Category: Politics

  • Michael Keating. The Financial System Inquiry. Part 3: Investor protection and other matters.

    I am reposting Part 3 of this important series by Michael Keating which was posted during the holiday period.  John Menadue

    Investor protection

    It is now more than 15 years since the present regulatory system was established for the financial system. The basic presumption underpinning that approach to regulation has been that proper disclosure should be relied upon as much as possible. That way it was assumed that investors acting in their own interest would make the best decisions regarding the selection of financial products and services, and through competition thus maximise the efficiency of the system.

    However, the Financial System Inquiry (FSI) has now found that ‘In terms of fair treatment for customers, the current framework is insufficient’, with ‘The most significant problems related to shortcomings in disclosure and financial advice, and over-reliance on financial literacy’.  Furthermore, ‘consumers are taking risks they might not have taken if they were well informed or better advised’. The cost of this ‘poor advice, information imbalances and exploitation of consumer behaviour biases [are estimated by the FSI to] have affected more than 800,000 consumers, with losses totalling more than $5 billion, or $4 billion after compensation and liquidation recoveries’.

    Part of the problem is the complexity of the financial system, which in turn is partly a response to regulation and taxation distortions. But the complexity also reflects the desire to provide consumer choice and flexibility, with a wide variety of financial products and services, which is constantly being augmented by further innovation. In other words there is a trade-off between complexity and choice, and this makes consumer protection more difficult.

    One solution that many customers have adopted in response to this complexity is to rely heavily on financial advisors. Unfortunately some of these advisors have received inducements or are under pressure to not always act in the best interests of their customers, but instead to direct the customer to a preferred product or service. Of course such conduct should be illegal, and the FSI has recommendations to tighten regulation to prevent this sort of behaviour.

    Another problem, however, is the competency of the financial advisers themselves. There is considerable survey evidence that many financial advisers do not have adequate knowledge of the products they are recommending and an appreciation of the risks involved. In particular, the FSI research suggests that some financial planners have limited knowledge of the longevity risk for someone considering retirement and how it can be managed.  Accordingly the FSI has recommended that the competency of financial advisers should be raised, with a relevant tertiary degree being the minimum standard, plus additional competence for those advising in specialised areas such as superannuation. In principle this seems like a good idea, but it may prove difficult to implement, especially quickly because of shortages of suitably qualified advisors, and it will add to costs.

    A second stream of recommendations relate to improving the information to the consumer. An interesting example is the recommendation that member statements from superannuation funds should include a projection of their retirement income, with the Australian Tax Office assisting members to consolidate this information where they have more than one superannuation fund. The FSI cites research showing that giving consumers retirement income projections improves their engagement with saving for retirement, and helps them make more informed decisions about their retirement savings.

    Finally a third stream of recommendations, to assist customers to make better decisions in their own interest, relate to new products tailored to the needs of customers which can then be their default selection. For example, introduction of the comprehensive income product for retirement (CIPR), discussed in my previous comment on superannuation, would involve the trustees of a fund pre-selecting a suitable CIPR option on behalf of the members. This would typically improve retirement incomes, thus better meeting the needs of members in an accumulation superannuation scheme, and while such pre-selected options have been found to influence behaviour positively, they do not limit a member’s personal choice and freedom.

    Other matters

    For reasons of space these three comments on the FSI report have not covered its consideration of innovation and regulation and associated recommendations. In brief, perhaps the most interesting conclusions in this regard are

    • How the financial system can make more and better use of digital technology, and that
    • Australia’s regulatory architecture does not need major change, but because sometimes regulation inevitably involves difficult judgements there should be a regular process that allows the Government to assess the overall performance of financial regulators.

    Conclusion

    One of the strengths of the FSI report is that while it lays out a path for reform of the financial system, it leaves the details to be settled by the appropriate regulator. That seems sensible because of the technical nature of the judgements involved and because it is desirable to settle these details in consultation with those affected.

    Overall there is no reason to disagree with the FSI’s conclusion that the net result of its recommendations would be to:

    • Encourage an efficient financial system that allocates scarce financial resources for the greatest benefit for the economy
    • Promote competition
    • Strengthen the resilience of the financial system, and
    • Lift the value of the superannuation system and retirement incomes

    Furthermore I doubt that there will be much opposition to most of the recommendations and so they should be relatively easy for the Government to adopt. The most difficult areas may be superannuation, if only because of the number of people affected and the importance of their stake in superannuation. The ‘observations’ by the FSI about taxation may well provoke more controversy, but this can only be determined following the Government’s separate review of taxation. Personally I think the Government would be well advised to pursue the changes to the taxation of superannuation first recommended by the Henry Review back in 2009 and now supported by the FSI. Indeed it is difficult to think of an easier option for Budget repair, while dramatically improving fairness and making little or no difference to the rate of household saving.

    So as I suggested at the beginning of these three comments on the FSI Review, I think this report and the other reports that are in the pipeline may well provide the Abbott Government with the opportunity to develop a genuine reform strategy for the Australian economy which it can then take to the next election. In these circumstances the Opposition would also be well advised to consider its position on these issues. Indeed the great shame is that it allowed the Henry Report on taxation to languish while it was in government. It is now not too late to repair that damage to its credibility, but time may well be short.

  • Robert Douglas. Senate report on Australian inequality.

    Bridging our growing divide: Inequality in Australia is an important report tabled without fanfare in the Senate by its Community Affairs References Committee. The report is clearly argued and well-buttressed by data and references. The points it makes about an issue central to the kind of society we are developing in Australia deserve wide community discussion.

    The inquiry terms of reference called for a review of the extent of income inequality, the rate at which it is increasing and its impacts on access to health, housing, education and work.

    The senators were also asked to inquire into specific impacts on disadvantaged groups. These included the likely impact of government policies – especially 2014-15 budget measures – on rates of inequality, the principles that should underpin social security payments and practical measures that government could implement to address inequality.

    The six-month inquiry engaged 13 senators – five from the ALP, five from the Liberal Party, two Greens and one independent. The 273-page report, tabled in December 2014, drew on 64 written submissions and seven public hearings involving 59 witnesses from government and voluntary agencies around the nation.

    The report makes it clear the non-government representatives reached consensus on the key findings. The government members, led by Zed Seselja, were uncomfortable with the conclusions. They tabled a dissenting report.

    I was a co-author of a report by the Australia21/Australia Institute, Advance Australia Fair? What to do about growing inequality in Australia. This was released in mid-2014. I met the committee as a witness and spoke about the origins of the report in a roundtable of experts at Parliament House in January 2014.

    Arising from that rich discussion we proposed ten ways to move to a fairer Australia. These included promoting a national conversation about inequality, its effects and ways of dealing with it.

    The stark inequalities of Australian wealth feature on the cover of the Advance Australia Fair? report. Australia21/Australia Institute
    Click to enlarge

    What did the inquiry find?

    The committee’s majority report states that income inequality has increased in Australia since the mid-1980s. It asserts that the budget measures will be likely to exacerbate income inequality and poverty. The report emphasises that the Newstart payment is too low – for a single adult recipient it is more than A$100 per week below the poverty line.

    The report points to the important role of the minimum wage and the fact that lower incomes are associated with poorer health outcomes. In addition, low transfer payments or low incomes often compound the disadvantage felt by groups such as Aboriginal and Torres Strait Islander peoples, people with disability, people living with mental illness, single parents and new migrants.

    It also argues the need to consider how the income-support system can assist the large and growing group of people with insecure work. The report notes that regional variations in labour markets can seriously limit people’s employment opportunities.

    It goes on to underline the importance of Commonwealth rent assistance and of long waiting lists to enter public and social housing. According to the report, a decent wage is the best way to lift people out of household stress.

    Finally, the report discusses the importance of a one-on-one approach for reconnecting people with education, training and employment opportunities. It argues the need to invest in programs that connect with young people at risk of leaving school early, that develop tailored training for workers aged 50 and above and that provide long-term unemployed people with mentors.

    The report makes 13 recommendations to act on these key findings.

    The Senate report cites research that suggests the public differs from the government on the urgency of acting to reduce inequality. Australian National University, Australia Election Study 1987–2013, CC BY-NC-ND
    Click to enlarge

    What is the government position?

    The government senators’ dissenting report affirms that Australia is a prosperous egalitarian society, which provides security and opportunity for all. It argues that while Australia has some significant issues with poverty and much can be done to improve opportunity and circumstances for all Australians, the majority report adds little to the debate. It says history has shown that a strong economy that provides employment is the best way to build a prosperous society.

    The dissenting senators say arbitrary comparisons between relative income levels pale in significance compared to Australia’s capacity to grow wealth and lift people out of poverty through employment and education. The majority report fails to make the case that inequality is driving poor socioeconomic outcomes, they say, and does not meaningfully engage with budget policies to improve these outcomes.

    The five-page dissenting report has a single recommendation:

    That the Senate implements the government agenda to build a strong and prosperous economy for the benefit of all Australians.

    That this is the government members’ response to inequality in Australia shows why the public needs to join the debate.

    Robert Douglas is Emeritus Professor, National Centre for Epidemiology and Population Health at ANU. This article first appeared in The Conversation on 13 January 2015.

  • Ian Coller. Liberty, equality, fraternity: redefining ‘French’ values in the wake of Charlie Hebdo.

    Beyond the tourist fantasy of the Louvre and the Eiffel Tower, France today is a fabulously colourful mixture of Christians, Muslims, Jews, Buddhists, Hindus, atheists. This is the situation all over Europe. Yet many Europeans are deeply uneasy with this diversity.

    The names of Charlie Hebdo victims reveal the diversity hidden by the Je suis Charlie hashtag: cartoonists and writers Charb, Cabu, Wolinski; psychoanalyst Elsa Cayat; proofreader Mustapha Ourrad; policemen Franck Brinsolaro and Ahmed Merabet; two students killed in a kosher supermarket, Yoav Hattab and Yohan Cohen.

    Yet media and government often still refer to Muslims as “them”: tolerated foreigners, immigrants graciously accorded rights by the state. And Muslims often respond by considering themselves unwanted outsiders, even enemies.

    Until the Second World War, many believed that Jews could not be French. That lie was at the heart of the Dreyfus Affair that tore the country in two. Under the Nazi occupation, millions of Jews were arrested across Europe and sent to their deaths. Since the 1980s, France has come to terms with the ugly truth about its role in those deportations. When it comes to Islam, however, many Europeans still suffer from historical amnesia.

    Most French people forget that Algeria was part of France for 130 years. They are unaware that the current Republic was born out of the bitter struggle over Algerian independence. France’s colonial domination extended through Asia, Africa, the Caribbean and the Pacific, but its heart was in the Muslim lands. Algeria became an integral territory of France after the Revolution of 1848.

    In that year French men were the first to gain universal suffrage. Muslims, however, were excluded from voting for almost a century. Only after 1945 could Muslim men vote, along with French women. It took another 13 years for Muslim women to gain that basic right.

    The Fourth Republic collapsed in 1958, when settlers fighting to keep Algeria French carried out a wave of terrorist attacks across France, culminating in an attempted coup d’état. Wartime leader Charles de Gaulle was hurriedly recalled and given emergency powers.

    Against violent settler opposition, de Gaulle signed Algeria’s independence in 1962. A million European settlers, along with hundreds of thousands of Algerians, crossed the Mediterranean to France. French companies kept their lucrative interests in petroleum and mining. The two countries remained indissolubly linked.

    Yet after decolonisation, most French citizens simply erased the colonies like a bad dream. Algerians could not do the same. In the 1990s, things turned nasty after the secular, French-backed regime in Algiers annulled elections won by an Islamist party. A bloody civil war broke out, killing more than 100,000 people. For Algerians in France, this horror left trauma, distrust and anger.

    In 1995, the violence hit France when a bomb in the Paris subway left eight people dead. The atrocity ramped up French support for the authoritarian Algerian regime’s “war on terror”.

    At home, the Muslim headscarf was increasingly targeted as a dangerous symbol of defiance against French secularism. The authorities banned the hijab in public schools, and made face covering in public illegal. Women wearing facial veils could be arrested in the street, forced to undergo searches, or pay fines. Rather than promoting secular freedoms, these laws fanned extremism, and pushed Muslims further to the margins.

    A position once associated with the far-right, denouncing the loss of “French identity”, has now moved into the centre, where even elements of the former Left have joined it. The French values trumpeted by this republican fundamentalism are abstractions that have little connection to the reality of French society. Freedom of speech is one of these.

    Right-wingers and libertarians alike enthusiastically applauded Charlie Hebdo’s bravery for publishing cartoons offensive to Muslims. Yet it is not clear what they were actually meant to achieve. To insist on abstract principle over negotiation, respect and compromise is what we usually think of as fanaticism.

    Leaders of the fascist-leaning Front National (FN), eager to profit from the potential backlash, now mourn a magazine that consistently reviled them. Je suis Charlie, agreed former leader Jean-Marie Le Pen – adding that he meant Charles Martel, who expelled Muslims from France in the Middle Ages.

    The attackers, French citizens of Algerian descent, also saw things in black and white. Their Islamist beliefs were built on a violent rejection of difference, a refusal to tolerate disagreement, dissent and compromise. This virulent religious nationalism is a mirror of movements like FN that rely on fear of Islam to build their constituency.

    But all is not lost. Asked what he was thinking during the minute of silence for the victims, one man said he was staring at the words on the column before him. Liberty, Equality, Fraternity.

    These are not French values. They belong to everyone. They are not easy, nor are they unstained by violence. Heads on pikes, the guillotine, wars, revolutions: it took a century of struggle for French people to agree on these words. They were almost lost in the brutality of colonial oppression, in the dark years of the German occupation and the anti-Semitism that some French people – including, sadly, many Muslims—perpetuate even today.

    We must confront the past in its richness and its ugliness. France has never been the postcard fantasy of cheese and baguettes. There have always been Muslims, Jews and Christians in France. As one Muslim wrote during the French Revolution:

    No matter where I first drew breath, or the religion in which I was born, we are brothers.

    Many Muslims feel the same today.

    Of liberty, equality and fraternity, the last is the biggest challenge. It is not just an idea but a way of life with deep roots in the French tradition. It is equally familiar in Islam. Fraternity is more than solidarity. It asks us to engage in the difficult project of living together, not as “us” and “them”, not in black and white, but in celebration of the vibrant colour that is Europe today.

    Ian Coller is senior lecturer in History at Latrobe University. This article first appeared in The Conversation on 13 January 2015.

  • Michael Keating. The Financial System Inquiry. Part 1: Resilience of the Financial System.

    I am reposting this important article in case you missed it during the holiday period.  John Menadue

    With its budget stalled the Abbott Government has often appeared to be floundering and devoid of any long term economic plan or strategy. But this appearance may be deceptive. In fact the Abbott Government has established major inquiries into the financial system, federalism and taxation. Taken together these reports could provide the basis for a comprehensive package of major reforms for the Government to at least announce, even if not complete, before the next election. Ideally that reform package would also include a review leading to a better integration of policy for retirement incomes; where many of the relevant issues have already been touched on by the recently released report on the Financial System and by the Henry Tax review (released five years ago, but except for the ill-fated mining tax, largely ignored since).

