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yet more on Telstra

September 15th, 2005

My column in today’s Fin (subscription required) has yet more on Telstra, and the general direction of regulation. It’s over the fold

The public stoush between John Howard and newly-appointed Telstra CEO Sol Trujillo has been entertaining and in some respects informative. Above all, it has been educational, driving home a lesson that ought to have been learned a long time ago. Partial privatisation represents the worst of both worlds, having all the costs of public ownership and few of the benefits.

The central aim of governance is to provide actors with clear and direct responsibilities. In a private corporation, the directors and managers have a fiduciary obligation to act in the interests of shareholders (considered as shareholders, without regard to any other interests they may have).

In a public enterprise, the managers are responsible to the relevant ministers who, in turn, are reponsible to Parliament and the electorate.

In a partially private term of Telstra, both lines of responsibility are present, and neither works properly. The CEO of Telstra may be seen as having obligations to manage the enterprise in the interests of any or all of: the private shareholders of Telstra; the Australian public; the Commonwealth government; the relevant ministers as formal shareholders; or even the Liberal party as the effective controller of the majority stake.

As long as the position of CEO was held by Ziggy Switkowski, a direct appointee and personal friend of the Communications Minister, these conflicts did not become apparent, though they had serious implications for Telstra’s corporate governance. From Switkowski’s point of view, what was good for the Liberal Party was good for Telstra and distinctions between the Liberal Party, the government, and the Australian public were not worth making. The appointment of Sol Trujillo has brought the contradictions out into the open.

All of these points were made when the government first proposed partial privatisation, denying that this would compromise its capacity to direct Telstra to act in the public interest. As I observed at the time (Labor’s dilemma on Telstra, AFR, 31 January 1997), the continued maintenance of a private minority shareholding in an enterprise like Telstra is an untenable position. The directors of the enterprise would be in an invidious position, as would the minority shareholders. Directors responsible to a government majority shareholder can not possibly disregard public policy imperatives in an area as important as telecommunications, but in doing so they violate their fiduciary obligations to disregard the interests of everyone except their shareholders. Minority shareholders are locked into whatever services and pricing polices, and whatever pattern of dividend distribution, the government chooses to impose on them.

Of course, the government has long since abandoned the claim that partial privatisation is a sensible policy, and argued for full privatisation as a means of rescuing Telstra from the no-mans land created by its own policy. Even if privatisation does take place, however, any benefits that might arise will be more than outweighed by the costs of almost a decade during which Telstra has been neither fish nor fowl.

But at least the government has changed its mind in the right direction. Having correctly opposed partial privatisation at the time, Labor now suggests it should be maintained indefinitely, saying that it will freeze public ownership at whatever level it happens to inherit from the present government when it eventually returns to office. This is a non-policy, made worse by the fact that Labor’s spokesman on the topic, Lindsay Tanner, once advocated the correct policy of privatising the peripheral parts of Telstra and renationalising the rest.

More generally, the pugnacious approach adopted by Sol Trujillo is symptomatic of the growing self-confidence of infrastructure monopolists confronting governments and regulators. It has become increasingly clear that, faced with a threat that socially necessary infrastructure will not be built, there is little option but to meet the demands of the monopoly businesses that own them. In most cases, this involves receiving a rate of return based on levels of risk typical of the private sector while getting revenue streams that are effectively guaranteed, in large measure, by the regulatory framework established by the private sector.

Thus far, households have seen little benefit from the radical reforms imposed on the Australian infrastructure sector. Real prices for most infrastructure services have remained constant or risen. The one exception, telecommunications, is the result of a decades-old trend of technological progress rather than of well-designed public policy. With infrastructure providers becoming more aggressive, and governments increasingly unwilling to confront them, the promise of lower prices and better services is likely to remain a promise.

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  1. Terje Petersen
    September 15th, 2005 at 21:12 | #1

    QUOTE:It has become increasingly clear that, faced with a threat that socially necessary infrastructure will not be built, there is little option but to meet the demands of the monopoly businesses that own them. In most cases, this involves receiving a rate of return based on levels of risk typical of the private sector while getting revenue streams that are effectively guaranteed, in large measure, by the regulatory framework established by the private sector.

    RESPONSE: I am sure you meant to end with “public sector” so I will proceed on that basis.

    I don’t understand why you think there are limited options. In theory at least if the government thinks we need a fibre optic link from Adelaide to Darwin it can have one built without Telstra. If it thinks we need WiMax to every home it can subsidies Optus to do this. If it decides that no child shall be without a mobile phone by 2009 then it can have yet another network built. It could even pay for it by jacking up the licence fee on spectrum for all the existing players. I would not advocate any of these but they are certainly options open to the government.

    Until recently one of the other major telcos (Powertel) was largely owned by state governments via their interest in Electricity distributors. In Tasmania they are trialing broadband Internet via power lines. Almost anything seems possible in this industry.

    A lot of the so called “socially necessary infastructure” (eg Broadband) was not available to anybody a few short years ago. Now everybody must have it before next Tuesday.

  2. Andrew Reynolds
    September 15th, 2005 at 23:51 | #2

    PrQ,
    Well written – I would agree with most of it. I think Terje is right on the ‘public sector’ bit.
    One point interested me in particular, though. When you said “…any benefits that might arise will be more than outweighed by the costs of almost a decade during which Telstra has been neither fish nor fowl…” to me, at least, you implied that the sunk costs in the previous decade may be a strong reason for your opposition to full privatisation now. Is this correct? I would not have thought that the sunk costs would have been an argument against a current policy but a critisism of policies past.
    You are also right that the Labor policy is now nowhere, although I think that we can be pretty sure that they will not re-nationalise. It would have been interesting to see them make a stand on principal for once.

