique of neoliberalism

    Among the many leading economists advising the Vatican has been Joseph E Stiglitz, former chief economist at the World Bank. Stiglitz has warned repeatedly about the danger from the astonishing concentration of wealth in the United States, resulting in the impoverishment of millions. He blamed the ideology of neoliberalism for this, with its naïve view of markets disguising massive rent-seeking, political corruption and manipulation of governments by powerful special interests, including in supposed free-trade agreements drawn up in secret negotiations.

    In his latest book, The Great Divide: Unequal Societies and what we can do about them, Stiglitz again pointed out that the top 1 percent of Americans take nearly a quarter of the nation’s income each year, and control 40 percent of the wealth, leaving almost a quarter of US children under five living in poverty (p. 88, 303).

    By comparison, in 2012 the top 10 percent of Australian earners took home 29.7 percent of Australian income, the highest on record, according to a report from the Melbourne Institute of Applied Economic and Social Research in May.

    Stiglitz called for “significant investments in education, a more progressive tax system, and a tax on financial speculation” (p. 392). In his view, “trickledown economics was totally wrong.” (p.415).

    To increase social equity globally, he supported proposals to include a ninth goal in the Sustainable Development Agenda: to reduce inequality so that by 2030 in no country would the top 10 percent of the population have post-tax income greater than the post-transfer income of the bottom 40 percent (p. 291).

    Following a visit to Australia, Stiglitz warned that the Abbott government did not seem to understand the basic dynamics of “deregulation and liberalization” that were driving increasing inequality and concentrating wealth in the hands of a few. Stiglitz was particularly concerned about the defunding of Australian research and universities. (p. 355-56).

    Pope Francis and Ban Ki-moon on climate change and inequality

    This June Francis will release his encyclical calling for urgent action to tackle climate change, challenging the views of climate deniers and highlighting the issue as a decisive one for Australia as it backslides on emissions’ reduction.

    After meeting the Pope in late April this year, the UN Secretary General, Ban Ki-moon opened a Vatican conference on environment issues and their impact on poorer countries, with many leading development experts present, including Jeffrey Sachs, who helped coordinate the UN Millennium Development Goals.

    Ban said that religious leaders did not claim to be scientists, but could help mobilise the political will to address climate change. “The most vulnerable must be foremost in our thoughts this year as governments construct a global response to climate change and a new framework for sustainable development.”

    He warned that we are “on course for a rise of 4-5 degrees Celsius”, and concluded: “We are the first generation that can end poverty, and the last generation that can avoid the worst impacts of climate change. Future generations will judge us harshly if we fail to uphold our moral and historical responsibilities.”

    Climate change is one of the six main topics for the UN Special Summit in New York in September 2015. Pope Francis will address the United Nations on the first day of this Summit on 25 September, presumably reiterating the main points of the new encyclical, stressing the moral responsibility to redress global warming and eradicate hunger and extreme poverty.

    Our perplexing short-sightedness

    Is Australia pulling its weight in this critical moment, which could well be a catastrophic turning point in the history of humanity? Certainly not on managing climate change, as Pope Francis will indirectly remind us.

    And how about our contribution to eliminating hunger and the worst forms of poverty? The Coalition government has slashed our overseas aid budget savagely, driving our aid from its current 0.32% of GNI to its lowest level at 0.22% of GNI by 2016-17, less than half of what Australia gave in 1971-72 as a proportion of GNI. In the 2014 budget, aid was cut by $7.6 billion over four years, comprising a fifth of all budget savings. In December, another cut followed of $3.7 billion over four years. And to the surprise of Australia’s Foreign Minister, Julie Bishop, another $1 billion disappeared from the 2015-16 budget, reducing Australia’s aid commitment to less than $4 billion a year. By 2017-18, Australia’s aid will fall to 0.82% of government expenditure.

    Australians may rue the day we turned our backs on the needs of our neighbours. Australia’s RAMSI intervention in the Solomon Islands cost about $2.6 billion. Imagine what a failed state in Papua New Guinea or other nearby states would cost. We spend billions of dollars on border protection; we lock up some 1700 asylum seekers on remote Nauru and Manus Island at a cost of over $475,000 a year for each person; yet we refuse to see that improving stability and living conditions in poorer countries is the most humane and constructive approach, and that it is definitely in our national interest, not least because it offers a decent way to manage refugee and migration issues in the long term.

    Let’s hope that the Pope’s encyclical will help the blind to see.

    Fr Bruce Duncan CSsR is one of the founders of the advocacy group, Social Policy Connections, and Director of the Yarra Institute for Religion and Social Policy in Melbourne. This article first appeared in the Social Policy Connections newsletter on 2 June 2015.