Saturday’s good reading and listening for the weekend

What people in other forums are saying about public policy


The pandemic’s progress

Victoria and New South Wales

So far so good in Victoria, but as the number of cases reduces we can expect to hear more strident calls to “open up” the economy.

It is sobering to remember that in the first two weeks in June Victoria was averaging only five new cases a day: a month later daily cases were in the hundreds. A small number of cases can have the seeds of a major outbreak. Qantas has joined the chorus of voices calling for state borders to be re-opened, conveniently overlooking the fact that contact-tracing databases are state-based.

Whether by design or by political instinct, the Victorian Government is handling this outbreak well – in sharp contrast to the way it handled hotel quarantining. In announcing numerical trigger points (lagging averages of case numbers) for lifting restrictions, responsibility shifts from the government to those who help it spread. That psychological shift gives people some sense of control – “it’s up to us” becomes a reality rather than a slogan – and it encourages people to shift their anger from the government to the problem at hand.

It’s nothing novel. It’s straight out of the negotiation textbooks – “confront the problem, not the people”. It can easily be applied to other situations where people have to make some personal sacrifice for the public good. Climate change comes to mind.

Victoria’s criteria for relaxing controls are tough. Melbourne can expect a substantial relaxation after late November when there are no new cases for 24 days, for example, and they can expect a Western-Australian type almost normal life if there are no active cases and no new cases for 28 days.

We may quibble whether this is called “elimination”, “aggressive suppression”, or plain good public policy, but it is clear that the Victorian Government does not entertain the idea that there can be some controllable background flow of cases. The health care sector is not some utility to be exploited for the commercial convenience of hairdressers, pubs, commercial gyms and other Covid-19 high-risk businesses.

Even though it is not explicitly going for elimination, New South Wales is doing well. Of its 47 cases last week, 25 were returned travellers in hotel quarantine, and of the other 22 only 3 have not so far been traced. There is a risk that the Berejiklian Government may embarrass Morrison by effectively eliminating the virus.

Aged-care homes: it’s not all Colbeck’s fault – Howard messed it up

Although by world standards, Australians of all ages have been comparatively lightly affected by Covid-19, among those 832 Australians who have died from Covid-19, 618 have been aged care residents. The proportion of Covid-19 deaths occurring in aged care is among the world’s highest.

Much media attention has been directed to the ways aged care homes have handled the epidemic, and political attention has been directed to the Commonwealth’s responsibilities, including the inept performance of Aged Care Minister Richard Colbeck.

Colbeck shouldn’t bear all the blame, however. The current problems in aged care go back to 1997, when Prime Minister John Howard lightened regulations on aged care providers – regulations that had held them to minimum standards of qualified nursing staff – and allowed them to use funds raised through bonds to finance real-estate speculation. (The bonds were named “refundable accommodation deposits”, but that was a euphemism, because the bonds are refunded only in nominal terms.)

Writing in the Saturday Paper, Rick Morton has the first of a two-part series The collapse of aged care. (The second part is available today).  Morton takes us through the history of Commonwealth policies on aged care, pointing out that, because of loose regulation, investors have enjoyed huge returns for essentially risk-free investments:

Nowhere in the world do similar systems have as high a return on equity as in private Australian aged-care operators – usually a reliable measure of income generated from investment. These providers have a return that’s almost 10 percentage points higher than the value for listed companies in Australia, and 4 percentage points higher than the closest cohort in the Asia-Pacific.

(The Saturday Paper allows non-subscribers only one free article a month, but you can create a free accountand enjoy a higher level of access. Also, the Saturday Paper is good value for anyone craving high quality investigative journalism that has largely disappeared from traditional print media.)

Europe and the USA

You can hear WHO Europe Director Hans Kluge warning about alarming transmission rates in Europe. See the graph below that illustrates his concern. In the EU the new case rate is now back up to its March peak. Cases in the UK are still below their earlier peak, but the growth in cases is very high.

In this wave the worst-affected countries are in southwest Europe – Spain, Portugal, France, Netherlands, but all over Europe rates are well above those in east Asia.  Even Malta, a small pair of islands that should have no trouble in containing the virus, has a daily case rate of almost 100 per million (Think 2500 daily cases in our island.) The onset of cooler weather, which will see more people congregating indoors, would be of concern to health authorities.

As for the USA – stay tuned to Trump for the next informed analysis.

There is no health-economy trade-off – the evidence is in

Our World in Data has been gathering data to test the idea, still held by some Australian politicians and businesspeople, that there is some trade-off between countries’ economic performance and protecting people from Covid-19. Many countries have reported their economic performance for the June quarter, and all countries have been recording deaths from Covid-19.  You can see the results, plotted and tabulated, on their page Which countries have protected both health and the economy in the pandemic?