    In this comment I will discuss one of these building blocks – the report by the Financial System Inquiry (FSI) chaired by David Murray. The report considers two general themes – removing distortions to the funding of the Australian economy and allowing competition to drive efficiency – and it also has 38 recommendations covering five specific themes:

    • Strengthen the economy by making the financial system more resilient,
    • Lift the value of the superannuation system and retirement incomes,
    • Drive economic growth and productivity through settings that promote innovation,
    • Enhance confidence and trust by creating an environment in which financial firms treat customers fairly,
    • Enhance regulator independence and accountability, and minimise the need for future regulation.

    In addition the FSI Report has another 6 recommendations covering some significant matters that do not fit neatly under the five themes above, and the Report has a number of observations (but not recommendations) about changes to the tax system, which the FSI believes should be considered as part of the process in train for reviewing the tax system.

    Although the FSI Report has not received a lot of media attention it does seem to have been well received. Personally I think there is a good chance that the Government, after a period of consultation, will adopt many of the recommendations, although as I will identify there are a few recommendations that may be opposed by various interest groups.

    In this posting I will comment on the recommendations which are intended to:

    • Make the financial system more resilient, and
    • Increase efficiency through improved competition

    In two subsequent postings I will discuss

    • the proposed changes affecting superannuation, and
    • investor protection and some other related issues

    In the space available it is not possible to cover all the report and all its recommendations, and so I will concentrate on what I consider to be the most important.

    Resilience of the Financial System

    The FSI found that historically Australia has maintained a strong and stable financial system. At its core is the banking system and its safety is of paramount importance. The Australian banking system is, however, very concentrated, unusually dependent on foreign capital inflows, and exposed to fluctuating terms of trade, so that the Australian banks need to be better positioned than most. Accordingly the FSI recommends setting capital ratios for the Australian banks so that they are in top quartile of internationally active banks, and this in a world where the international standards for capital ratios are being raised. There was some expectation that the major banks would oppose this recommendation, arguing that it would reduce bank dividends and/or increase bank margins thus damaging economic growth. But the report shows that such fears have been greatly over-stated[1], and since the release of the report, the major banks seem to have decided that a fight over this recommendation is not worth it, and they seem likely to agree.

    Other key recommendations to improve the resilience of the banking system are:

    1. Increase the risk weighting for mortgages held by the big banks. At present the big banks are able to shrink their mortgage books to just 18 per cent of their real size for the purpose of calculating minimum capital levels, and the FSI has recommended that this risk weighting should be increased to between 25 and 30 per cent, with the exact decision to be made by the regulator, the Australian Prudential Regulatory Authority. This recommendation will also make the smaller regional banks more competitive because they can only risk weight their mortgages down to 39 per cent of their true value.
    2. Change the tax treatment of investor housing, which the FSI found presently ‘tends to encourage leveraged and speculative investment’, to the point where ‘Housing is a potential source of systemic risk for the financial system and the economy’. Accordingly the specific suggestion by the FSI is that the capital gains tax concessions for assets held longer than a year should be reviewed. In this context the FSI also recommends that superannuation funds should no longer be able to borrow to finance investments in property. This recommendation may prove particularly controversial with the owners of self-managed superannuation funds which have increased their borrowings by almost 18 times over the last five years from $497m in June 2009 to $8.7bn in June 2014. This leveraging up of these superannuation funds has not only made them more risky, but if they fail some of the risk is transferred to the taxpayer, as the owners of the funds then become eligible for the pension.

    In my opinion all the recommendations to improve the resilience of the financial system should be supported. The Global Financial Crisis has reminded us very forcibly of the problems that arise when an institution is considered to be ‘too big to be allowed to fail’.  I agree with the FSI that its package of recommendations to improve the resiliency of the financial system ‘would make institutions less susceptible to shocks and the system less prone to crises. It would reduce the costs of crises when they do happen … and minimise the cost to taxpayers, Government and the broader economy from the [inevitable] risks in the financial system.’

    Efficiency and Competition

    The FSI found that the primary driver of efficiency in the financial system is competition, and overall the Inquiry considered that ‘competition is generally adequate’. The FSI was, however, properly critical of the lack of competition in the superannuation industry (see more in next posting), and personally I was disappointed that the FSI did not pursue competition in the banking industry with the same vigour as it applied to the superannuation industry. From a lay point of view, some of the banking margins (eg. foreign exchange transactions) look excessive, but this was not seriously examined in this review. However, another aspect of some of the recommendations already discussed is that they should improve competition. In particular, the recommendations regarding risk weighting of assets will help make the second tier banks more competitive and overall the FSI is probably correct that its recommendations will help small business in particular gain improved access to funding.

     

    [1] The FSI calculated that increasing the capital ratios by one percentage point would increase average loan interest rates by less than 0.1 percentage point which could reduce GDP by 0.01-0.1 per cent. This seems a reasonable insurance cost against the potential losses from a financial crisis that challenged the solvency of the financial system. For example, on the basis of recent international experience, the FSI suggests that ‘the average financial crisis could see 900,000 additional Australians out of work, … [and] the average total cost of a crisis is around 63 per cent of annual, GDP, and the cost of a severe crisis is around 158 per cent of annual GDP’.

  • Chris Clohessy. Bad reading leads to destructive religion.

    The recent terror attacks in France have highlighted a number of issues, all needing further discussion. One is the reality that it took an attack on European soil to provoke such a reaction – 1.6 million people marching in Paris, led by forty or more world leaders. But militant groups, under Islamic guise, have been slaughtering people for an extended period of time – in Nigeria, in Pakistan, in Syria and Iraq – in the last few weeks Boko Haram terrorists have killed over two thousand in Nigeria. The world reaction, compared to its reaction to Paris, has been negligible, suggesting an inconsistency in the way we value human life.
    A second issue is whether free speech can legitimately include hate speech. The reason that I don’t walk down the street calling out racial or bigoted epithets at people of colour, or of a particular culture or religion, is because I am neither a racist nor prejudiced against people who are different, but also because such behaviour is profoundly wrong. In that sense, I quite rightly do not have complete freedom of speech: both the civil law and the moral law forbid speech that is hateful: leading one to ponder whether the now popular #jesuischarlie slogan believes that bigoted or hateful speech is a permissible part of free speech. Charlie Hebdo is an unpleasant publication: not satire, for satire is subtle and clever, but simply crude, bigoted and unfunny. Those who speak in its defence insist that religion is an idea, and that ideas can be attacked. But Muhammad, or Pope Benedict or Jesus of Nazareth are not ideas: they are people, and Charlie Hebdo attacks them brutally and regularly. In 1946 the judges at Nuremburg unanimously sentenced to death a Nazi named Julius Streicher. He had never killed anyone: but he did publish an appalling newspaper call Der Stürmer, which incited anti-Semitic feeling mostly by its cartoons caricaturing members of the Jewish faith. So, can free speech legitimately include hate speech? If not, then we don’t have freedom of speech: and who knows, maybe that’s not a bad thing after all.
    But no cartoon could ever be as offensive as the taking of a single human life: the slaughter of men, women and children, young and old, armed and unarmed, Christian, Muslim, Jewish, Yazidis and so many others in the last few months by men and women claiming to act in the name of Islam, remains the most pressing issue. It is not because these are educated Muslims living Qur’anic principles that the massacres are happening, but because they are uneducated people, Islamic only in name or in the slogans they carry, who consistently fail to read their sacred texts correctly. A sacred text cannot be read and then acted out: there is a middle step, that of authentic interpretation which, if bypassed, leads to all sorts of fundamentalisms. The issue with the Qur’an is not whether it exhorts to violence – at times it does – but whether or not those exhortations were for their time only, or whether they have a universal and timeless validity. As long as a portion of people read their text incorrectly, we will continue to experience behaviour in the name of religion which is destructive and  life-threatening.
    *Fr Chris Clohessy is Parish Priest of Newlands/Claremont in the Archdiocese of Cape Town. He is South Africa’s leading Catholic Scholar in Islamic Studies and wrote this guest column for the Jesuit Institute.
  • John Menadue. Why are the Nordics so successful? Part 2.

    You might be interested in part 2 of these articles on the Nordics.

    In my earlier postcard from Denmark, I described the Nordic success.

    I didn’t mention that they are rated the happiest people in the world, have the lowest rates of corruption and are on track to achieve their target of 50% renewable energy by 2020. Copenhagen is a very liveable city.

    But why have Denmark and other Nordics, Finland, Sweden and Norway been so successful?

    Obviously a small country like Denmark with less than six million people has advantages in terms of social cohesion. A small population makes for stronger personal and community ties, and national unity. But a smaller population does not have the advantages of scale although with higher value added production this is probably less of a problem than in earlier years.

    Amongst their other features, the Vikings were great traders. That tradition continues today with Danes actively pursuing overseas markets. The people are well equipped to do so. In my admittedly brief stay in Copenhagen I did not find any local who was not reasonably fluent in English. It contrasts sharply with our failures in developing Asian languages to equip us in our region.

    In the 1970s and early 1980’s Denmark came to the conclusion that it’s remarkably high taxes and high welfare was not sustainable. Changes needed to be made, but in the process they did not shred everything from the old model. The country continues to have high taxes and provides very generous welfare. This reflects the close linking of national identity and social responsibility which is central to Denmark’s welfare model.

    On discovering that the old social democratic consensus was no longer working, Denmark let some of it go with remarkably little fuss and introduced new ideas from across the political spectrum. They were determined to push through reforms. There was a hard-headedness and pragmatism about it.

    This pragmatism explains why the new consensus so quickly replaced the old one. Few social democratic politicians now want to dismantle the conservative reforms put in place in recent years. Denmark has seen an amalgam of left and right wing policies that are broadly agreed across the community. Winners don’t take all in Denmark. Compromise is essential. A left wing coalition led by Social Democrats and Social Liberals was returned to power in 2011.

    An underlying factor in the successful changes in recent years has been strong trust in government. The Danes do not see the state as a dead hand. They see government as enabling opportunity, promoting individual autonomy and social mobility. They trust their government and politicians to a remarkable degree. What a contrast it is to Australia.

    This Danish trust in institutions is quite remarkable. A survey by the European Commission in November 2012 found that 53% of Danes had public trust in institutions. In Europe it was only 32%. By comparison in Australia, Essential Media reports that our ‘trust in institutions’ ranges from above 50% for the High Court, the ABC and the Reserve Bank but down to 20% or lower for trade unions, business groups and political parties. We have a long way to go to catch up to the Danes and other Nordics in trust in public institutions. We badly need to renew our public institutions that have been badly damaged. Just think of the deliberately created chaos in our last Parliament.

    Trust in government has been a feature in Denmark for centuries. That results in high quality people joining the public service. Citizens and companies pay their high taxes without a great deal of complaint, and play by the rules. Government decisions are widely accepted and few go to the courts to settle disputes.

    This trust in institutions is reflected in the fact that Danes expect their public leaders to keep their word. In his History of Denmark, Professor Knud J.V.Jespersen puts it this way.

    The fundamental attitude of modern Danes is that the state is a friend and ally, not adversary, a protector and not an enemy. This is very much an unconscious result of the fact that for generations, the Danes have been accustomed to a state of law fashioned by the Danish Law to express… the relationship between the individual, society as a whole and the state. … The code stated that any promise intended to create obligations of a legal nature should be considered as binding irrespective of the form of the promise and whether it related to commerce or any other contractual circumstance. Even a verbal promise to give a present or to sell a property was considered as binding as if it had been in writing. … It is still true in Denmark that a man is a man, his word is his word, and should anyone in public life in modern Denmark fail to deliver on his word or promise, the public will judge him accordingly….

    The most recent and spectacular example of this was when the previous Prime Minister, Poul Nyrup Rasmussen made a public promise in the run-up to the 1998 elections not to tamper with the rules for early retirement. When he did so anyway, after forming a government, he was embroiled in a crisis of confidence from which he never recovered. He lost the next election in 2001, not so much because he had chipped away at the system of early retirement benefits, which most people anyway thought was a sensible thing to do, but because he had breached a fundamental principle of Danish Law, the binding contract, which dates back to the Fifth Book of the Danish Law.’

    As part of this trust in government Danes insist on honesty and transparency. They insist on rigorous scrutiny with access to almost all official records.

    In the economic sphere, they let the economy rip but underpin that very liberal approach with support and retraining for those who are unemployed. The labour market is very flexible. Universal and free education encourages all students, regardless of social background, to achieve their potential. In taxation, husbands and wives are treated separately and on equal footing. Universal day-care for children makes it possible for both parents to work full time. This Danish emphasis on building human capital is not only a key to greater equity but major economic benefits.

    That commitment to human capital development is dramatically shown in its support for skilling in architecture, design and film.

    The Danes have clung to a strong public funder in health and have refused to go down the path of subsidised, costly and inequitable private health insurance

    The Danes have clearly shown the benefits of getting a few important things right. They are pragmatic enough to make major changes when necessary. We could learn something from that in Australia at the present time.

    At its core, the Danes have trust in institutions and government in particular. They see the government as a positive influence. Freeloading by any group or person is not tolerated. Governments in turn must earn that trust. Trust is perhaps a little fuzzy and hard to define. But we instinctively know it is essential in both private and public life.

    The greatest damage to public trust in my lifetime was the dismissal of the Whitlam Government in 1975.Our Governor General and High Court Justices deceived the Prime Minister and damaged our public institutions. We have not recovered from that appalling episode. Our ‘betters’ who extol the importance of institutions and the value of conventions, trust and tradition were the very people who caused such damage.

    We could learn from the Danes about good governance and trust, and the importance of developing human capital. They are the keys to their success.

     

  • John Menadue. What does Labor stand for? Part 6

    You might interested in this repost of part 6 on the economic role of government.

    The economic role of government

    In addition to key principles the second immediate issue is the economic role of government. Those who would benefit from weak and distrusted government have deliberately undermined the legitimacy of the public sector.

    We are often told that there is really no difference between the major parties. In some respects that is unfortunately true but I suggest there is a major and continuing difference. And that difference is over the role of government. The Labor Party has always rejected the view set out in the Liberal Platform ‘that only businesses and individuals are the creators of wealth and employment’

    Australians have been encouraged to forget that their prosperity is based on both public and private goods. To many people government has become ‘invisible’, except as a vehicle for distributive welfare. Australians have lost sight of the contribution of the mixed economy, not only in providing public goods, but also in ensuring that the forces of greed and short-sightedness don’t lead to economic and social collapse. It is noteworthy that despite the continued denigration of government and the public sector, the three most trusted institutions in Australia are public institutions – the High Court, the ABC and the Reserve Bank. In the survey by Essential Research there was not a private group in the top eight most trusted groups and institutions in Australia. The three least trusted groups were business, trade unions and political parties.

    Even conservatives acknowledge that only the public sector can provide some services such as national defence and management of the money supply. In addition, however there are economic functions where private funding or provision is possible but only at high economic cost, with distorted incentives and with serious consequences for equity. These include education, health insurance, energy and water utilities and communication and transport infrastructure. In these and other areas there are market failures for which prudent economic principles require a strong government role in funding or provision. Unless Labor articulates and defends the proper economic role of government – a pre-requisite to improving Australia’s weak taxation base – economic growth will be restrained by inadequate public spending and investment.

