Category: Politics

  • Kerry Brown. Australia’s vanishing China policy.

    One of the side effects of the visit by Chinese president Xi Jinping to Australia, New Zealand and the region in mid November was to raise questions about whether each of these countries has what might be called a strategic vision of their relationship with a country that has quickly become their largest trading ally. Xi’s suspicion that they don’t may lie behind his observation, addressing the Australian parliament on 17 November, that there needs to be more imagination and ambition in the bilateral relationship.

    At a time when many in the rest of the world are asking China to be more active and take a greater role as a stakeholder, albeit on Western terms, it seems ironic that its current leader should make this point in Canberra. Australia is a fellow member of the UN Security Council and a major player in the G20, the World Bank and other global forums, and yet it seems not to have impressed Xi with any strong vision of its relations with the country he leads.

    There is certainly a constituency in Australia that would be antagonistic to the very notion of having a strategy. To them, you shouldn’t hedge yourself in with self-imposed limits. You leave yourself maximum room for manoeuvre and, in the words of the great economist John Maynard Keynes, change your mind when the facts change. The most that many in this camp would accept is that a country needs a sense of its national interests, and goes out to defend these. At the moment, that means sticking by the United States, no matter what, and building up complementary alliances wherever else you can.

    Xi’s words should at least begin a process of considering whether this approach is sustainable. At times, Australia’s stance comes dangerously close to outsourcing all the deeper thinking about strategic interests and global roles to the United States. If Washington says something should happen, it happens. If Washington vetoes it, then Australia follows suit. (Witness Tony Abbott’s quick reversal of his initial interest in being part of the Chinese-instigated infrastructure bank.) Ironically, this seems to work in every policy area barring the one in which Australia might well argue it really should follow in the slipstream of the United States – action on climate change. The embarrassment of holding a climate-light G20 a few days after the United States and China announced a major deal on carbon emissions only served to underline, at least to Chinese officials, that Australia is kept in step by the United States when it matters to it, and then simply kept in the dark when it doesn’t.

    Like the United States, Australia welcomes a strong, peaceful, cooperative China. No surprises there. And yes, it wants a China mostly in our own political image – just like America does. It has a common conceptual language with China on many economic issues, and like the United States it has trouble when the dialogue gets to values and rights. Australian companies love the Chinese market, and Australians on the whole see value in getting benefits from the Chinese economy and its links with their country. But these things simply add up to a framework for pragmatic engagement. Even the free-trade agreement, which was levelled off when Xi was in Canberra, doesn’t go much further towards answering the question of what Australian policy towards China really is.

    It isn’t as though the question hasn’t been exhaustively considered by policy-makers and their political masters across Australia. And in many ways, it might be more accurate to talk about a multi-strand policy, involving individual states and the federal government, rather than a unified position. This is not unusual: the European Union could be accused of having not one policy towards the People’s Republic but twenty-eight, reflecting the number of member states. What is odd is that Australia sounds like it has a policy, and does the things that a country with a policy might do – but when the going gets tough (under pressure from America or from domestic interests) the policy vanishes. The cause célèbre is the Australia in the Asian Century white paper, issued to great fanfare in 2012 as the herald of a new era of regional engagement, with China at the centre. Those seeking this report now have to rummage around in the online archive of the Department of Foreign Affairs and Trade. Britain did a similar thing, specifically about China, in 2009, and that paper too has more or less vanished from cyberspace.

    Does this mean that, in its heart, Australia doesn’t want a policy? The signs are that it wants to look like it has a China policy, but that thinking about what the world will look like in a decade’s time, when China will be a bigger, stronger, more prominent global force, is really too demanding. Australia’s policy is therefore to make as much for itself materially as it can, and leave to others the heavy lifting of working with China to integrate it more closely into the global system. That means sticking predominantly by the United States, no matter what, tactically defending specific national interests from time to time (including perverse obstruction on climate change) and leaving it at that. In essence, work with the United States.

    Were China a more predictable partner, this make-hay-while-the-sun-shines approach might do the job. But in a number of key areas, all of which affect Australia, that isn’t the case. The vulnerability of China’s growth is something Chinese leaders past and present have all drawn attention to. China’s unity is also much more fragile than outsiders might believe. (Chinese leaders certainly aren’t complacent about the issues on their vast western borders.) Its political model is undergoing very real reform, not towards what many in the outside world might want but certainly towards something more law-based and accommodating of the needs of the emerging urban middle class. Its environmental problems are simply vast.

    In any of these areas, China could all too easily receive a killer blow. And a killer blow to its stability and prosperity would in many ways be a killer blow for Australia. To daydream about the shifting interests of India or another market is, in the short to medium term, simply to indulge in fantasy. Like it or not, it is China or nothing for Australia’s future growth and prosperity.

    The point of a policy is to try to deal, at least, with scenarios that involve some future influence and dynamic interaction. An Australian policy towards China would therefore need to look at China’s domestic challenges, admit they are directly linked to Australia’s own interests, and then work out where it might have influence. In some areas – such as technology and ideas transfer or deeper intellectual engagement – this would be to focus on the clear positives. In others, it would mean dealing with more challenging topics – how to mitigate partial pandemics or an environmental collapse in China, if they were to happen, for instance. A policy also has to think the unthinkable. If China did implode or collapse, what would Australia do? One of the merits of thinking through doomsday scenarios is that it sharpens minds and makes everyone intent on avoiding them, however unpleasant the process of thinking them through might be.

    A policy is not simply a risk strategy. Australia has proved quite good at thinking through the risks of China’s rise regionally. But a fundamental part of its thinking should now be about what sort of China might exist in ten to twenty years, and in what ways that country is important and influential for Australia, and Australia for it. This is a positive part of policy formation.

    Those who remain sceptical about the need for a strategic vision like this should remember that even if Australia doesn’t have a vision about China, China certainly has one about it. That vision was outlined by Xi Jinping last week, when he talked about an Australia that would increasingly be part of the economic, and therefore the geopolitical, realm of a China-influenced world in which the luxurious isolation of the past is over. After all, China has had a culture of strategic thinking for thousands of years. Look at the words of Confucius in the Analects: “To lead into battle a people that has not first been instructed is to betray them.” And in terms of future economic and security challenges, that is precisely the mistake that the Australian government has been making. Xi’s visit offered the chance to change that. Let’s hope it is taken.

    This article first appeared in Inside Story on 25 November 2014. 

    Kerry Brown is Director of the China Research Centre at the University of Sydney.

  • John Menadue. The scholarship is the real issue.

    Freya Newman has been placed on a two year good behaviour bond  with no conviction recorded  for  accessing the computer system of the Whitehouse Institute of Design concerning a ‘scholarship’ awarded to Francis Abbott.

    Overwhelmingly the media coverage has been about Freya Newman and very little about the substantial issue, the ‘scholarship’.

    The substantial issues seem quite clear. They have not been publicly disputed.

    • The Whitehouse Institute is a private tertiary body.
    • It awarded Francis Abbott, the then Opposition Leader’s daughter, a scholarship which saved her family more than $60,000 in fees.
    • The scholarship was not advertised.
    • Its existence was never made public.
    • The Institute insists it was offered on the basis of academic merit, but has offered nothing to substantiate this claim.
    • The Institute’s chairman was a substantial donor to the Liberal Party and has confirmed that he ‘probably’ recommended Ms Abbott for the scholarship.
    • Tony Abbott did not disclose this benefit as part of his parliamentary obligations.

    Just imagine if the daughter of Kevin Rudd or Bill Shorten had been awarded a $60,000 scholarship in such circumstances. The English language would not have been adequate to describe the criticism they would have received from Tony Abbott and Julia Bishop. The Murdoch media would have gone almost into meltdown over such a scholarship. The Australian would have called for either a judicial enquiry or a royal commission. It would have been as relentless as it was on Julia Gillard’s union connections.

    It is remarkable that a young woman, who chose at very considerable risk to be a whistle blower, has been the focus of public attention, including from Christopher Pyne, while the substantial issue, the ‘scholarship’ has been sidelined.

    It should not have been left to a young whistle blower to bring this issue to public attention. If Tony Abbott had been a member of the Parliament of NSW, Freya Newman and other whistle blowers could bring their concerns to the attention of the NSW ICAC. But there is no national ICAC.

    The real issue is not Freya Newman. It is the ‘scholarship’ and the circumstances under which it was granted. An injustice has been done to Freya Newman. At least Magistrate O’Sullivan got the point about how trivial the case was.  The magistrate said that Freya Newman was not motivated by personal gain or a sense of animosity to Francis Abbott. ‘I accept that Freya Newman was motivated by a sense of injustice rather than a desire for personal notoriety or any desire to embarrass the student (Francis Abbott)’.

    An injustice has been done, but the central issue surrounding the ‘scholarship’ has not been properly examined.

    The issue is certainly not Frances Abbott. There is no suggestion she has done anything wrong.

    New Matilda deserves credit for pursuing this issue whilst almost all other media avoided it or focussed on the whistle blower rather than on the ‘scholarship’.

  • Rethinking the cost of Western intervention in Ukraine.

    In the Washington Post on November 25, Katrina vanden Heuvel had a very interesting article on the mistakes that Europe, NATO, and the US have made in their approach to Russia over the Ukraine and Crimea. She quotes Henry Kissinger as saying ‘Nobody in the West has offered a concrete program to restore Crimea. Nobody is willing to fight over Eastern Ukraine. That’s a fact of life.’  Kissinger has said that the West might weigh its real security concerns before posturing and escalation over Ukraine.

    Even far away Australia has been posturing over Ukraine. In one of his more bellicose moments, and as a way of shirt-fronting Vladimir Putin, Tony Abbott suggested that Australia might send 1,000 Australian  troops to secure the crash site in Eastern Ukraine!  The link to this article is below.  John Menadue

    http://wapo.st/11sAUyu

  • Michael Keating. Capitalism and the Economy.

    As both John Menadue and Ian McAuley have argued in recent posts there are good social reasons for governments to intervene to modify the outcomes from a purely capitalist economy. Right now rising inequality and taxation avoidance by companies and wealthy people are priority issues that should be addressed. It is also possible that the impact on the government budget from increasing inequality could have a negative impact on future economic growth.

    I think, however, it is going a step too far to suggest that capitalism is leading to low wages which then result in a shortage of demand, and that this is the reason for the failure of business investment and economic growth to pick-up, especially in the US.

    The fact is that currently – and indeed for decades – US domestic investment has been greater than US savings. The difference between the two is identically equal to the US current account deficit, which amounted to as much as 6 per cent of GDP immediately prior to the GFC, and is still running at around 2 ½ per cent of GDP notwithstanding generally sluggish domestic demand and a significant depreciation of the US dollar.  So the US is not short of demand in aggregate, although some might prefer a different pattern of that demand. Instead it is arguable the US needs to reduce its reliance on other people’s savings. Indeed with China holding around 40 per cent of US government debt, this is hardly the basis for an independent foreign policy and maintaining US supremacy in the Asia-Pacific region.

    But what is required to restore a better balance between investment and savings in the US, and also in many other capitalist economies which are relying on the savings of foreigners?

    One view, most prominently promulgated by Larry Summers, a former Secretary of the US Treasury, is that there is an excess supply of savings in the world.  Accordingly action needs to be taken to reduce the global savings rate, even if that is not true for many rich capitalist countries.

    To the extent that excess global savings are a problem, the principal country responsible is China. Furthermore, China has been over-investing and many of its domestic investments are under-utilised. But if investment in China is more closely related to demand in future, potentially there could be even more flows of Chinese savings to the US and elsewhere.  Interestingly China agrees, to at least some extent, and its economic strategy envisages increasing consumption and lowering both investment and particularly savings. So effectively there is a measure of international agreement that the present global economic imbalances are not because capitalism has been paying wages that are too low, but rather because communism has been doing this.

    The question then is what consequences would flow from a better global balance between savings and investment. In the US the reduction of the current account deficit would require some combination of a real exchange rate depreciation and increased savings. Both of these changes would reduce US consumption but this reduction could be more than offset by increased foreign demand and less reliance on imports, so that economic growth would be likely to pick up. But returning to our starting point, an increase in US wages and consumption is not the way to restore the health of the US economy.

    For those of us who favour a more equal distribution of income an increase in minimum wages may well have a role in the US, where the minimum wage is very low, but only if it leads to an improvement in the relative wages of low paid people, and not an across-the-board increase in wages generally. A more lasting solution is to improve the skills of people on the margin of employment so that they can obtain the jobs of the future. It is in this respect that capitalism is too often at fault and risks being unsustainable unless it is prepared to make greater efforts to train people, and to train them not just for today’s jobs but also so that they can move easily to tomorrow’s jobs.

    Michael Keating was formerly Secretary of the Department of Finance, and Secretary of the Department of Prime Minister and Cabinet.

     

     

  • John Menadue. Our ‘best friend’ in Asia is in trouble.

    Japan now faces its fourth recession since 2008. The Japanese economy has contracted in 13 of the last 27 quarters. In effect, there has been no growth for six years. The Japanese economy has been moribund for two decade.

    So far Abenomics is not delivering as Prime Minister Abe had hoped. His attempt at money-creation on a vast scale to monetise Japan’s enormous public debt is not working.

    Facing failure of his economic policies, Prime Minister Abe has done what many politicians do when they are not sure of their position. He has called an election for next month. He will probably win that election despite the drubbing he received in a bi election a few days ago in Okinawa over US military bases on the island. He will win the December election, not because of any policy success he has had but because of the abject failure of the major opposition party, the Democratic Party of Japan.

    Abenomics had three arrows.

