Pearls and Irritations

What people in other forums are saying about public policy

ABC’s Saturday Extra with Geraldine Doogue (from 0730 to 0900 or on their website  in case you miss it).

In Germany, Angela Merkel’s carefully thought out succession plan has been thrown into disarray after her party did the unthinkable and allied with the far right in a local election. Guest: Andreas Kluth, Bloomberg Opinion.

The riots in Hong Kong and the coronavirus outbreak have both left President Xi looking vulnerable. So how strong is his hold on power? Guests: Richard McGregor, Graeme Smith.

Tap n’ pay: How much is the cashless economy actually costing you? Perhaps you should check your receipts …

He’s the most powerful man in British politics; responsible for Brexit, able to fire and hire ministers at will, always in the news … but he’s not PM Boris Johnson. Meet Dominic Cummings, the power behind the throne. Guests: Tom Clark, Prospect magazine, Hugo McGee, CNN International.

Other commentary

“This is not the way a free and fair democracy works”

That was a statement by the ABC News Director Gaven Morris when Federal Police raided its headquarters in June last year. On February 17^th the Federal Court dismissed the ABC’s case against the raid.  On the ABC’s Late Night Live Phillip Adams interviews Denis Muller, of the Centre for Advancing Journalism, University of Melbourne – Dismissing the ABC: Court decision on AFP raids.  The court’s deliberations gave little weight to the principles of public interest journalism, the implied right of free speech and the implied right for journalists to protect their sources, while giving disproportionate weight to government interests. (15 minutes)

Productivity isn’t everything but it’s nearly everything

The Productivity Commission has released a major study with the inelegant title PC Productivity Insights 2020: Recent Productivity Trends. It concludes that slowing labour productivity growth (linked to a fall in investment), shifting terms of trade and a low wage share of income, have been the main causes of slow wage growth. The labour share of national income over this century so far has fallen due to growth in the capital-intensive mining sector and increasing profitability of financial services.

The chart below, derived from data in the report, shows the post-2005 slowdown in labour productivity by industry sector, with emphasis on three industries – manufacturing, agriculture forestry & fishing, and electricity, gas, water & waste services – that together account for all of the national fall in productivity growth.

Another quarter of low wage growth – 0.5 per cent – is revealed in the latest ABS Wage price index for December 2019.

While government spokespeople spruik the supposed strength of the Australian economy, Ross Gittins provides a more realistic picture, focussing on productivity – Lucky country has lost its dynamism and can’t find where it is.  He reports how Reserve Bank Governor Philip Lowe, when appearing before the House of Representatives Economics Committee, started by saying “our fundamentals are fantastic”, but he had to admit that, due to low investment and low productivity, the economy is stagnating, and that has serious implications for our prosperity in the medium to long term.

Innovation does not thrive in a culture of crony capitalism

Innovation and Science Australia, an advisory body to the Department of Industry, Science, Energy and Resources, has produced a commissioned report with the bureaucratic title Stimulating business investment in Australia.  It stresses the difference between R&D (research and development) and innovation, the latter being mainly about the application of established technologies in new ways.  Unsurprisingly, it finds that firms that innovate have higher revenue and employment growth than those that do not.

It finds that Australia’s business innovation as a share of GDP is 1.9 per cent, well below the OECD average of 2.9 per cent.

The report’s logic is difficult to follow. It acknowledges that the benefits of R&D have significant positive externalities: that’s why public subsidies for R&D are justified and that’s why R&D expenditure may not correlate with firms’ performance.  It finds that innovation, however, does have significant benefits which firms can capture. All in line with conventional economics. Yet it goes on to argue for government support for innovation, on the basis that as well as private benefits there are “spillovers” (positive externalities) from innovation.  That’s a stretch of mainstream economic theory, which justifies government intervention only when firms do not capture enough benefits for themselves. Almost all market transactions have benefits shared between producers and consumers.

What the report does not address is the economic culture, nurtured by Coalition governments, that rewards rent-seeking and exploitation of environmental resources over innovation. Why should businesses bother to invest in innovation when there are such high profits to be made in finance and property development and when it is so easy to win a government contract to look after the Barrier Reef, run a detention centre, or conduct a feasibility study for a coal-fired power station?

The competition delusion

Australian policymakers have put great faith in competition – the supreme motivator – as a way to achieve beneficial outcomes for society. They believe that the power of Adam Smith’s “invisible hand” can drive beneficial outcomes in domains such as health, education and social services. Worse, competition has tended to become an end in itself, regardless of outcomes.