    Of these investments, the most important is human capital to ensure that people can develop their capabilities so that they can contribute to their full potential through employment, business or unpaid work. In the competitive global economy of this century, human capital is a nation’s only secure asset. Scandinavian countries demonstrate this. A population with skills and with incentives which match rewards to contribution will draw less on distributive welfare, preserving public revenue for needed social insurance and public goods. The best antidote to disadvantage and low self-esteem is not welfare but well paid and meaningful employment.

    Labor will find it hard to make these investments if it allows itself to be depicted as the party of big welfare spending. In fact conservative governments, because of under-investment in human capital and physical infrastructure, and neglect of economic adjustment, have spent strongly on distributive welfare to compensate for inequalities rising from a weakened economic structure. Over the last 50 years, social security assistance has risen from 5% of Australians’ household disposable income to 12%. Examples of this expanded social security assistance are baby-bonuses, family allowances and superannuation concessions for the wealthy. Governments are moving to wind back some middle class welfare, but the justification is more about immediate budgetary management rather than an expression of principles. Rather, Labor should be the party which ensures that Australia becomes less reliant on distributive welfare. Instead of referring to ‘the education revolution’ in isolation, it should present its human capital policies in the context of a unified set of principles in infrastructure, education, health, environmental  protection, underpinned by principles of investing in capabilities, nurturing individual freedom and autonomy and supporting social inclusion.

    There is an opportunity to differentiate Labor from what has emerged as continuity between Howard and Abbott in that both are strong on distributive welfare while ready to sacrifice other aspects of government which would strengthen the economy’s capacity to provide well-paid and productive employment with less need for social transfers.

    A reframing of policy in terms of strengthening the economy in order to reduce the need for distributive welfare would not only neutralise the ‘right’s’ attack on Labor as the party of the welfare state but would also give a unifying theme to many policies. It would link policies in industry adjustment, infrastructure, education, health and social inclusion. It would overcome the false framing of a trade-off between equity and efficiency. It would give Labor parliamentarians an opportunity to engage more openly with the public without the need for spin and carefully prepared texts.

     

    In the last 5 blogs I have argued that Labor should be explicit about the principles that drive policies and programs. Those key principles were

    Fairness

    Freedom

    Citizenship

    Stewardship and

    Ethical responsibility

    In addition to these principles Labor should stand for democratic renewal, including of itself and the key role of government in a strong economy and society.

     

  • John Menadue. Postcard from Denmark on the Nordic Success

    For holiday reading, you may be interested in this repost.

    I have been interested for many years in the economic and social success of the Nordic countries, Sweden, Denmark, Finland and Norway. Together they have a population of about 26 million.

    But what triggered my recent interest and decision to visit Denmark was the sheer pleasure of watching several Danish TV series –Borgen, The Killing, The Bridge. They are the best TV series that I have seen in years and far superior to the tosh that we often get from the US and sometimes from the UK. The Danish film industry receives government finance, but more importantly the Danes have invested heavily in human capital and the talent shows in these TV series. Portrayal of a country’s cultural life is important for the country to understand itself better. But in the case of Danish films, I have found them attractive enough to come and visit Copenhagen and spend some tourist dollars. Although I should say that Copenhagen is expensive.

    In 2012, the World Economic Forum and several related agencies ranked the four Nordic countries the best performing in the world. The ratings covered global competitiveness, ease of doing business, global innovation, corruption perception, human development and prosperity. Whilst the Nordics ranked 1 to 4 in the world, Australia ranked number 12.

    Last year The Economist, a conservative magazine, published a special survey of ‘The next supermodel’. The Nordics were the supermodel. It said ‘If you had to be reborn anywhere in the world as a person with average talents and income, you would want to be a Viking. The Nordics cluster at the top of league tables of everything from economic competitiveness to social health to happiness. They have avoided both southern Europe’s economic sclerosis and America’s extreme inequality. Development theorists have taken to calling successful modernisation “getting to Denmark”.’

    It added ‘The Nordics also offer something for the progressive Left by proving that it is possible to combine competitive capitalism with a large state; they employ 30% of their workforce in the public sector compared with an OECD average of 15%. They are stout free-traders who resist the temptation to intervene even to protect iconic companies. Sweden let Saab go bankrupt and Volvo is now owned by China’s Geely. But they also focus on the long-term – most obviously through Norway’s ($US884billion) sovereign wealth fund and they look for ways to temper capitalism’s harsher effects. Denmark, for instance, has a system of “flexicurity” that makes it easier for employers to sack people, but provides support and training for the unemployed. Finland organises venture capital networks.’

    The Nordics have traditionally had high taxes and high welfare spending along with strong economic growth and low unemployment. But the global financial crisis and membership of the European Union has forced readjustment and reform to reduce taxes and welfare spending.

    These changes are broadly supported by all the major parties. But the sales tax on new cars is still 180%. There are also heavy fuel and parking charges. This shows up in Copenhagen where it is one of the few major cities in the world not being strangled by cars. On the road you have to watch out for bicycles as much as cars. The 25% VAT includes food and restaurants.

    Taxes generally are amongst the highest in the world but the community seems broadly to accept them because it is confident that the government will spend the tax money for worthwhile purposes and with equity.

    In Denmark there are two or three strong parties and four or five other significant parties. No party has won an outright majority since 1901. No single party has formed a government alone since 1982. With multi parties, negotiation and compromise is essential. The record shows that new governments maintain the thrust of previous government policies although making changes around the edges.

    Capitalism is given a fairly free hand and there is acceptance that firms will go bust. But the Danes and others go all out to protect the most valuable resource, their human capital. People who lose their jobs through structural change are given good income support and meaningful retraining.

    The Danes have excellent schools and government funded and free health care. They root out corruption and rent seekers. If only we would do the same! Denmark has one of the most liberal labor markets in Europe with a very high rate of social mobility. In information technology and the internet they are ahead of most. 79% of eligible men work and 72% of eligible women work. Child care is readily available. The Danish gross government debt as a proportion of GDP is well below the US and Europe.

    In Denmark there is a strong tradition of different classes getting along with each other which is not surprising with such a small population (5 million) and a strong neighbour like Germany to the south.

    The absolutist monarchy took serious note of the French Revolution and decided that their survival depended on not resisting democracy and living modestly. Politicians think that it is smarter to be seen riding a bike to work rather than using a government limousine.

    The Nordic model is still work in progress with many changes necessary with I suspect more means testing. But they have probably reached the future ahead of others and are grappling with problems that others will face in the years ahead.

    The major stain on public life in Denmark, as it is with so many other countries in Europe, and even in far-away Australia, is the xenophobic attacks against refugees and migrants by political conservatives. Only last weekend in neighbouring Sweden the anti-immigration party, Sweden Democratic, polled 13% of the vote.

    In my next postcard from Denmark, I will try to describe why the Nordics and Denmark in particular have been so successful, despite high taxes, generous social services and more recently, significant increases in refugees at least compared with the size of their populations.

    Obviously organisation is easier in countries with small populations, but I suspect that the most important reason for Denmark’s success is good government. The Danish people see government not as a dead hand or the purveyor of red tape, but very largely an enabler of opportunity and freedom.

     

     

  • John Menadue. What does Labor stand for. Part 1

    You might be interested in this repost .  It was part 1 of a six part series. Part 6 will be reposted tomorrow.  John Menadue

    Labor’s constituency

    The Labor primary vote has declined from about 45-50% fifty years ago to 35-40% today. Labor has lost its clear identity with the ‘working class’ and what it stands for. Its natural constituency and membership has declined. To contain the loss, Labor has increasingly committed itself to focus groups, marginal seat strategies and ‘whatever it takes’. Values, principles and ideas have given way to marketing of products .Money has replaced membership as the driving force of campaigns. The trade unions remain the most important institutional Labor supporter. The unions have a proud record but their influence is out of proportion to their role in the community and the ‘Labor constituency’.

    Principles as the basis for policy

    If Labor is to differentiate itself from conservative parties, it needs to express that difference in a clear set of principles which accord with the best of Australians’ values. Otherwise the political contest is reduced to satisfying short-term materialist ‘aspirations’, appeasing vested interests and managing the media cycle. In such a contest, Labor is engaged in a futile struggle, for the Coalition is adept at conveying the misleading impression that it is the ‘natural party of government’, particularly because of its supposed competence in economic management. Joe Hockey’s performance as Treasurer shows that this supposed competence is a myth but conservative commentators still persist with the myth.

    From community values a set of principles of public policy can be developed – principles which define Labor in contrast to other parties. Those principles can underpin a coherent set of policies and programs which implement those policies.

    Values > principles > policies > programs.

    Moving to the ‘right’ on issues such as refugee policy and health care simply legitimises the conservative position – a position from where exploitation of people’s fear is likely to drive out sensible and reasonable political debate. Selectively compromising – a little socialism here, a little free market there – as was the strategy of Britain’s New Labour – only confuses Labor supporters and the electorate because it presents inconsistent values.

    Social democrat parties, including Labor, were founded on an optimistic view of human nature and on recognition of the public sphere where people realise their full capabilities. These ideas can be expressed in consistent and coherent principles such as stewardship, the common wealth, including enhancement of social, environmental and institutional capital and protection of natural resources.

    In his emphasis on the ‘social question’, John Curtin gave effect to these principles, acknowledging that only a strong society, including a strong and respected government, can support a strong economy. And of course there is no point in an economy that does not serve social ends.

    Curtin’s social democratic vision contrasts sharply with the Liberal Party platform ‘that only businesses and individuals are the creators of wealth and employment’, a view that reduces government to a burden rather than a contributor to the common wealth. Curtin’s vision contrasts with the notion that ‘a rising tide lifts all boats’, which legitimises destructive social divisions, which encourages people to separate themselves from society in physical or metaphorical gated communities (private schools, private health insurance), which allows the connection between contribution and reward to be severed, which encourages rent-seeking, speculation and protection of privilege rather than productive investment and which compensates the ‘losers’ with social security handouts.

    Just as Labor governments provided leadership to face great challenges in the 1980s, so too today Australia faces even greater challenges – climate change, population ageing, dilapidated infrastructure, commodity based exports, deficits in human capital and a weak base for public revenue. The politics of ‘what’s in it for me’ discourages us from facing these challenges, for there will have to be trade-offs: some will have to pay more than others and some will have to forego benefits now for the sake of longer term benefits. Such transitions can be painful, but are more likely to gain support when people understand the principles underpinning public policy.

    When the Labor Party is unified around a set of principles it can still have a robust debate about how to give effect to those principles. But it would be in control of its message because its parliamentary representatives can engage with the electorate in a consistent and sincere voice, with less reliance on ‘talking points’ and spin and with less concern with the immediate reaction of focus groups. Labor supporters would be much more prepared to accept political compromise if they know that there is strong leadership and there is broad agreement on key values and principles. Labor leadership has to be patient and consistent around these values and principles – and never go backwards. Authenticity and sincerity are then easily recognised.

     

  • John Menadue. Be careful what you wish for.

    You may be interested in this repost.  John Menadue

     

    Be careful what you wish for.

    With the Victorian election result the Labor Party may be hoping to see the demise of Tony Abbott in the New Year. But it should be careful what it hopes for.

    Gough Whitlam successfully crippled Billy Snedden as the leader of the Liberal Party in 1974 and got Malcolm Fraser in his place, a much more substantial leader.

    Paul Keating pulled the rug from under Alexander Downer and got John Howard instead. We know that John Howard proved to be a much more formidable opponent than Alexander Downer.

    What if Tony Abbott was deposed or stood aside and a new leader, after a brief honeymoon, went to an early election?

    What is not clear at this stage is when Rupert Murdoch will tap Tony Abbott on the shoulder and tell him that he is no longer marketable and that a new leader would be easier to sell!

    Sitting behind the serious problems of the Liberal Party is a nagging concern, what does the Labor Party stand for?

  • Andrew Podger. Integrating aged pensions and superannuation.

    Just as the Abbott government sorely needs a coherent health policy, welfare policy and family assistance policy, it should also put time and effort in 2015 into investing in a coherent approach to retirement incomes instead of focusing narrowly on the age pension.

    The budget measures are being stymied by the Senate, not because of poor communications, but because they simply do not stack up as fair and reasonable.

    David Murray’s FSI offers a more considered approach though it too only covers part of the retirement incomes system. Perhaps its most important contribution is Murray’s simple admonition to articulate in legislation the objectives of the superannuation system, the primary one being, ‘to provide income in retirement to substitute or supplement the age pension’.

    The wider retirement incomes system in fact has two objectives:

    1. The alleviation of poverty amongst the aged (addressed mainly by the age pension); and
    2. The maintenance of income and living standards at and through retirement (addressed mainly by superannuation).

    Australia’s ‘multi-pillared’ system (to use the language of the World Bank) has considerable strengths. Its ‘foundation pillar’, the age pension financed by general revenue, addresses poverty alleviation effectively and efficiently. Instead of a ‘pillar one’ national superannuation scheme with unfunded promised benefits, we have ‘pillar two’ mandated contributions and ‘pillar three’ tax-encouraged voluntary savings which are mostly fully funded. In theory at least, our approach imposes less risk on governments and future taxpayers.

    But there are significant weaknesses. The tax concessions for pillars 2 and 3 are very substantial and skewed to those on high incomes; the accumulated savings are not directed efficiently or effectively into retirement incomes; the transaction costs are high; and the system is very complex and places an undue burden on individuals, particularly on older people whose cognitive ability may be impaired (indeed, few financial advisers have an adequate understanding of superannuation products, tax arrangements and the means test). These weaknesses greatly overshadow those the Government has so far tried to address through its proposed age pension measures.

    Murray suggests changes to tax arrangements that would address the scale and distribution of the concessions for consideration through the White Paper process. The scale of the tax expenditures may be of the order of $10 billion (using a comprehensive consumption tax benchmark) rather than the $30 billion (using the comprehensive income tax benchmark) more commonly and inappropriately used, but this is still large, and it is even more skewed to the rich.

    Murray’s suggestions follow the Henry Report approach: taxing contributions at individuals’ marginal tax rates less 20 per cent, and applying a standard (low) tax on fund earnings whether individuals are in the accumulation or de-accumulation phase.

    As Murray highlights, our system’s greatest weakness is in the de-accumulation phase. Too much of the accumulated savings are taken in the form of lump sums and allocated pensions, and too little in the form of annuities or other forms of longevity insurance, with the result that many retirement incomes are lower than they could be, too much is left in unplanned bequests and too many rely on the age pension for their longevity insurance.

    Murray does not go as far as I would in regulating the de-accumulation phase, but he is certainly heading in the right direction. He recommends that funds be required to pre-select a comprehensive income product (which includes insurance against longevity risk) as a default option that individuals would not be required to accept. He believes that most people would accept such a product or buy some other form of insurance against longevity and not rely so much on the age pension, and that as a result they would in fact consume more in retirement knowing they are adequately insured. My own preference would be to mandate some form of deferred lifetime annuity, not only to reduce reliance on the age pension and enhance living standards in retirement, but also to limit opportunities for tax avoidance.

    Murray complements these proposals by recommending the removal of regulatory obstacles to longevity insurance products and greater competition to reduce fees.