  3. September 16th, 2005 at 00:43 | #3

    I agree with all of that, John, but just a small correction. Tanner was spokesperson on communications prior to the last election, but is now Shadow Finance Minister. Stephen Conroy is the communications spokesperson.

  4. jquiggin
    September 16th, 2005 at 08:51 | #4

    Andrew, I’m not using sunk costs as the basis of my current position, merely pointing out that, even if full privatisation is desirable (I don’t think it is) and is achieved in the end, a policy of approaching it through salami-slicing partial sales may have negative net benefits.

    Terje, I agree there are alternatives, but, taking the infrastructure sector as a whole, incumbent monopolists are in a very strong position to control investment. If they decide to drag their feet, the whole process is likely to slow down. Hence, governments are in a weak bargaining position.

  5. econwit
    September 16th, 2005 at 09:08 | #5

    “the correct policy of privatising the peripheral parts of Telstra and renationalising the rest.”

    What section of Telstra do you envisage thriving in a nationalised quagmire.

    The only thing that Telstra has got going for it at the moment is its copper network- which is steadily becoming obsolete. Wireless technologies & mobiles will eventually dominate the industry, creating a few oligopolistic players.

  6. Andrew Reynolds
    September 16th, 2005 at 10:48 | #6

    PrQ,
    Thanks for that – I did not think you would have made that error. I did not see it in your original justification of your position – it just looked odd. I would add that the salami slice option was forced on the government by the obstructionism of the Senate with the Dems as the swing voters. I think that is why the government wanted this to get through ASAP – they wanted to get it through before the agrarian socialists became swinging voters trying to rescue their party from the history books.

  7. observa
    September 16th, 2005 at 13:45 | #7

    Partial privatisation was the obvious path for a govt that believed in full privatisation and had to deal with ideological opposition. The problems of part privatisation would then become obvious and lead to the logical push for full privatisation. It is really the ideological opposition and obfuscation that has meant taxpayers will not get the best price for their assets now. Nevertheless they have to get the best price they can now and quickly. If you ever needed a sample of what could happen to taxpayer’s assets here, TV last night showed a trial of 500 households in Tas, using Mitsubishi Electric technology and the power line network to access cheap phone calls with no line rentals. If we’re not careful, lefty’s will leave we taxpayers with a costly dinosaur copper network, that nonone wants to maintain. Communications with rapid technology change, needs to be in the hands of private entrepreneurs at their risk. Does anyone seriously believe govts should be running airlines and banks these days? Remember how we once did?

  8. September 16th, 2005 at 13:58 | #8

    “Does anyone seriously believe govts should be running airlines and banks these days?”"

    Yoo-hoo! Over here!

  9. September 16th, 2005 at 14:00 | #9

    With all arguments about the privatization of Telstra and the full or partial sale of Telstra over the about past 10 years, I have still to find anyone to pursue the arguments such as I have outlined on my website http://www.schorel-hlavka.com.

    If the privatization was unconstitutional and hence so any or all shares sold, then should we not first address this?

    For example; When there is a car collision and one of the drivers is unlicensed, then the Courts will simply hold that driver at fault, because of being unlawfully in charge of a motor vehicle, even if the other driver caused the accident. After all the unlicensed driver has no legal position!

    Therefore, if the privatization of Telstra is unconstitutional then it is not relevant if all or some of the shares are sold.

    I suspect that if all shares are sold, Telstra will challenge the validity of the Telstra Communication Act, upon constitutional grounds, to get rid of any impediments, and then Senator Barnaby Joyce will have achieved the worst outcome for the people in the bush, and for it other residents of the Commonwealth of Australia!

    In my view, it requires a REFERENDUM to approve the privatization of Telstra, as it took a REFERENDUM to give the commonwealth of Australia postal and communication services, and so for specific reasons, such as that the Framers of the constitution didn’t want telecommunications to be in the hands of private operators as they commented was applicable in the USA. As they made clear the Minister would be responsible for the one Department of postal and communication services, even the employment of staff and trucks used!

    If you accept ignorance of constitutional limitations in the communication issue, then as we all know it is flowing on with so called terrorist laws, etc and we now have people deported without reasons given.

    Where will it stop?

    Again, wake up and forget about which side of politics you are on but consider what is constitutionally appropriate!

  10. Jim Birch
    September 16th, 2005 at 15:44 | #10

    Just a couple of technology points.

    Electricity lines were never designed for data frequency signals. Broadband over telephone lines sprays an enormous amount RF noise and could seriously impact on existing radio applications including systems like air navigation and coastal safety depending on the frequencies used. There’s a tradeoff between bandwidth, coverage and impact on other systems. It may be acceptable in some areas but it will never kill the copper network.

    Likewise, the mobile phone network – G3, G4, whatever – can only replace landlines in limited circumstances. It’s great for low bandwith applications like mobile phones, but unless you cable in base stations on every street corner you’ll never get internet bandwidth levels for the masses. In which case…

  11. Andrew Reynolds
    September 16th, 2005 at 16:29 | #11

    Mr G. H. Schorel-Hlavka,
    There is no question over the constitutionality of selling Telstra, nor need there be. There is nowhere in the constitution that says the posts or telecommunications MUST be in the hands of one level of government or another – merely one saying it MAY be.
    In any case, 49% (approx) of the shares have been in private hands for years.

  12. jquiggin
    September 16th, 2005 at 17:41 | #12

    Andrew and Observa,

    The government campaigned on partial privatisation in 1996 and argued very strongly that this was a sustainable position, not implying full privatisation. Of course, they were lying but that’s not much of a defence in my view.

  13. observa
    September 16th, 2005 at 20:56 | #13

    In a democracy it’s a government’s right to change its mind, particularly if it does it before an election. It’s called progress John.

