Saturday’s good reading and listening for the weekend

Economy, Public Policy

Saturday’s good reading and listening for the weekend

Aug 8, 2020

What people in other forums are saying about public policy

The pandemic’s progress

Two Australias

Nineteen million Australians live in states (and territories) that have the Covid-19 under control: in the past four weeks they have recorded 442 cases, a daily case rate of less than one per million people. That’s among the world’s best performance.

Then there’s Victoria, population 6.6 million, where there have been 11 288 cases over the same period. That’s a daily rate of around 60 per million: 100 per million if we consider Melbourne over the last two weeks. That’s not the worst in the world: USA and Brazil are up around 200 daily cases per million, but it’s far worse than in almost all “developed” countries.

Victoria has had only limited returns from the measures it introduced in early July. They were effective but not effective enough: policymakers seem to have been over-reliant on the power of gentle persuasion and appeals to good sense. The Victorian Government has now fallen back to a blunt but effective way to control the virus: it has restricted mobility and opportunities for mixing. Even the best contact-tracing systems cannot keep track of infections when daily infection rates are in the hundreds: a daily rate of around 20 per million seems to be where contact-tracing starts to become difficult.

Those measures will take time to take effect. We should not be discouraged by disappointing numbers in the early stages.

To understand what has been happening in Victoria, and what is likely to happen over the next few weeks, Norman Swan and other experts provide a clear explanation of how case numbers grow and fall in response to policy changes: Melbourne’s stage 3 lockdown prevented thousands of coronavirus cases, research data shows on the ABC website. The lockdown will be tough for Victorians, particularly for those who don’t have the luxury of working from home, but it should be effective.

New South Wales is the only other state with a significant rate of infection. It is shown on the graph above, but because the axis is set by Victoria’s high rate it’s hard to discern its trend. Below is the same graph for New South Wales, with its own Y axis.

The New South Wales Government seems to be relying on appeals to people’s community spirit and common sense, assuming that people north of the Murray are more intelligent than those to the south. But can any rational appeal get through to idiots who tempt fate by seeing how many pubs and clubs they can get to in one weekend? Closing all places of indoor eating and drinking for a short period may be far less disruptive than what the state will have to do if contact-tracers are overloaded by the behaviour of inconsiderate blockheads.

Where to from here

A tough but well-designed strategy to deal with Victoria’s crisis has not restrained the Murdoch media from the front-page headline in Thursday’s Australian: SECRET MODELLING REVEALED: Covid cases peak still weeks away. The article, confidently predicting that Victoria’s daily case rate is heading to 1100, is paywalled, but it’s not worth reading anyway: what they reveal about the “secret model” makes no sense – if it has any basis it’s probably a scenario about what might happen if the state were to be slow in taking measures.

It’s hard to understand what lies behind such alarmist journalism. Discrediting Labor governments is in Murdoch journalists’ job descriptions, but they have plenty to go on in relation to the Victorian Government’s ineptitude in handling hotel quarantines and the Cedar Meatworks outbreak, without resorting to fabricated models. The likely explanation is that, in line with the Murdoch media’s more general policy, it is seeking to discredit any attempt to control the virus, in support of the Trump-Bolsonaro-Johnson philosophy that real men learn to live with the virus and let the health system cope with the consequences. Those doctors and nurses are only public service workers; they’re not in the real economy. (A quick check on the figures: if we had followed the path of Johnson’s Government in the UK, by now we would have recorded 18 000 deaths, rather than 250.)

If all goes well, within a few weeks Victoria’s case load will be back to levels where contact-tracing will be effective, but from there progress could be slow. As we are seeing in New South Wales, tracking down isolated cases is a slow process: in any large population there is always a handful of idiots and defiant lawbreakers presenting unnecessary challenges to public health officials, and costing the nation billions of dollars.

As Victoria’s numbers fall, we can expect to hear a chorus of calls to “open up” – to relax restrictions and to open borders. There will be immense political pressure placed on Victoria – we might recall Education Minister Tehan’s strident demands that Victoria open up its schools back in April when Victoria’s case numbers were low. If our governments yield to those demands we could find ourselves within a few weeks in the same dismal situation the USA is in now. If our state governments can hold on we might be able to experience the less-restricted conditions New Zealanders are presently enjoying: “They didn’t close the deal”: New Zealand looks on in horror at Melbourne Covid-19 crisis in The Guardian.