    Two other aspects of the system were not within his terms of reference: pension indexation and the age pension age, the only aspects so far addressed by the Government.

    The Government rightly wants to move away from indexation based on average earnings (AWOTE). This index will move faster than community incomes as the population ages. But while CPI would protect the real incomes of pensioners, it is not appropriate as the sole adjustment factor in the longer-term. This will be most obvious to all if the Government sticks to it in February’s Inter-Generational Report: forty years of CPI-only indexation will reveal a dramatic reduction (up to a third) in the pension relative to community incomes.

    There is a case for some reduction in the relative level of the pension. Rudd’s costly increase in 2009 following the Harmer Report (which was in response to Abbott’s reckless promise of a $30 a week increase) contributed much of the sharp increase in social security outlays in recent years and crowded out much higher priority increases in assistance for the unemployed, sole parents and those in private rental accommodation.

    Once appropriate relativities are in place, all social security payments need to be regularly adjusted by more than CPI to maintain them. Biennial independent reviews should be set in legislation so that appropriate adjustments are made beyond automatic CPI indexation.

    The Government’s proposal to increase the age pension age to 70 is over-the-top – the currently legislated increase to 67 comes on top of the very cost effective measures since the 1990s to phase out wives’ pensions, widow class B pensions and pensions for women under 65. We do not need to press everyone to work until age 70.

    As Murray demonstrates, there are much better ways to improve the retirement incomes system, and to make budgetary savings.

    Andrew Podger is Professor of Public Policy at ANU. He was formerly Secretary of the Department of Health and Ageing.

     

    This article was first published in the AFR on 6 January 2015.

     

     

  • Héctor Abad Faciolince : Against Submission

    I am forever indebted to the Catholic Church and Cardinal Alfonso López Trujillo.  When I was a happy and irreverent twenty year old student at the Pontifical University, I published an article in which I openly insulted the Holy Father.

    “The Meddling Pope”, it was called. I say that I am forever indebted to the Church because at that time, they restricted themselves to expelling me from the Universidad Pontificia Boliviariana (with three other iconoclast friends) when, according to the time honoured Catholic tradition, the correct thing to do would have been to burn us at the stake, make a public example of us, put us on trial for blasphemy, and deliver us over to the secular arm to put us on the rack until we died from the pain. But no, they did me the simple favour of expelling me, and as a result I went to a good university, the University of Antioquia, and ended up travelling to Italy to study literature.

    I mention this incident because it illustrates very well the welcome change that has occurred within the Catholic Church and within Catholic countries after so many centuries of evolution. The Protestant Reformation and the smiling Enlightenment philosophers, in my opinion, tamed Catholicism. After the Protestant split there came the century of the Enlightenment. Voltaire and Diderot used the wonderful weapon of laughter to teach the Church (well, not counting the diehards like Archbishop Lefebvre and his followers) the difficult virtue of tolerance. The Church accepted that if religious wars were to be avoided, it would have to put up with other forms of Christian belief, and it would also have to put up with non-believers, satirists, atheists and anyone who makes fun of religion.

    Much of Islam is still in the medieval phase of their beliefs. The timing coincides: Mohammed started preaching in 622CE. If we take this number from 2014, we can see that they are still at the year 1392 of their history: they are still living in the time of the Crusades, the fatwas and the jihads. The Renaissance had hardly stuck out its nose, the Americas had not been discovered, and they were still a century away from Luther and three centuries away from Voltaire and Diderot. They are riveted by their beliefs, and they have no qualms about imposing the death penalty for adultery, blasphemy, apostasy and atheism. And its most extreme factions commit barbarities like those that occurred in Paris this week. It is true that using historical transpositions and simple arithmetic is very simplistic. The medieval phenomenon, like the current Islamist one is more complex than a few simple dates. Despite there being a kernel of truth in this generalization it overlooks something very important: while Islamic terrorism is governed by a pre-modern ideology, it uses contemporary weapons that cause a lot of damage: rifles, planes, cars and mobile phones.

    The Charlie Hebdo Weekly used (and it will continue using it against fanatics!) the best weapon against violence and fanaticism in the best tradition of the French Enlightenment: making people think by making them laugh. Using caricature and ferocious criticism, they laugh at Jews, Muslims, Catholics, capitalists etc. This publication is not in the least a weapon of the racist and colonial Right, as some ignorant local people think – they sacked an anti-Semite from the editorial staff. It was (and continues to be!) an iconoclast and libertarian publication. For them, the pope, the prophet, Israel and even freedom of expression are not sacred. They subject everything to critical scrutiny, and put it to the supreme test of scorn and mockery.

    Charlie Hebdo’s last title page before the attack referred to a political fantasy – a kind of futurist novel – which is being published this week in France: Submission. In it they make fun of its author, Michel Houellebecq, predicting that he will lose his teeth this year, 2015, and what he will do at Ramadan in 2022.These predictions follow on from the catastrophic fantasy of the novel that narrates the nightmare of France governed by the Islamists, where the women are paid not to work, and where university professors have to convert to Islam (a word which in fact means “submission”) or resign. Terrorism teaches us that the time has come to struggle against submission. We cannot submit to its horrific blackmail. All of us, whether Muslims (“muslim” means, submitting to God), or non-believers, have to fight against submission using laughter and reason.

     

    Héctor Abad Faciolince, is a Colombian author and columnist for the Colombian daily, El Espectador. This is his column of 11 January 2015, translated by Kieran Tapsell and published with their permission:

    http://www.elespectador.com/opinion/contra-sumision-columna-537248

  • Building more roads is not 21st century thinking.

    In my blog of 3 January, I discussed our love affair with cars and how cars are crippling our cities.

    In the SMH on January 12 this year, Jacob Saulwick takes up the issue of our failure to face up to the futility and cost of building more roads. See link below to the article. John Menadue.

     

    http://www.smh.com.au/business/building-more-roads-is-not-21st-century-thinking-20150111-12lstx.html

  • John Dwyer. Medicare changes – why on earth would a young doctor want to be a GP?

    In case you missed it, this is a repost of a blog that I posted on 12 December last year.  It is highly relevant to the continuing debate about copayments and general practice.  John Menadue.

    The most distressing feature of the government’s determination to have us pay more for a visit to our GP is its the total lack of vision for the structural reforms we should be discussing to provide Australians with Primary Care services that meet contemporary needs, are equitable and more cost effective. Instead of focussing on new models of care that around the world have been shown to achieve better health outcomes than we enjoy in Australia, the  $5 reduction in the remuneration for a standard GP consultation will make matters worse. The logic associated with this latest initiative is seriously flawed. Placing the money saved into a research fund means that the proposed reduction will do nothing for the budgets bottom line, the imperative presented to us in the May budget.

    The Government wants to send a “price signal” to Australians to remind us that no longer can we expect Medicare to be free. Australian taxpayers provide every cent of the 19 billion dollars we spend each year on Medicare. If you pay to join a tennis club but do not pay extra for having a game of tennis you don’t consider that game to have been free. There is in fact plenty of evidence that current additional expenses associated with Primary Care see many delay seeking help and unable to afford prescribed medicines. Our out of pocket expenses for health care top 29 billion dollars a year, on a per capita basis, second only to the United States.

    Australians on average, make five visits per year to a GP.  That does not suggest that we are abusing our entitlement to Primary Care services such that we need to be discouraged from visiting our doctor. With health expenditure at 9.3% of GDP there is no health budget crisis and there is time to make structural reforms that would achieve better outcomes and continue to make our expenditure sustainable.

    The truth is that many of us need to visit a GP more frequently if we are to avoid the pain and suffering associated with chronic disease, the problem that is eating up the majority of our health care dollars. Many rural Australians, whose health outcomes are disgracefully inferior to those of their city cousins, would willingly consult a GP more frequently if there were GPs to consult. If Rural Australians accessed Medicare funded services as frequently as urban Australians the cost to Medicare would be an additional two billion dollars.

    The future availability of sufficient numbers of general partitioners is already problematic. Only 13% of young doctors express any interest in becoming a “GP”. Only one percent are contemplating a career as a rural GP. Primary Care training is rigorous and GPs are true specialists. How does all the rhetoric from Canberra about the pivotal role they play sit with the proposed $31 fee for a standard consultation? Given the training required and the responsibility associated with medical care this fee is frankly insulting. The discrepancy in the income potential for GPs when compared to that of other specialists is now huge. No wonder young doctors considering career options are increasingly ruling out Primary Care. The ability of GPs to consider “bulk billing” the majority of their patients is only possible if the total remuneration they receive is satisfactory. Bulk billing doctors will not be able to absorb the five-dollar cut in the Medicare rebate and are appalled by the added levels of bureaucracy and paper work that the new arrangements will entail.

    Young doctors looking at the professional life of our GPs are uncomfortable with the current “fee for service” model which encourages “turnstile” medicine that is so professionally unfulfilling. Many GPs join corporate Primary Care providers preferring a salary. In New Zealand the government has facilitated 85% of the nation’s GPs moving away from “fee for service” payments. The same is true for 65% of US Primary Care physicians.  Throughout the OECD health systems recognising the perverse incentives associated with fee for service remuneration are exploring changes that increase a GP’s remuneration for keeping people well.

    Were it not for the destructive division of health care responsibilities shouldered by State and Federal governments, Canberra would not be looking at Medicare as if were in isolated from the rest of the health care system. Hospital expenditure, at more than 50 billion dollars per year, dwarfs Medicare spending and is increasing more rapidly. There is now abundant international evidence that we should be spending more on Primary Care services to reduce the spiralling cost of hospital services and at the same time achieving better health outcomes for the community. Just this week the UK government has been presented with a review that concluded that an extra 72 million pounds spent on improving Primary Care in the community would save the system 1.9 billion pounds by 2020! The future of quality hospital care in our country is totally dependent on reducing demand for hospital services through better Primary Care.

    A competent government would be looking at the way we can introduce the highly successful “Medical Home” model of Primary care where teams of health professionals populate a practice and are available to enrolled patients. The infrastructure is available to help people avoid illness, have potential problems recognised earlier, offer coordinated “in house” care for people with chronic problems and care for many in the community currently sent to hospital. But no, all we discuss is this five-dollar impoverished initiative. The Abbott government should abandon this latest plan and start a dialogue with health professionals and the community about needed structural reforms that would extract far more health from the available dollars.

     

    Professor John Dwyer is Emeritus Professor of Medicine UNSW.

  • Charlie Hebdo – Freedom of expression in an imperfect society.

    In this article, Paul McGeough in the SMH says ‘Yes, it is utterly inappropriate to go round shooting those who cause offence, but is it appropriate to go round causing offence?’ Paul McGeough also recalled that when Charlie Hebdo republished the controversial Danish cartoons of the prophet Muhammad in 2006, then French President Jacques Chirac issued a swift rebuke.  ‘Anything that can hurt the convictions of someone else, in particular religious convictions, should be avoided – freedom of expression should be exercised in a spirit of responsibility’. John Menadue

    http://www.smh.com.au/world/charlie-hebdo-total-freedom-of-expression-has-little-chance-of-survival-in-an-imperfect-society-20150112-12mgih.html

  • John Menadue. Mission creep in Iraq again

    I have reposted below my blog of September 1 last year about the developing pattern of mission-creep in Iraq. Now, four months later, we are seeing it happening again. Last week in Iraq Tony Abbott made it clear that Australia was receptive to any further requests to send more Australian military to Iraq. 

    Tony Abbott, with John Howard, have both been part of our disastrous intervention in Iraq. We now intend to continue and expand it. 

    War is a serious business, but Tony Abbott doesn’t seem to think so, given how easily he makes one military commitment after another. Last week he was pictured admiring the vinyl decal stickers on the side of an RAAF fighter denoting each Iraq bombing mission. What a thoughtless, provocative piece of stupidity to have decals on our fighter in the first place, let alone having the Australian Prime Minister looking on approvingly.

    The mission creep continues and how obviously our Prime Minister seems to be enjoying it.  

     

    In an excellent article in the SMH  [31.8.2014], Paul McGeough writes of our still being at the beck and call of the US and the mission creep already evident as we rejoin the war in Iraq.

    http://www.smh.com.au/federal-politics/political-opinion/australia-still-at-americas-beck-and-call-20140831-10albb.html

    Have we forgotten Vietnam and all the other disastrous wars that we have got involved in at the request of the US? Invariably they started with humanitarian aid, then advisers, then logistics support and all the way from there to full-scale military involvement in causes we didn’t understand – except that the US was an ally and we had to be loyal. In Vietnam we lost with disastrous consequences for ourselves, but mainly for the Vietnamese people. In Vietnam and later in Iraq and Afghanistan our role steadily expanded. We are already seeing this mission creep again today in northern Iraq.

    We are now committed again to Iraq whilst refusing debate in our parliament. We were told by the Minister for Defence that ‘Were we to delay making decisions as the events confront us, people’s lives will be seriously at risk.’  This is an echo of the false reasoning we have been given in the past. Just forget that our ill-advised decision to join the war in Iraq was based on flawed information and costs hundreds of thousands of Iraqi lives. That foreign intervention in Iraq sowed the seeds of the disaster we are now seeing in that country. For centuries foreign interests have failed dismally in trying to control events in Iraq and Afghanistan. Don’t we ever learn?

    Our latest commitment to help the people of Iraq began as humanitarian air-drops. Now we are to provide arms to a break-away province in the north of Iraq. In that province there are strong elements of the Kurdistan Workers’ Party which is a proscribed terrorist organisation. How will we ensure that the arms we are supplying will not finish in the hands of the PKK?

    The mission creep has occurred quickly. It has now moved from humanitarian and military supplies to include our Special Air Services to protect air drops of food and deliveries of weapons. It won’t be long before the SAS is asked to extend its role.

    But what are our ‘friends’ doing to combat the Iraqi State? There is speculation at the moment rather than clear information that IS is receiving support from some of our friends.

    • France, Switzerland, Austria and Spain seem to have paid ransom money to IS for the release of their nationals. Presumably that has been done with the support of those governments. It is estimated that over the last five years IS has earned Pds75 million in ransoms for more than 50 European captives.
    • The Director of the Centre for Research and the Arabian World at the University of Mainz in Germany has commented recently that ‘The most important source of ISIS funding to date has been support coming out of the Gulf States, primarily Saudi Arabia, Qatar, Kuwait and UAE. Aren’t these countries our friends with strong trade, investment and aviation links? The Director added ‘Saudi citizens now compose the largest contingent of foreign fighters in ISIS.’ He commented further that the funding was ‘less from the Saudi Government than rich Saudis’.

    IS is also drawing on local resources. It looted the Central Bank in Mosul of $US429 million. The Iraqi Army that we had helped train fled and left their uniforms and weapons behind. IS has access to oil wells in Syria and Northern Iraq.  In the same way as the mafia it extorts taxes from businesses and individuals.

    Surely we should be told more about what is involved in our recent rejoining of the war and what we are attempting to do, and how we will avoid the mistakes of the past. Surely the Australian Parliament should be the primary forum for this debate. With Simon Crean as Leader of the Opposition the ALP opposed our joining the US invasion of Iraq in 2003. That same leadership is sadly lacking today.

    In terms of our own security, we will now be less safe. The head of ASIO has told us.