    Jim, I’m no telecommunications expert, but there were 500 households with telecommunications, paying no line rental, 10c local calls and 6c/min OS calls and they could plug their ‘phone’ into any power point in the house. They seemed pretty happy punters to me. Might be time to ditch the Telstra shares and buy up ETSA utilities who now own the SA poles and wires. Our telecommunications have never been better or relatively cheaper since competition. Ditto the banks and airlines. Some of you lefty greenhorns have forgotten the bad old days of the old school tie getting hold of piddling interest passbook savings account funds, while the mugs paid full tote odds with 2nd mortgages from the CUs and Building Socs. As for women, forget it! Who’s for rollback eh girls?

  14. Ian Gould
    September 16th, 2005 at 21:36 | #14

    >Partial privatisation was the obvious path for a govt that believed in full privatisation and had to deal with ideological opposition.

    “Deal with ideological opposition” sounds so much nicer than “lie”.

  15. observa
    September 16th, 2005 at 22:16 | #15

    Ian, times change and telecommunications is no longer a natural monopoly, for which govt has a valid role. The opposition parties are now just being ideologically pig headed and deserve to be treated as such. Mind you some of them are so busy backpedalling frantically on statements about their former fearless leader, that such ‘reassessments’ on Telstra would be impossible at present.

  16. Lindsay
    September 16th, 2005 at 22:39 | #16

    Having spent 39 years in the industry, (I am proud to say that I have worked for the PMG’s Dept, I am proud to say that I have worked for Telecom Australia, I am also proud to say that I have NEVER worked for Telstra). I am totally unable to see any benefit that has occurred as a result of both the deregulation and the privatisation of this industry.
    One writer has claimed that telecommunications have never been better or cheaper since competition. I submit that “better” is a result of technological advancement, and “cheaper” is because of regulatory fiat.
    Another writer has claimed that The taxpayer will be left with a costly copper dinasaur that no one wants. But the copper is a small percentage of the total infrastructure. The copper is one method of delivering the service, the service that originates in the switching network that is still needed to tie everything together. Those Powertel customers could not talk to anyone other than themselves without this network. For one person to reach anyone else outside of the network to which they are connected requires the use of this switching network.
    Queensland has recently seen a furore over power generation and distribution but the disaster that is just around the corner in telecommunications is going to be far greater

  17. Lindsay
    September 16th, 2005 at 22:42 | #17

    Observa,
    Unfortunately I believe that telecommunications is still a natural monopoly it is just that ideology fails to recognise it.

  18. Terje Petersen
    September 16th, 2005 at 23:29 | #18

    LINDSAY:The copper is one method of delivering the service, the service that originates in the switching network that is still needed to tie everything together. Those Powertel customers could not talk to anyone other than themselves without this network. For one person to reach anyone else outside of the network to which they are connected requires the use of this switching network.

    RESPONSE: The closest think that Telstra has to a monopoly position is in the realm of access (ie copper). Both transmission and switching have multiple players. With fibre-optics the transmission business is wide open. And every telco (mobile or otherwise) runs their own voice switches and interconnects with multiple parties. If all the Telstra switches went off the air tomorrow then directly connected Vodafone subscribers could still call directly connected Optus or Powertel subscribers.

    And Powertel also has a very extensive fibre access network in the capital cities.

    For calls in and out of the country the Telstra monopoly is long gone.

  19. Andrew Reynolds
    September 17th, 2005 at 03:15 | #19

    PrQ,
    If we were to campaign against every government position that subsequently got reversed we would have to campaign against many things, not least the FBT and CGT, introduced by Labor after explicitly saying they would not in the 1983 election. At least little Johnny, in introducing the GST and now the sale of the remaining Telstra stake, went to the people again after making it clear what his intentions were. I say again, if anyone was unaware that the full privatisation of Telstra was not on the agenda then they were not listening. That is more honest than an outright lie.

  20. jquiggin
    September 17th, 2005 at 06:58 | #20

    Andrew R,

    i’m not criticising the government for changing their position on this issue, but I don’t see why they shouldn’t be criticised for a policy they introduced, simply because they were lying when they said that they regarded it as a good one.

  21. observa
    September 18th, 2005 at 05:39 | #21

    And some of us don’t see why it’s not fair to criticise those who are lying about the reasons for opposing privatising Telstra now, simply because they feel it’s their right to privatise it when they’re in power.

    “Unfortunately I believe that telecommunications is still a natural monopoly it is just that ideology fails to recognise it.”

    Well Lindsay, if you believe that, all I can suggest is you and your wise consortia of investors should buy up Telstra now amigos. They tell me 49% is readily available for sale most week days and relatively cheap these days.

  22. Brian Austen
    September 18th, 2005 at 10:41 | #22

    Yes well, the reality is that Telstra still has responsibility for the public good component of national communications; and for “the bush”. It is not a private company in the normal sense of the term but presumably it will try to be. To the extent that it succeeds in economic terms of satisfying its shareholders, services in “the bush” will inevitably decline relatively. How this structured contradiction plays out will be interesting.

  23. Econwit
    September 18th, 2005 at 20:41 | #23

    The bush,The bush,The bush,The bush,The bush.

    If it rains they whinge about flooding,
    if it doesn’t they whinge about drought.
    They whinge about telecommunications.
    They whinge about their roads.
    They whinge about the standard of their health care.
    They whinge about the standard of their schools.
    They whinge about subsidised imports.
    They whinge about subsidised primary producers in other countries.
    They whinge about imported crop diseases.
    They whinge about not getting a big enough of a cut on diesel tax.

    Oh, my heart bleeds for our poor cocky cousins.

  24. September 18th, 2005 at 23:07 | #24

    Andrew Reynolds wrote At least little Johnny, in introducing the GST and now the sale of the remaining Telstra stake, went to the people again after making it clear what his intentions were.