    The first was printing of money on an enormous scale by the Bank of Japan. It was designed to stimulate the economy, particularly consumption and promote inflation which would help monetise the debt and encourage consumers to spend now rather than wait for prices to fall. But the economy has stalled again and prices are not rising.

    The second arrow was budget reform to repair Japan’s enormous government debt. Japan’s gross government debt as a percentage of GDP stands at 238%, the highest in the world. By contrast the Australian figure is 27%, although when we listen to Tony Abbott or Joe Hockey we would think that we face an emergency.

    Prime Minister Abe attempted to address the government debt problem by increasing the GST from 5% to 8% in April, but it stopped consumption in its tracks. Prime Minister Abe has now said he will delay the next increase in the GST from 8% to 10% which was scheduled for October 2015. So budget reform has been put on the back burner. The second arrow has also missed its mark.

    The third arrow involved structural reform which necessarily takes longer to achieve. This third arrow had several features. It is not having much effect.

    • Boosting the role of women in the workforce, but there is no sign yet of any upward trend in participation by women in such a male dominated society.
    • Reform of industries including, importantly, agriculture. But farmers are solid supporters of Prime Minister Abe’s Liberal Democratic Party and he is reluctant to upset them.
    • Immigration to address Japan’s pending democratic disaster. Japan’s population is currently about 127 million. It is projected to fall to about 100 million by 2050. By then the population will have aged dramatically. For decades Japan has talked about migration, but little is done because Japan is culturally apprehensive about foreigners, ‘gaijin’. There are over 500,000 ethnic Koreans in Japan, the descendants of people who were brought to Japan as workers when Korea was part of the Japanese empire (1910-1945). Those Koreans are still ‘outsiders’ in Japan and presently subject to a hate campaign by right-wing nationalists who are attracted to Prime Minister Abe’s policies in such areas as visits to Yasukuni Shrine, denial on comfort women and the Tianjin massacre. There have been a few Asian women who have migrated to Japan to marry farmers who have found it difficult to find a partner. With a culturally exclusive attitude to all foreigners and with Japanese women reticent about marriage and families, Japan is unlikely to break free of its population decline.

    Our ‘best friend in our region’ is in serious trouble.

    In July last year, we signed a much hyped Economic Partnership Agreement with Japan which Andrew Robb said would ‘turbo-charge’ our trade with Japan by reducing tariffs and other restrictions on our goods and services into Japan.

    But twelve months later it is clear that two factors will slow down the alleged benefits of the EPA. The first is clearly Japan’s sluggish economy which is again in recession.

    The second is the depreciation of the Japanese yen which is the direct and intended result of Japanese policy-makers. Since we signed the EPA with Japan in July, the Japanese yen has depreciated over 7% against the Australian dollar, making imports into Japan more expensive. This will reduce the benefits of the tariff reductions that we have negotiated. And Japanese policy-makers are determined to depreciate the Japanese yen even further. The Yen has depreciated 20% in recent months against the US dollar.

    By 2050 China will have a population of about 1.4 billion and Indian 1.6 billion compared with Japan of 100 million. A large population does not necessarily result in economic success and influence. But we are seeing amazing growth in China. Watch this space for India.

    China and India are likely to be increasingly important to Australia’s economic future. Tony Abbott should be more careful about the language he uses about ‘our best friend in Asia’. By 2050 we may have a very different view about who is most important to us in our region.

  • Lifters and leaners in tax.

    In the SMH today (27 November 2014), Michael West has a very interesting story about the leaners and lifters in the business community and the unfairness of tax avoidance by some companies. It clearly works to the disadvantage of many Australian companies who are paying fair rates of taxation. For the link to this story, see below.  John Menadue

     

    http://www.smh.com.au/business/comment-and-analysis/leadership-needed-on-tax-fairness-in-australia-20141126-11ukw2.html

  • John Menadue. Move over Joe Hockey

    The Julie Bishop media blitz continues. But will it flame out like the media blitz of her namesake, Bronwyn Bishop who was also touted by the media as a possible Liberal leader over a decade ago. Like Julie Bishop now and Bronwyn Bishop then, they had amazing free runs in the media. But in the end substance and not style wins out.

    And on substantial issues as I have mentioned in my earlier blogs, there is little of real achievement… There have been record cuts in overseas development aid, Ebola delays, needlessly provoking China over its island dispute with Japan, failure to achieve real outcomes on MH17 and of course, most recently, playing party politics with the President of the US over climate change.

    Since Joe Hockey hit the hurdle with his first budget, Julie Bishop has obviously seen an opening. The media posturing is so obvious – a range of interviews from Harpers, Vanity Fair and Peter Hartcher in the SMH. There was a round of media interviews in New York which was ideal to project her role as Chair of the Security Council. And of course there was media interest in her jogging in Beijing and elsewhere. She has clearly been impressed by the media which John Howard attracted with his early morning walks and Tony Abbott’s bike riding. But there is not much substance in jogging. She probably decided that shirt-fronting the President of the US would bring her brownie points with her increasingly nervous colleagues and with the electorate.

    Her attack on Tanya Plibersek in yesterday’s SMH also reflects this media drive. It hard to understand how she thinks that flirting with Kevin Rudd adds to her foreign policy credentials. If anything she might consider retracting what she said about Kevin Rudd’s campaign for an Australian seat on the Security Council.  ‘There really has been no justification for the benefits that will accrue to Australia for pursuing a seat [on the Security Council] at this time.’ How ironic that she now projects herself as the Chair of the Security Council that she was so critical of a short time ago. How Julie Bishop also thinks that Tanya Plibersek would benefit by a briefing from her is hard to grasp. Most people would think that a briefing from foreign policy and intelligence specialists, which she received, would be much more useful.

    But what Julie Bishop will be most remembered for is her attack on President Obama to burnish her tough person image as the logical successor to Tony Abbott if opinion polls keep trending down against the Coalition.

    The Coalition was not expecting President Obama’s speech in Brisbane or the deal that President Obama made with President Xi. The Coalition clearly feels badly hurt by the position the US has taken.

    Our Foreign Minister and the government however should not have been surprised. The signs were everywhere that the Obama administration was tiring of the Australian Government’s position on climate change.

    Tony Abbott was due to meet President Obama for their first meeting at the APEC Summit in Bali only a month after Tony Abbott was elected. But President Obama could not attend and was represented by his Secretary of State, John Kerry. On good advice, I understand that John Kerry was not impressed with Tony Abbott on climate change. He asked officials ‘Where does Prime Minister Abbott get this stuff from on climate change?’

    In the AFR yesterday, John Kehoe, its correspondent in Washington spells out very clearly that the Australian Government had been warned about what was coming up in the lift on climate change. Kehoe referred to a speech that John Podesta, President Obama’s climate change policy architect had made. Podesta had been pivotal in President Obama’s landmark deal with China. Kehoe reported that in July this year in a speech ‘to senior Americans and Australians including Finance Minister Mathias Cormann and Opposition Leader Bill Shorten, Podesta bemoaned Australia’s lack of climate policy. After the abolition of a carbon price, attendees say Podesta told the audience the Australian Government did not have a credible climate policy in place, adding he felt he should be honest with Australian friends.’

    According to Kehoe the issue was also spelled out plainly by Caroline Atkinson who was President Obama’s ‘G20 sherpa’ and national security adviser for international economics. Kehoe reported ‘Not once but twice in the lead up to the G20, Atkinson publicly told Washington audiences full of Australian government officials that the US expected to have a proper discussion on climate at the G20. She even suggested that other countries would team up against Abbott to make it happen. For those in Canberra blindsided by Obama damaging Abbott on climate change, they overlooked signals the White House had been sending for months.’

    There is clearly no excuse for Julie Bishop’s ignorance or surprise in what was in train. A minister who was on the ball would not be blindsided like this.

    In recent days we have had The Australian carrying stories designed to help the government in its predicament on climate change. Could we think of it doing anything else! The Australian suggested that Tony Abbott led the pack in standing up against President Obama on climate change in and around the G20. This is patently nonsense and special pleading. The reverse was the case with not only President Obama but Prime Ministers Cameron and Merkel, and President Hollande, and maybe others ringing the carbon change bell on our Prime Minister.

    The relentless media campaign by Julie Bishop tells us a lot about the problems unfolding in the Liberal Party, Julie Bishop’s personal aspirations and how the under resourced Australian media can be so easily manipulated and distracted by personality and celebrity at the expense of examination of policy.

    It is also becoming clear that the government has nowhere to go on climate change, except in reverse.

  • John Menadue. Capitalism, inequality and taxation.

    In his challenging series last week on ‘Is capitalism redeemable’ Ian McAuley drew attention to how growing inequality is the cause not only of serious social concerns, but it is also presenting us with some quite serious economic problems.

    There is not much doubt that in the US, the growing tax concessions for the wealthy and the obstacles placed in the path of low income and poor people to organise themselves through trade unions, has had serious economic as well as social consequences. With companies like Walmart paying poverty wages, low income people don’t have the money to buy goods and services that businesses would like to sell. And despite US companies and the wealthy being awash with money, particularly as reflected in the buoyant US stock market, business is not investing in new businesses and jobs for the chief reason that the demand is just not there. Inequality is a major economic problem.

    The IMF has highlighted the economic damage that inequality is doing. A staff policy paper 2014 found that ‘our work built on the tentative consensus in the literature that inequality can undermine progress in health and education, cause investment-reducing political and economic instability, and undercut the social consensus required to adjust in the face of shocks and that it tends to reduce the pace and durability of [economic] growth.’

    The managing director of the IMF has been even more explicit. She recently noted that the 85 richest people in the world control as much wealth as the poorest half of the global population – 3.5 billion people. She commented ‘With facts like these, it is no wonder that rising inequality has risen to the top of the agenda – not only among groups normally focused on social justice but also increasingly among politicians, central bankers and business leaders. … It is therefore not surprising that IMF research – which looked at 173 countries over the past 50 years – found that more unequal countries tended to have lower and less durable economic growth.’

    The Governor of the Bank of England warned us only a few months ago that unless action was taken on inequality ‘capitalism would devour its children’.

    The OECD in its June 2014 report said that ‘OECD data shows that well into the recovery from the global economic crisis, the distribution of pre-tax and transfer income remains significantly more unequal than it was before.’ In particular the OECD expressed concern about ‘anchored poverty’ particularly amongst the young.

    Ian McAuley has pointed out that because of growing inequality and the unwillingness of corporations and individuals to fund new growth and new jobs, more and more people have to rely on government benefits to tide them over. That in turn results in increased budget problems. We all instinctively know that well-paid jobs in a strong economy are better for everyone than government benefits. We need to address this downward spiral by the poor who become increasingly dependent on welfare with severe personal and social consequences but also serious public finance problems.

    One feature of modern capitalism particularly by global companies is tax avoidance. We are reading about it almost every day. It is not only unfair but has serious economic consequences. As Ian McAuley put it ‘The economist Joseph Stiglitz points out that well-crafted taxes can actually improve a country’s economic performance. Tax regimes which give a leg up to new ventures, which encourage retraining, or which shape depreciation provisions to encourage the uptake of new technologies, can all help improve a country’s economic adaptability. A carbon tax is an example not only of the payment for harm done to others, (negative externalities in the language of economists) but also of an incentive for industries to adjust and modernise their productive methods.’

    But unfortunately Australia is going in the opposite direction with widespread tax avoidance. Companies such as Westfield paid an effective tax of only 8% over the last decade. News Corp tops the list with 146 subsidiaries in tax havens.

    Companies like this are the real ‘leaners’ and not the welfare bludgers that Alan Jones and the Daily Telegraph talk about. But not content to avoid company tax on an enormous scale they have their corporations fund their private travel, private entertainment, and their private boats

    In 2011-12 according to Peter Martin in the SMH on 13 May ’75 ultra-high earners had a taxable income of $1.10 each’.

    Almost every day we have more and more information about tax avoidance and tax havens. What is becoming increasingly clear is that the benefits to the rich are damaging both our society and our economy.  Our four major international tax advisory firms are facilitating this large scale tax avoidance. They call it ‘aggressive tax planning’ or the means to overcome ‘unfair tax competition’, presumably by other tax avoiders in Australia and elsewhere.

    The government is not making it easier to crack down on major tax avoidance by cutting back experienced and professional staff in the Australian Tax Office. The government and the ATO also need information on where profits are being made and taxes incurred by jurisdiction. The ATO needs new legislation to address profit shifting through transfer pricing, thin capitalisation and debt loadings. We hoped that the G20 in Brisbane would address this issue but it seems to have been overwhelmed by other matters.

    The most consistent critic of inequality and concern for the poor is Pope Francis. A year ago he seemed a voice in the wilderness.  But he is now being joined by such people as the managing director of the IMF, the Bank of England and senior politicians.

    We are finding that inequality breeds not only social problems but has serious economic consequences for the future of capitalism.

  • John Menadue. Murdoch and Abbott vs ABC.

    This is a repost of a blog which I initially posted on December 19 last year.

    Tony Abbott has a debt to repay to Rupert Murdoch for the extremely biased support he received in the last election.

    With the help of Senator Cory Bernadi, Tony Abbott is now following the Murdoch Media line in attacking the ABC. He is also following in the steps of the Howard Government that attempted, unsuccessfully, to bring the ABC to heel. During the Howard Government, Minister Richard Alston and Senator Santo Santoro led a concerted campaign against the ABC to force political compliance.

    Last week Tony Abbott joined in the attack on the ABC in the Coalition party room. He particularly took a swipe at the ABC for revealing government spying around the world that has been brought to attention by Edward Snowden. But the ABC was in good company in carrying these stories. The Snowden revelations were carried by The Guardian, the New York Times, the Washington Post and Der Spiegel. Even if the ABC had declined to participate in the Snowden revelations it could not have avoided subsequent coverage of one of the major news stories of the year and possibly the decade. The ABC would have been forced into catch-up for weeks.