  • Charlie Hebdo and Algeria.

    Robert Fisk of The Independent traces the Charlie Hebdo massacre back to the French occupation and disaster in Algeria. See link to this article below.

    http://www.independent.co.uk/voices/comment/charlie-hebdo-paris-attack-brothers-campaign-of-terror-can-be-traced-back-to-algeria-in-1954-9969184.html

  • Allan Patience. Liberty or Narcissism?

    On the Need for a Wider Debate about Charlie Hebdo
     
    No one can justify the recent brutal murders of the French journalists and police in Paris. However, the belief that this act constitutes an attack on free speech and freedom of the press is in grave danger of being over-stated. What is missing in the debate so far is the understanding that there is a particularly fine line between satirizing people’s beliefs and values and insulting them.
     
    When Attorney-General George Brandis asserted that freedom of speech meant people had the right to be bigots, many Australians disagreed with him. They took the view that to taunt or disparage people gratuitously, because of their ethnicity, religion, age, disability, or gender, is unacceptable – even un-Australian. The Brandis defence of bigotry springs from a perverted version of liberalism driven by extremist ideological assumptions that can only lead to a narcissitic and conflict-ridden society.  
     
    Moreover those who rejected Brandis’ view were aware that licensing bigotry all too easily leads to blowback. History shows that people who live under the yolk of unrelenting bigotry, with its associated discriminations and cruelties, have nothing to lose. It is inevitable some at least (especially the alienated young) will turn to irrational and violent actions that are at the very core of extremism. They have no other choice.
     
    In the neo-liberal West there is an increasing insensitivity to the fragile distinction between satirizing peoples and their traditions and being insulting about them. On too many occasions crassness has supplanted subtlety. We hear this almost every day on shock-jock radio and we read it in the splenetic columns of doctrinaire journalists – all claiming to be exercising the freedom of the media as they spread misinformation and inflame prejudice among a gullible public.
     
    This failure to distinguish between satire and insult is symptomatic of cultural arrogance in the West. It is based on moral insecurity and a particularly egocentric form of nihilism. It fosters a corralling of “us” (the “West”) while sneering at “them” (the “Rest”) in ways that can only bring suffering to everyone. The old adage that we shall reap what we sow is as relevant now as it was when it was coined. While witty caricatures of powers-that-be are permissible – even necessary – treating peoples’ cherished beliefs and sacred values with contempt is simply not. It is spiritually wounding to the perpetrators and socially destructive for everyone, especially those at whom it is targeted.
     
    Without doubt there are valuable insights to be gained from intelligent satire – including cartoons – that highlight the foibles, hypocrisy and dishonesty of our own politicians, prelates, public pontificators, pugilists, and anyone else who seeks to exercise authority over us – or bully us. But we should tread sensitively and respectfully when it comes to caricaturing people with whose religio-cultural understandings we are unfamiliar – or perhaps ignorant.
     
    Western liberalism is not the ultimate repository of all human wisdom. Far from it. In a judiciously cosmopolitan world the great and little traditions of humanity’s cultural evolution need to be conversing with each other as never before – with understanding (Max Weber’s Verstehen), mutual respect, frankness, and a genuine desire to explore the common ground they (we) all share. That common ground is broader and more solid than many glibly informed Western liberals understand, or even want to know about. Their positivist certainties wrap them in a dogmatic belief in their own absolutist beliefs that have all the marks of fundamentalism. Their blinkered rationalism and blind faith in scientistic solutions to absolutely everything is a major threat to a humane and cosmopolitan future for our beleaguered planet.    
     
    It’s time to draw breath and ask whether Charlie Hebdo is as liberally innocent and culturally iconic as its outraged Western defenders would have us believe. Those defenders need to acknowledge that among its undoubted wit and sharp insights it has also indulged in levels of cynicism and self-righteousness that are quite as egregious as the bad religion it purports to expose and oppose.
     
     
    Allan Patience is a principal fellow in the Asia Institute in the University of Melbourne. He has held chairs in politics and Asian studies in universities in Australia, Papua New Guinea and Japan:
  • John Menadue. If I were a Muslim…

    The brutality and assasination of the editors and cartoonists of Charlie Hebdo must be condemned. Those responsible must face and perhaps have faced the full consequences.

    But if I were a Muslim, I would have been offended by the Charlie Hebdo cartoons. They were not a critique of Islam but gratuitous insults. I expect my Christian faith to be respected. Religious tolerance requires respect for other people’s beliefs.  The cartoonists at Charlie Hebdo did not do that.

    We live in a fragile and pluralistic world and we must be aware of the consequences of what we do and say. Surely that is what fraternity and solidarity is about – respecting the rights and beliefs of others.

    Both the New York Times and The Guardian have refused to publish the Charlie Hebdo cartoons. I believe that shows mature judgement.

    Charles Walton of the the University of Warwick sets out in the link below the problem when free speech becomes a kind of fundamentalism. This article was published in The Conversation on 9 January.

    http://theconversation.com/when-free-speech-becomes-a-kind-of-fundamentalism-36039

    Extremism in any religion is a major concern. We need to consciously build relations with moderate Islam so that the extremists can be isolated. Building relations with Islam goes far beyond anti terrorism action. It involves economic, social and political action so that young Muslims in particular are not isolated in frustration and urban ghettoes.

    The west has exploited the Middle East and antagonised Islam from the time of the Christian Crusades. The Middle East has been attacked, colonised and its resources exploited. That inevitably leaves a legacy of hostility.  That hostility must be addressed on a range of fronts.

    Andrew MacLeod in The New Daily writes about the need for the West to undertake a wide range of activities that will encourage and support moderate Muslims and at the same time isolate extremists. The link to this article is below.

    http://thenewdaily.com.au/news/2015/01/09/must-rethink-islam/?utm_medium=email&utm_campaign=The+New+Daily+Saturday+10115&utm_content=The+New+Daily+Saturday+10115+CID_c2ce349d983fb49cc7796b4c588d8994&utm_source=&utm_term=Why+a+heavy+handed+approach+to+Islamic+extremism+will+not+work#.VLGlodSO5uc.gmail

  • Corporate tax avoidance.

    The Parliamentary Library has prepared a report for the Senate inquiry into corporate tax avoidance.  The report provides background on this issue as well as a summary of what other countries are proposing to address corporate tax avoidance by multinational companies. See link to report below.  John Menadue

    http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/FlagPost/2014/December/Senate_inquiry_into_corporate_tax_avoidance

  • A taxing tale of two peak bodies.

     

    In the SMH on 2 January, Michael West drew attention to the ways that two BCAs were treated differently. The Blind Citizens Australia (BCA) learned that it had been subject to federal government funding cuts. Another BCA, the Business Council of Australia, did much better. ‘Only a week earlier the government had backflipped on a proposed tax-avoidance reform entailing some $600 million in tax deductions that multinational companies could claim on interest on their debts in offshore subsidiaries.’ For the full story from Michael West see link below.  John Mendue

    http://www.smh.com.au/business/a-taxing-tale-of-two-peak-bodies-20150101-12gcty.html

  • Max Corden. Without revenue, Australia can only have half a budget debate.

    The missing element in this week’s mid-year economic and fiscal outlook, and more broadly, in current government policy, stares Australians in the face. Revenue needs to be increased. Increasing taxes, reducing tax concessions and eliminating loopholes are all options, which I and other commentators have argued for.

    For example, journalist Peter Martin has shown that if compulsory superannuation contributions were taxed as income, i.e. like wages (rather than being taxed at a concessional rate) there would be a net gain to the budget of approximately A$12 billion a year. But there are many other measures to consider, all designed to increase revenue. Prominent is the ending of negative gearing.

    Many of these possibilities, and more, were discussed in the Henry tax review, with many more expected to be discussed in the forthcoming white paper on tax reform. But this should have been the first order of business. This is where the solution to the “budget crisis” lies. There is, indeed, no reason why there should be a crisis.

    Corporations and households all borrow – and as a result go into debt. Why can’t governments do the same? At present Australia’s federal public debt is modest (relative to GDP) compared with the debt of most comparable countries. Why then create this air of panic or, at least, guilt?

    Click to enlarge

    There are two explanations.

    The first is that the Coalition has demonised deficits. In its view Labor produced deficits for several years but it – the Coalition – will produce surpluses by some specified time. It seems they believed in the demons they created, and as a result made unwise promises. Perhaps they genuinely believe that deficits are “bad””. Some of them even thought that the deficits of 2008-9, which were produced deliberately for Keynesian reasons to avoid excessive unemployment during the global financial crisis, were dangerous.

    There is a second, more rational, explanation for being concerned about budget deficits and setting the attainment of a surplus as a target. Too much debt leads to having to pay higher interest rates and, with the accumulation of debt, a bigger burden on the budget. All this is obvious. But there is the problem of political discipline. Less discipline on spending leads to more debt. Someone who has a tendency to alcoholism is wise to stay off alcohol altogether. This is the argument from prudence. But it can be carried to extremes, as it is at present.

    It is quite surprising that in the mid-year update there is a massive concern about a budget deficit and the objective of getting to surplus, relative to a concern about the state of the economy at a time when there is excessive unemployment. Is the government’s focus sensible?

    Click to enlarge

    The blame game

    Treasurer Joe Hockey blames (1) the sharp fall in the iron ore price, (2) the Senate and (3) the adverse inheritance from the previous government. With regard to commodity prices, one can never foresee world price changes precisely, but way back in the Howard years, when the iron ore price rose so much, there were plenty of people who saw the probability – not the certainty – of a later decline, and recommended caution (Ross Garnaut was one of them).

    With regard to the cross-bench Senators, they have reflected public opinion. They simply bear out the observation that the biases of the budget, as originally presented by the Treasurer, were not in tune with Australian historical attitudes and public opinion.

    Click to enlarge

    To what extent are the policy decisions of previous governments to blame for excessive spending commitments? The Gonski education reforms and the proposed establishment of a Disability Insurance Scheme under the Gillard government can take some of the blame. Perhaps there were other (possibly irresponsible) decisions as well. But what the budget statement seems to ignore is the severe harm done by the “Howard Gift”, namely the five personal income tax reductions and superannuation concessions of the Howard Coalition government.

    The elephant in the room

    Commentators like me are sometimes accused of being “economic rationalists”. Well, this is an area where more rational thinking is needed. The GST might be broadened and increased (though Hockey seems loathe to do so). Even the carbon tax might be reinstated, since it would both help to finance the budget substantially and bring about a desirable reduction in carbon emission. Both these widely-canvassed and very rational ideas, while economically sound, would encounter political and public opposition, particularly the broadening of the GST. Bipartisanship is needed here.

    Given the missing elephant of revenue, the mid-year update can be summarised as follows: Government spending can and will be cut, but the possibility of increasing revenue is not considered. The Australian government is required to live within its means, the means being defined as ruling out measures that generate extra revenues. The aim is to minimise the size of government irrespective of the purposes and efficiencies of the various governmental activities.

    The only hopeful sign is the admirable recent decision of the government to produce its tax white paper in 2015, which presumably includes the possibility of increasing revenue – the missing element in the budget update.

    Max Corden is Professorial Fellow in the department of Economics at University of Melbourne.

    This article first appeared in ‘The Conversation’ 19 December 2014.

  • Israel must be its own worst enemy.

    The Palestinians have requested that they join the International Criminal Court. It could be a double-edged sword if both Palestinian and Israelis were brought before the International Court. But most people would believe that joining the International Court would be an important way to demonstrate that the Palestinians wanted to join the international community and be subject to its norms.

    But both Israel and the US opposed the request. Robert Fisk in The Independent on 6 January this year underscores the futility of policies in the Middle East.  See link below. John Menadue.

    http://www.independent.co.uk/voices/comment/robert-fisk-the-real-reason-why-israel-and-the-us-dont-want-palestine-to-join-the-international-criminal-court-9956751.html?utm_source=indynewsletter&utm_medium=email05012015

  • John Menadue. Is the state being captured by special interests?

    In his recent book, ‘The Origin of Political Order and Political Decay’ Francis Fukuyama of ‘End of History’ fame, focuses on how even developed and democratic societies can be captured by powerful vested interests. He suggests that this has happened in the US with the coalition of extremists in big business, the Republican Party and the Tea Party.

    First there was the crippling of the political process in the US with money and lobbying; then followed the capture of the state.

    It is a warning for us. We have the institutions of democracy- responsible government, a parliamentary system, the rule of law and a ‘free’ press. But we run a serious risk of these institutions being hollowed out by powerful, wealthy and unrepresentative vested interests.  In Australia we are seeing what Ross Garnaut has called a ‘diabolical problem’, the power of the polluter lobby. Ken Henry has spoken of the appalling public debate on key issues.

    Perhaps the only US lobby group that we are not tracking is the gun lobby

    There is no better illustration of the threats we face than donations by the rich and powerful to buy favours from political parties and the state. The US sets an appalling precedent with its Supreme Court opening the flood gates for political donations.

    Our mining sector has an effective veto on mining tax reform. For $20 million the mining lobby threatened the elected government and saved itself billions of dollars in tax. Will any Australian government in future ever seriously address reform of our mining taxes?

    The payment of tax in Australia by many wealthy people and large corporations is optional. It is costing us tens of billions of dollars each year. Fifty seven percent of our ASX100 companies have subsidiaries in tax havens. One third of the top ASX200 companies pay company taxes of 10 % or less. The statutory rate is 30%. We need to hear from senior executives before a Royal Commission how  companies like Westfields, Glencore, Ikea, Google, Apple and News Ltd can avoid so much tax.

    Wealthy and powerful interests are handed out tax benefits in superannuation deductions, capital gains, negative gearing, family trusts, salary packaging and subsidies to coal, oil and gas companies. Yet we are told that we have to cut back on welfare concessions to fund the disability program. Australian government expenditure is one of the lowest in the developed world but wealthy interests keep proposing cuts to government spending and cuts in taxation.

    With over 60% of newspaper circulations in Australia, News Ltd is a major supporter of vested interests including Big Tobacco. It is an obstacle to informed debate on key public issues. News Ltd aided our disastrous involvement in Iraq and is vehemently opposes serious action on carbon emissions. News Ltd is polluting the public debate in Australia more than any other company.

    The ABC is under attack by News Ltd and other powerful interests.

    With journalists under-resourced, the media depends increasingly on the propaganda and promotion put into the public arena by vested interests. The Australian Centre for Independent Journalism at UTS found in a survey of major metropolitan newspapers published in Australia in 2010 that 55% of content was driven by public relations handouts from lobbyists and their associated public relations arms.

    There are over 900 full time independent lobbyists working in Canberra. That is over 30 lobbyists for every Cabinet minister. On top of these third party lobbyists there are special interests who conduct their own lobbying, e.g. Australian Mining Council and Australian Pharmacy Guild. On top of these lobbyists in Canberra, there are the lobbyists in state capitals. These lobbyists encompass the whole range of interests; mining, clubs, hospitals, private health funds, business and hotels that have all successfully challenged government policy and the public interest.  They are doing great damage in undermining the public interest.

    The health ‘debate’ is really between the Minister and the Australian Medical Association which opposes workforce reform, the Australian Pharmacy Guild that restricts competition, Medicines Australia which exploits its monopoly pricing power and the private health insurance companies which get a taxpayer funded subsidy of over $6 b per annum to undermine Medicare. All these vested interests effectively push aside the public interest.