    (Why do you refer to our PM diminutively as ‘little Johnny’? Whilst I have little time for him, I would not resort to this kind of personal attack, so it seems odd that someone defending his record would choose to do so.)

    Garbage!

    He concealed his intentions to introduce the GST almost to the last minute. A farcical inquiry into our taxation system was held. When Liberal commmittee Paul Zammit came to realise that the Government was not interested in seriously considering submissions other than submissions in favour of the GST, he resigned.

    John Howard timed the elections to make it impossible for Parliament to examine the GST legisaltion prior to the elections.

    In the weeks leading up to the elections, millions of taxpayers dollars had been spent to promote the concept that ‘reform’ to our tax system was necessary.

    In spite of that the Coalition still lost the popular vote in the lower House (roughly 51.5% against the Government on a two party preferred vote) and a decisive majority of Senators who stood opposed to the GST were elected.

    After the election a Senate Inquiry found that many of the claims made during the election campaign were false.

    The Government still had the hide to push through its GST legislation. The most galling aspect of this whole sad episode was that Australian electors were never given the choice at the next election to reject the GST because, as Peter Costelllo so impudently reminded us over and over and over again, “The Labor Party is so opposed to the GST that they are fully committed to implementing it should they win the next election.”

    Andrew Reynolds wrote I say again, if anyone was unaware that the full privatisation of Telstra was not on the agenda then they were not listening.

    Rubbish!

    The election last year was clearly orchestrated to put the issue of Telstra right at the back of peoples’ minds at the time they voted, and they obviously succeeded. I have already shown this in this article in this article. Had they not succeeded, they almost certainly have lost the election. Certainly, Ziggy Switkowski made it clear that he feared that this would be the consequence.

    Not one single Government candidate has ever accepted any one of the numerous challenges made to publicly debate privatisation, and in the Senate last week they went out of their way to see that the legislation got through without scrutiny by the Senate or by the public.

    What happened in the Senate last week, was a perversion of democracy. The legislation got through on the vote of a man who promised his electors to oppose privatisation. Another Liberal Senator, Brett Mason, from Queensland who voted for privatisaion actually said :

    Of all the emails I get, 95 per cent are against the sale of Telstra. … Nearly everyone who comes into my office and nearly every email I get is against the sale of Telstra.

    Having so contemptuously ignored the wishes of even their own constituents, the Coalition Senators had the sheer effrontery to loudly cheer after the vote had been carried last Wednesday night after debate had been gagged by them.

    They were in such a rush to get it through that they could not grant the wishes of those who appeared before the Senate committee to be given more time to look at the legisation and to be able to make submissions.

    Clearly it suits you to have the public manipulated in this way and you would be more than happy to see this pattern repeated in 2007 and indefinitely into the future.

  25. observa
    September 19th, 2005 at 11:49 | #25

    Jesus James, you’re not still in GST rollback mode are you? I doubt you’ll get any support from the State Labor govts for giving back some of that lovely GST moolah, even for a popularity contest in lowering petrol prices, federal Labor are shamelessly banging on about. The reform of the ubiquitous WST, on top of the Hawke/Keating reforms, has gone a long way to helping ordinary Aussies enjoy the lowest unemployment for a generation, albeit with low inflation (remember how the GST opponents said the sky would fall here?) Still, the left are stuck in a time warp with issues like Telstra, when it should be obvious what’s happening under a competitive telecommunications regime here http://finance.news.com.au/story/0,10166,16648670-31037,00.html
    Never let the cold facts get in the way of a bloody good emote though!

  26. September 19th, 2005 at 21:03 | #26

    observa,

    It is not opponents of privatisation who fear the facts. It is the proponents, who, as I wrote earlier, have not yet accepted a single challenge to publicly debate privatisation A challenge made by Independent MP Tony Windsor on 15 Dec 2004 has not been taken up by Helen Coonan.

    They are not willing to debate the sale either outside or inside of parliament these days.

    observa wrote: … it should be obvious what’s happening under a competitive telecommunications regime here

    The duplicated infrastructure necessary to support the contrived environment of competetion must ultimately be paid for by consumers, if the telcos themselves are not to go bankrupt.

    Even if profit margins are reduced to zero, common sense would dictate that a publicly owned monopoly would have to be astonishingly inefficient to be unable to provide a cheaper service.

    In a recent article in The Age on 15 September Kenneth Davidson wrote  :

    When Telstra was a regulated monopoly at the beginning of the 1990s, the price of a standardised basket of services to households was equal to the OECD average – which was a pretty good effort given that Telstra’s services covered an area bigger than Western Europe – and it used its economies of scale and scope to support an efficient telecommunications equipment manufacturing industry.

    Since then, the OECD figures show that the cost of a representative basket of services has increased relative to the average by 15 per cent – equal to about an extra $140 a year on the average household telephone bill. This is the effective tax households pay annually to subsidise the Government’s competition fetish, excluding the additional burden placed on the balance of payments deficit resulting from the destruction of the Australian telecommunications equipment industry.

    My main point in raising the GST was to refute the myth as Andrew Reynolds put it that John Howard ‘went to the people again after making it clear what his intentions were’. As I have shown, this is nonsense, and it is also nonsense in relation to Telstra’s privatisation.

    Opposition to privatisation in 1998 stood at 62%(probably Newspoll) In 2002 it stood at 66%(Newspoll) and in August this year it stood at 70% (Newspoll). (From a speech in the Senate on 13 Sep). John Howard in 2004 knew perfectly well that he would not be able to change people’s minds and that is why he never mentioned it once in any of his campaign speeches, and mentioned it only twice, by my count, during the course of the election campaign.

    John Howard has clearly won office by deceiving the Australian public, and not only in relation to Telstra. This is a pattern that must be stopped, but it won’t be stopped, if the 70% of the Australian public, who are opposed to the sale, take this lying down as you would have them do.