If our business lobbies have any consideration for the interests of their members and the health of the economy they will be urging their members to be patient, rather than petulantly demanding that governments “open up”. By any reasonable criterion a few weeks of tough restrictions is preferable to an ongoing over-stressed health system, the distress of lonely deaths, and a majority of the population fearful to go about all but the most essential economic activity. The reward for a little patience is significant.

Achieving acceptance and compliance

All governments are coming in for criticism – for being too hasty or too slow in imposing restrictions, for imposing regulations that are too detailed and complex or that are too general, for being too harsh or too lenient on rule-breakers. It looks like they cannot win

As behavioural specialists Liam Smith and Jim Curtis of Monash University remind us in their Conversation article, achieving compliance with rules is difficult. What works with one person does not work with another, but in general we take our cues from what we see others are doing. Psychologists also know that people are motivated by defined goals, particularly if those goals promise some tangible reward. That’s one reason public health experts are urging governments to set an explicit target of elimination. Like world peace we may never get there, but it makes sense of our sacrifice.

Those Victorians who have lost income and meaningful work must be struck by talk of food shortages – the fears that some of us in other states may be unable to get our favourite brie from the King Valley, or that there will be fewer fillets of Angus beef in our supermarkets. Have we forgotten that our parents and grandparents went through years of food rationing during the Pacific War? There are serious food shortages, and they are being suffered by many of those who have lost work and are ineligible for government assistance.

A focussed consideration of Melbourne’s experience reveals the virus’s regional concentration in Melbourne’s southwestern suburbs. (The Lalor electorate seems to be the nation’s hotspot.) Perhaps, when we have time to analyse the regional concentration of the virus, our politicians, journalists and public servants will start to look more seriously at regional policies, and realise that our big cities are no less regionalised than the rest of Australia. Our lazy simplification of regional policy – to believe that the adjective “regional” refers only to what lies beyond city limits, needs serious consideration. There are people in our comfortable middle-class urban regions who have no idea of how others live in other regions in their own cities, and therefore little appreciation of how hard it is for some to cope with coronavirus restrictions.

Nursing homes

The Victorian situation has put aged-care homes under the spotlight. Use of casual labour, poor training standards and inadequate accountability have all been brought to the fore. So far there has been less attention paid to the basic structure of the sector, and the public policy settings within which it operates. ABC journalist Erin Handley provides some data and conflicting explanations about the starkly different performance of Victoria’s state-run aged-care homes and private aged-care homes: Why are there more COVID-19 cases in private aged care than the public sector?. It’s not about a binary private-public comparison, because the private sector includes both not-for-profit and for-profit sub-sectors. So far little has been said about the policies introduced by the Howard Government that allowed – even encouraged – aged-care to operate on a loosely-regulated for-profit model. Undoubtedly these issues will be given attention by the Commission into aged care quality and safety.

Other countries’ experience

As in previous weeks, we have updated the curves for selected countries. The US case rate is coming down from its very high level. In Europe generally cases have started to rise again however: the worst case-rate in Europe now is in Luxembourg (124 daily cases per million), a small country with a surfeit of borders.

In our region The Philippines is struggling: Millions in Manila back in lockdown as Duterte loses control of coronavirus spread as reported in The Guardian. Nationally its daily case rate has hit 260 per million, based on WHO figures: this is probably a significant under-estimation.

Information sources

These are on a separate website.

The world order

The west’s culpability for a damaged world order

Bobo Lo of the Lowy Institute has an essay on the Institute’s website: Global order in the shadow of the coronavirus: China, Russia and the West. The present global disorder results not only from commonly-identified factors – China’s attempt to re-shape the order, Russia’s destructive mischief and America’s retreat into isolationism – but also from the “West’s” loss of moral authority. That loss is largely (but not solely) attributable to the Trump administration, which has “laid waste to international rules, conventions, and values”. It is also attributable to other western countries having turned to nativism and authoritarianism and having made a hash of their responses to the coronavirus.

He goes on to argue for a new world order (similar to the postwar order of embedded liberalism as described by John Ruggie), built “on a more inclusive and less antagonistic basis”. “The primary focus must be on meeting universal challenges, such as climate change, pandemic disease, and global poverty”.