Writing in the Griffith Review – Trust and the competition delusion – Nicholas Gruen questions the effectiveness of such reliance on individual self-interest. It’s a motivation that does not bring out the best in people: over-reliance on competition is corroding our social and civic institutions.

Gruen also delivers his message as one of the guests on an ABC Future Tense program where Anthony Funnell also interviews Yves Dejaeghere of the University of Antwerp and Ben Tarnoff of Logic Magazine –  The competition delusion; and a call to nationalise big data. Dejaeghere describes the function of citizens’ councils and assemblies and Tarnoff points out how data is becoming an asset allowing corporations to accumulate monopoly power. (30 minutes, of which the first 15 is Gruen’s segment)

Private health insurance: where does it fit, where is it going?

Where does it fit?

Michael Brennan, Chair of the Productivity Commission, has delivered a speech titled Private health insuranceat a Sydney conference. He starts by spelling out an assumption so few policy makers query:

For at least 25 years and probably more, PHI policy has been conducted on an implicit premise, which is that we need a viable PHI industry in order to take pressure off the public hospital system.

His speech is about the whole way we finance and deliver health care. He lists and discusses four shortcomings in those arrangements:

• the excessive focus on outputs rather than outcomes;
• (relatedly) the extent of ineffective procedures and unjustified clinical variation;
• the lack of integration between parts of the system — particularly between the primary and acute sectors but also with other health and non-health services, and
• the general passivity of the system as a whole.

(Going into the 2019 election Labor proposed a Productivity Inquiry into private health insurance. Most observers believed that Labor’s proposed reference was too narrow, but the Morrison Government has no plans at all to subject this highly-subsidised and high-cost industry to the scrutiny of a Productivity Commission inquiry.)

Where is it going?

On Tuesday The Australian Prudential Regulation Authority (APRA) released its Quarterly private health insurance statistics for December 2019.  In terms of gross numbers, PHI coverage has been remarkably stable – at around 11 million people – for the last five years.  But that means, as a percentage of the population, it has fallen from 47 per cent in 2016 to 44 per cent in 2019.

Of more concern for the industry is that over the last four years, while the number of people covered by PHI has fallen by only 100 000, this is a net figure. It has gained 190 000 people over 60 (the age at which members tend to draw more than they pay in premiums) while it has lost 290 000 younger people, as shown in the chart below.

Yes, the Russians helped Trump win the presidency, but so did the FBI

Robert Kaiser – former managing editor of the Washington Post – has an article in the New York Review of Books Fear and Loathing and the FBI, reviewing three books on the FBI’s relationships with Trump and his team.

The books shed some light on Russia’s involvement in Trump’s campaign, particularly how during that campaign his senior foreign policy advisor, Lieutenant General Michael Flynn, colluded with Russia to further that country’s foreign policy objectives. For the most part however, these books are about the FBI’s culture – a right-wing partisan culture, legacy of its J Edgar Hoover days. There was a strong anti-Clinton sentiment among the Bureau’s senior staff, who went much further than operationally necessary in pursuing Hilary Clinton’s use of her personal email accounts.

The central figure in these works is FBI Director James Comey. Two days before the election Comey announced that the Bureau had found Clinton had work-related emails on her personal account. That was an indiscretion rather than a breach of security, but Trump made the most of it. Kaiser does not accuse Comey of partisan intent, but he does see his behaviour as improper and ill-advised, and in line with the Bureau’s established partisan culture.

Trump showed no gratitude to the FBI for its support: he sacked Comey and developed a poor relationship with the agency – a reflection of his contempt of law-enforcement institutions.

How the US became a corporatist state

Corporatism is a political ideology which sees the organisation of society in terms of government-interest group relationships, particularly between government and big business. As a monolithic ant-democratic system it is similar in ways to Soviet Communism, but without government ownership of the means of production. Mussolini’s Italy was the textbook example of corporatism.

Bernard Keane’s Side View draws our attention to a long article in The National Interest – The U.S. economy is rigged – by businessperson and contributing editor Milton Erzati, tracing the way the United States, through Democrat and Republican administrations, has drifted towards corporatism. He sees the election of Donald Trump, and growing support for Bernie Sanders, as a public reaction against this trend. Trump has put his own mark on corporatism, and Sanders’ proposals, while being more democratic, would still result in an elite class controlling the economy.  Erzati is no “small government” ideologue: he accepts the need for government regulation, but it should be consistent and “hands off”, without favouring or disadvantaging any particular interests.

Remember the myth of Australia’s Wunderkinder? Forget it

The medical journal The Lancet has published a major WHO-UNICEF study on children’s health and wellbeing –  A future for the world’s children?.  It describes threats to children’s well-being – not only threats such as poor sanitation and physical violence, but also threats from unconstrained commercial markets which groom children as future (or present) customers of tobacco, alcohol, sugar and gambling.