  27. Andrew Reynolds
    September 19th, 2005 at 22:56 | #27

    James,
    If you are right then, advertising the Telstra sale would have given us Mark Latham, PM. Great. As many members of the Labor party now concede that would have been a mistake.
    I do not regard stating that someone is height challenged as a ‘personal attack’. To the extent that it is, I apologise and retract.
    As a matter of setting the record straight, I am not, and never have been, a great fan of our current PM – he is a conservative and a centralist, two things I disagree with, and he also brought in, as treasurer under Fraser, retrospective tax legislation and other outright silly policies. Nevertheless, I believe he has made a good PM and am happy to defend the government’s record where I believe they have got it right.
    I think the Australian people voted for the coalition at the last election – and would have done so whatever the position on Telstra was. If you were in any doubt that the Government wanted to sell it off then you were as blind as you wanted to be. Can you honestly say that you were in any doubt that the government wanted to sell it off? No, really.
    Regarding 1998. The whole 1998 election was called on the GST issue. You can go on believing what you want, but I have no doubt what happened there. I was in the UK at the time, far from the Aussie press, and I was in no doubt that the GST was coming. If Labor could not make an issue of it they must have been stupid – something that Beazley is not known for.
    On Barnaby Joyce – you said that he was elected on the promise not to privatise Telstra. Do you wonder how many people actually numbered Barnaby ’1′ and then filled in the rest of the card on the basis of any promise he may have made? From the AEC web site: 4,698 of a quota of 323,611. Not enough to make a difference.
    The coalition won, fair and square. As a government, they have decided what to do with one of the publically held assets.
    Get over it.
    .
    PrQ,
    The government may have regarded the partial privatisation a good policy at the time – wrong, as you and I agree, but for them to have been lying they would have had to have been aware of that. They may have been aware – we will probably have to wait for the cabinet papers to be released in the decades to come to be sure – but I have not seen any evidence that they knew it was a lie.

  28. observa
    September 20th, 2005 at 01:19 | #28

    “Since then(the early 1990s), the OECD figures show that the cost of a representative basket of services has increased relative to the average by 15 per cent – equal to about an extra $140 a year on the average household telephone bill.”
    That may simply indicate that in places like the US, EU, Japan,etc, competition has left Telstra in its wake, or that increased competition there (and here?) has finally exposed the higher remote costs of provision in Oz. Doesn’t tell us a thing. We might be more interested in the respective changes of a relative basket of services wrt say Big Macs in each market, to compare the results of competition in those markets.

    Just because 70% of the population believe the earth is flat doesn’t make it so. Those sorts of majorities might once have believed that without a Commonwealth Bank or half govt owned 2 airline policy, or tarriff protection, they couldn’t bank, fly or get their kids a job. Who believes that now? As I said, if the ALP think Testra is a natural monopoly goldmine of no risk, supernormal profits, flog their Canberra office building and with their union mates funds, borrow a heap of dough and buy the company. Presumably that would solve all their compulsory union fee worries and election fundraising concerns forever. I’m sure the student unions would be in it. Really makes you wonder why noone’s thought of it yet, doesn’t it? I’m really a man ahead of my times James.

  29. September 20th, 2005 at 06:51 | #29

    observa,

    Please address the arguments I have made and forget about red herrings.

    I am not interested in defending everything that every Labor Government has or has not done, and I don’t want, on this forum, to be diverted into arguments about the rights and wrongs of the Laws of Torts in Inner Mongolia.

    The one argument you have supposedly responded to is only one of many examples which show that it is cheaper for Governments to run services such as telecommunications as publicly owned monopolies. If you think that a system in which there are five digital mobile networks covering the same geographical area in large cities can possibly be cheaper than having it all done by a publicly owned owned monopoly, then I would be interested to see any figures that you are aware of that would back that up.

    Those who argue for public ownership believe that if you want a job done properly, it is better to do it yourself.

    The job to be done, of course, is the provision of decent telecommunications services to every man woman and child in this country. Even proponents of privatisation accept that Governments have some role in the provision of these sevices, otherwise they would simply scrap all regulatory laws and sit back and allow private telcos open slather.

    However privatisation proponents, including the Government believe that only others, acting to achieve private profit, rather than governments acting, as we pay them for, for the good of the whole comunity, can do this directly.

    Accordingly, we are obliged to hand over both the means and responsibility to do this to private corporations answerable to their own shareholders, and only, very indirectly and circutiously, to the community they are providing with telecommunications.

    To me this seems analogous to handing over the task of driving oneself home to an alcohol intoxicated stranger and attempting to give directions from the back seat of your car.

    To force the private corporation to act, to some extent, to serve the interests of the community, rather than purely those of their shareholders, taxpayers must pay to have expensive bureaucracies set up to oversee the operations of the service they would have previously owned.

    For his part, Trujillo has stridently pointed out that Telstra will also have to do the same, and, who, apart from Telstra’s customers, do you believe must utimately pay for this cost?

    I will just remind you of some of cost that we have paid, so far, for the folly of deregulation and partial privatisation:

    Line rentals increased from $11.65 in 2000 to at least $26.95 in 2004, and threated to rise further

    Tens of thousand of jobs lost and sent overseas. Much of Telstra’s current workforce made part time or casual sed. Working conditions in general eroded

    Wanton neglect of our copper network.

    Closure of our world class training centers

    Loss of Australia’s ability to manufacture its own telecommunications equipment

    Loss of opportunities to roll out a comprehensive broadband network as Telstra has shifted its focus away from the provision of services towards speculative adventures such as the disastrous dotcom investment in Hong Kong.

    etc., etc.

    If full privatisation proceeds we can only expect even more of the same. Only stupid blinkered ideologues, or else the very few Australians who truly stand to gain at everyone else’s expense could possibly fail to acknowledge the harm that will be caused to the public interest if full privatisation proceeds.