Bobo Lo summarises his essay on Geraldine Doogue’s Saturday Extra program: New, new world order. On the same segment Allan Behm of the Australia Institute discusses our involvement in the world order in the context of the Canberra-Washington relationship, particularly the ANZUS Treaty. In their visit to Washington for the AusMin talks Ministers Payne and Reynolds have wisely held back from an “all the way with USA” approach, but Behm notes that ever since 1788, we have been “a nervous country” when it comes to foreign relations. (23 minutes)

Lebanon was in a mess even before the explosion

Understandably, most media coverage of Beirut’s explosion is focussed on deaths and property damage, pressure on Lebanon’s already-stressed health care system, and speculation about the explosion’s causes.

The Economist’s report on the disaster covers these aspects, and it goes on to point out that “Lebanon was in a mess even before the explosion, thanks to a squabbling, inept government”. For many years the government has pegged Lebanon’s currency to the dollar, but black-market trade suggests the currency is overvalued by a factor of five. Inflation is rampant, particularly for food and fuel (imported through a now non-existent port). “As the country sinks, its venal political class seems oblivious.”

87 dangerous days for peace in our region

In the period between now and the US election conflict between China and the US is likely to heighten. Both Xi Jinping and Donald Trump are inclined to see heightening that tension as a means of solidifying their hold on office. “The once unthinkable outcome—actual armed conflict between the United States and China—now appears possible for the first time since the end of the Korean War. In other words, we are confronting the prospect of not just a new Cold War, but a hot one as well.”

So writes Kevin Rudd, in Foreign Affairs: Beware the guns of August—in Asia. Rudd describes conflicts over Taiwan, Hong Kong, and the South China Sea. It’s the last of these he sees as most dangerous, the South China Sea having become “a tense, volatile, and potentially explosive theater at a time when accumulated grievances have driven the underlying bilateral political relationship to its lowest point in half a century”.

He compares the present situation in our region to that prevailing in Europe in 1914, when failures of diplomacy and crisis management and the binds of bilateral treaties led Europe into the 1914-18 War, described in Christopher Clark’s book The Sleepwalkers, which he recommends for weekend reading.

Rudd provides a short summary of his essay on the ABC’s RN Breakfast program: China-US armed conflict “no longer unthinkable”, with some comments on specifically Australian issues. On Australia-China-US relations, discussed at the recent AusMin talks, he says: “Finally the penny dropped for Prime Minister Morrison and Foreign Minister Payne that the US presidential election campaign strategy was beginning to directly influence the content of rational national security policy”.

Fran Kelly asks him to comment on Morrison’s idea that other countries in the region should develop an alliance to deal with China. His response: “Prime minister Morrison seems to like making speeches but I have yet to see evidence of a coherent national Australia-China strategy in terms of what Australia is operationally doing, rather than what it continues to talk about”. We should be trying to develop a “common policy approach” with other Asian powers rather than trying to develop an “alliance” or to stand alone in our relation with China. (9 minutes)

The world economy

What is the gold price telling us?

For investors and speculators alike, gold is seen as a safe haven in times of uncertainty. A rising gold price, therefore, is generally seen as an indicator of economic uncertainty.

Because its price is generally expressed in terms of $US per ounce (28.35 grams), a rising price can also be read as a lack of confidence in the US dollar.

The graph below shows the gold price over 2020 so far. Some may note the sharp dip in March. That is explained as “a dash for cash” as traders started to appreciate the effect of the pandemic: it ended when the US Fed dramatically lowered rates. Note the sharp rise in the last two weeks.

The Australian economy

The Reserve Bank has two bob each way

Consider a core extract from RBA Governor Philip Lowe’s statement on announcing the Bank’s decision not to change the official interest rate:

The Australian economy is going through a very difficult period and is experiencing the biggest contraction since the 1930s. As difficult as this is, the downturn is not as severe as earlier expected and a recovery is now underway in most of Australia. This recovery is, however, likely to be both uneven and bumpy, with the coronavirus outbreak in Victoria having a major effect on the Victorian economy.

It might have been simpler if he had simply said “we don’t know, and neither does anyone else”. What is of interest in the Bank’s statement is that they are actively targeting a 25 basis point yield on three-year government securities, rendering no difference between overnight and medium-term yields.