    The Chairman of the ABC has announced a ‘bias audit’ of the ABC to counter the campaign by the Coalition and the Murdoch media. I can understand this defensive reaction, but it is all so one-sided. Who is to audit the Murdoch media and the scurrilous campaign that it conducted during the last election? Murdoch even sent one of his New York heavies, Col Allan, to do a hatchet job on the Rudd Government. It was an appalling abuse of power.

    The Murdoch media is critical of the performance of the ABC but is silent on the performance of the Lachlan Murdoch – James Packer performance at Channel 10, to say nothing of the free ride it has given to James Packer for Sydney’s second casino for high rollers.

    The Murdoch media which consistently points the figure at others has been charged with phone hacking and bribery of police in the UK. Rupert Murdoch abandoned his Australian citizenship to take advantage of business opportunities in the US.

    The Murdoch campaign against public broadcasting is not new. James Murdoch, who has been pushed aside because of the hacking scandal that occurred under his watch in the UK, took every possible opportunity to attack the BBC. He alleged that the taxpayer-funded BBC was providing unfair competition to the Murdoch media.

    It is nonsense to suggest that it is only public broadcasters like the ABC that are publicly funded. Ian McAuley in New Matilda on 9 December this year put it this way

    “Commercial media are funded by what is to all intents and purposes, a sales tax. For example, if you buy a new car, around $500 of what you outlay is for advertising. Last year, $13.1 billion was spent on advertising, of which $4.9 billion was for commercial TV and radio, and $2.6 billion was for newspapers. To put these figures into a digestible form, we are paying about $1,500 per year per household for advertising, of which $500 is for commercial TV and radio, and $300 is for newspapers (not including the cover price). By contrast we are paying about $120 a year for the ABC. It is as asymmetric deal: those who use only the ABC pay $500 a year for commercial TV and radio, while those who use only commercial media pay $120 for the ABC. … Perhaps it’s part of our civic contract that those who pay for the commercial media they never use don’t complain, but the commercial media, particularly the Murdoch media when they attack ABC funding, don’t seem bound by such rules of decency.’

    But who does the public really trust in the media? The overwhelming evidence is that the ABC is the most trusted media in Australia and the Murdoch media is the least trusted.

    A recent poll on ABC funding in the Fairfax media drew over 21,000 respondents. 77% agreed that the ABC was an excellent and essential service that deserved more money. Another 12% said that the ABC did good work but the funding was about right.

    Essential Research has just reported about ‘trust in the media’. Once again, the ABC is at the top of the list. Rankings for “a “lot of, or some trust, in the media” were as follows:

    ABC TV news and current affairs                                70%

    ABC radio news and current affairs                           63%

    ABC talk-back programs                                              46%

    Commercial news and current affairs                       38%

    News and opinion in daily newspapers                     48%

    Commercial TV news and current affairs                 41%

    Commercial radio talk-back                                        31%

     

    For particular newspapers, respondents ranked the newspapers in which they had “a lot of or some trust”. The rankings were as follows:

     

    Melbourne Age (Victoria only)                                    68%

    The Sydney Morning Herald (NSW only)                   64%

    The Australian                                                                64%

    Courier Mail (Queensland only)                                  59%

    Herald Sun (Victoria only)                                            48%

    The Daily Telegraph (NSW only)                                 41%

    Trust in the Daily Telegraph has fallen dramatically over the last 12 months with its particularly biased campaign during the last election.

    The Australian Press Council has also noted the performance of some Murdoch publications. The APC publishes guidelines to aid journalists and editors an investigates complaints. One subject which I follow closely has been asylum seekers. The APC reported on a Daily Telegraph story of 26 November 2011 headed ‘Open the floodgates – exclusive: thousands of boat people to invade NSW’. The APC found that this story was ‘grossly inaccurate, unfair and offensive’. It upheld a complaint about a similar story in the Herald Sun on the same day. The APC also found against three articles by Greg Sheridan on ‘illegals’ that appeared in the Australian on 23 and 28 October 2010 and 5 March 2011.

    The ABC does not always get it right. It has had a very ordinary coverage of news on both TV and radio from Canberra for many years. Its Canberra correspondents show little interest or knowledge of policy. I wonder if they can spell the word! I am also amazed that the ABC continues to use ‘experts’ from so-called independent think-tanks like IPA, that refuse to disclose their funding sources. I suspect that those “think thanks” are often fronts for special interests. Cash for comment takes many forms.Unfortunately the ABC also still sees itself as a branch office of the BBC and CNN rather than an independent and involved media organisation in our own region.

    But for all of its shortcomings, what an awful and barren media landscape we would have without the ABC.

    The last people who should be lecturing the ABC about performance and bias are Tony Abbott and the Murdoch media.

  •  John Menadue. Undiplomatic, politically partisan – and wrong!

    Julie Bishop has decided to take on the President of the United States over his comments to an audience at the University of Queensland on the state of the Great Barrier Reef.

    It shows immaturity to jump in so quickly to defend what I think is the indefensible by attacking others without any real basis.

    It is also an example of how the Liberal Party sees the alliance between us and the US, not as an alliance between our two countries, but as a special relationship between the Liberal Party of Australia and the Right Wing of the Republican Party in the US.  Such behaviour does great damage to Australia’s long term relationship with the US

    In attempting to rebut President Obama, Julia Bishop said ‘Of course the Great Barrier Reef will be conserved for generations to come. And we do not believe that it is in danger.’ Yet Australian experts on the subject tell us quite clearly that the reef is in real danger.

    • Ove Hoegh-Gulberg, the Director of the University of Queensland’s Global Change Institute, said that President Obama was ‘right on the money. … He is stating the facts … the reef has already shrunk by half in 30 years, with climate change a factor in the retreat.’
    • Charlie Veron, the former Chief Scientist at the Australian Institute of Marine Sciences, said ‘In the long term, that is the whole of this century, we are going to have the Great Barrier Reef slaughtered … if carbon dioxide emissions keep trending as they are.’
    • Dr Jon Brodie, the Chief Research Scientist at James Cook University said ‘Julie Bishop’s comments contradicted the government’s own report on the state of the reef. … The report found the reef to be in poor condition and the outlook is for continuing deterioration … it’s obviously in danger. … Under the government’s 2050 action plan, the reef will continue to decline.’

    The clear error by Julie Bishop on the Great Barrier Reef follows a pattern of climate change denial by Tony Abbott and the government.

    This undiplomatic response by our Foreign Minister and poor action on policy is becoming part of a pattern as I set out in my blog of 18 November ‘Julie Bishop-substance and style’.

    • In the last Coalition budget she was responsible for the largest reduction in overseas development aid by this country. It was the largest cut in the budget.
    • She unnecessarily sided with Japan against China over the Senkaku/Diaoyu Islands.
    • She sided with Israel against overwhelming world opinion over the continuing expansion of settlements by the Israeli Government.
    • Her megaphone diplomacy over MH17 achieved very little. It was the Malaysian Government that negotiated with the rebels in the Ukraine and secured access to the crash site, the return of most of the bodies and the recovery and return of the black boxes.
    • Despite the posturing in the Security Council on Ebola, we have been very slow,selfish and restrictive in our response.

    And now we are seeing the most diplomatic and gauche mistake of all with the attack on the President of the US.

    I would be confident that this extraordinary  attack  on President Obama would be against the advice of the Department of Foreign Affairs and Trade. It  very likely came directly from the private offices of Tony Abbott and Julie Bishop.  The PM would probably not want to do the job himself, so the media obsessed Foreign Minister  obliged.

    Despite misstep after misstep the media has given Julie Bishop a very free run. Perhaps the media is giving her this free run because it feels guilty about the unfair treatment that it dealt out to Julia Gillard!.

  • Is capitalism redeemable? Part 9: Restoring a moral voice

    It is easy to allocate blame for our apparent entrapment in bad public policy. Tony Abbott’s truculence, disregard for reason, inflexibility and broken promises all come to mind. As does the blatant partisan stance of the Murdoch media.

    Those who look for more general causes draw attention to dysfunctional party structures, an adversarial parliamentary system and sloppy journalism.

    It is useful to go a little deeper than these specific manifestations, and ask why so many of us are indifferent to such problems. Why have we turned our back on Enlightenment values – those values which a century ago saw Australia take a world lead in female suffrage, decent wages, pensions and good government generally? In a country that has made such strides in mass education, how come tabloid newspapers still command any readership and how come spiteful shock-jock radio hosts hold their audiences?

    Australians have always been a sceptical lot, but scepticism seems to have morphed into cynicism, and more generally a creeping atmosphere of nihilism is stripping all consideration of morality from our public debates.

    One starting point is to look back to the unrest of the 1960s. To shift Wordsworth’s context, “Bliss was it in that dawn to be alive, but to be young was very heaven!”. It was a revolution against the hypocrisy exhibited by society’s moral guardians, against race and sex discrimination, against colonialism, and against a pointless war. All ideas were up for grabs, all nostrums were up for question.

    Into that space came the philosophy of postmodernism, a philosophy holding that there is no reality, just subjective viewpoints. Your viewpoint, my viewpoint, her viewpoint – all are equally valid. It was an easy philosophy to embrace because it required no moral references, and it dispensed with the need for reason or logic. While the hard thinkers were making the case for tolerance, respect and humility in issues of race and sex discrimination, those who embraced postmodernism took the easy path of adopting the amoral view of cultural relativism – even, in extreme cases, not objecting to practices such as selective abortion of female foetuses and genital mutilation, and considering the Holocaust to be no more than a subjective interpretation of history.

    Although emanating from the “left”, postmodernism has spread its influence across the political spectrum. If there are no moral standards as reference points, then we don’t have to worry too much about what Louise Newman says about children in detention or what Tim Costello says about poker machines: Newman and Costello are entitled to their “opinions”. ABC staff interpret their charter to give balance to contrasting “views” on climate change, and leave unchallenged politicians’ most egregious lies: if government ministers say that Labor left a record deficit, or that no other country has emissions trading (both easily dismissed by reference to authoritative sources) they’re just “opinions”, not to be questioned any more than the minister’s choice of a blue tie over a red one.

    And, as we all know, the quickest way to put down a political argument is to say “there are two sides to every story”, before moving on to less unsettling dinner table discussions, such as comparisons between New Zealand and South Australian Hills Sauvignon Blanc, or the noise levels of BMW and Mercedes Benz cars.

    Also developing from the 1960s has been a general downplaying of the more rigorous academic disciplines, most clearly manifest in the relative fall in enrolments in science and mathematics, and also in an erosion of logical rigour in many other disciplines. Students can get through a whole high school education and university degree without exposure to the basic tools of critical thinking, such as understanding deductive logic or the rules of scientific inquiry.

    When people don’t have recourse to tools of critical thinking, logically empty statements such as “I cannot guarantee there were no terrorists on that refugee boat”, or “Not all Muslims embrace the views of ISIS” come to carry meaning for the casual listener. The use of statements which are correct in logic but misleading in content is known as “sophistry” to philosophers and as “dog whistle” politics in more general parlance. John Howard was a master in sophistry and Abbott, though more gauche, follows his footsteps. Similarly, if people don’t understand the conditionality of hypotheses and the role of attempted refutation in scientific method, they are likely to believe that the question of climate change is one of great uncertainty and disagreement between experts.

    Ironically, the nihilism which arose as a by-product of student radicalism in the 1960s may have made it easier for universities to drift into the world of commerce, where faculties are treated as business units, where students become customers, and where the starting salaries of graduates become the prime measure of success. The enthusiasm with which so many vice chancellors have embraced the Government’s tertiary education “reform” proposals would render C P Snow and John Henry Newman speechless.

    Although the churches condemned some of the movements of the 1960s, in various ways they too have dealt themselves out of the moral debate, paving the way for nihilism.

    A few religious movements, particularly in some of the fundamentalist Protestant churches, have espoused bitterly anti-Enlightenment values in relation to evolution, in literal interpretation of scripture and in reduction of morality to the ten categorical rules that guided Moses to keep his restive tribe in order.

    Throw out the love of learning and reasoning that sit at the core of the Enlightenment, however, and you throw out the tools which allow us to handle complex moral problems – and most moral problems that count are complex. Good public policy is often about finding practical reconciliations of conflicting moral principles.  (By contrast Australian-style politics is more about a supposed Manichean conflict between good and evil.)

    The other moral distortion has come from parts of the Catholic Church and from some other religious groups, and that’s an obsession with sex, allowing concerns with sexual behaviour to crowd out almost all other moral issues. Also, as we uncover the history of political events in Spain, Portugal and Chile, we learn that people with positions of authority in the Catholic Church have been involved in terrible transgressions of human rights. More recently, revelations of sexual abuse have exposed widespread gross hypocrisy. Logically, one should distinguish between the corruption of an institutional church from its moral teachings, but that separation is a big ask for those who feel betrayed by those they have trusted.

    To his credit the present Pope is trying to address wider moral issues, and there are similar movements in other faiths, but they are up against institutional inertia. In spite of separation of church and state in our constitution, the Anglican and Catholic Churches have become intertwined with government, the former through de-facto establishment in colonial times, and the latter through dependence on government support for its schools and hospitals. If we are looking for moral leadership from the church it is worth remembering that Martin Luther King’s effectiveness owed a great deal to his separation from the political establishment.

    The task of confronting lies with truth, and of restoring some moral stance to public life, is a great one. There are voices – in the political sphere Bob Oakeshott, Tony Windsor, John Faulkner, Lindsay Tanner, and John Hewson come easily to mind, and undoubtedly there are many politicians working quietly behind the scenes. These people all need strong support, because their stances have been met with some of the most vile abuse imaginable.