  30. Andrew Reynolds
    September 20th, 2005 at 11:09 | #30

    James,
    You remain fixated by the capital cost of setting up networks – indeed, this seems to be the main thrust of your argument. This is the ‘natural monopoly’ position. Superficially, it has its attractions. If there is only one of something, it must be cheaper than having 5. In the case of mobile telephony, this is simply not the case – if there were only one provider of mobile telephony services there would still need to be almost as many base stations, as many antennae, as many links to a central distribution points etc. simply because of the way that cell structures work – putting all the mobiles on to one of the current systems would overload it with calls.
    If there were only one operator the incentives for that operator to act in the interests of the community are greatly diminished and you end up with the anti-competitive elephant that Telstra has become.
    Do not forget that all of the ‘faults’ you have identified have happened under majority government ownership.
    BTW, how do ‘send jobs overseas’? Do you wrap them up – and do they spoil in transit? Strangely enough, most, if not all, the former Telstra employees have found jobs outside Telstra – frequently higher paying.
    Also as an aside – there is no law of tort in Mongolia. Tort is an English civil law concept not found there.
    .
    Also, please do not term me either stupid or corrupt, which is the meaning of your last paragraph. I have not resorted to abuse of you, please accord me the same privilege.

  31. September 20th, 2005 at 14:58 | #31

    Andrew Reynolds wrote : Also, please do not term me either stupid or corrupt, which is the meaning of your last paragraph.

    Point taken. My apologies. I withdraw the last paragraph of my last contribution.

    Andrew Reynolds wrote : if there were only one provider of mobile telephony services there would still need to be almost as many base stations, as many antennae, as many links to a central distribution points etc.

    I just don’t buy this argument. Of course the efficiency gain of having one network instead of two, would be less than double and the efficiency gain of having one network instead of five would be less than five. Even, so the efficiency gain would have to be very substantial, particularly if you removed the overheads of having to send calls from one network to another.

    Also, with one larger network there would be greater capacity for that network to deal with peaks in use than with five individual networks.

    My intuition would lead me to think that if this duplication were removed there would easily be enough resources left over to fix up the urban black spots that exist at least in Brisbane and Hobart as well as in our rural areas.

    If you know of any evidence that would support your argument that the efficiency gains from having a single network instead of five, would not be massive, then I would be interested to see it.

    In any case, even if it were true that there would not be significant efficiency gains from having one digital mobile network instead of five, in a democracy, with 70% of the public in favour of public ownership of Telstra, what is wrong, with the Government, on behalf of the public, operating a telecommunications service, if no other barriers to the participation of private operators are placed?

    Andrew Reynolds wrote : BTW, how do ‘send jobs overseas’? Do you wrap them up – and do they spoil in transit?

    It was a figure of speech. Much of the work performed by IT staff and call centre personnel as well as manufacturing previously performed here, is now being done overseas.

    Andrew Reynolds wrote : Strangely enough, most, if not all, the former Telstra employees have found jobs outside Telstra – frequently higher paying.

    Nearly all of the current and former employees of Telstra that I know are not satisfied with the way things have changed in recent years.

    Furthermore, as a result of the closure of Telstra’s training centres, opportunities for Australians to train have been lost. This, together with the general winding back of training opportunities in other government bodies is one of the reasons for the shortage of skilled worker of which we have read so much in recent years.

    Whilst it may not be possible to convince the the bean counters of the benefits of providing these training opportunities, the immense overall benefit to the wider community was indisputable.

  32. September 20th, 2005 at 15:02 | #32

    Andrew Reynolds wrote : If there were only one operator the incentives for that operator to act in the interests of the community are greatly diminished … Do not forget that all of the ‘faults’ you have identified have happened under majority government ownership.

    Of course! How could I have not seen this? The axing of jobs, the cutting of costs, resulting in the decay of our copper network and raising of charges had nothing to do with managers trying to maximise the return on private shareholder investment.

    Rather, these faults, I have identified are further illustration of the iron clad Laws of Market Fundamentalism which hold that every government enterprise can do no other than to gouge, from each and every member of the public, every possible cent in return for the most abysmal service possible.

    No amount of will to the contrary on the part of our Government or from the government enterprise’s workforce can alter, in the slightest, these laws of nature. No amount of transparency or accountability, will, in the least affect the ability of any government enterprise to act in, any way, other than with the maximum level on incompetency and the minimum degree of efficiency.

  33. Andrew Reynolds
    September 20th, 2005 at 20:18 | #33

    Your response is interesting. Nice to see you concede efficiency gains from competition – I think this is a first. My answer to that would be that, if capital were fairly cheap (as it is now) then the efficiency gain would be worth pursuing, as the costs of doing so are low.
    If the jobs being “exported” are low value add, like call centres and IT support, all the better. It leaves the higher paying, more interesting ones for the Aussies to do. It is interesting to see you lamenting a net transfer from low value to high value jobs.
    Yes, there has been a shortage of skilled employees – this has resulted in the current high real wages growth. The value placed on education is also increasing – long term, this will increase the numbers of trainees. Not a bad thing; temporary market squeezes are a clear price signal to people to pay more for their education.
    James Sinnamon wrote
    No amount of will to the contrary on the part of our Government or from the government enterprise’s workforce can alter, in the slightest, these laws of nature. No amount of transparency or accountability, will, in the least affect the ability of any government enterprise to act in, any way, other than with the maximum level on incompetency and the minimum degree of efficiency.
    Your sarcasm betrays you, James. You take what I have said to breaking point, and beyond. Greater transparency and accountability will always improve results, which is why Telecom Australia was better than the phone system in the U.S.S.R. However, transparency and accountability, transmitted through the slow and imperfect mechanism of a government bureaucracy, will never give the the direct transmission of a competitive market, which is why I have always advocated the break up of Telstra; as a monopoly it will never be subject to true competition unless it is either broken up or shrunk by some other mechanism.
    The only real difference between PrQ’s position and mine is that I believe the copper network itself should be privatised – PrQ does not.
    A privatised monopoly, while better than a government one (IMHO), is still a monopoly.