    The wealthy private schools, with their influential alumni, lobby against needs-based funding which is necessary for both equity and efficiency.

    Most of the business economists that we see on television to ‘inform’ us are employees of banks and other financial institutions. They are unlikely to tell us about the conflict of interest of financial advisers employed by the banks. Public intellectuals have gone missing in action.

    Many of the ‘think tanks’ that pose as independent are funded by secret and  powerful interests. Yet we take them seriously.

    The wealthy polluters successfully destroyed an emission trading scheme and the carbon tax. We no longer have any credible program to reduce carbon emissions.

    We have seen enormous concessions given to casino operators without proper public processes and transparency.  The casino operators lobby both sides of politics.

    The wealthy and powerful have little sense of their enormous privileges and the damage that they are wreaking. During the debate on the mining tax we had the richest people in Australia such as Gina Rinehart and Twiggy Forrest protesting from the back of trucks about how the poor mining companies were being threatened. They should have been laughed off the political stage but we took them seriously. They tell us that the sky will fall in if their privileges are challenged. .

    One of the objectives of the privileged and News Ltd in particular is the discrediting of the whole political process and politicians. They are concerned because it is through political action that their privileges will be challenged. They tell us that only the private sector produces benefits for the community and that the government is both a burden and inefficient. Yet governments have been great contributors in the past and must be in the future.

    The discrediting of our parliament and government reached a peak during the last parliament with disruption and wild accusations of corruption. We need to improve our political processes because they are essential to any reform of our democratic institutions and countering vested interests.

    We face a serious threat with the hollowing out of our democratic institutions through the actions of wealthy and powerful vested interests. We should not take our liberal democracy for granted. It faces a serious threat from within.

    It is getting late and dark.

    Where is the protest movement to check the abuses by the wealthy and powerful and the takeover of the state for their own purposes?

  • The Chinese are coming.

    After WWII the financial hegemony of the US and Europe in the IMF and International Bank was established. Later, the Japanese came to dominate the Asian Development Bank. That is now being challenged by China. See article below by William Pesek in ‘Bloomberg View’, subject ‘China steps in as world’s new bank’.  John Menadue.

    http://www.bloombergview.com/articles/2014-12-25/china-steps-in-as-worlds-new-bank

  • Mary Chiarella. Co-payments, general practice and workforce reform.

    If there’s a problem in primary health care then nurses are (and always have been) the solution. 

    Susan Sontag wrote in 1978 “Illness is the night side of life: a more onerous citizenship. Everyone who is born holds dual citizenship, in the kingdom of the well and the kingdom of the sick”. I was working in palliative care nursing when I first read this and it struck me that, continuing the metaphor, nurses were therefore like tour guides for those negotiating these health care kingdoms of both the well and the sick. We provide the translator services (“what did they say nurse?”), the coordination of meetings and events (“I need an appointment to see…”); the advice on what to do and how to do it (“I don’t know how to work this spacer thing”), and always, always, always the assistance to do whatever needs to be done when people lack “the necessary strength, will or knowledge” (Henderson, 1966) to do it themselves.

    If we look to primary health care (PHC) there is clearly a need for “tour guides” in this space, whether it be to help them stay in the kingdom of the well or to assist them to travel in the kingdom of the sick. John Menadue has suggested the key is to rethink funding for general practice. I would go further. The key is to rethink who provides the bulk of PHC and then think about how to fund it.

    In 2009 I compiled a compendium of nurse-led PHC models in 38 countries for the World Health Organisation (WHO, 2009).The elements of PHC identified for reporting purposes in the template were that each service, programme or project should:

    • provide essential health care based on practical, scientifically sound and socially acceptable methods and technology;
    • be universally accessible to individuals and families;
    • involve full participation of the community;
    • have a cost that the community and country can afford to maintain;
    • foster self-reliance and self-determination;
    • be an integral part of the country’s health system and overall development; and
    • have an entry level for patients located close to the heart of the community.

    The main needs of the populations served were those of the chronically ill and the elderly, basic social and infrastructure needs, psychological and mental health needs, maternal and child health needs and acute care needs (particularly in war zones).

    To provide a local example of what is possible, the work of an Aboriginal renal nurse practitioner in Australia with both indigenous and non-indigenous groups suffering from end-stage renal disease brought about significant health gains. The need for this role was identified as a result of the rising number of people needing acute dialysis 24 hours a day. A retrospective study of the causes of this rise suggested that 80% of the patients had risk factors that, if addressed early enough, would have prevented admission to the tertiary referral hospital for acute intervention. These risk factors were further examined and the diagnostic, clinical and referral skills required to address them were evaluated, and it was found that the scope of practice of a nurse practitioner met the requirements. The community nephrology nurse practitioner was able to develop and implement nursing models that integrated evidence-based clinical management with nursing advocacy for quality of life.

    Two key areas, considered central to the success of the case studies, presented challenges for a number of contributors. These were the issues of reliable and adequate funding and resources, and challenges to narrow thinking about the capacity of staff to take on new roles. The issue of sustainable funding; access to other resources such as medication, equipment, textbooks and staff created significant challenges. Some projects were completely or predominantly funded through the charitable sector (for example Chile, Haiti, United States). For example, a US project working with a poor community in Chicago sought its primary funding from a charity, and supplemented it with grants from no less than 16 funding sources and a further 13 in-kind donation sources. The time required to undertake the fundraising, administration and reporting on so many donations takes the nurses away from much-needed care delivery.

    In addition, there were a number of reports of medical and some nursing staff having difficulty in letting go of conventional and stereotypical thinking about who ought to perform which tasks. This issue has been much studied and discussed (Chiarella 2002) and has been described in relation to affirmative action as the ‘myth of the meritocracy’ – the possibility of work being taken on by another group, unless similarly qualified, is unthinkable because they are seen as incapable of meeting the challenge (Hall 1997). Yet there is ample evidence and experience to show that different personnel and community members are capable of equal, high quality participation in health care decision-making and delivery. Strong claims to maintain the status quo are often made on the grounds of safety and quality, but the evidence about the outcomes demonstrates this resistance to change is based only on protecting professional power and privilege.

    There is such potential to harness the skills of nurses to provide first class primary health care in this country, yet currently we seem to move further and further away from this potential and back to outdated models of health care provision that service only those who can afford to pay.

    Mary Chiarella is Professor of Nursing, Sydney Nursing School, University of Sydney.

  • Richard Butler. Russia.

    Tony Abbott and Julie Bishop have been playing loosely in our relations with Russia even thought those relations are quite modest, at least as far as the Russians are concerned. Threatening to ‘shirt-front’ President Putin is not a dignified way to behave with a major nuclear power.

    Our recent behaviour towards Russia underlines that prejudices and rhetoric should be put aside. We should focus on evidence, principles and interest.

    Major European powers being close to Russia and with far deeper experience of Russian behaviour do not afford themselves the luxury of playing politics the way we have been in recent months.

    The Russian position deserves serious consideration. Richard Butler does this in the following article.  It is more lengthy than usual in this blog but the subject does require in depth consideration. And in a holiday period a longer read may be timely. It is a good read.  John Menadue.      

    RUSSIAN FOREIGN POLICY: NOW AND IN THE PERIOD AHEAD

    THE CONSTRUCTS OF RUSSIAN FOREIGN POLICY.

    Under Vladimir Putin, Russia’s foreign policy seeks to realize three fundamental objectives:

    1. Rejection of what it assesses has become the post Cold War order, dominated by the interests of the United States;
    1. Insistence on a role and status for Russia in international affairs, as a great power whose participation in and influence over the conduct of those affairs is recognized as essential.
    1. Enter into a new set of political and economic relationships, not western in orientation, and designed to strengthen Russia at home and in the world.

    The West’s insistence that Russia is obligated to conform to standards, both domestically and in its international relations, which are set by western policies and western institutions, is viewed by Russia as aggressive and dismissive of Russian interests and values.

    Even more striking, in the Russian view, is the flagrant inconsistency of western actions. Russia sees these as having repeatedly violated those same purported standards. The United States invasion of Iraq, and NATO’s action to change the Regime in Libya, without the authorization of the Security Council, are seen as a prime examples of such behavior.

    In October, 2014, in a presentation to the Russian International Affairs Council, President Putin spoke directly to Russians concerns about what it sees as imperious behavior:

    “ The Cold War ended, but it did not end with the signing of a peace treaty with clear and transparent agreements on respecting existing rules and standards. This created the impression that the so called ‘victors’ in the Cold War had decided to pressure events and to reshape the world to suit their own needs and interests. If the existing system of international relations, international law and checks and balances got in the way of these aims, this system was declared worthless, outdated and in need of immediate demolition” (1)

    In his second term as Russian President, Vladimir Putin has constructed  Russian foreign policy, in pursuit of the three fundamental objectives described above.

    That he is determined to pursue these objectives is clear, and particularly his refusal to accept a uni-polar world, based on American leadership:

    “ Today we are seeing new efforts to fragment the world, draw new dividing lines, put together coalitions not built for something but directed against someone, anyone, create the image of an enemy as was the case during the Cold War years, and obtain the right to this leadership, or diktat… The situation was presented this way during the Cold War… The United States always told its allies: ‘We have a common enemy, a terrible foe, the centre of evil, and we are defending you, our allies, from this foe,and so we have the right to order you around, force you to sacrifice your political and economic interests and pay your share of the costs for this collective defense, but we will be the ones in charge of all it all, of course.’ In short, we see today attempts, in a new and changing world, to reproduce the familiar models of global management, and all this so as to guarantee their (the US’) exceptional position and reap political and economic dividends.” (2)

    While Putin’s policy determination is very clear, equally clear are: the divisions within western policy circles on how to respond to these circumstances, including Russia’s refusal to comply with western demands; the disarray within the American polity, and thus external policy formulation; and, the current proliferation of complex international political issues.

    What needs to be underlined is that, during the period since the Maidan Revolution in Kiev, a major conflict of interests, between Russia and the United States, has, again, become a key dynamic in international relations.

    On the Russian side, key sources of its deep dissatisfaction with the current state of affairs in international relations, has included the following:

    1. While significant actions were taken to construct a post Cold War system for common security: Treaty on the reunification of Germany; the Helsinki process on mitigating the Cold War, beginning in 1975 which led to the establishment of the Organization for Security and Cooperation in Europe (OSCE) in 1994; the NATO-Russia Founding Act of 1977, in which it was declared that “NATO and Russia do not consider themselves to be adversaries”; the US never the less commenced a series of unilateral actions which deeply disturbed Russia. For example; the partition of Yugoslavia and Serbia, the illegal invasion of Iraq, US withdrawal from the Anti Ballistic Missile Treaty (ABM) and failure to ratify the Comprehensive Nuclear Test Ban Treaty (CTBT), the application of the UN Security Council resolution on Libya, passed under the principle of the responsibility to protect, to instead, change the regime in Libya.
    1. In spite of the undertakings given to Russia at the time of the reunification of Germany that there would be no eastward expansion of NATO, the alliance has expanded to the borders of Russia.
    1. The US insistence, at the level of the President that it is “the exceptional country”, which Russia takes as meaning that the US does not feel bound by international law; a view which has some basis in fact.

    President Putin addressed the notion of US exceptionalism, among other issues, in his Op-Ed published in the New York Times on September 11th, 2013, responding to President Obama’s address to the Nation on the situation in Syria:

    “ I would rather disagree with a case he made on American exceptionalism, stating that the United States’ policy is ‘what makes America different’. It’s what makes us exceptional”. It is extremely dangerous to encourage people to see themselves as exceptional, whatever the motivation.” (3)

    In his address to the Nation on December 4th, 2014, Putin accused the West of extreme hostility to Russia, to the point of attempting to dismember it.

    WESTERN POLICIES

    The major western concern about Russian policy and actions has arisen in the context of the crisis in Ukraine. The West has expressed alarm about Russian intervention in the Ukraine, inter alia on the ground that it violates Article 2.4 of the UN Charter, which forbids the ”use of force against the territorial integrity or political independence of any state”; and, the incorporation of Crimea into Russia, on the basis of a referendum, the legality and authenticity of which was clearly dubious.

    These actions are seen as breaching a deeply important principle, widely accepted in Europe, that the agreements reached at the end of the Second World War (the UN charter, the Treaty of Rome), put and end to any alteration of national borders by force.

    There were also a series of agreements, some taking a number of years to be reached, which covered a range of post World War II, borders: the Oder-Neisse line between Poland and the GDR, the border between West and East Germany, the Soviet Union and the Baltic States, for example. All of these, together with the question of the status of Berlin were managed between the West and the USSR on what could be called a basis of equal participation.

    The situation entered a new phase with the reunification of Germany, in 1991 and the coming to independence of 15 former Soviet Republics, including Ukraine, in 1991. The issue of Ukraine’s status as a nuclear weapon state (several thousands of Soviet nuclear weapons had been stationed in Ukraine) and its future security was immediately addressed by it and the depository States of the Treaty on the Non-Proliferation of nuclear Weapons. (US,UK,Russia)

    Ukraine decided to repatriate those weapons to Russia, and join the NPT as a Non Nuclear Weapon State. In return, the depository States signed the Budapest Memorandum of 1954 in which they undertook to guarantee Ukraine’s security.

    Another important event, consequent upon the dissolution of the USSR, was the assurance given to Soviet President Gorbachev by the United States, that if he agreed to the reunification of Germany and accepted the inclusion of Germany in NATO, the alliance would not move further east than Germany. Gorbachev accepted this.

    Clearly, the Budapest Memorandum is now dead, following the events of the past year in Ukraine, and both Russian and Western  intervention in them. In addition, NATO has now been joined by three Former Soviet republics and four States previously members of the Warsaw pact and has, thus, moved well east of Germany, right up to the Russian border. Signficantly, the Ukrainian Parliament, elected in November 2014, immediately expressed support for Ukraine joining NATO.

    The situation in Ukraine remains unresolved and continues to be a source of significant dispute between the West and Russia, neither of which are likely to, easily, soften their position. However, it is widely regarded that the likelihood of direct military conflict, war between, NATO for example and Russia, over Ukraine is unlikely.

    While there is growing division of opinion within Western circles about the appropriate policy to pursue towards Russia, on sanctions for example, there remains abiding concern about the principle of borders not being able to be changed by force.

    It is not clear how far Russia will act to secure its Ukrainian objectives. Putin, appears not to want major armed conflict. It would appear to be far too costly, in every respect, and in any case may not resolve things. But, nor does he want to give up important Russian objectives, including that of not accepting Western authority in determining issues of major importance to Russia. This school of thought posits that his preference will be for a continuation of an unresolved state of dispute, a so called “frozen conflict”, in Ukraine.

    Possibly serious sources of restraint upon Putin maintaining conflict with the West over Ukraine are: the impact of sanctions on the Russian economy, the attitude of key Russian stakeholders in that economy, as expressed by them to Putin, what the ordinary people will accept; in other words the impact of sanctions upon standards of living.