    But we cannot wait around for some messianic “leader” to take us to the promised land of a decent society, like sheep waiting for a drover and his border collie. The task of leadership does not reside solely with the people in positions of authority – indeed, those people often face constraints that limit their capacity to raise hard issues. To take one prominent illustration, it may appear to many people that Malcolm Fraser has gone through some Pauline conversion, but the more likely explanation for what looks like a change of behaviour is that he has been free of the shackles of political office for the last thirty years.

    That’s why the task of moral leadership is one that falls on all of us, in our various modest but collectively effective roles.

     

     

  • Ian McAuley. Is capitalism redeemable? Part 8: Inequality’s downward economic spiral

    Let’s start with what looks like a self-evident proposition. “Countries with right-wing or neoliberal governments spend less on social security than countries with more left-inclined governments.”

    It’s a proposition university lecturers put to students of public economics, and the smarter students usually recognize that there’s a trick in it.

    Harvard economists Dani Rodrik and Alberto Alesina studied the impact of neoliberal policies such as those pursued by Britain’s Thatcher Government, and found that those policies, because they resulted in widening inequality, actually increased the demand for social security payments.

    Whatever images they may project, it’s worth remembering that governments on the right are not entirely heartless, and may even be well-intentioned. Even if it’s only because their supporters find street beggars and shanty towns indecorous, they feel constrained to spend on alleviating extreme poverty. (Lest anyone think that last suggestion is too cynical, we should contemplate our likely political reaction if the squalid conditions of Aboriginal settlements in the remote outback were more visible from the roads and railways used daily by our urban commuters.)

    Economists often argue for neoliberal policies, such as those which dilute workers’ rights, on the basis that while they will make some people worse off, they are worth pursuing because they will increase economic growth and therefore improve governments’ taxing power and capacity to make compensatory payments. Anyone with a little mathematical ability can work through the econometric equations and check the validity of this proposition.

    The main flaw in the argument is not mathematical. Rather it lies in the assumption that social security payments can compensate for some of the non-monetary costs of disruption associated with economic change. The tradeoff is rarely as stark as a choice between job and a welfare payment, but it is often in the form of compensation for a job with less pay, or with less security. It is easy, for example, for an economist in Canberra looking at a proposal which may wipe out regional economy to suggest generous re-location payments, but those calculations rarely take into account the hard-to-quantify costs of loss of a community’s social capital.

    Also, most people prefer some level of self-reliance to dependence on government benefits.

    By almost any consideration, “left” or “right”, an economy is healthier if it can provide well-paid employment for all, either in the form of jobs or self-employment in small business, without making too much call on social security benefits. There will always be enough call on the social security budget as a result of ageing, and to those with severe disabilities, without also asking it to pick up the costs of an under-performing economy.

    The general way in which governments can avoid this demand for re-distribution is to ensure the economy can support well-paid employment, through investment in human capital (education in particular), research, transport and telecommunications infrastructure, primary health care – in fact the whole set of public services that the market either cannot provide or cannot provide efficiently. Research into the determinants of economic growth show that even public investments which we may consider to be remote from the productive end of the economy, such as street lighting, have a positive effect on growth.

    But when there is an increasing demand for social security payments to compensate for poor economic performance, a nation’s public finances become caught in a destructive spiral, as demands for such payments crowd out other areas of government expenditure, particularly if a government has constrained itself with some arbitrary cap on public expenditure. As social security payments crowd out other areas of expenditure, particularly (but not only) education and infrastructure, a country’s long-term economic performance suffers, creating in turn more pressure on the social security system.  It’s a downward spiral to poverty.

    This downward spiral is far from hypothetical. It almost certainly accounts for much of Argentina’s economic decline over last century. And closer to home, the Howard Government used social security payments, such as family allowances, to compensate for our economy’s increasing inability to provide well-paid jobs. “Middle-class” welfare was, and still is, an unsustainable way to prop up material living standards.

    Hockey, Cormann and their advisors understand that social security payments and some other open-ended benefits are making a big call on the public budget, and that in material terms we are living beyond our means. Some short-term sacrifice is needed in order to put our economy and public finances back on track.

    The trouble is that they are going about rectifying this situation in completely the wrong way. Our escape from this spiral should be in the form of increased investment in public services, financed by higher taxes, rather than by cuts in expenditure, while sustaining social security provisions. In time, when those payments are no longer being called upon to compensate for our economic weaknesses, they can even be made more generous for those with enduring needs. Also, expenditure on universally-available services, particularly health and education, besides having high value in themselves, help support the living standards of those who are not so well-off, without being dependent on social security. There is a world of difference between the dignity of participating in shared services and the humiliation of applying for social security.

    Higher income taxes, and withdrawal of excessively generous superannuation benefits for the well-off, would carry a message of shared sacrifice.  One doesn’t need a PhD in economics or ethics to understand that it’s almost impossible to ask people to make sacrifices when the burden isn’t shared.

    The latest example of the Government’s stupidity in this regard has been in its support for a cut in soldiers’ pay. Any soldier, private through to colonel, knows the military tradition of shared sacrifice. The military is not a democracy – far from it – but when, in difficult conditions, sacrifice is needed, it is across the board, or is even disproportionately applied to senior NCOs and officers. Had the Government cracked down on corporate tax avoidance, made wealthy superannuants pay taxes, withdrawn privileges for family trusts, and scrapped privileges for financial commission agents, it may not be in such political strife over issues to do with military and public service pay.

    In this series of articles I have touched on some of many areas of public policy. Many of these will be covered in a book which Miriam Lyons (former Executive Director of the Centre for Policy Development) and I are writing, and which should be published around May next year.

    In the final piece I will look at some of the reasons why unjust and economically destructive public policy remains largely unchallenged. The roots of this problem lie much deeper than media bias or political apathy.

     

  • Ian McAuley. Is capitalism redeemable? Part 7: Inequality – a shameful waste

    “Australia’s program to increase world growth seems to be to cut social security benefits from the poor.”

    When Geraldine Doogue asked Malcolm Fraser to comment on Abbott’s G20 agenda, that was his summary of the present Government’s economic policy

    Unfortunately, ministers such as Hockey and Cormann may not understand the sarcasm in his comment, because there is an economic philosophy supporting their very line: redistribute income towards the rich while disciplining the poor with hardship.

    Of course that doesn’t get stated so bluntly; it’s padded in spin about a “budget emergency”, “Labor’s waste” and so on. But it shows through in the Government’s budget proposals, not only those directed at the poorest, but also in its rejection of Labor’s measures aimed at reigning in some of the undeserved privileges enjoyed by the already well-off. These reforms included changes in the tax treatment of employer-provided cars, ending the racket of hidden commissions on financial products, and modest taxes on multi-million dollar pension accounts.

    Giving breaks to the already privileged is based in part on a belief that if people are rich they must be clever, and therefore their entrepreneurial virtues should be further rewarded. It’s a belief that conveniently overlooks the role of inheritance, luck, political deals and outright corruption in contributing to many people’s financial prosperity.

    It’s also based on the slightly more respectable economic theory that those with higher incomes tend to save and invest, therefore creating jobs for others.

    As Thomas Piketty points out, the saving and investment theory holds only up to a point. Once a financially wealthy class develops it goes on accumulating more financial wealth, and there is no certainty that its financial wealth will be invested wisely. Even if that financial wealth came about in the first instance through entrepreneurship, there is no guarantee that those entrepreneurial energies will be sustained into subsequent generations, who are likely to lead an indolent lifestyle, spending their fortunes on luxuries rather than on productive investment. And that lavish consumption does little for the local economy – it is more likely to make its way to car manufacturers in Germany, watchmakers in Switzerland and vignerons in France than the more modest consumption patterns of those of more modest means.

    Also, perpetuation of privilege is often based on the well-off having first call on what economists call “positional goods”, where supply is limited – the best surgeons, the best teachers and so on. There is a strong economic case, for example, for allocating the best teachers to where they can do the most good, in endeavours such as helping kids who haven’t had the early childhood breaks enjoyed by rich kids.

    The other end of that philosophy – making it hard for the poor – is so economically dumb that it is hardly worth taking the effort to refute it. When there is no demand for labour herding people into the labour force through punitive social security conditions just doesn’t work. The business cycle is an inescapable economic reality, and in an interconnected world one’s chances of finding a job are as likely to depend on decisions of the US monetary authorities or the sentiment of Chinese investors as on local business conditions or one’s own skills and motivation.

    For those who, through a tough upbringing or educational disadvantage, lack skills, there just aren’t jobs available. Minimum wages would have to be brought down to absurdly low levels to make it worthwhile for business to employ unskilled labour, and if they did, there would be a huge waste of resources, because low wages provide no incentive for employers to use labour productively. The waste would be in that most valuable of all resources, people’s capabilities.

    Good public policy is about investing in people’s capabilities which, through circumstances beyond people’s control, have lain dormant and undeveloped, or have been devalued by life’s experiences. Far better than denying unemployment benefits to out-of-work young people would be programs to support them in gaining new skills, and, of course, programs devoting resources to children at risk – children who are otherwise going to spend their adult lives in and out or poorly paid work, in and out of the criminal justice system, and without any stake in society.

    Instead we have a suite of policies designed to sap the self-confidence and dignity from those who become unemployed, as if subjecting people to the humiliation of job rejections and having to beg from friends and charities has no negative consequences. There are consequences, however, not just for the individual but also for the community as a whole.

    Another waste resulting from punitive conditions on the unemployed is that bad management is rewarded and perpetuated. Besides collective action through unions (which is becoming more difficult), one of the few ways people can knock some sense into bad employers is having the capacity to walk out of a lousy job. A workforce of people held to employment only because the alternative is unbearable is not a productive workforce. Sullen compliance with directions, like an ongoing work-to-rule campaign, is a poor substitute for enthusiasm.

    Those are some of the reasons why high levels of inequality hobble a country’s economic performance: they inevitably involve a waste of resources. When Tim Costello spoke of the need for the G20 to bring up the standards of the poorest through “inclusive growth” he reminded us that good social morality and good economics have a great deal of common ground. That common ground seems to be unknown territory to Abbott and his ministers, hell-bent on replicating George Bush’s so-called “supply side” economics, an experiment that failed in the USA and would be even more likely to fail here because it is so alien to our tradition of the “fair go”.

    This article has focussed on the waste of unchecked inequality and the pointlessness of economic growth that benefits only those who are already well-off. The next will outline how policies which promote inequality (intentionally or otherwise), not only waste resources. They also sap governments of the capacity to prevent widening inequality from dragging down the whole economy.

     

  • Cavan Hogue. Russia and the G20

    Contrary to some media reports the G20 did not mention Russia in any of its documents and criticism came only from the West. Nothing happened which is likely to change Russian attitudes or actions.

    The Russia bashing by Australian politicians and media is not likely to worry Russia and the criticism by Western nations is not having any effect either. It is worth noting that claims about “world criticism” of Russia is in fact criticism by Europe and North America with Australia trotting along faithfully behind or indeed jumping out in front.. Countries in our region have not joined in and China has got closer to Russia as a result of the sanctions. Australian attacks, especially about MH17, have of course been for domestic consumption. Our media tends to equate the world with Europe and North America.

    Criticism of Russia at the G20 was restricted to a minority of those present and even they were more interested in economics, Ebola and climate change. The final communique did not mention Russia nor did any of the agreed supporting documents. So perhaps the G20 showed how little the rest of the world is interested in this issue? Tony Abbott’s pathetic opening address can only have given him less credibility with those present about anything.

    Sanctions have not deterred Russia and its counter sanctions are having economic effects on some other countries. Australia lost agricultural markets and recent reports claim that German industry has been affected. Subsequent statements by Putin and the continuation of Russian military supplies to the separatists in Ukraine have not changed in any way as a result of the G20 which is not surprising since it is an economic organisation. Criticism of Russia came from countries which have been saying the same things for some time and were made outside the framework of the Meeting. The only comment from outside Western countries came from UN Secretary General Ban Ki Moon who urged Russia to use its influence with the separatist for peace. Mr Abbott’s unusual claim that he has intelligence linking Russia to the downing of MH17 has been matched by an even more dubious doctored photo from Moscow claiming it was Kiev.

    Vladimir Putin is an authoritarian nationalist who wants Russia to be respected throughout the world as a great power and a major player in world politics. He also wants friendly states around Russia’s borders and sees Western criticism of Russia as a resurgence of Cold War attitudes. This is why he gets 87% approval rates in domestic polls. While polls always need to be taken with quite a few grains of salt, like it or not this is how a majority of |Russians see things. True not all Russians agree with him and, while not quite a new Stalin, he does not deal kindly with opponents. What politician is going to change an approach which gets strong domestic support because of foreign criticism?

    Australia is not a serious player in Europe and Ukraine is a European problem. The main result of European pressure on Russia has been a rapprochement between Russia and China and greater Russian interest in the rest of the world. We may ask how this serves Australian interests? Instead of identifying ourselves with the West and its problems might we not be better advised to focus on our own neighbourhood? Unfortunately the answer is that despite all our talk about Asia and our growing Asian population, our leaders still see us as a far flung extension of Europe or perhaps as the 51st state of the union.

    Australia should not try to make a big noise about issues that are not of direct interest to Australia but should focus on promoting clearly identifiable Australian national interests. We do not have to like the kind of Russia that Putin likes but why do we have to make a big issue of it? The G20 did not reveal great public concern by countries outside of the West. Hairy chested attacks on Russia may play well with the shock jock boviators who, to borrow Hamlet’s expression, are capable of nothing but inexplicable dumb show and noise but they do not enhance Australia’s reputation as a responsible country.