  34. September 20th, 2005 at 22:00 | #34

    Andrew Reynolds You take what I have said to breaking point, and beyond.

    You will find that we recent converts will often be more true to the faith of Market Fundamentalism than those, such as yourself, for whom adherence to the faith is more out of habit and convenience than out of true deep inner conviction.

    Your point about ‘the direct transmission of a competitive market’ makes a lot of sense.

    Instead of our Government just getting out and building what the community requires, for example a fibre optic network, we hand across the means and responsibility to do this to a private corporation which is dedicated to its own bottom line, rather than to the overall good of the Australian national community.

    Then we spend months of the Parliament’s time writing legislation to regulate that company in order to force it to build that fibre optic network. Then we spend hundreds of millions of taxpayers dollars to fund a bureacuracy, whose goal it is to administer the legislation in order to force the corporation to build the network.

    Then the private corporation, for its part, also spends hundreds of millions of its dollars in order to set up another bureacracy whose goal it is to thwart that legislation.

    However, if the taxpayer funded bureacracy is sufficiently large, then eventually, after many long years we can hope to see work begun on the optic fibre network.

    Yep. As it happens, that also conforms to my own definition of ‘direct transmission’.

  35. Andrew Reynolds
    September 21st, 2005 at 02:32 | #35

    James,
    The question is how does the government determine what the community requires? Does it need a fibre optic network? Where should it go? Who should pay? How much should they pay? What capacity should the network have? What technical standards should be used? What should it be used for? These are the questions that a functioning market answers every day, frequently several times a day, without regulation. How do you think your milk gets to the shops? Not by government action, but by government inaction. For a government to construct a fibre optic network an enquiry must be held, a green paper issued, comments received, submissions examined, a white paper issued, more submissions, legislation – blocked in the Senate, re-written after further submissions, passed in Parliament, regulations issued, planning completed, court challenges etc. etc. etc.
    The regulation is only needed because there is a monopoly – get rid of the monopoly and the need for regulation drops away.
    Bingo – the people get what they want, at a price they are prepared to pay – no regulation, no bureaucracy, just a functioning economic system.

  36. September 21st, 2005 at 05:36 | #36

    Andrew Reynolds,

    We simply employ technically competent managers, who are accountable to the public, through parliamentary scrutiny and effective Freedom of Information legislation, to make those decisions.

    You have written nothing to demonstrate why this could not work, other then ideologically derived assertions that governments are inherently less efficient than private enterprise.

    Of course, decisions which affect the lives of ordinary people should be subject to some degree of democratic checks and balances, regardless of whether they are made by publicly owned monopolies or privately owned monopolies.

    However, if Telstra, as a publicly owned monopoly, had made such a decision that was so obviously in the public interest, as to comprehensively roll out a fibre optic network in the 1990′s, it is unlikely that there would have been any significant opposition, and the public’s requirements for checks and balances would have been fairly quickly satisfied.

    BTW, I am still waiting for some substantion of your other assertion that five duplicated digital mobile networks will ultimately cost the consumer less than one.

  37. Andrew Reynolds
    September 21st, 2005 at 16:18 | #37

    James,
    Technically competent managers have, in the past, made silly decisions – witness Concorde and numerous others. The limitations of a blog comment do not permit me to go further. If you genuinely want to understand my position, I suggest you read Hayek’s Road to Serfdom. If not, well, there is not much point continuing this. If you have a similar suggested reading on your bare assertions, I would be interested to read it.
    .
    There are many studies on the net regarding the lowering of prices that results from competition – potential competitors put them out a lot until they get a license, at which point they normally say there is now enough competition. One carried out for OFCOM, Switzerland does not seem to carry too much baggage from the suppliers. Page 8 seems particularly relevant. If that does not satisfy you, trawl through Google. Your challenge, should you choose to accept it, is to find a single (just one) peer reviewed article supporting your position on anything more than a theoretical basis. Good luck.

  38. September 22nd, 2005 at 09:43 | #38

    Andrew Reynolds,

    It is your case that is theoretical, as well as against all common sense.

    The evidence I have referred to above, and in other forums, of the harm that has been caused by inappropriately trying to impose a competitive commercial model on what is a natural monopoly, and what should be treated as a public service, is there to see for all who choose to look.

    Why else, do you think that the Government felt it necessary to curtail the normal functioning of the Senate in an unparallelled fashion and gag the debate on privatisation (see Andrew Bartlett’s article on Margo Kingston’s web diary)?

    Why else was it that no Government member has yet accepted any challenge to publicly debate privatisation? Why else was it that they deliberately downplayed the whole issue during last year’s election campaign, if as you say, the case in favour of privatisation is so strong?

    Why else do you think that 70% of the Australian public remain opposed to the sale, after years of overwhelming media bias in favour of the sale?

    If public ownership of Telstra is such a burden on all of us, why isn’t the public clamouring to have Telstra offloaded as soon as possible? Why was it that, instead, Queensland Liberal Senator Brett Mason on 13 September 2005 acknowledged (in fact, boasted in a curious and perverse way ) that:

    Nearly everyone who comes into my office and nearly every email I get is against the sale of Telstra.

    ?

    I say again, your case against public ownership simply hinges on an unproven, and I think, dismal, view of human nature, that is, that people will not give their best unless driven by cold economic self interest.