It has produced a “child flourishing index”, ranking countries, by the criteria of the study. In Australia we may have a self-image as a country that’s a paradise for young people – an image conditioned by sporting success and the postwar stereotype of pale, sickly immigrant children coming off migrant ships. In fact most European countries and prosperous Asian countries (Singapore, Japan and Korea) rank well ahead of us. We come in at #20, even way behind the UK at #10.

Money laundering and tax evasion

On Tuesday the Tax Justice Network released its financial secrecy index for 2020. Its list of the biggest enablers of financial secrecy includes the usual suspects – Cayman Islands in first place, followed, in order, by the USA, Switzerland, Hong Kong and Singapore. Australia does better than Japan and most European countries, but poorly in comparison with New Zealand and the Nordic countries.

To find the report’s entry for Australia you need to drill down through a hierarchy of links, but here is a direct link.

Its criticisms of Australia are generally about the secrecy around corporate financial transactions. One specific criticism relates to the government’s reluctance, in the face of industry lobbying, to require tax advisers to report to the Tax Office if they are marketing aggressive tax schemes. It also specifically mentions a weakness in our anti money-laundering laws, referring to legislation drafted in 2007 which would have covered real estate agents, dealers in precious metals and stones, lawyers, accountants, notaries and company service providers, but this legislation was never implemented.

Expanding on the Tax Justice Network’s report, the ABC’s Nassim Khadem has an article Australia a safe haven for illicit funds, but Cayman Islands the world’s worst.

The fires – as seen by 3000 surveyed Australians

Researchers at ANU’s Centre for Social Research and Methods and the Social Research Centre have conducted a survey to assess the direct and indirect effects of our season of fires – Exposure and the impact on attitudes of the 2019-20 Australian bushfires. Almost 80 per cent of those surveyed reported being affected in some way. In summary the findings show:

… that subjective wellbeing amongst the Australian population has declined since the start of spring 2019, people are less satisfied with the direction of the country, and have less confidence in the Federal Government. People are more likely, however, to think that the environment and climate change are issues and a potential threat to them, with a significant decline in the proportion of people who support new coal mines.

They find a significant fall in support for Scott Morrison and a general fall in support for the Coalition since September last year, much of which is attributable to the Government’s handling of the fires. This fall is mainly an intensification of the Coalition’s loss of support among young people, the well-educated and women, manifest in the 2109 election. In addition, people living outside of a capital city, who swung towards the Coalition in the election, have swung strongly away from the Coalition. Respondents’ attitudes towards state governments is more positive than their attitude to the Commonwealth Government.

The fires – as seen from New York

If you read Damien Cave’s New York Times article The end of Australia as we know it you will find some fine quotes from Lynette Wallworth, Robyn Eckersley, Thomas Keneally, David Bowman and Mike Cannon-Brookes, about our season of fires. The real value of this piece is in Matthew Abbott’s photographs which not so much accompany the article as define it, particularly his photograph of New Year’s Eve at Lake Conjola.

Wage theft – a chance to have a say

News of underpayment in supermarkets – this time Coles – has brought wage underpayment to the fore. These cases, which probably result from a lack of care rather than deliberate exploitation, are commanding plenty of media publicity. Less well- publicised is wage theft in certain industries dominated by small businesses, including food service (cafes and restaurants), sex work and horticulture.

The Attorney General’s Department is conducting an inquiry into underpayment and lack of adherence to mandated conditions. It has a discussion paper with the grand title Improving protections of employees’ wages and entitlements: further strengthening the civil compliance and enforcement framework, canvassing options for enforcement, up to and including criminal sanctions.  Submissions are due by April 3, and it is a reasonable bet that lobbies purporting to speak for “business interests” (whatever they are) will be arguing that any regime of compliance should be soft.

If you live in or near Sydney, mark 30 March in your diary

The Centre for Policy Development is hosting the 2020 John Menadue Oration. Professor Megan Davis, Pro Vice Chancellor Indigenous and Professor of Law at the University of New South Wales, will address the question “Can Australia deliver?”.  See the event details on the CPD website, which includes a link to the Eventbrite registration page. (17:30, Monday March 30)

A reprieve for Holden?

A well-connected reader of Pearls and Irritations has learned that Morrison has a plan to bail-out Holden.

Saturday’s Good Reading and Listening  is compiled by Ian McAuley

Watch out tomorrow, Sunday, for Peter Sainsbury’s Sunday environment round up.

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