    Cavan Hogue was formerly the Australian Ambassador to USSR and Russia.

  • John Menadue.   Julie Bishop – substance and style

    According to opinion polls, Julie Bishop’s standing has climbed. In Harper’s Bazaar she has been described as the Woman of the Year. It is suggested that she could be a leadership contender…

    But how much substance and how much achievement has there really been. How has Australia’s foreign policy interests been advanced?

    Before looking at the performance, it is worth recalling that no Australian Foreign Minister could be said to have failed in recent decades, from Gareth Evans to Bill Hayden to Alexander Downer, Stephen Smith, Kevin Rudd and Bob Car. One advantage that Foreign Ministers have is that there is really no domestic constituency that they are likely to upset. At the same time there are numerous media and photo opportunities to do newsworthy things like running around Beijing. The media which is so often about politics and spin rarely looks beyond style and presentation.

    In passing I think there were more real achievements by Gareth Evans than any others.eg peace in Cambodia.

    In terms of the first twelve months of the Abbott Government and Julia Bishop’s performance in foreign policy, what can we deduce?

    The largest cut in the May 2014 Budget was in Julia Bishop’s portfolio. Overseas development aid was cut by 21%. What a failure!

    Julia Bishop unnecessarily involved us in the dispute between Japan and China over the Senkaku/Diaoyu Islands. She said “China doesn’t respect weakness” and that “Australia will stand up to China to defend peace, liberal values and the rule of law”. Perhaps that was just an inexperienced Foreign Minister but hopefully she now reflects that we should stay out of that dispute.

    Julie Bishop has announced a “signature initiative” to promote understanding of our region by supporting Australian undergraduates with internships in the region. She has called it a Colombo Plan in reverse. But there is a problem with this. What she has not explained is how those undergraduates will get jobs in Australia using their regional education and experience. We had a boom in Asian language training in Australia a couple of decades ago, but it fizzled because Australian companies would not employ Australians with Asian skills. As a result these young and Asian skilled Australians drifted away to take jobs in places like Hong Kong. Has Julie Bishop examined this serious problem of Australian companies and their unwillingness to employ people with Asian skills?

    There is no indication that Julie Bishop discouraged Scott Morrison in proceeding with his grotesque proposal to send refugees to Cambodia.

    The Rudd and Gillard Governments opposed the policy of the Israeli Government in expanding settlements in occupied Palestine. Last year Julie Bishop reversed that policy at the UN. 158 countries supported the UN’s call for an end to these settlements. Australia joined with eight other countries in abstaining from a vote.

    Julie Bishop made a name for herself in the recovery of bodies from MH17. She showed us her toughness although she didn’t quite use the rhetoric of “shirt-fronting”. But the real achievement in the recovery of bodies from MH17 was made by the Prime Minister of Malaysia whose government, without fanfare, negotiated directly with the Russian backed rebels in the Ukraine. As a result the rebels agreed to a train with refrigerated carriages carrying most of the bodies out of the crash area. The Malaysian Government also secured access to the crash site and the recovery of the black boxes. In the UN and elsewhere Julie Bishop, in association with the Dutch Foreign Minister, continued to attack the Russians but refused to deal with the rebels. It was good domestic politics in Australia but not helpful in assisting recovery from the crash site. The Malaysians really delivered when it mattered. Julie Bishop,despite the rhetoric,was really only a bit player.

    Julie Bishop and Tony Abbott were completely blind sided by the agreement on carbon pollution between the US and Chinese Presidents.. On this most critical issue,involving  the US, our most important ally and friend,we knew nothing. On such a matter of great substance Julie Bishop was asleep at the wheel. It tells us a lot!

    It is important to distinguish between style and substance.

  • Michael Kelly and Michael Sainsbury on The Pope and the President.

    When the Chinese government confirmed Xi Jingpin as the country’s president in March 2013, among the congratulatory letters received in Beijing was one from the newly elected Pope Francis. It was a nice touch from the leader of one “regime” to another, since the two have been at odds for decades over religious freedom.

    Over the years, many observers have remarked on the similarity between the two dogmatic, highly regimented and stratified organizations operated by powerful but opaque ruling cliques, regimes that have brooked no opposition to their official diktat from the centre.

    The two leaders command the attention of over a third of the population of the planet – 1.2 billion Catholics and 1.4 billion Chinese with little overlap. Both leaders have now been in place long enough for assessments to be made of their contrasting approaches to leadership.

    On November 15 the Chinese leader will mark two years since he took control of China’s ruling Communist Party and, crucially, of its armed forces. The presidency was simply a titular addition to the party chief position. And November 13 marks the 20th month since Jorge Mario Bergoglio became bishop of Rome, the title he prefers.

    There are similarities between the two men. Both are popular with their people. Both want to clean up the institutions that administer their domains. Both arrived at their posts with a reform agenda supported by those who elected them. Both have little patience with self-promoters and those looking for titles and recognition.

    But that’s where the similarities end.

    Francis is an outsider – the first non-European pontiff in 1,300 years and the first to be drawn from the Jesuit order, some of whose members have been at odds with the papacy in recent decades.

    Xi, on the other hand, is part of the Party aristocracy widely known as the “princelings”, descendants of the most senior of the original party revolutionaries. Xi’s father, Xi Zhongxun was a famous general and later a key player in Deng Xiaopings’s original program of reform in the 1980s.

    These two reformers, Francis and Xi, intent on reviving two powerful institutions that have become sclerotic in recent decades, differ most on how they approach the challenge of leadership and manage their own positions as leaders. They are both opposed by powerful groups of conservatives, but they are taking diametrically opposed approaches to dealing with them.

    In contrast to his predecessors over the last 35 years and Xi now, Pope Francis has refrained from issuing or authorizing the Roman curia to issue many official documents. John Paul II issued 14 encyclicals, presided over an apparently never-ending stream of declarations by the Vatican’s departments managing theology, morality, liturgy, education, ministry, Mary and many more topics in the Church.

    A good many of the moral, liturgical and doctrinal documents were authored or overseen by his main doctrinal lieutenant, Joseph Ratzinger, who succeeded him as Pope Benedict XVI. In just under eight years in the top job, Ratzinger kept up the pace, publishing 37 books, three encyclicals and three apostolic exhortations or papal declarations of lesser significance than an encyclical. In his first two years alone, Pope Benedict published 13 books of which only four were republished earlier works.

    Under Xi, the Party’s leadership has produced detailed documents on economic, and lately legal, reforms in China. These have been the outcome of two plenums (annual summits of the Party), the most recent of which concluded October 23. Written in the dense, opaque style of Party decisions, these programs are aimed at further centralizing power in Beijing.

    However, the corruption blighting the Party and threatening its destruction is most visible to ordinary Chinese people at the local level. This is particularly true of the nexus between the security apparatus and the courts, something Xi’s adjustments to China’s flawed legal system are meant to break.

    The solution Xi and his followers propose is a centrally authorized and administered but locally operated legal system that still has to take account of the all-important role of the Party. The conflict of interest inherent in a system with no separation of powers between the judiciary and the executive is likely to be the undoing of the reforms.

    In his first 18 months, Pope Francis has produced only a single publication, the Apostolic Exhortation Evangelii Gaudium, his broad-brush program for the Church’s renewal. But what is more significant is his consultative style of leadership, one integral to the Jesuit mode of governance.

    This approach was vividly displayed at the recent Synod for the Family. Critics of the pope accused him of licensing anarchy. He, on the other hand, asserted that no lasting solutions can be found until all suggestions and proposals have been considered.

    The contrast between the approaches is that between centralization, fostered by Xi since his rapid emergence as China’s most powerful leader since Mao, versus Francis’ decentralization. It is a contrast between an ultra-proscriptive approach and inclusive attentiveness.

    While Xi issues directives, Francis keeps saying that a great deal of the Church’s life from the administration of marriage laws to matters such as celibacy and the nature of ministry in the Church should be delegated to local consideration.

    In using the phone to contact people directly and in talks to journalists, Francis has resurrected a personalized tradition of governance that pre-dates the last two centuries.

    In contrast, Xi employs some of the techniques of Western politicians, popping up in local noodle bars and taxis as part of a propaganda campaign to cast him as “a man of the people”. His anti-corruption campaign is popular and he has heightened the rhetoric of Chinese nationalism, especially against Japan. Yet he has also reached back to what many fear is a sort of personality cult not seen since the days of Mao Zedong.

    Within the Party he is ruthlessly pursuing and crushing his enemies, a campaign initially focused on the vast power base of former security chief Zhou Yongkang, the highest ranking official since the days of Mao to come under official “investigation”.

    Xi has also instigated a program of crushing intellectual and artistic dissent, arresting activists, rights lawyers, religious freedom advocates, academics and artists – as well as chasing others out of the country.

    Francis plays a more subtle game, breaking open the circle of discussion with off-the-cuff remarks in sermons, addresses and other occasions in a way that can be described as similar to that of former Chinese leader Mao Zedong who, in the 1950s, claimed to want to let “100 flowers bloom”.

    Mao did that so he could flush out his opponents and neutralize them with jail terms or worse. Not so the bishop of Rome.

    Letting the flowers bloom is what the recent Extraordinary Synod aimed to do – create open debate. And that it did, with the conversation now being internationalized over the year as all the Church’s members are asked to participate in a discussion of how to resolve outstanding issues of doctrine and pastoral practice such as marriage and divorce.

    Francis’ inclusive and consultative approach to leadership has provoked alarm and hostility from those more comfortable with a command and control approach not unlike what Xi is attempting in Beijing. One of the Vatican’s most notorious conservatives, Cardinal Raymond Burke, told a Spanish publication on October 31 that the Church was “rudderless” under Pope Francis.  http://ncronline.org/news/vatican/burke-church-under-francis-ship-without-rudder.

    The Church is not without a rudder. Instead, there are just more voices being heard than usually get invited to join the conversation.

    Authoritarians, whether in China or the Church, don’t like hearing the voice of the people. But some leaders do. Pope Francis is one of them because he believes it is among the people that the voice of the Holy Spirit can be heard.

    For all his talk of reform, for Xi Jingpin the only voices to get a hearing are those committed to the Party’s current line with little room for input from the people.

    It remains to be seen which program will be more successful in the long run, but we are betting on Francis.

    Michael Kelly is the Publisher of www.globalpulsemagazine. com and Michael Sainsbury is a freelance writer in Bangkok and a regular contributor to the online magazine which now welcomes subscriptions.

     

  • Renewable energy investment.

    A key feature of the President Obama/President Xi communique is their commitment to substantially reduce carbon pollution. There was little mention of an emissions trading scheme or putting a price on carbon. The emphasis was on developing renewable energy as an alternative source of energy to fossil fuels.  Emphasis was given to development of solar, wind and nuclear power. But in Australia, our government in attacking the established renewable energy targets has caused great confusion and damage in investment plans. As a result, renewable energy investment in Australia dropped 70% in the past year.  See the link below to the  report from the Climate Council which was published in The Conversation on 10 November.  John Menadue.

    http://gu.com/p/436ym/sbl

  • Is capitalism redeemable? Part 6: Inequality – it ain’t fair

    We get a laugh out of the Monty Python sketch of four Yorkshiremen competing with one another to tell stories of the hardship they endured when they were children, 30 years earlier – “you think you had it tough …”.

    Without going into Pythonesque exaggeration, four older Australians could easily recount similar stories. If they grew up in a Brisbane middle-class suburb, their house probably had no indoor toilet: there would have been a bucket toilet in the backyard emptied by the “dunnyman” (the “sanitary collector” to use one common euphemism) . If they grew up any distance from a city they probably didn’t have electricity, and the idea of turning on a tap to get hot water was almost beyond imagination.

    Like the Python characters, who all claimed they “were ‘appier back then”, they wouldn’t consider they had led deprived childhoods, because those were the standards of the time.

    Those material standards now, however, would be considered deprivation. Even if our own material conditions don’t deteriorate, if everyone else’s conditions improve, we feel hard done by.

    We have a natural concern for fairness, a concern not to be confused with envy. In our concern for fairness we want to see our own and others’ conditions brought up: envy is about wanting to see others brought down.

    This may all seem to be no more than commonsense, but there is a strong economic philosophy captured in the slogan “a rising tide lifts all boats”, essentially saying that any outcome is a good outcome so long as no-one is made any worse off. Inequality doesn’t count in other words. This philosophy, based on the work of the Italian Fascist Vilfredo Pareto, made its way into schools of economics and into public policy in the latter part of last century and is a mainstream of economic thinking.

    It was influential not because academics and public servants had any attraction to fascism, but rather because it came in a neat “value free” mathematical package, absolving the academic or public servant from having to worry about fuzzy things necessitating moral judgements, such as equity.  And it provided an easy rationalisation for the economic philosophies of the Reagan and Thatcher administrations in the early 1980s, later to be taken up across the political spectrum.

    Since the 1980s Australia has become more prosperous, but the benefits of that prosperity have gone disproportionately to those who are already most privileged. Research by Andrew Leigh and others shows that over the twentieth century Australia’s income distribution became more equal up to around 1980, but then started diverging once more. By now those gains have been lost: our income distribution is now roughly similar to what it was in 1900. Thomas Picketty’s research, which also takes in wealth, has similar findings for other ‘developed’ countries.

    If that widening inequality were a result of choice it should not necessarily be a policy concern. There are people who choose to work hard and to take risks, while there are others who choose to join religious orders with vows of poverty or to seek low-paid but safe employment. Australians show no appetite for enforced social levelling.