    THE RUSSIAN ECONOMY

    The Russian economy is a developing rather than a relatively fully developed one. It was recognition of the failure of the command economy, and that Russia was slipping backwards, that led President Gorbachev to begin significant reforms in the USSR, which then contributed to its dissolution. Putin has declared that dissolution to be  one of history’s great mistakes.

    Currently, the World Bank ranks the Russian economy as the world’s ninth largest, by nominal GDP, and sixth largest by purchasing power parity in 2014.

    Russia has produced advanced goods, particularly in the aerospace sectors, but it has a widely scattered population, which in both rural and urban settings, includes a substantial portion of people who are poor, by any comparable standard, and live with a parlous level of infrastructure. Its middle class has grown, but the economy is in many respects a classic dual economy, in which those with economic means and those without operate in two very different spaces.

    For the latter group, the social support structure of the Communist period, for example free education and health services have largely disappeared. This is of virtually no importance to the small but massively wealthy group of people, the so called oligarchs, who have built private sector economic interests, following the end of what was virtually total State control of the economy. They have done this with the consent of the Government, starting during the period of Boris Yeltsin but continuing under Putin. The extent to which they invest in Russia’s social and economic development is mixed at best.

    It is important to note that Russia is not alone in being a dual economy. Many western states share this characteristic. For example, some 18% of the US’ population live below the official poverty line.

    The current demographic profile of Russia is of immense importance to its economic prospects. It is assessed that in 1995, Russia entered into “ a black demographic patch” of population decline. The gap between deaths and births was 1 million people. In recent years, Russia’s population has declined by between 0.6-0.7 million, each year. This is attributable to: decreasing fertility rates, increasing mortality rates and population aging. This demographic situation puts pressure on the economy, principally with respect to the availability of labor, but also in terms of the maintenance of demand.

    While there is a growing middle class in Russia and overall, standards of living have increased under Putin/Medveydev, serious problems, such as  imposed as a consequence of Russia’s actions in Ukraine, are hitting Russia hard. This is particularly the case with respect to the major source of wealth generation for Russia, its export of hydrocarbons.

    The sanctions have led to the cancellation of the South Stream pipeline to deliver gas to Europe. This was at the direction of Brussels and cost Russia $50 billion. Russia has attempted to replace this through a gas delivery agreement with Turkey, of more limited yield and at reduced price.

    For the longer term, in October Putin signed a gas delivery agreement with China worth $400 billion. But, it requires substantial investment for its development, the sources of which are not established, and has a lead  time of some 10 years before its impact will be felt in the Russian economy.

    Russia’s need of investment is of basic importance and as a consequence of sanctions, the rate of foreign investment has declined substantially, mainly as western banks have become averse to investment in Russia. Moody’s rating Agency has moved Russia to marginally above junk bond status. In addition, capital flight from Russia, disinvestment, has grown to a record level of $85 billion in 2014. Russia was obliged, in December 2014, to make payment of $40 billion to service sovereign debt, in circumstances where national currency reserves are declining.

    The inevitable consequences of these trends have occurred: the value of the Ruble has collapsed. During the last year it has lost at least 40% of its value, and price inflation has doubled. The Russian Ministry of Economic Development has estimated, this week, that the economy will contract by 0.8% next year and that both household disposable income and GDP will decline by 2.8%.

    Worst of all for Russia’s prospects, the price of oil continues to collapse. It has fallen nearly 50% since June 2014 and may fall further. This is of the deepest importance for Russia as every reduction of $1 in the per- barrel price brings a drop of $2 billion in revenue for Russia.

    Possibly symbolic of the pressures upon the economy, as being felt by ordinary people is that buckwheat, a staple of the Russian diet, has doubled in price and in parts of Russia has disappeared from shop shelves. This has, in fact, largely been the result of bad weather but coming at the time of sanctions and price inflation generally, it has possible political implications.

    These are significant trends and there are persistent reports that senior figures in the economy, both within Government and in the private sector, are expressing anxiety to President Putin.

    On the micro level, daily life is becoming tighter for citizens although one notable consequence of the new circumstances is that many citizens are entering into import replacement; growing, farming, manufacturing domestically, goods and commodities people need, in replacement of formerly imported goods. In some measure, this is a positive development for Russia. President Putin made this point in his address to the nation on December 4th, 2014.

    Ironically, in some limited respects, sanctions could prove to be positive for the internal economic and social development of Russia. It would, in fact, be consistent with the overall experience of sanctions in a variety of countries in the past. When large economic interests are targeted, such as Banks, sanctions can prove to be effective, although always mitigated by cheating. But, as far as the bulk of the people are concerned, while sanctions cause pain, people find solutions and they often rally to support their government. This was the case with sanctions in Iraq from 1991 to 1999.

    EU sanctions are causing concern to some of its members and they are breaking ranks. Hungary, a member of both EU and NATO has violated EU policy by entering into an agreement with Russia on the construction of a nuclear power plant and, Finland has also signed a nuclear energy development agreement with Russia.

    Russia is now working towards replacing some of its significant economic dealings with the West with new relationships in the East and South: the BRICS, established in 2010, (the cooperation agreement between Brazil, Russia, India, China, South Africa) China as a major bilateral partner, Turkey, the Shanghai Cooperation Council, established in 1996, ( Russia, China and four former Soviet Republics in Central Asia) and within its own sphere, the Eurasian Union (Russia, Belarus and Kazakhstan) which will be launched at the beginning of 2015, providing a common market and possibly include the adoption of a common currency. Kyrgizstan is likely to join the Union.

    It must be emphasized however, that there will be no early result for Russia in replacing reliance on western markets and western sources of finance. In many respects, the prospect of significantly diminished economic interaction with the main EU States – German industries, UK Banks, could border on a disaster for Russia.

    Even so, the possibility remains that the West could lose from Russia’s turn away from it, but to what extent and how seriously this will be taken is yet to be calculated. No calculation is required in predicting that divisions within the West, on relations with Russia, will emerge.

    The critical questions that arise in conjunction with the strong relationship between foreign policy and the economy are those of: the balance between policies designed to win approval on a nationalist basis, such as the annexation of Crimea and the price paid for such policies in terms of sanctions and political isolation; and, at what point does the combination of heightened nationalism and the associated resentments of others on the one hand, with rising economic hardship on the other, translate into bellicosity.

    Going to war is both intrinsically costly and a stimulus to domestic production but the reasoning or sentiment which comes to prevail can be: We are being treated so badly that there is little to lose from attacking those who have so seriously harmed us, our situation can barely be worse; and we can, by our actions, rectify it and salvage our national self respect.

    While this may seem exaggerated, such reasoning is not unknown in history and, it must be said, that the level and style of propaganda currently being deployed in Russia with respect to the West; xenophobic and nationalist, is characteristic of situations which, in the past, led to war.

    Clearly, a solution to the situation in Ukraine is needed and attention must be then given to problems within the Russian economy, although obviously this will not include manipulating the price of oil. That is determined by a combination of market forces and OPEC production decisions.

    In a paper on: Russia’s Future in the World Order, prepared for the 2014 annual meeting of the Russian International Affairs Council, the scholar Ivan Timofeev observed:

    “ The contemporary world order may appear to be paradoxical. On the one hand, we see a steady dynamic of social and economic development. In other words, there is no great shortage of resources that could lead to large-scale conflicts and violent change of the existing order. On the other hand, there are several powers in the world whose political relations and security policies may shake and overturn the world order, Russia is among such powers….. Russia’s position among great powers today is fairly vulnerable. While the country’s political resources are great, these resources are only converted into development in a limited way. The connection between Russia’s global weight and its potential for solving its own social and economic problems is tenuous.” (4)

    PUBLIC SENTIMENT IN RUSSIA

    The sentiment of the Russian people towards the official narrative in Russia is being measured repeatedly. The current form of that narrative is: Russia, led by Putin, has acted to prevent the West and it’s Nazi collaborators in Ukraine from seizing Ukraine; it stood up to them and rescued Crimea; for this and its attempts to defend the Russian people of the Donbas it is being punished with sanctions; Russia, in other ways too, is being treated with unacceptable disrespect; it is a great power and will never accept this; it rejects US attempts at dominance and a world based on proclaimed US leadership and exceptionalism; Russia is building new relationships, such as with the BRICS, the Shanghai Consultative Group, and is forming the Eurasian Union; and these will build a new and fairer global system, with better outcomes for Russia.

    The people are told that, consistent with Russia being treated disrespectfully and in bad faith by the West, led by the US, economic punishment will be imposed on ordinary people, at least for a while.

    The people are asked to accept this. For now, they are apparently ready  to do so and on the issue of how do you rate the job President Putin is doing, he is presently recording approval ratings in the 80% range.

    Putin must be concerned, however, about the views of the small but powerful owners/managers of major Russian private sector corporations. One sign of this has been his banishing, incarcerating, stripping of the power and assets, of senior executives who have been reluctant to comply with his decisions. Although some of his opponents and those who have suffered losses under him, have condemned his policies, his actions seem, for now, to have relieved pressure on him. There have been loyalists willing to step into the positions thus opened up, and presumably the rewards that attach to them.

    It is impossible to speculate accurately about whether or when a point will be reached when influential individuals may approach President Putin to explain, perhaps menacingly, that he and his policies can no longer be afforded. But, there have been some signals of this possibility and, it is now officially predicted that Russia is moving into recession.

    THE MEDIA AND CIVIL SOCIETY

    It is clear from the public discourse in both Russia and US, that cultural and spiritual values, deeply at odds with each other, are in play.

    In Russia, the perceived greatness of its long history, the orthodox culture, its spiritual nature, all in their traditional conservative forms, support a powerful nationalism, which Russians will not allow to be trashed. Putin has invoked this with great credibility. Opposed to this is seen the lazy, self- indulgent West, legalizing drugs, tolerating widespread pornography and, approving same-sex marriage. That such people would purport to lead others, tell Russians how to live, is rejected officially.

    Putin has drawn significant support from the Russian Orthodox Church leadership. The control over the Church exercised by the State intelligence agencies, during the period of atheistic communism, has not only ended, but Putin has specifically deepened cooperation between the Church and the Kremlin. A number of agreements have been signed between the Church and government ministries on matters of policy, ranging from international relations to public morality.

    For example, the Social Affairs Minister has rejected as unthinkable any suggestion that sex education be taught in Russian schools, saying that such teaching would violate traditional Russian values. This is the policy of the Church.

    Patriarch Kiril appears prominently at public events with Putin, demonstrating the strength of the relationship with the State. Putin prominently attends important Church services. These actions and Putin’s stated policy of ensuring “ closest cooperation with religious organizations” echoes the earlier Byzantine tradition of common purpose between the State and the Church. This is in sharp contrast to the role in support of reform of government, or even revolution, that was played by the Church, only thirty years ago, in: Poland, Hungary, Czech Republic, and East Germany.

    This relationship has at its core, the assertion of Russian national identity and patriotism. Putin’s elemental political identity is that of a staunch nationalist and, to some extent, populist. His attitude towards the Church underlines that identity.

    This has specific internal political utility given the challenges to central authority flowing from: the situations in Chechnya and Dagestan, in Russia, and South Ossetia and Abhazia in Georgia, and in Ukraine. Putin seeks to justify Russian actions in these areas of conflict and challenge to Russian authority by reference to notions of cultural as well as territorial and political integrity. The Church has been made basic to that notion of sovereign integrity and Russian-ness.

    A major lever deployed by Putin for the exercise of social control, and the formation and expression of opinion, has been his reassertion of strict control of mass media. Media organizations allowed to work are obliged to broadcast government approved news and interpretations. Many go beyond this and create their own narratives, reports, designed to demonstrate their faithfulness to the government and to Russia’s purposes.

    Social media is widely utilized by individuals not only for personal messaging but also as an alternative source of information to the official sources. As a consequence, the government has repeatedly sought to restrict the operations, and content of social media.

    These circumstances are a cause of serious concern both inside Russia and internationally. It is sensible to recognize, however, that a parallel phenomenon exists in the west, particularly the US, with respect to Russian issues. Censorship and shaping of opinion is clearly carried out much less blatantly in the west, but it occurs, and this is noticed in Russia and viewed as propaganda.

    Much of such propaganda is conducted through public media, on both sides, and on both sides it is signaled that there are notions that are clearly not acceptable, within the public discourse. Unfortunately, gross characterizations of “the enemy” are not amongst these, but questioning of the purposes of one’s own Nation are.

    The salient point to make here is that, at present, attempts to forge a dialogue based on facts and evidence, freed from a priori national purposes and stereotypes, is struggling. This is typical of situations which, in the past, have spun out of control.

    THE WESTERN REACTION.

    On western policy more broadly, it has three main structural elements: the US, the European Union, and NATO. The basic point about this Troika is that there is internal tension between the three elements.

    While the EU has progressively transformed itself into a continent wide supranational institution, with all of the elements of government: legislature, judiciary, bureaucracy, and a range of standard setting Treaties, it experiences on a continual basis substantial tension between members of different weight and outlook. These tensions have been pronounced on the issues of both Ukraine and overall relations with Russia.

    It is safe to predict that the EU would split over any suggestion of serious conflict with Russia and indeed, internal questioning of the sanctions policy is continuous. In this context, it is worth recalling that the fundamental motive for the establishment of the EU was to ensure that serious war would never again arise in Europe.

    NATO is another matter. It is, in an elemental sense, all about war, deterring it and when necessary waging it, collectively.

    The Treaty provides, in it’s 5th article, that an attack on any member will be considered an attack upon all. It’s not clear how seriously this is taken

    by Russia. For example, if Russia were to move to protect the Russian speaking population of Estonia, now a NATO member, from suppression by the government in Tallinn, would NATO then attack Russia, pursuant to Article 5?

    This introduces the particular role of the US. It is very attached to NATO. It provides its military command and a good deal of the lethal hardware. It conceives of its doctrines. There seems to be a good measure of support for US approaches, as the 2014 NATO Summit in Wales showed, from the UK and the newer, smaller, apparently more insecure States members, but a smaller degree of enthusiasm for its doings from France, for example.

    Finland, which remained neutral during the Cold War, is now undergoing a lively debate on whether it should join NATO, in the light of Russia’s annexation of Crimea and its pattern of military incursions in the Baltic space. Were it to join NATO, the Alliance would again move closer to Russia’s borders.

    The relevant point in the present context is, what does Russia think and calculate about this Atlanticist structure? At least one point is clear: As long as this hostile Troika exists, aimed at Russia; the US having withdrawn from the Anti Ballistic Missile Treaty, and refusing to postpone further anti- missile system development, Russia calculates that it will need to maintain an effective array of nuclear weapons, targeted at both Western Europe and the US.

    The issue of nuclear weapons is a serious, yet under discussed aspect, of the current stand-off between Russia and the West. The facts are that in violation of policy undertakings and Treaty obligations, both the US and Russia, during the last year have: authorized new nuclear weapons development/renewal, involving massive expenditures and, Treaty obligations for critical nuclear material management, inspections, and missile testing, have been broken.

    A NEW WORLD ORDER AND GOVERNANCE?

    What are the elements of a new world order or system of governance that Russia appears to want to see replace the present system?

    The obvious first priority would be a reduction in the role played by the US. This is, of course, almost exclusively in the hands of the US and it’s very difficult to imagine how this could be brought about from outside the US. The only way the US would moderate its behavior, listen more to others, share authority and decision making, would be if it came to the conclusion, from within, that such action would be in the best interests of the US. Everything we witness from the current state of the US polity, points in precisely the opposite direction.