Investors anticipate decades of low inflation and low interest rates

Peter Martin draws our attention to the government’s sale of $15 billion of 31-year bonds – the third in a series of large bond sales this year. The interest rate on those bonds is 1.94 per cent. “That means the foreign and Australian investors who bought them (including Australian super funds) were prepared to accept less than the usual rate of inflation right through until 2051 in return for regular government-guaranteed interest cheques.”

Investors don’t expect to see an overheated economy any time soon. But it does seem to be a good time for the government to borrow to invest in infrastructure.

If the government wants more spending in the economy, it must do it itself

Ross Gittins considers two significant economic indicators – our weak inflation (around zero) and our low real interest rates (also around zero). Weak inflation indicates weak demand, and low real interest rates indicate that neither households nor businesses can be enticed to invest: Weak inflation tells us: it’s the demand side, stupid.

The Morrison Government, however, cannot grasp the nature of this demand-side problem. It is still obsessed with supply-side economic remedies, such as cracking down on (supposed) labour market rigidities – solutions that may have relevance in a period of high inflation but not now. If the government wants more spending in the economy, it must do it itself, Gittins writes.

Can we build our way back to prosperity?

The events of the last six months have prompted Infrastructure Australia to update its Infrastructure Priority List. It sees a flow of nationally-significant projects as one way to help pull the country out of its recession. Most of its new proposals are for transport infrastructure – road, rail, cycling and ports, in urban and rural regions. In view of the region’s strong population growth, a significant number of the projects are in southeast Queensland.

On ABC’s RN Breakfast, Fran Kelly interviews Infrastructure Australia boss Romilly Madew. Can Australia build its way out of the recession? Madew explains the criteria Infrastructure Australia uses to assess projects. Employment creation (reference Morrison’s “jobs, jobs. jobs”) is one criterion, but it is not the sole criterion. Projects must be directed to solving particular problems, and once we are through the coronavirus recession congestion on roads and public transport will re-emerge as a major problem. (8 minutes)

Building up

Have you ever wondered why, in a country renowned for people’s love of the backyard, in just a few years, small clusters of high-rise apartments have sprung up like saplings after a bushfire?

Some of the answer is in a Reserve Bank discussion paper The apartment shortage by Keaton Jenner and Peter Tulip. They use straightforward microeconomic analysis to show that prices, and heights, rise because planning regulations restrict the supply of land on which apartments can be built. As the price of land rises it becomes optimal for developers to build higher and higher, even though the unit cost of each apartment increases with the number of storeys. This effect is strongest in Sydney, where it would make sense to developers if apartments could be built even higher than at present. Zoning restrictions have given developers an incentive to build higher and higher, adding to costs and therefore prices. if there were no zoning restrictions the optimum height of apartment blocks would be around 20 storeys.

Their paper shows the geographical distribution of apartment costs resulting from height restrictions in Sydney (highest in Leichardt and the eastern suburbs), Melbourne (the bayside and most inner suburbs) and Brisbane (the city). Because data relates to the 2016 to 2018 period, it would not reflect probable price falls associated in fall in demand since the Covid-19 restrictions.

Memorials

Two stories from Hiroshima – the personal and the global

Last Thursday August 6 marked 75 years since the US dropped an atomic bomb on Hiroshima, and Sunday will mark 75 years since the bombing of Nagasaki. (Japan surrendered a few days later on August 15.)

The Asahi Shimbun tells the story of one survivor, Tetsuko Shakuda, a 14-year old girl working as a tram conductor in Hiroshima on the day the bomb dropped.

Writing in the Washington Post Rick Noack covers the story of 75 years of global nuclear proliferation – a story that started on August 6 1945.

“We are all complicit when we tolerate injustice”

John Lewis died on July 17. Just before his death he wrote this short essay, published in the New York Times.

US politics

Trump flails like a stranded dugong: “It is what it is”

Millions of Americans have watched Trump flail around in confusion as he is confronted with questions about the coronavirus and other issues from a well-prepared Jonathan Swan. Axios has the full 38-minute interview on its site, but unless you have a VPN to bypass the geo-block, you will get a black screen and a message that the video is unavailable in Australia. (Such is the contempt the US shows to our country under the misnamed “free trade” agreement to which the Howard Government meekly assented, in order to protect the interests of the US entertainment industry.)