    But when inequality results from entrenched privilege, inheritance, “old boy” networks, exercise of political influence, denial of access to quality education and corruption, we are properly indignant. As a general point, we are less concerned with inequality in itself, than with the fairness or otherwise of the processes that lead to inequality. An almost uncontested political value in a country like Australia, transcending traditional “left’/”right” divisions, is a belief in equality of opportunity – a “fair go” in the vernacular.

    While the fair go may be an aspiration, Australians don’t believe it holds in reality. In a recent survey by Essential Media respondents were asked “which has more to do with why a person is rich” – “because he or she has worked harder than others” or “because he or she had other advantages”. Hard work scored only 28 per cent while “other advantages” scored 56 per cent.

    The capitalist economic system works when there is a strong connection between contribution and reward. That’s the very theoretical and practical basis of market economics.  That connection will never be perfect: even in the fairest system there is an element of luck. But when the connection between contribution and reward is badly severed the economic system itself loses its legitimacy. When legitimacy is lost people are inclined to reject the whole capitalist model, turning to superficially attractive but destructive alternatives. The plutocrats who show off their riches so vulgarly and the politicians who dismiss our concern with fairness don’t seem to realize that they’re threatening the very viability of the system that has supported them.

    Even before reaching that self-destructive outcome, an economic system that results in inequality is one that is wasting many opportunities.  That’s the subject of the next article.

  • Today’s World – Democracy, capitalism and Islam.

    Mauricio García Villegas, El Espectador, Colombia, http://www.elespectador.com/opinion/elmundo-actual-columna-526496

    The anniversary of two events that have marked out the course of our world has just been commemorated.

    The first is the taking of the United States embassy in Teheran on 4 November 1979. Iran at the time was governed by the Shah, a monarch who wanted to turn the ancient Persian people into a Western nation, hell or high water. It set off a reaction from Islamic leaders, amongst them the Ayatollah Khomeini, who, from his exile in London, organized a revolution to overthrow the Shah, and to establish an Islamic theocracy. The taking of the embassy and the capture of 52 American hostages for 444 days is one of the culminating moments of that revolution.

    The second event is the fall of the Berlin Wall that occurred on 9 November 1989, which started the disintegration of the Soviet Union, and put an end to the Cold War. The fall of the Soviet Union changed history so much that Eric Hobsbawm, the great English historian, said that the 20th century was a very short one, lasting only 75 years between the First World War and the fall of the Berlin Wall.

    These two events changed the course of the 20th century. The Iranian revolution was proof that despite all the colonial attempts to assimilate the Middle East culturally and economically, the old yearning for a theocratic government continued intact for many Muslims. The colonial sins of Europe and the United States in the Middle East (starting from events in Palestine) not only gave rise to the Islamic revolution in Iran, but also saw the birth of the increasingly furious forms of Islamic fundamentalism that we see today.

    On the other hand, the fall of the Berlin Wall, and the subsequent defeat of the Communist model, gave way to a kind of bold and lazy capitalism that ceased to feel guilty about increasing social injustice. Not only that, the lack of a competing system divorced capitalism from its democratic ideal, which was the flag that Western nations hoisted in opposition to its great 20th century enemies, first the Nazi regime and then the Soviet model.

    Many academic studies published in the last decade have raised the alarm about the way capitalism has been devouring democracy. I only site two recent and influential examples. The first, Thomas Piketty’s book (Capital in the Twenty First Century) demonstrates that we live in a system of hereditary capitalism where the level of accumulation of capital increases faster than the economy, and this leads inevitably to an increase in inequality.

    The second text is an article by Martin Gilens and Benjamin Page (Testing Theories of American Politics: Elites, Interest Groups and Average Citizens) which uses quantitative information never used before to show that the American political system is dominated by the most powerful economic elites, and that there is very little that ordinary citizens can do to prevent it. The authors demonstrate that the majority do not rule in the United States. The rich do.

    In short, the direction that the world of today has taken has been determined in good part by the fall of Communism and the political defeat of the West in the Middle East. We have inherited terrible evils from this: the increasing acceleration of economic inequality and the rebirth of the wars of religion; they are two evils that in the middle of the 20th century, appeared to be on the way to extinction.

    Mauricio is a lawyer, sociologist and currently professor of law at the Universidad Nacional in Bogota, Colombia and also Honorary Fellow of the Institute for Legal Studies at the University of Wisconsin-Madison.

  • Tony Abbott and the G20

    In the media in the past few days we have been overwhelmed by stories and photo opportunities from the G20 in Brisbane. It will take some time to sort out fact from spin. I have set out below some comments and opinions from observers. It provides a useful but only partial account by observers of the G20. I have not included any comments from News Corp publications. News Corp’s support of the government is entirely predictable.

    (more…)

  • Steve FitzGerald on Gough Whitlam, Chairman Mao and Premier Zhou

    Of the many things I admired and loved about Gough, one of the most delicious, next to our shared liking for food, was that he was the best person I’ve ever been privileged to brief. It wasn’t just that he soaked it up like blotting paper and asked for more and never forgot. It was that each piece of information was absorbed into its appointed niche and found a place in his political and historical cosmology, and emerged as knowledge, fully fashioned, and in context. One imagined the Graeco-Roman or later Christian ‘art of memory’, but of course Whitlamesque in its Enlightenment commitment to science and reason and the art of enquiry.

    When I went with Gough to meet Chairman Mao in 1973, at one point the discussion got into history and Sino-Soviet relations, and Gough says, from his reading it seems the Soviet Union wasn’t always helpful to the Chinese and at times directed them to actions which proved disastrous, ‘like the Nanchang Uprising. I understand Premier Zhou (Zhou Enlai, who was also at the meeting), you were the leader of that uprising’. I looked at him in astonishment. This generally little known event in Chinese history took place in 1927, after the Chinese Nationalists broke a united front with the Communists and staged a bloody attempt to wipe them out. Two and a half years before, on that famous 1971 visit that laid the fear of China, I’d given Gough background reading on a huge range of things and somewhere in there was a small piece on the early history of the Chinese Communist Party. And now, this obscure detail comes out, in context, accurate, appropriate. And Premier Zhou Enlai caps the moment with a self-criticism about his responsibility for the failure of that uprising.

    But the one time when in my experience Gough’s memory failed him was also in that meeting. They were winding up, with some comments from Gough about the roles of Mao and Zhou in the Chinese revolution, and Mao decided to launch back into the discussion, and asked ‘Would your Party dare to make revolution’ and Gough said ‘we believe in evolution,’ and the meeting was re-ignited, and there was an exchange on the theories of Charles Darwin (which Mao said he accepted but they didn’t apply to historical changes in human society). Mao asked if the city of Darwin was named after Charles Darwin and did Darwin ever visit that city in the Beagle, and Gough had a rarest of moments when a detail escaped his prodigious memory. Zhou Enlai looked at his watch, and with some banter about Mao’s age and infirmities, we stood to leave.

    A few days after Gough’s departure from China, I received the following telegram. It was vintage Gough.

    ‘Apropos my conversation with Chairman Mao, you should know that in 1836 Charles Darwin visited Australia as official naturalist aboard H.M.S. Beagle, landed at Sydney on 12 January and visited Bathurst. On next voyage in 1839 Beagle without Darwin visited Darwin harbour which captain named after him.

    Please make full confession of error to Chairman Mao and Premier Zhou Enlai and say that with Chairman’s help I shall now follow correct line.’

    The ‘big ideas’ about which so much has been said and written in the last few weeks,  came from the big learning, the foundation of Gough’s weltanschauung. And the big target. Not for Gough the small target. No temporising, no pussy-footing politics or ducking and weaving to dodge negative opinion polls, no fudging principle to make oneself look more like one’s opponents. You could brief him. You could contribute ideas. But it was the courage and fortitude of the big target that turned the big ideas into the big public policy reform.

  • Bruce Duncan. Pope runs moral template over G20.

    Pope France outlined a sharp moral template for world leaders at the G20 meeting in Brisbane. In a letter on 6 November to the current chair of the G20, Prime Minister Tony Abbott, the Pope warned that “many lives are at stake”, including from “severe malnutrition”, as he highlighted the values and policy priorities needed for the global economy.

    Francis regarded the Global Financial Crisis as “a form of aggression” equally serious and real as the extremist attacks in the Middle East. He specifically condemned abuses in unconstrained speculation and maximising profits as “the final criterion of all economic activity.”

    In effect, the letter was a firm rejection of the neoliberal policies that have been driving economic policies in recent decades, resulting in a yawning chasm between the very rich and the poor, within and between nations.

    In line with his earlier statements, Francis called for urgent measures to reverse “all forms of unacceptable inequality” and poverty, and to restore social equity and opportunity for everyone, but especially to focus efforts on the needs of the most vulnerable. “Responsibility for the poor and the marginalised must therefore be an essential element of any political decision”.

    His concern about “the spectre of global recession” springs from his experience of the economic collapse in Argentina in 2002 and the terrible results of the 2008 financial crisis. In parts of Europe unemployment is still running up to 50 per cent among youth. He urged “improvement in the quality” of public and private spending and investment, especially to create “decent work for all”. He warned that prolonged social exclusion can lead to criminal activity and “even the recruitment of terrorists”.

    Mr Abbott would welcome the Pope’s comments in support of “concerted efforts to combat tax evasion” and proper financial regulation to ensure “honesty, security and transparency”. Abbott would also take heart from the Pope’s support for the United Nations legal system to “halt unjust aggression” against minorities in the Middle East. The Pope affirmed the duty of the international community to protect people from extreme attacks and violations of humanitarian law.

    But the Pope also contended that there can be no military solution to the problem of terrorism, since the roots causes derive from “poverty, underdevelopment and exclusion” as well as distorted religious views. The Pope did not mention the huge cuts to Australia’s overseas aid, but urged support for the UN Assembly’s post-2015 Development Agenda.

    Mr Abbott may not have been so happy to read about the Pope’s concern with climate change and “assaults on the natural environment, the result of unbridled consumerism”, with serious consequences for the world economy.

    Mr Abbott may not have been so happy to read about the Pope’s concern with climate change and “assaults on the natural environment, the result of unbridled consumerism”, with serious consequences for the world economy.

    Nor would Abbott feel too comfortable with the Pope’s appeal about the humanitarian crisis of refugees around the world. While not mentioning Australia’s extremely harsh treatment of refugees arriving by boat, the Pope asked the G20 states “to be examples of generosity and solidarity”, especially for refugees. Australia’s current quota of 13,750 refugees, reduced from 20,000 by the Abbott government, appears inordinately meagre in comparison to our wealth and resources.

    None of what Pope Francis is saying about the moral criteria for a more just economic system will come as a surprise to those who have been following his earlier criticism of abuses in capitalist and other economies. Indeed, the critique of capitalism by the popes has been consistent since Pope Leo XIII in his 1891 document, On the Condition of the Working Class, and more especially since John XXIII and the Second Vatican Council which finished in 1965.

    Pope Benedict also reiterated the call for reform in economic systems in his 2009 document, Caritas in Veritate, in which he extolled Pope Paul VI’s incisive critique of neoliberalism in his landmark 1967 document, Development of Peoples.

    What is new with Pope Francis is his ability to communicate refreshingly in a friendly and popular way, and articulate clearly a renewed moral perspective on our global economic plight. Even people who are not Catholic or Christian can hear his voice as a call to reason, humanity and sanity at this critical moment in the human story.

    Fr Bruce Duncan CSsR is one of the founders of the advocacy group, Social Policy Connections, and Director of the Yarra Institute for Religion and Social Policy in Melbourne.

     

  • Ian McAuley. Is capitalism redeemable? Part 5: When finance goes its own way

    One of the world’s most useful social institutions is money, but it’s hard to think of it in its social context.

    To understand the social value of money, think of a world without money, or a country where, through recklessness the currency has been debased, as happened in the hyperinflation in the Weimar Republic in the 1920s.

    Barter served us well when few articles were traded – grinding stones, pituri and ochre in the Australian outback – but not in Germany in the 1920s and certainly not now. Complex trades require some agreed currency, not necessarily having any utility in itself, but with an agreed value in exchange. It’s that need for agreement, and for trust in those who control the currency, be it obsidian, rare shells, gold, or US Treasury Notes, that gives money that social context.

    Besides facilitating exchange, money also allows those with a temporary surplus to lend to those with temporary deficits – the wealthy individual funding someone else’s startup business, the older generation lending to the younger generation to buy houses. Such deals involve a huge range of instruments – loans, mortgages, equity and so on – but what they have in common is the need for some level of trust. Trust that the debtor intends to repay, trust that the terms of the deal are protected by some external authority, trust by the creditor that the debt will not be whittled away by inflation.

    Apart from times when we are caught short of cash – when the taxi fare is blown on the last race at Randwick – individuals don’t go around lending and borrowing. We do so through financial intermediaries, such as banks and stockbrokers. When we make deposits in these institutions we must be able to trust that they will act responsibly (in line with normal risk/return tradeoffs). That is, they will assess the quality of the way they invest that money on the depositor’s behalf and act as responsible trustees.

    That’s the way money serves the economy – by facilitating trade and investment. Thanks to what is known as “fractional reserve banking”, money isn’t some fixed entity: if there is trust and confidence money expands. When I borrow to buy a house or to set up a business I use that money to pay a builder or to hire workers, who, in turn use some of that money to lend to others through their bank deposits.

    These arrangements serve us well, until we lose sight of this practical, mundane function of money. They start to fall apart when we start to think that money itself is something real, as wealth, rather than as a means of denoting wealth.

    It’s hard to put a date on this confusion of money with wealth. The Biblical warning about “love of money” suggests it goes back a long way. On the other hand, older Australians can remember when bankers were respectably dull people who drove Holdens, wore Fletcher Jones suits, and ate roast lamb with three veg on Sundays.