As shown on their chart, those countries with the worst death rates, such as the UK and France, have also had some of the worst economic performance. Australia is not shown on the chart, which plots deaths per million people against GDP in June quarter 2020 relative to the same quarter in 2019.  If it were, with 33 deaths per million and a 6.25 per cent fall in GDP, our dot would lie between Japan and Norway, near the X axis.


The Australian economy

Making sense of the August labour force data

The August ABS labour force data seems to have caught everyone by surprise when it recorded 87 000 fewer Australians as unemployed and 111 000 more Australians in employment – an impressive rise of 0.9 per cent over the July figure.  But over the month there was hardly any rise in the number of hours worked – only 0.1 per cent.

The explanation for this apparent anomaly lies in an increase of 50 000 people described as “owner manager without employees” – the self-employed.  (Click on the tab “Strong growth for non-employees.) We don’t know how many of these are in the gig economy – mowing lawns, delivering pizzas, washing dogs – and how many are well-qualified tradespeople and professionals, able to earn reasonable incomes, but the rapidity of the rise in numbers combined with no rise in hours worked suggests it is mainly about the gig economy. Over the same time there was a fall in the number of people in “payroll” jobs – employees working for businesses or governments.

If these trends continue the implications for income distribution are clear: the gig economy is flexible and absorbs many people but pays poorly. But there are also implications for Morrison’s paternalistic model of worthy “employers” providing “jobs” for grateful “employees”.  The economy is changing faster than politicians’ capacity to understand how it is changing.

What’s happening to younger Australians in the workforce

In July the Productivity Commission published a research paper Why did young people’s incomes decline.  The Commission now has a website of information from the paper, presenting a short visual summary of the findings – essentially a slideshow – and a 43-minute podcast with Commissioner Catherine de Fontenay and Professor Jeff Borland from the University of Melbourne. In contrast to earlier periods, when income gains tended to be shared across age groups, over the ten years to 2018 incomes of Australians under 35 fell, while they rose for older Australians.  Transfers from parents was the only category of young people’s income to rise.

What happens when the Coronavirus supplements are removed – bad news for the bush

ACOSS commissioned Deloitte Access Economic to look at the economy-wide effects of cutting unemployment benefits (“Jobseeker” in Coalition Newspeak), youth allowances, and paternity payments, back to their pre-pandemic levels.

As the media have reported, the effects would be significant, not just for the recipients but throughout the economy, because these supplements are providing a fiscal stimulus. Recipients of these benefits spend them in Australia on new economic activity – unlike people targeted by the Government’s proposed tax cuts, those who receive these allowances don’t use them to buy a fifth investment property or a BMW.

Less reported by the media are the regional effects of such cuts.  They would hit hardest in not-metropolitan regions, particularly in Victoria – see the regional analysis on Pages 30 to 44 of the report.

Don’t blow up ancient rock shelters: it’s bad for business

On the ABC’s Saturday Extra last weekend, in introducing Alan Kohler to discuss the reaction to Rio Tinto’s destruction of ancient rock shelters in Juukan Gorge, Geraldine Doogue described Rio Tinto’s behaviour as “a case study into how to mismanage a social licence”.  Kohler pointed out that shareholders take seriously corporate adherence to what are sometimes called “ESG” (Environmental, Social and Governance) standards of behaviour.

Kohler suggested that one factor in investor activism in this case was assertiveness by Australia’s industry superannuation funds. They are not large shareholders, but they are willing to assert their members’ interests on ESG and other matters. Most superannuation funds and other investment vehicles are fairly passive, particularly when a firm is generating good profits as Rio Tinto is. (7 minutes)

The ABC’s Ian Verrender puts the issue in a wider context – Consequences for Rio Tinto over Juukan Gorge catastrophe are the new norm. He sees shareholder reaction to the Juukan Gorge incident, and to AMP over its mishandling of sexual harassment, as affirmations that it’s the owners of financial capital, not bodies such as the Business Council of Australia, who understand business. He writes:

You could argue the rise of industry superannuation funds has returned capitalism to its roots, delivering power back to the ultimate owners who coincidentally happen to be employees, a neat merger of two factors of production.

You could also mount an argument that the BCA is a trade union, representing the interests of their members, company directors and senior executives.

Saving Australia’s superannuation system

On the ABC’s Saturday Extra Geraldine Doogue interviews Pauline Vamos, former head of the Association of Super Funds of Australia and Richard Holden of the UNSW on Saving the Super System. They discuss ways people may use their superannuation balances for purposes other than retirement income, including the special Covid-19 allowances. They go on to discuss the question whether a rise in superannuation would come at the expense of wages.