The first half of the interview is about the coronavirus, before Swan moves on to Russia’s bounties on US troops in Afghanistan, Trump’s possible response to an election loss, Ghislaine Maxwell’s arrest, and unrest on the streets of American cities. It’s worth seeing if you can get hold of it, because it’s far more than two talking heads: Swan’s expressions of incredulity are on a par with Marcel Marceau’s mimes. Also it shows Trump using his well-practiced tactics designed to throw journalists off track – “you didn’t know that?” (where “that” doesn’t exist), a made-up figure thrown in between accurate figures, and a patronising tone. None of it ruffles Swan however. (A calm unflappability must be in his genes.)

If you cannot get the whole interview you can see two (short and highly-edited) extracts on Jimmy Fallon’s Late night on NBC (including Trump’s inane statement “it is what it is”) and a slightly longer (1-minute) extract on The Guardian’s Explain it to me quickly where Trump tries to spin his way around America’s appallingly-high coronavirus death rate.

On the ABC RN Breakfast show Fran Kelly talks to Swan about his interview. He describes how he challenged Trump to explain his misleading claims about coronavirus death rates in the US. (11 minutes)

Why the working class votes against its economic interests

Jeff Madrick, writing for the New York Review of Books, reviews two books that try to explain why the working class votes against its economic interests. One is ”The System” who rigged it, how we fix it, by former Labor Secretary Robert Reich. The other is Break ‘em up: recovering our freedom from big ag, big tech, and big money, by Zephyr Teachout of Fordham University.

Reich warns that “a powerful money-fueled oligarchy has emerged in America that is an enemy of democracy”, whose power often goes unnoticed, and who manage to misdirect voters’ attention away from the economic condition creating poverty, while succeeding in obtaining tax cuts and regulations to their own advantage. Teachout’s concern is about the power of oligopolies and monopolies that dominate the pharmaceutical, communication, finance, health insurance and internet-related industries. (Americans have a long-standing concern with industry concentration, and many Americans, including liberals, see competition as the answer to all economic ills.)

Polls and elections

It’s been a quiet week

William Bowe’s Poll Bludger gives a guide to the upcoming (22 August) Northern Territory election and a report on Tasmanian Legislative Council elections, which have seen both Labor and Liberal capturing a seat from independents. The ABC’s Alexandra Humphries provides a little more detail on the candidates in the Tasmanian election. (There would be few elections arousing less political passion than those for the Tasmanian Legislative Council.)

Media

Disinformation overload

Writing in The New York Review of Books, Jonathan Freedland reviews three books on disinformation: Disinformed to death. Drawing on these books he describes an extraordinarily well-organised Russian disinformation operation at work in the US.

The authors don’t single out any country, however. At least 70 countries around the world have government-sponsored disinformation units, busily disinforming their own citizens or citizens of other countries. Freedland describes one disinformation operation waged last century by Britain against the US – an operation in which the stakes were very high.

These works tend to concentrate on Russian involvement with Trump’s campaigns. One of the authors, Philip Howard of Oxford is sure that the US is the country where disinformation has spread “widest and deepest”. Not that the Russians have to try very hard:

Russia wanted to elect Donald Trump but, perhaps above all, it wanted to intensify internal American rancor. Indeed, the former goal was, in part, a means to the end of the latter. Judged by that standard, it has been an extravagant success.

and

Only the most optimistic Kremlin spymaster would ever have dreamed of a US president who himself, unbidden, encourages the American people to lose all faith in their institutions, to distrust their media, scientists, judges, and intelligence agencies, even to take wild risks with their own health and so make a vicious pandemic worse. There is surely little need for active measures—spreading conspiracy theories or promoting bogus remedies—when the man in the Oval Office will do that work for you.

The review ends with a description of ways Trump may falsify the coming US election, with or without help from Russia. Freedland believes that Americans are hopelessly unprepared to combat such possible fraud.

The books are:

Thomas Rid: Active Measures: The secret history of disinformation and political warfare;

Ben Buchanan: The hacker and the state: cyber attacks and the new normal of geopolitics;

Philip Howard: Lie machines: how to save democracy from troll armies, deceitful robots, junk news operations, and political operatives.

AAP rebooted

We might recall that in March the main shareholders of Australian Associated Press (News Corp and Nine entertainment) cut their relationship with the organisation. Writing in The Back Story, Steve Larkins describes AAP’s near-death experience and its resurrection, financed by a group of 35 philanthropists: Enduring values continue in renewed AAP.