    Something was changing when we started to hear life insurance salesmen (they were men) and bankers re-brand themselves as financial planners, and when they later re-branded themselves as “wealth managers”, when the Holden was replaced by a BMW and the Fletcher Jones suit by a Hugo Boss.

    The situation worsened as traders bought and sold financial instruments, sometimes not even knowing what acronyms such as “CDOs” stood for, let alone knowing about any connection these instruments may have had to any physical reality. Hence the GFC.

    The GFC is most easily understood as a loss of trust, as a loss of the social capital that allows borrowers and lenders to deal with one another.

    It meant that money literally disappeared. That doesn’t mean people’s or businesses’  bank accounts suddenly shrank, but it meant that many debts were never repaid, that some investments went belly-up, that investments in pension funds went backwards, and that people and businesses became reluctant to lend and invest. Governments tried to stimulate their economies with low interest rates and “quantitative easing” (i.e. printing money), but as fast as they injected money into the economy people took it out again, often re-investing in the safety of government bonds – the equivalent of putting banknotes under the bed. They no longer trusted the financial system, and trust, once lost, is very hard to restore.

    That has been the main consequence of the GFC – a crisis that could have been avoided had governments not been so gung-ho about deregulating the financial sector in the 1980s.  As is so often the case, rather than replacing obsolete regulations with more appropriate ones, they went down the path of deregulation.

    The other cost to the economy has been manifest since well before the GFC, and that has been the distortion of incentives in the economy. The message in the financial boom was that doing anything useful in the real economy was a mug’s game: playing with money was where the big returns were to be found. The finance sector took in some of the world’s most mathematically talented graduates, who could have been contributing to the real economy in engineering or science.

    In so doing it worsened economic inequality, damaging the already tenuous links between contribution and reward. Inequality, its causes and consequences, is the subject of the next two contributions.

     

  • John Tulloh. Innocents abroad at the ABC.

    INNOCENTS ABROAD AT THE ABC LOOK INWARDS AS AUSTRALIA LOOKS OUTWARDS

    ‘Now we cross to an ABC correspondent in Beijing for the latest on the Japanese crisis…’

    The Guardian the other day carried a report that the ABC planned to emasculate its foreign news presence as part of its budget cuts. While the ABC has not confirmed or denied the claim, the reporter concerned has had very good contacts at the ABC for many years.

    If true, it means that at least 40% of the ABC’s foreign bureaux will be scrapped. Nearly half. Snuffed out. Just like that. It will mark the destruction of one of the most impressive and admired foreign news-gathering operations anywhere in the world. It has employed so many outstanding foreign correspondents and cameramen over the last half century that you wouldn’t know where to start. They have brought home to Australians the biggest international stories in that time as well as unrivalled and specialist radio and television reporting.

    The report claims Beijing, Jakarta, London and Washington will become the news hubs. If so, that means the end of the long-standing ABC bureaux in Auckland, Bangkok, New Delhi and Tokyo. No mention was made of the Africa bureau. Incredibly, the bureau in the most volatile region of the world – the Middle East – is said to be ‘under review’.  All this follows the recent axing of the Moscow bureau despite the resurgence of Russia as an unpredictable power to be reckoned with.

    In short, the ABC will end up with perhaps just six overseas news bureaux. Even Fairfax Media, which face even more straitened times than the ABC, have a presence in seven countries.

    Again if true, the report means the ABC is once again taking what for its executives is an easy way out by going after ‘soft’ targets. These are out of sight and thus out of mind. The local staff mean little to ABC HQ. They have no union to fight for them and thus will go quietly and cause no discomfort to the bosses back in Sydney.

    It seems the ABC is reverting to its old white bread reporting outlook with emphasis on Mother Britain and its new-found obsession with every political development in the US. The last US presidential campaign lasted for nine months and was covered to excess and at the expense of almost anything from Main St USA. The Washington bureau has become an American version of the ABC’s Canberra Parliament House bureau. It has four reporters, the same number as those on death row in Auckland, Bangkok, New Delhi and Tokyo.

    Imagine a reporter based in Beijing trying to analyse with credibility the intricate political and economic moves in Japan. Or the same person being asked to report on events in Thailand because the Jakarta correspondent is tied up on a local story. Or the Jakarta person trying to make sense of Indo-Pakistan politics. Or London colleagues possibly having to keep tabs on news as far east as Vladivostok and as far south as Cape Town. It is only natural that reporters will become absorbed in developments where they are based rather than the region around them. What sort of quality reporting can ABC viewers and listeners expect then?

    It is hard to reconcile the reported moves when you consider the following:

    + As every Australian schoolchild knows, our future is in Asia, including countries like India and Japan. That’s where we are focussing our trade agreements. That’s where our commercial interests lie. And that’s where topics critical to our future interests and well-being can be expected.

    + The biggest migration intake into Australia is now from India. The new Indian Prime Minister, Narendra Modi, is a reformist who has bold ideas to crank up the Indian economy into what will be the biggest transformation in the sub-continent in this century. It is reported that the leaders of Australia’s top 500 companies will attend a lecture he is due to give in Melbourne this week (November 18) which speaks volumes about India’s future and the economic opportunities for Australia. How is the ABC going to report the developments with any authority?

    + Tony Abbott has praised Japan as Australia’s great friend in Asia, while his Japanese counterpart, Shinzo Abe, has hailed the ‘special relationship’ which has led to closer economic and defence ties. Japan, as Australia’s second biggest trading partner, is critical to our economic security. Our close ties with Japan have been a matter of concern to China. Is the ABC going to walk away from this?

    + Apart from the Korean peninsula, the military flashpoint of any significance in East Asia is the Senkaku Islands administered by Japan and claimed by China. Again, how can the ABC interpret with any authority developments in this dispute from Beijing?

    + China cracks down on social media, still maintains strict internet censorship and     restricts access to foreign satellite broadcasts. Look what happened during the recent Hong Kong protests. Is this an appropriate working environment for a major news hub? You will find no such interference in Japan.

    + The proportion of Australians from English-speaking backgrounds is in decline yet the ABC is reverting to the old Anglo-Saxon mindset. Even Tony Abbott with his once limited outlook on the world has become stimulated by his encounters in Asia and the prospects for Australia.

    + The ABC’s foreign news coverage more than ever will become bland and be much the same as that of the commercial networks. The value-added reports by ABC correspondents away from the main news of the day will become a threatened species. So will specialist reporting and analysis of trends and developments in the countries where the bureaux face closure. The ABC seems bent on foreign news suicide.

    + Australians are among the most widely-travelled people in the world. More went overseas last year than ever before. Partly because of our isolation, we have an abiding curiosity in other countries and what is happening there. The leading destination for Australian travellers is New Zealand. Thailand is the fourth most popular. So we may well ask: why close the bureaux there?

    The Guardian report suggests that the threatened bureaux may be replaced by Video Journalists working from home. If so, I cannot imagine reliable ABC reporters queuing up for that sort of working existence or a partner or spouse happily sharing an abode with a daily news operation and possibly, if the budget will permit, a translator.

    It is not unreasonable for the ABC foreign news operation to contribute to funding cuts, of course, but to take a sledgehammer to it is wanton vandalism. As I recall, the Auckland, Bangkok and New Delhi operations are the least costly of all, while the Tokyo bureau has had a long-standing and successful tie-up with NHK, the Japanese equivalent of the ABC.

    As a former ABC colleague observed elsewhere in Pearls and Irritations, once you dismantle a bureau you cannot put it together again. Nor can you under-estimate the value of the local staff’s contribution to a successful reporting operation with their local know-how, contacts, ideas, language skills, versatility, dealing with program requests from Australia and ability to assist at all hours for the good of the ABC.

    ABC foreign news-gathering has done far more than its fair share towards saving money in recent years with the closing of bureaux in New York, Moscow, Brussels, Singapore, Hong Kong, Hanoi, Nairobi, Amman, Kuala Lumpur and Nicosia. Some were because of changing times and news demands, but the majority were to save money. Have there been comparable savings or sacrifices elsewhere in the ABC? I doubt it.

    The ABC London bureau once had three reporters to cover mainly Britain and Ireland. They were supplemented by two in Brussels to focus on Europe and two in Moscow to cover the old Soviet empire and later Russia and its former states. Now the ABC has just three reporters to cover those regions, based in London. It is not because it makes news sense. It is to save money. The price is a wholesale dilution in the extent and scope of ABC reporting.

    Furthermore, the ABC correspondents overseas set the example years ago of bimedia reporting instead of serving just radio or television outlets. This made the operation less wasteful, more efficient and saved a lot of money, especially on off-base assignments. Domestic reporters later followed the example.

    While I am not privy to the ABC’s budget, I imagine the financial elephant in the room is the 24-hour news channel which costs the ABC far more than anticipated. Certainly news staff elsewhere under threat of cuts resented having, as they saw it, to bail out the service.

    In an ideal world, the ABC could have a foreign news unit in Sydney or Melbourne to package the general news of the day for radio and television just like SBS’s excellent example. That would leave the overseas correspondents to focus on interesting, meaningful and interpretative stories that the international news agencies never touch. Among the Australian broadcast media, the ABC would stand out like a beacon in the desert rather than being just another player.

    It could be revealing to learn how much the ABC estimates it will cost to staff the proposed news hubs and fly in reporters and camera staff to cover countries where bureaux face the axe and compare that with the cost of maintaining the bureaux. At least twice since the closure of the Moscow bureau the last correspondent, now the ABC’s social affairs reporter, has been sent back from his Melbourne base to report from Russia.

    Once upon a time, the ABC despatched a camera team from Singapore several times a year to Tokyo and New Delhi to link up with the local correspondents who otherwise worked mainly for radio. It seemed so quaint. Who knows, now the same could start happening, with cameramen travelling hither and thither to help some harried Video Journalist working out of a flat.

    The ABC’s reported decision to look inward while Australia takes on a greater role in international matters – think Julie Bishop at the UN – is puzzling. It is all the more so when the same Guardian report says the ABC’s superb Foreign Correspondent program is going to be cut back from 30 weeks a year to 26. All this comes at a time when the only other television foreign affairs program, SBS’s long-running Dateline, is said to be under threat and, if it does survive, will focus on light rather than hard-hitting stories.

    I once attended a meeting of ABC news executives from all over Australia. I was asked if the ABC had to close a foreign bureau, which one should go. Launceston, I suggested. As my former colleague has concluded, the ABC should take a closer look at some of its domestic practices if it wants to save money.

    John Tulloh was the ABC television news and current affairs international editor from 1985 to 1999 and then head of international operations until 2004.

  • The G20 economies.

    The link to The Conversation below, provides a useful summary of the G20 and its member economies, e.g.

    The G20 economies represent 65% of the world’s population, 79% of world trade, 84% of the world economy and 77% of world carbon emissions.

    Australia rates number 3 in GDP per capita based on purchasing power parity.

    As a percentage of GDP, Australia has a relatively low level of debt compared to other G20 economies.

    Along with Canada,UK and Germany, we are the only G20 economies with a AAA credit rating.

    Australia and Canada have the lowest corruption rating amongst the G20 countries.

    John Menadue.

     

    http://theconversation.com/the-g20-economies-explained-in-12-charts-33887

  • Ian McAuley. Is capitalism redeemable?  Part 4: Moral conflicts

    Luxembourg (more properly the Grand Duchy of Luxembourg) is one of Europe’s smallest sovereign nations, both in population (about the same as Tasmania’s) and area (about one thirtieth of Tasmania’s).  Many Australians might have driven right through it, not realizing that in a half hour or so they had crossed a whole nation.

    If corporate accounts are to be believed, however, it is a major centre of economic activity. Ikea, Fedex and Amazon – all firms with global distribution functions – realize a large proportion of their profits in Luxembourg, even though it is landlocked.

    But if you linger in Luxembourg you won’t find any Amazon depot, and not even an Ikea retail outlet. Nor will you find an Australian bar for employees of AMP, the Macquarie Group, Lend Lease and the Goodman Group, companies which also report a significant presence in that country.

    Luxembourg is in the Australian news because those firms and many others, using various techniques of transfer pricing, declare part of their profits there, taking advantage of its low corporate tax rate.  In other words, they are engaged in tax minimisation, at the expense of our own public revenue.

    Whether such schemes are legal is a question for the courts. But by any reasonable criteria we are entitled to feel that there is something morally wrong about such corporate behaviour.

    The common corporate rationalization for such behaviour is that everyone else does it. It’s an excuse we probably tried as children, and learned that it didn’t have much traction. But before we jump in and condemn the corporations, let’s look at that rationalization in two situations we may encounter when we’re in a stadium watching a football game or the races.

    The first situation is where we may be tempted to shove our trash under the seat, observing that many others do likewise.

    The second is when we stand up during an exciting part of the event, presenting the person behind us with the choice of looking at our backside or standing up herself. Our rationalization is that the person in front of us stood up.

    Both decisions – discarding trash under the seat and standing up – incur costs on others. But in the case of the trash the personal cost of finding a bin is trivial. In the case of standing up, the personal cost of staying seated is significant. (Those who have studied game theory will recognize the latter as a “prisoners’ dilemma” situation.)

    To generalise the issue, there are many situations where we do the wrong thing because we are penalised for doing the right thing. These are morally difficult situations where reasonable people feel they have no choice but to act unreasonably.

    Those situations are often faced by corporations in competitive markets. The firm that doesn’t minimize tax, that doesn’t misrepresent the quality of its products, that doesn’t ruthlessly exploit its workforce, that doesn’t pollute the environment when its competitors are doing all these things may be sending itself out of business, or paving the way for an even more ruthless raider to take it over.