Because we’re living longer our superannuation needs are greater than they were when the present system was designed. Holden calls for simpler systems with lower fees, and a more equitable and neutral way of applying tax to superannuation contributions and pensions – no tax on the way in, full marginal taxes on the way out summarises his preferred model. (14 minutes)

If only economists could think like engineers

Nicholas Gruen, writing on Club Troppo, has an essay The ghost of Descartes: Why is economics so uninterested in practical problem solving?.  It’s an essay in epistemology – the way we develop and refine knowledge. In disciplines such as engineering and medicine practitioners are concerned with what works. Such concern does not mean they are bound by crude empiricism: they seek coherent scientific explanations and refine their theories. But economists are often bound by purely deductive models, such as the ideas of Pareto optimization, and are unwilling to sacrifice the purity of their models for the messy complexities of the real world.


The Coalition’s war on renewable energy

Comrade Morrison’s 40-year energy plan

For most of last century electricity was provided through vertically-integrated government-owned utilities – a model that worked reasonably well.

Then, around the turn of the century, a bunch of economic zealots decided it should all be broken up, privatised (or at least corporatised) with the natural monopoly bits (“poles and wires”) subject to regulation, and with generation of electricity left largely to the market.  That model – the National Electricity Market – provided lots of profits for the new owners of the poles and wires, lots of jobs for regulators, and lots of business opportunities for “retailers” doing at high cost what the old government monopolies did at low cost. It brought us high-priced but generally reliable electricity. Within that model, in spite of Coalition governments’ hostility to renewable energy, the renewable share of electricity generation rose from about 9 per cent at the turn of the century to 25 per cent last year.

Then, on Tuesday, in a policy announcement deftly combining all the shortcomings of Soviet central planning and crony capitalism, Morrison dropped a bomb into the market place in his Ensuring affordable, reliable and secure electricity statement, in words that seem to have been lifted from one of Hugo Chávez rants – after translation from Spanish:

… the Government is giving the private sector until the end of April 2021 to reach final investment decisions on 1000 MW of dispatchable capacity, with a commitment for generation in time for summer 2023-24.

However, if, by the end of April 2021, the private sector has not delivered on the target, the Government will take necessary steps to ensure the required dispatchable capacity is built.

The Energy Council, representing major investors in generation, issued a press release warning that the Government’s plan “risks deterring the very investments the Government is attempting to encourage”.

The problem, as seen by the government, relates to the planned closure of AGL’s fifty-year old Liddell power station – a plant with a nominal capacity of 2000 MW. AGL has announced plans to deal with the closure, by investing in a large electricity storage facility at the same location, taking advantage of existing transmission infrastructure.

In a ten-minute interview on the ABC’s Breakfast program on Wednesday, Mike Cannon-Brookes (co-founder of Atlassian), identified several problems with the Government’s plan:

  • The Government cannot see past gas, while there are other ways to fill the expected gap in supply.
  • The gap on Lidddell’s closure is only 100 MW, not 1000 MW – the Australian Energy Market Operator’s Integrated System Plan does not call for such a large amount of replacement capacity.
  • The Government’s thinking is only on the supply side (“dispatchable” power), while there are many other ways to stabilise the grid and to use market mechanisms on the demand side to reduce the need for peaking power.
  • It would not reduce prices – it could discourage lower-cost ways to meet our electricity needs, and by some means (taxes or higher prices) we would have to pay off an increasingly redundant asset.
  • Even if we are to use gas to complement renewable resources “we have enough gas in the system already to support three times the renewable load we already have”.

Morrison and his backers keep harping on about electricity prices. We should remember that only 25 to 30 per cent of your electricity bill is for the electricity generator – the coal, wind, gas etc plant. The rest pays for getting it from the power plant to our home or business. Electricity prices, which had been stable in real terms for decades, started to rise around 2005. Some of this was because of necessary capital investment, but much of it has been as a result of the inefficiencies and over-compensation in the National Electricity Market. And as shown in the graph below, Labor’s short-lived carbon price had much less impact on prices than the NEM “reforms”, and in spite of recent minor falls, the price of electricity is still higher than it was during the carbon price period. Morrison’s concern about prices is hypocritical.

We should also remember that what counts to most consumers is not the price of electricity, but the size of the bill. The Morrison Government conveniently overlooks opportunities for energy conservation, which wouldn’t be good for gas company profits.