    It could be said of Russia that it is in something of a symmetrical position, especially given the extent to which Putin has played upon nationalist and traditional sentiments within Russia. But there is a difference and it could be important.

    What needs to be examined is precisely how much of the current system Russia wants to revise. Its detractors in the US charge that it wants the lot, to dominate, but this would appear to be hyperbole.

    What President Putin has said is:

    “ The allegations and statements that Russia is trying to establish some sort of empire, encroaching on the sovereignty of its neighbors, are groundless. Russia does not need any kind of special, exclusive place in the world – I want to emphasize this. While respecting the interests of others, we simply want for our own interests to be taken into account and for our position to be respected”. (5)

    Statements of a general character, such as this one, are only illuminating to a limited degree. But, it is important that it has been made and can serve as a basis for testing what can be achieved, practically.

    For example a key instrument for global governance, in the vital area of peace and security, is the UN Security Council. The community of nations overwhelmingly believes it needs reform. Given the rules of the Charter this cannot happen without the consent of its five permanent members. In practice, this can be narrowed, or at least in the first instance started off by the US and Russia indicating that they are open to change.

    That reform has two obvious parts: the constituency is too small and does not reflect the post-colonial and now post Cold War world. A new composition of the membership is needed to make it representative of the contemporary and foreseeable world.  A new decision making methodology is also needed: should there be vetoes, if so, which States should hold them, in what circumstances should they be able to be used?

    Perhaps President Putin had something innovative in mind when he said in October 2013;

    “ In the light of the fundamental changes in the international environment, the increase in the uncontrollability and various threats, we need a new global consensus of responsible forces. It’s not about some local deals or division of spheres of influence in the spirit of classic diplomacy or somebody’s complete domination. I think that we need a new version of interdependence.” (6)

    On the other hand, in his Op-Ed in the New York Times in September 2013, President Putin referred to the Security Council in terms supportive of its present configuration:

    “ The United Nations’ founders understood that decisions affecting war and peace should happen only by consensus, and with America’s consent the veto by Security Council permanent members was enshrined in the United Nations Charter. The profound wisdom of this has underpinned the stability of international relations for decades”. (7)

    This is not the position of a person who wants to change the system. Instead it suggests that President Putin is, in fact, not as much concerned about the need to establish systems of governance and cooperation amongst nations that are fit for the purposes of the modern world, but rather that he would simply prefer better outcomes for Russia from the existing system.

    He would hardly be alone in such pragmatic thinking; indeed many argue that pragmatism is a good guide. A corollary of this is that Russia’s interests should be addressed pragmatically, not ideologically.

    What is glaringly absent from the view Putin expressed in this Op-Ed is the fact that all of the permanent members of the Security Council, including the USSR/Russia have repeatedly abused the system for their own ends, causing a serious collapse in confidence in the system itself. It is this behavior, which a clear majority of Member States of the UN believe, needs to change.

    CONCLUSIONS:

    1. Twenty five years after the end of the Cold War, President Putin says he is convinced that the systems under which international relations and global governance are conducted today, harm and inadequately respect Russia.
    1. He rejects forcefully the triumphalism the US expresses for having “won” the Cold War. In particular, he rejects, indeed seems repulsed by, the notion that the US is the “exceptional country” and what is implied by that notion, particularly, that international law and rules do not apply to the US.
    1. Russia feels threatened by the policies and actions of the Atlanticist institutions: US/EU/NATO. The promises made by them have been serially broken and always in directions that have been regarded as hostile to Russia.
    1. Russia will pursue vigorously the establishment of a new set of political and economic relationships, principally in the East, to the exclusion of the West. President Putin does not seem to have anxieties about what some have called an emerging Pax Sinica, in replacement of the reviled Pax Americana. These relationships will have an almost immediate political effect but they will be slow in delivering prosperity.
    1. The Russian economy faces major challenges, particularly given its demographic profile. These challenges are being substantially expanded as a consequence of the sanctions currently applying to Russia and the sharp drop in the price of oil and the devaluation of the Ruble. The question of how Russia will work through these circumstances, without recourse to international conflict, is a crucial one.
    1. Russia claims it wants to see a revision of the system and framework for the conduct of international relations, which will be fairer and establish a new degree of interdependence. At this stage this is a rhetorical claim, not yet given substance.
    1. It is important to note that much of President Putin’s stated concerns are rejectionist – a list of the things of which Russia disapproves and will not accept. There have been few if any concrete, positive, new proposals by Russia.
    1. A solution to the Ukraine problem is likely to be found, without major war, because that would be too costly and not provide a solution. But, it will not be found without a respectful consideration of Russia’s interests.
    1. If the Russian economy descends into significant hardship and loss, and if this leads to an increase in xenophobic nationalism within Russia, the possibility of recourse to war, for example in Ukraine and Russia’s “near abroad” will grow.
    1. As long as nuclear weapons exist, great care needs to be exercised in threatening the use of force. Neither the US nor Russia have been clear enough about this in the recent period and, indeed, their actions in strengthening and expanding their nuclear weapons systems should be a cause for serious concern.

    Notes: 

    (1) V Putin: Valdai Speech, Sochi, October 25th, 2014.

    (2) V Putin, Op cit.

    (3) V Putin: New York Times, September 11th, 2013.

    (4) Ivan Timofeev: World Order or Anarchy, Working Paper 18/24, Russian International Affairs Council, October 2014.

    (5) V Putin, Op Cit.

    (6) V Putin, Op Cit.

    (7) V Putin, New York Times, September 11th, 2013.

    Richard Butler AC is a former Australian Ambassador to the UN and now distinguished scholar, International Peace and Security at Penn State University.

     

     

  • John Menadue. Our love affair with cars.

    We are infatuated by the convenience of our cars, particularly at holiday time.

    There are clearly major economic and social benefits but the costs both economic and social are going to become much more apparent. How can we continue to realise the benefits of car travel, but minimise future costs.

    There are enormous political problems in addressing the cost of traffic accidents, traffic congestion and carbon pollution from cars, but we need to start thinking seriously about a suite of options to minimise the damage that cars will continue to inflict on our economy and society. It is not only a political problem in terms of disruption of our lifestyles but the political problem is intensified because of the power of the automobile lobby and the large construction firms who want to keep building more and more freeways and tollways.

    I posted two earlier blogs on this subject. They were ‘Increasing the petrol tax is good policy’ on 9 May 2014 which included an earlier post, ‘Cars are killing our cities’.

    Some people suggest that public transport is the answer to the damage caused by car accidents, car congestion and pollution. But it is only part of the answer. Cities like London and Paris have very good public transport systems, but they still have problems of car congestion, accidents and pollution.

    The fact is we need to curb our use of cars.

    In 2013 a report by eight of the nation’s transport, health and planning organisations estimated that congestion on our roads is costing Australia about $10 billion p.a. This is projected to increase to $20 billion by 2020.

    The Bureau of Transport and Regional Economics estimated the cost of road accidents at $17.85 billion in 2006. When the cost of loss of life is included, the total cost of road crashes increased to $28 billion in 2006. There are reservations about these estimates, but they are the best that are available. Almost all commentators believe that the cost of road accidents is conservative and in any event the data is eight years old.

    According to the Australian Government Department of the Environment, ‘transport’ contributed 17% of our greenhouse emissions in 2013-14. The highest contribution of greenhouse gasses was ‘electricity’ which contributed 33% of greenhouse emissions.  Clearly greenhouse emissions from transport are a serious problem.

    We need to consider seriously a range of measures to maximise the benefits of car travel and to minimise the cost.

    We invariably complain about the cost of petrol, but we pay some of the lowest petrol prices in the OECD and petrol prices in Australia today are the lowest for four years. In the September quarter this year only Canada, Mexico and the US amongst OECD countries paid less for petrol than we did. The tax component of our petrol prices was the fourth lowest in the OECD. For these and other reasons, I support the government’s reintroduction of the indexation of petrol taxes which John Howard abandoned in 2001. Reintroduction of the indexation of fuel excise would be useful transport policy to discourage car use as well as making a small contribution to the budget.

    The Henry Tax Review recommended a traffic congestion tax. Well implemented, a congestion tax would encourage more rational use of our roads. We would have an incentive to travel outside peak congestion periods. It would provide an incentive for employers and for schools to move to more flexible work and school hours. London and Singapore have taken action on traffic congestion with clear public support.

    Just as the sensible carbon tax was designed to impose a charge on companies that pollute so motorists should pay a tax when they choose to travel in peak hours. Such a tax would have to be a state tax. Who is game!

    We need to consider increased sale taxes and registration fees. In almost every respect these imposts in Australia are much lower than in the rest of the world. In Denmark the sales tax on cars is 143%, in Finland 53%, the Netherlands 48% and Sweden 30%. In Australia it is 10%.

    A feature of many European countries is smaller cars, not the large SUVs that are so common in Australia. A Toyota Hilux emits double the carbon dioxide of a Toyota Carola. In addition to the high levels of pollution from large vehicles they obviously occupy more road and parking space. A useful approach would be to increase the sales tax and registration fees of these larger vehicles and reduce the fees for smaller vehicles with a neutral financial result for the government. Higher fuel excise would also discourage car use.

    We also need to tighten emission standards for all our vehicles. The Climate Change Authority says that the new tougher emission standards to operate from 2018 are one of the best and least costly options available to reduce carbon emissions from cars. In doing so we would bring Australian emissions into line with international standards.

    We also need to ensure that in future there is effective integration of transport and urban development policies. So often urban planning is deficient where there is no convenient or efficient means of transport except by car.

    These issues will involve hard political decisions. We cannot put off indefinitely addressing the problems of car use.

    In the short term we should be very cautious about repeated proposals from federal and state governments for more and more ‘freeways’ that only shift the bottleneck and line the pockets of construction and finance companies..

    We do need improved public transport and many major cities of the world show that that is possible. But we can’t avoid facing up to our own infatuation with cars. We are all guilty of helping to kill our cities.

    .

  • Maggie Callingham. Top schools ‘top’ because someone has to be bottom.

    Across Australia Year 12 students are collectively holding their breaths to see what results they’ve achieved and, consequently, what their futures hold.

    Only hours after their release, many secondary schools proudly display their best results on billboards for passers-by to see. Newspapers select high-achieving students to profile. As schools promote these glowing results, it’s worth highlighting that many have had the invisible slave of the disadvantaged schools working for them.

    That is, the high-profile academic success of some schools has occurred as a result of social stratification – the increasing gap between students into schools of low socio-educational advantage and schools of high socio-educational advantage – as well as differential funding arrangements. Around Australia, some condone these arrangements in the name of “school choice” while others condemn them in the name of “school equity”.

    School choice

    Australian states and territories each have their own version of one or more senior secondary certificates that promote pathways for their students – usually into some form of further education or the workforce. Victoria, for example, has the academic, university-oriented Victorian Certificate of Education (VCE), as well as the practical, vocationally-oriented Victorian Certificate of Applied Learning (VCAL). However, the relatively high public profile of VCE results can incline schools seeking an academic reputation to offer only VCE – and in some cases, the even more prestigious International Baccalaureate (IB).

    Schools that promote their academic orientation and excellence usually do so to attract predominantly upper or middle-class families, or those aspiring to such classes. In addition to using expensive advertising to recruit their students, many academic schools provide scholarships to entice high-achieving students away from their neighbourhood schools. The pressure on these schools to maintain reputations for strong academic scores can motivate them to focus more on grooming their star academic learners and less on affirming their applied learners, or on catering for students from disadvantaged backgrounds requiring additional support.

    In pursuing such a strategy, academic schools privilege a select group: conforming, middle-class, elite-performance students. As a result, students and families that do not fit into the compliant, middle-class, academic profile of the school may find they are overtly or covertly encouraged to seek another school. The actual wording of this encouragement may be couched in language that indicates the student needs to find a new school “to suit his or her needs”, but the subtext is clear: the school is safeguarding its academic reputation and status. The outcome for these schools is an increasingly homogenised and advantaged school community.

    School equity

    In contrast, Victorian schools that offer both VCE and VCAL pathways meet an equity principle under which VCAL was introduced in 2002, to ensure that all students are able to access a senior secondary program of study. Schools prepared to take all-comers may find themselves catering not only for bright local students who haven’t been tempted elsewhere, but also non-academic students other schools have chosen to ignore or reject.

    As a result, these schools can be perceived as less successful than their high-achieving counterparts because their outcomes are likely to be skewed toward non-university pathways such as apprenticeships, traineeships, vocational courses or employment.

    These are each valid pathways, but as the Australian government acknowledged when it looked into youth transitions in 2009, much work is required to promote vocational pathways so they are seen as equal first-choice options. Unfortunately, five years on, little has changed in Australia regarding this public perception.

    One reason disadvantaged students are more likely to choose a less academic pathway such as VCAL can be found in Australia’s national and international testing results. Both NAPLAN and PISA results reveal that the lower the social class of an Australian student, the lower his or her test scores.

    It seems reasonable, therefore, that students who have been disadvantaged from an early age, the time when they learn foundation skills such as reading and writing, will be less inclined to pursue the reading and writing-oriented VCE. It is also not surprising that VCAL might better appeal to young people from economically disadvantaged families who then seek job-related pathways as a means to gain crucial financial independence or contribute financially to their families.

    School funding

    It’s no secret that schools don’t operate under similar funding conditions. Recent researchreveals funding increases from 2010 to 2013 across the three main school sectors are inversely proportionate to the socio-educational advantage of their student populations.

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    This growing social stratification and inequitable funding between advantaged and disadvantaged schools represent a critical equity issue for Australian schooling. While recommendations from the 2011 Gonski review of school funding attempted to address this inequity, it clearly continues.

    At a time of year when many advantaged schools celebrate their students’ high scores, it’s important to point out the contribution that disadvantaged schools have played in their success. It’s also timely to highlight the growing number of flexible learning programs in Australia that teach diverse student populations, including those with complex needs related to their disadvantage.

    These schools and programs too have valid stories to tell of their students’ successful academic and vocational results obtained under far less advantageous conditions. Unfortunately, these achievements are unlikely to appear on billboards or in newspaper articles.

    Maggie Callingham is a PhD candidate at the Victoria Institute for Education, Diversity and Lifelong Learning at Victoria University.

    This article first appeared in ‘The Conversation’ on 15 December 2014.

  • What a disgrace! Australia at the UN on Palestine.

    Concluding our two year term on the Security Council, Australia voted against the proposal in the Council demanding Israel and the occupation of Palestinian territories end within two years. For the resolution to pass, nine votes were needed. Eight countries voted in favour of the resolution, including China, Russia, Luxembourg, France and Jordan. Five countries abstained, including the UK and South Korea. Only two countries voted against the resolution, the US and Australia.

    Over the years there have been a number of UN resolutions. Australia’s voting on these important resolutions can be found in the table in a blog from the Parliament of Australia ‘Diplomatic terrorism’: Palestinian statehood, the United Nations, and Australia’s voting record.  See link below.  John Menadue

     

    http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/FlagPost/2014/December/Palestine_at_the_UN