    In competitive situations it is not feasible or fair to leave sole responsibility for good behaviour with the corporations. The moral responsibility is a collective one, involving a recognized higher authority. Returning to the stadium situation, if there were an enforceable rule requiring us to stay seated in the stadium, we would all be better-off.

    In relation to corporate behaviour that authority is the government, which is where the prime responsibility lies. We elect governments to protect the weak against the strong, to protect the public interest against the sectional interest.

    Politicians, in defence of weak regulatory effort, may claim that in an interconnected world individual nation states are powerless, but there are vehicles of multilateral cooperative action, such as the World Trade Organization attending to the rules of trade. The hurdles to cooperation on taxation, labour standards, product safety and environmental protection (particularly the urgent issue of global warming) are not insurmountable.

    That doesn’t get corporations off the hook: they have political influence.  In that regard it was disappointing to hear a spokesperson for the Business Council of Australia suggesting that governments should not pursue international tax reform too vigorously.

    While the Australian travelling through Luxembourg may not see much sign of corporate activity, he will see excellent publicly-funded public transport, roads, schools and a health care system.

    The traveller, having been driving on French or German roads, may notice that Luxembourg has low gasoline taxes. Will he yield to the temptation and top up his rented car, or will he wait till he is over border and chip in to pay for the roads he has been using?

  • Ian McAuley. Is capitalism redeemable? Part 3: Why tax avoidance is bad for business

    One article of faith in the corporate sector is that low taxes are good for the economy – not only low corporate taxes but also low taxes in general.

    Echoing this sentiment, Treasurer Hockey and other spokespeople for the Government repeatedly promise to cut taxes. Even suggestions that the GST should be increased are set in the context of a tradeoff against income taxes, rather than any net increase in tax.

    For a start, let’s get one myth out of the way. Although repeated surveys reveal that most people believe Australia is a high-tax country, the reality is that among high-income OECD countries, Australia’s taxes (as a percentage of GDP) are very low: only the USA has lower taxes, and they have achieved this by running much higher budget deficits than in Australia.

    Another myth is that high taxes are bad for the economy.  Again, looking at high-income OECD countries, there is no evidence to support this proposition. There is no relationship between the level of taxes and economic growth or competitiveness. What does seem to be the important factor is not the size of government (as measured by taxes or spending), but the purposes to which public revenue those taxes are put. A competent “big government” contributes to economic performance in ways that an incompetent or corrupt “small government” does not.

    Also, research on competitiveness suggests that some countries try to entice investment with the offer of low taxes to compensate for deficiencies in other conditions, such as poor infrastructure, corruption, or an inadequately educated workforce.

    Businesses need publicly-funded services. They obviously need the networks of transport and telecommunications infrastructure. They need an educated and healthy workforce. They need a publicly-funded but independent legal system.

    Less obvious, but no less valid, is the way business benefits from safety nets, such as social security payments. If people are to take risks, such as investing in start-ups, or developing specialist skills, they need a safety net to fall back on when these investments fail.

    The economist Joseph Stiglitz points out that well-crafted taxes can actually improve a country’s economic performance. Tax regimes which give a leg-up to new ventures, which encourage re-training, or which shape depreciation provisions to encourage the uptake of new technologies, can all help improve a country’s economic adaptability. A carbon tax is an example not only of a payment for harm done to others (“negative externalities” in the language of economists), but also of an incentive for industries to adjust and modernise their production methods.

    Of course, established businesses have a voice in various industry associations, such as the Business Council of Australia and the Australian Chamber of Commerce and Industry, as well as numerous industry-specific lobbies. These organizations, quite understandably, represent the interests of established firms (just as trade unions tend to represent the interests of already-employed workers). These are the firms that have established their place in the market, have benefited from past investments in public goods, and which don’t necessarily welcome the entry of new firms into their industries. They certainly don’t welcome disruptions such as carbon pricing – disruptions which may force them to lift their game or to go out of business as new and more nimble competitors grab opportunities.

    Also when these lobby groups speak on tax matters, particularly personal income taxes, it is questionable whether they have in mind the interests of corporations (inanimate constructs with no interests other than those of their stakeholders) or the interests of generously-paid corporate managers.

    In recent times we have heard pathetic rationalisations as to why Australian companies should be able to use Luxembourg as a tax haven, and why any right-minded business executive should feel affronted by the suggestion his or firm should pay their share of taxes. Perhaps the “small government” line is just a conditioned, rather than a considered, response.

    In the next article we’ll look at the ethics of tax avoidance – it’s not as straightforward as it looks at first sight.

  • Frank Brennan SJ.  The G20 Agenda and Pope Francis

    The leaders of the world’s 19 largest economies (together with the EU) are meeting in Brisbane this weekend at the annual G20 meeting.  Australia is the host and Prime Minister Tony Abbott is the president this year.  The host country gets to put its stamp on the agenda.  Last year at St Petersburg, the G20 acknowledged the “need to work to ensure that growth is strong, sustainable, inclusive and balanced”.   At these meetings, a lot of word-smithing goes on even before the world leaders disembark their planes and change into the compulsory conference shirts.  In the lead up to this meeting, Australia has been wary about the word “inclusive”, preferring a commitment to achieving “strong, sustainable and balanced growth”.  When the G20 Finance Ministers and Central Bank Governors met in Cairns as guests of Australian Treasurer Joe Hockey in February, they set a goal of economic growth “at least 2 percent above the currently projected level in the next five years”.    Since then the IMF has twice downgraded its global growth forecasts in light of the weaker than expected global activity, volatility in the financial markets, and geopolitical tensions.  Back then no one was talking about Ebola or the need to go to war against the Islamic State.

    The C20 steering committee which convened a national summit of civil society in June has been agitating the need for our leaders to have a keen eye to social inclusion and the reduction of inequality.  They have also urged the Australians to put aside the domestic politics on climate change, insisting that it be “a separate and specific item on the G20 agenda”.  No doubt the freshly minted climate change agreement between Barack Obama and Xi Jinping will be a major talking point in Brisbane, whatever the host’s discomfort.

    There has been a lot of common ground amongst the official engagement groups which have been meeting in the lead-up to the G20.  They include the B20 (business), C20 (civil society), L20 (labour), T20 (think tanks) and Y20 (young people).  Everyone welcomes the G20’s commitment to financial regulation reforms, modernising the international tax system, addressing corruption, and strengthening energy market resilience.  Not surprisingly, the C20 has called the G20 back to key principles like inclusion, poverty alleviation, sustainable growth and gender equity.  There is no magic in untramelled economic growth which exacerbates inequality already galloping at rates never before experienced.  Though the G20 has committed to closing the gender gap by 25% by 2025, the C20 has pointed out that “closing the participation gap for women alone could deliver the G20’s stated growth target”.   If the G20 is going to engage in pie-in-the-sky economic planning such as an added 2% in growth despite the downturns all about, why not factor in some social equity?  For example, why not commit to increasing the incomes for the bottom 20% of households in each G20 country by 2%?

    Last year, President Vladimir Putin invited Pope Francis to send a letter prior to the summit; and the Pope was happy to do so.  This year, Tony Abbott did the same.  Pope Francis’ letter acknowledges unapologetically the economic achievements of the G20 since its first summit during the 2008 financial crisis.  Given that the summits have often taken place against the backdrop of military conflicts and disagreement between G20 members, the pope expresses his gratitude “that those disagreements have not prevented genuine dialogue within the G20, with regard both to the specific agenda items and to global security and peace”.  As you would expect, Francis says “more is required”.  He focuses particularly on “the living conditions of poorer families and the reduction of all forms of unacceptable inequality”.  He rightly identifies economic inequality and social exclusion as contributors to world turmoil.  He sees financial unaccountability and misconceived economic policies as deterrents to justice and world peace.  Having spoken of human rights abuses, war, the plight of refugees and disregard for humanitarian law, he places the economic reform agenda within the context of justice and peace:

    The international community, and in particular the G20 Member States, should also give thought to the need to protect citizens of all countries from forms of aggression that are less evident but equally real and serious.  I am referring specifically to abuses in the financial system such as those transactions that led to the 2008 crisis, and more generally, to speculation lacking political or juridical constraints and the mentality that maximization of profits is the final criterion of all economic activity.  A mindset in which individuals are ultimately discarded will never achieve peace or justice.  Responsibility for the poor and the marginalized must therefore be an essential element of any political decision, whether on the national or the international level.       

    It is heartening that so many world leaders can gather in peace committing their countries to an economic reform agenda for growth.  Such dialogue as the culmination of ongoing planning by countless government officials from across the globe might contribute to better quality investment in infrastructure, reduced barriers to trade, increased competition, and “a boost of over $2 trillion to global GDP with the promise of millions of additional jobs” – to quote from the G20 agenda.  But unless the poor, alienated and excluded of the globe share the fruits, our leaders will be building on sand.  Next year’s summit is in Turkey with Prime Minister Davutoglu the host.  It will be the centenary of the landing at Anzac Cove.  There will be more than economics to discuss.

     

    Fr Frank Brennan SJ, Gasson Professor at the Boston College Law School, has been a member of the C20 Steering Committee

  • Global Pulse Magazine

    You can now subscribe to Global Pulse Magazine.

    Global Pulse Magazine which you can view at www.globalpulsemagazine.com  was launched on September 29 and for the last month has been free to visit.

    We invite you to subscribe at and receive daily newsletter. Just go to the homepage of www.globalpulsemagazine.com and at the top right hand corner you can click the SUBSCRIBE button and follow the prompts.

    Global Pulse Magazine combines the resources of five leading Catholic publishers – Commonweal in New York, La Croix in Paris, UCAN based in Bangkok, Eureka Street in Australia and eRenlai from China though edited in Taiwan.

    Everyday, news, features and opinions of international interest and significance will appear on the site.

    As a special introductory offer, you can subscribe to Global Pulse Magazine for a modest US$22 that lasts for a year. A pay wall operates on the site.

  • Peter Christoff. US-China climate deal: at last, a real game-changer.

    The new US-China climate deal is a game-changer.

    The United States, the world’s biggest historical emitter of greenhouse gases, has pledged to cut emissions by 26-28% by 2025 relative to 2005 levels, while China, the current biggest emitter, has promised to peak its emissions by no later than 2030.

    The agreement between the world’s two biggest greenhouse gas emitters is part of preparations for the United Nations negotiations in Paris next year, where the rest of the world will attempt to hammer out a meaningful deal to limit emissions.

    It is a significant step forward. Back in 2009, the keenly anticipated UN climate conference in Copenhagen failed, largely because of a standoff between the two states.

    Their inability to collaborate and to reach a level of mutual recognition of each other’s capacities and limits before the conference was a major contributor to the meeting’s chaotic close and weak, non-binding outcome.

    The big turnaround

    This time, things seem different. Both states have recognised their responsibility to show leadership on the climate issue.

    China’s pledge to peak its emissions by 2030 indicates that it is now willing to assume a leadership role in international climate negotiations – a role commensurate with its global economic importance, with its status as the world’s largest greenhouse gas emitter, and as a country that would be devastated by accelerating climate change.

    China’s proposed target – the first time it has agreed to stop growing its emissions in absolute terms – points to a willingness to shift towards a post-carbon economy.

    It is also a pragmatic response to the social and political challenges posed by dangerous levels of domestic air pollution, caused in part by dirty industrialisation and the use of fossil fuels, in its major cities.

    Meanwhile, US President Barack Obama’s pledge effectively throws down the gauntlet to the newly Republican-controlled Congress.

    The US Climate Action Plan has been Obama’s main policy for meeting the previous target of 17% below 2005 levels by 2020, which he announced at Copenhagen.

    But Obama has been unable to legislate to establish a national emissions trading scheme in support of the existing US target or of tougher goals.

    Nevertheless, even in the absence of such a scheme, US emissions have dropped significantly because of the global financial crisis and its economic aftermath in the United States, the development and uptake of new gas sources, and the use of existing regulatory measures.

    In 2012, US emissions were 10% below 2005 levels and the United States seems likely to achieve its 2020 target, despite the recent upswing following several years of emissions decline.

    The new US target of 26-28% below 2005 by 2025 increases the pressure the country is putting on itself to perform and reform. The joint announcement also forces Congress to recognise that China believes that its economic competitiveness – and its challenge to the United States’ economic dominance – will not be harmed even by rapid decarbonisation.

    This knowledge should reinforce Obama’s push for better and more aggressive emissions-reduction measures, enshrined in domestic law, that will also help to modernise the American economy.

    But is it all enough?

    That’s the good news. Now for the not-so-good news.

    These commitments will frame the levels of ambition required of other states at Paris next year. Climate modellers will no doubt now be rushing to determine what these new commitments, if delivered successfully, will mean for combating global warming.

    The US and Chinese cuts, significant though they are, will not be enough to limit the total increase in the atmospheric carbon dioxide unless other states engage in truly radical reductions.

    In other words, global emissions are likely to continue to grow, probably until 2030, which will make it impossible to hold global warming below the world’s agreed limit of 2C above pre-industrial levels.

    Australia snookered

    Nevertheless, this announcement means that laggard states like Australia can no longer hide behind the fiction that major developing economies like China are unprepared to make serious efforts to cut their emissions.

    It further embarrasses Australia in its attempt to keep climate change off the agenda at the meeting of the G20 next week.

    It increases the pressure on Australia to bring substantial target commitments to the table in Paris in 2015 – something the Abbott government is presently resisting vigorously.

    And it strongly suggests that the Abbott government’s longed-for coal export boom will, as many have predicted, turn out to be an illusion.

    Peter Christoff is the Associate Professor at University of Melbourne. This article first appeared in today’s The Conversation.