John Hewson on Morrison’s gas plan – “an arrogant, irresponsible disaster”

Using conventional economic analysis – the economic reasoning the present mob in the Coalition don’t understand – John Hewson takes us through the flaws in the Morrison gas plan: Scott Morrison’s gas plan is an arrogant, irresponsible disaster published in Young Witness (re-posted from the Canberra Times where it lies behind a paywall). He sees two main factors behind this stupidity:

First, Morrison himself, who runs on prejudice, simplistic (focus-group type) assessments of perceived short-term political advantage and his standing with mates.

Second, those mates who seize any moment to further their own special interests and have been appointed as “advisors” to his COVID recovery strategy.

Craig Kelly meets someone who understands economics

Writing on the ABC website, Gareth Hutchens reports on a Parliamentary inquiry in which Craig Kelly, Liberal Member for Hughes (who has a close relationship with Scott Morrison) asked NAB CEO Ross McEwan to explain why the bank is ceasing to lend to new thermal coal mines, and is planning to divest itself of all thermal coal assets by 2035 – NAB chief’s enlightening answer under questioning by Federal MP Craig Kelly on Australian coal.  Assuming Kelly’s statements are sincere, it’s clear that he has no idea of the risk involved in putting private or public money into supporting fossil fuels.


The rest of the world

Belarus and Russia

What happened in Belarus wasn’t just a rigged election: it was a coup by Lukashenko because he had hardly any support from the people. On the ABC’s Saturday Extra Arkady Ostrovsky, Russian editor of the Economist, considers the Belarus situation in the context of Putin’s hold on power and Navalny’s poisoning: Putin, Navalny and Lukashenko.

Dictators tend not to notice when they are losing their grasp on power until it’s too late. Lukashenko is suddenly aware of his fragility, and Putin, although more secure for now, would be feeling anxious about what is happening what was once a part of the USSR.

Ostrovsky goes on to explain Germany’s strong reaction to Belarus and to Navalny’s poisoning: for the first time a senior western politician has taken Putin to task for something that has happened to Russian citizens. Merkel has recognised that what happens inside Russia – attacks on critics, abuse of human rights – are not just Russian matters. They are threats to international security. (13 minutes)

Ostrovsky is author of The Invention of Russia: From Gorbachev’s Freedom to Putin’s War.

Why do people think the Republican Party (or The Liberal Party) is “pro-business”?

“Contrary to popular conception, the GOP [The Republican Party] does not govern in the interests of U.S. business — or, at least, not in the long-term interests of U.S. business as a whole.”

That’s one of the conclusions arrived at by Eric Levitz, writing in Intelligencer: The GOP is no longer the pro-business party.  The context is the Trump Administration’s refusal to accept that climate change is making the world unsafe for America’s model of capitalism. Trump and his political supporters (like Morrison and his supporters) see a transition to clean energy as a burden on business, rather than as a necessary adjustment to avoid the known and unknown costs of a hothouse world. Neither do they see the costs of a reactionary and disorderly attempt to modernize too late when old fossil-fuel powered systems start to break down.

If one accepts the reality of climate science … it is clear that the Democratic Party is the most capable steward of American capitalism on offer. The GOP may be a more indulgent guardian. It may spoil its favorite industries rotten with gifts and permissiveness.

The Pearls and Irritations reader who drew this article to our attention wrote “It’s my suspicion that Labor doesn’t actually realise that capital is on its side in the climate ‘wars’”

One of Europe’s offshore islands

Boris Johnson’s government has introduced the “Internal Market Bill”, which allows the UK government to override parts of the Brexit agreement it has negotiated with the EU. In its passage through the House of Commons several members of Johnson’s Tory Party abstained or voted against it (but too few to kill it), and all living former prime ministers, Labour and Tory, have condemned it.

On Philip Adams’ Late Night Live, Ian Dunt, editor of politics.co.uk, discusses the two major problems with Johnson’s approach. First, because it almost certainly means erecting a hard border between Northern Ireland and The Republic of Ireland, it could scuttle the whole Irish peace process – a process that was based on the principle of free movement of people and goods within the island of Ireland. Second, it signals to the world that the UK Government can legislate to put itself above national and international law, and sees no problem in breaking negotiated agreements with other countries. What hope does Johnson have of negotiating a trade deal with the US, for example? (8 minutes)

If some good comes from this stupidity, it may be that it hastens the breakup of the United Kingdom. (Northern Ireland and Scotland voted strongly against Brexit: Brexit was an English folly.) Fintan O’Toole writes that this stupidity is an ongoing manifestation of Britain’s inability to deal with its long-term decline on the world stage: English nationalism is too naive to know its own limits (originally published in the Irish Times behind a paywall, re-published on Reddit). He concludes:

The tragedy for England is that it is not unfettered, merely unmoored. Its unspoken nationalism is not a course charted towards a well-planned future. It is just the setting adrift of an ill-conceived nation. It floats under a false flag – not the cross of St George, but an increasingly tattered Union Jack. And it has just ditched its moral compass.

 If the Barbadians can have their own head of state, why can’t we?

There has been plenty of coverage of Barbados becoming a republic. Here is the coverage by Britain’s BBC. Note the statement by Prime Minister Mia Motley: “This is the ultimate statement of confidence in who we are and what we are capable of achieving”, and try to imagine Morrison expressing such confidence in Australia.


Detentions, lockdowns and curfews in other countries

If we find a two months lockdown tough imagine seven years on a 21 km2 island

Writing in The Guardian, Saba Vasefi reminds us that there are almost 200 refugees on Nauru who have had either medical transfers or resettlement requests approved but who remain on the island. Contrary to Australian Government claims, processing of their cases has stalled. There are also 180 refugees remaining in Papua New Guinea.

Spare a thought for Kashmiris

In August last year Narendra Modi’s Government revoked Kashmir’s semiautonomous status, sending a million troops to the territory. We haven’t heard a great deal about this takeover, because the Indian Government imposed strict travel restrictions, and imposed long periods of curfews and communication blackouts, including shutting off access to the Internet.

Writing in Harper’s, Sonia Faleiro gives a personal account of life in Kashmir— Valley of unrest: India’s unending occupation of Kashmir. She also takes readers through a history of the region’s relationship with India’s government since 1947.

She recounts how a party of Hindu nationalists stirred up troubles in the region, over a false claim that a mosque had been built atop a Hindu temple. Prominent in this movement, in which two thousand people died, was the relatively unknown General Secretary of the Gujarat BJP, Narendra Modi.

(Harper’s has a rather tough paywall, but it does allow non-subscribers one article a month.)


 Polls and surveys

Unhappy Brits – but are we any more content?

“I hope everything will go back to the way it was.”  This was a possible response in a YouGov survey in the UK, when people were asked what describes their hopes about the future when the Covid-19 crisis is over. Only 9 per cent of respondents wanted everything to go back to the way it was, with a further 6 per cent hoping to make some personal changes but with everything else going back to the way it was.

The UK is a very different country from Australia, and in view of its troubles over the last few years, it is quite understandable that 85 per cent of those surveyed didn’t want to see a reversion to pre-Covid-19 Britain. It would be informative if one of our polling companies did a similar poll here.

USA – only 45 sleeps before the election

America has more pollsters than flavours of ice cream. Our choice is Nate Silver’s FiveThirtyEight, where he tracks and consolidates a number of polls, weighting and adjusting them to correct for bias. FiveThirtyEightalso distinguishes between all adults and likely voters. As at 5 pm, September 18, FiveThirtyEight was giving Biden 76 per cent chance of winning. Trump’s fortunes seem to have been slipping over September.

Fading memories

According to a survey of Millennial and Gen Z Americans (i.e. under 40), many younger Americans have poor knowledge of the Holocaust. Almost half could not name a single concentration camp or ghetto. Knowledge of the Holocaust seems to be weakest in the southern states, but even quite liberal states show concerning results: 19 percent of New York respondents believe that Jews caused the Holocaust.


Coming events

If you have an hour free on Wednesday

You can register to hear Katharine Murphy, political editor of Guardian Australia, and Ben Oquist and Ebony Bennett of The Australia Institute, discuss Murphy’s Quarterly Essay The end of certainty: Scott Morrison and pandemic politics. It’s an insightful essay that dispels any notion that post-pandemic Australia will be the same as pre-pandemic Australia.  As Murphy points out, not even those in Morrison’s inner circle believe it will be. The webinar is at 11 am (AEST), Wednesday 23 September – register in advance.

Another one for your diary

Put down 6 pm (AEST), Thursday 15 October for the third John Menadue Oration, hosted by the Centre for Policy Development.  Professor Megan Davis will speak on the theme: “Can Australia deliver?”. The oration will take a big picture view of 2020, encompassing our COVID-19 response, the increased spotlight on indigenous incarceration, and the future of the Uluru Statement from the Heart. You will need to register in advance.


And the winners are …

2020 Ig Nobel Prize winners

Australia gets a mention in the 2020 Ig Nobel Prizes. An Australian was a co-author of published research titled “National income inequality predicts cultural variation in mouth to mouth kissing”.


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

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Ian McAuley is a retired lecturer in public finance at the University of Canberra and a Fellow of the Centre for Policy Development.

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