    I don’t say that humans are perfect and I have previously willingly acknowleged that abuses have occurred in Government enterprises in the past (as well as in private enterprise), however, I believe that, with proper accountability, and openness, we can achieve a situation where the public can be very well served by the workers employed to run statutatory bodies and publicly owned enterprises on its behalf.

    If 70% of the Australian public support public ownership, and have consistently supported public ownership since at least 1998 then why can’t it at least be given a try?

    (I will, next time I visit my library seek out a copy of “The Road to Serfdom”, but it is not a high priority for me. The evidence of the more general, possibly irreperable, harm caused by the application of Hayek’s ideas to our whole planetary life support system is, tragically, too overwhelming for me to be able to ignore, even if you choose to. Feel welcome, at any tine, to respond to my later posts concerning the environmental question on the earlier discussion thread.)

  39. Andrew Reynolds
    September 22nd, 2005 at 12:12 | #39

    James,
    Public ownership has been ‘given a try’ – what do you think got us into this benighted monopoly situation? I do choose to look, and all I see is a bloated, inefficient telecoms system that costs too much and does not deliver what we need – never mind what we want. As you indicated earlier, if the public were in favour of privatisation, you would still oppose it, so please do not bring apparent public opposition up again and again. Both you and I agree it is irrelevant.
    My support for competition and private ownership is founded on my experience of both systems and the practical, real life outcomes from both – not from any ‘dismal’ view of human nature. One of the (many) points you have ignored above it that it is socialists who have a dismal view of human nature – that people are not capable of being altruistic without without being forced to through government force. I reject this entirely and you have not said anything to even attempt to counter it, merely repeated the mantra that freedom is in some way ‘dismal’.
    As for the government – for some odd reason it is full of politicians. In this case they are trying to do what is right (at least in their opinion), rather that what they believe to be popular. As a result, they are trying to keep their heads down. The reason it is being rushed through is to get it done ASAP so that it will be forgotten by the next election. The reason the ALP is trying to slow it down is so that it is still around by the next election. It is politics that is driving this, not the rights and wrongs of the case. I do not believe that you are that naive so as to believe anything else, so this can also be regarded as irrelevant.
    .
    I take it, BTW, that you have not read anything I have pointed you to, despite me reading many of the things you have pointed me to. Please do before you come back again – and actually answer me this time rather than simply re-hashing the tired, old, incorrect phrases as you did with that comment.

  40. September 22nd, 2005 at 18:09 | #40

    Andrew Reynolds wrote : As you indicated earlier, if the public were in favour of privatisation, you would still oppose it. so please do not bring apparent public opposition up again and again. Both you and I agree it is irrelevant.

    Opposition to privatisation, which stood at 62% in 1998, 66% in 2002 and 70% this year, in spite of the pervasive pro-privatisation propaganda coming from our media and our Government, I would say, is a little more more than only ‘apparent’.

    Of course, I agreed that whether a majority happened to support a particular policy does not, in itself, determine whether or not that policy is right, but I never said that it follows from that that the Government has a right to ignore such clearly expressed wishes of the majority of public opinion.

    Andrew Reynolds wrote : … they are trying to keep their heads down. The reason it is being rushed through is to get it done ASAP so that it will be forgotten by the next election.

    This ‘explanation’ for why the Government members should not have allowed proper scrutiny of its legislation is most interesting.

    It seems that they, and, apparently, you, don’t believe that they stand any chance of being able to convince the public that privatisation is in their best interests. Why else, would they wish to, as you put it, have it ‘forgotten by the next election’?

    Yes, I can see that you do have a truly dismal view of the Australian public. You must think that they are truly stupid, if, after all of these years, they are incapable of understanding, in spite of the overwhelming evidence, the clear benefits that privatisation will bring to them.

    You claim to have read the articles I pointed you to, but I see no evidence of your having properly responded to any of the arguments made in them, and you have not propely responded to the arguments I have made above, either. For my part I did try to read the article concerning about mobile telephony in Switzerland, but I didn’t see where it answered my point about the costs of the duplication of mobile phone network infrastructure.

  41. Andrew Reynolds
    September 23rd, 2005 at 00:34 | #41

    James,
    In a previous thread you indicated that, even if majority support were behind the privatisation, you would still oppose it. So that immediately rendered however many statistics you can trawl up as irrelevant to your argument. I could equally say that x% of the world believed it was flat prior to 1492 (some still do) and that would not make the world any flatter than it is. Polls still hold up the death penalty as a good idea – as you agreed at the time that does not render it a viable judicial option. From your position it would be ‘dismal’ to force through Parliament a bill abolishing it. I accept that, to the extent that polling is correct, the selling of the Government’s remaining stake in Telstra is not popular. I also accept that Mark Latham was the preferred PM for some time, with an approval rating that went over 60% at one stage. If I (or you) accepted everything that polls told us we would have a very muddled view of the world.
    James, politicians are politicians. Do not expect great and brave stands from them, on either side of the House. When they are doing something they know they need to do, or at least believe they need to do, do not expect then to poke their heads above the barricades. They do it as quickly as possible with the minimum possible fuss. This happens regardless of which party is in power. When Paul Keating floated the currency and started to reduce the stupidly high tariffs we used to have he did it the same way – quickly, at the start of their term and just rammed it through. It was unpopular (opposed by a great majority of the population) but necessary. At least the Howard government had the guts to say before hand that they would do it – and before you make your usual speech, read this speech by Darryl Williams in 2004 to Parliament regarding the “Telstra (Transition to full private ownership bill) 2003. If you, or anyone else, did not know what was going to be done you must have had your fingers in your ears and screaming ‘la la la la’ at the top of your voice.
    On the Swiss example. You asked me to show that there was a benefit to the consumers – that article shows it clearly in the great reduction in the cost of mobile telephony to the consumer. I cannot see what else you were looking for. I am still waiting for one article (just one) that shows a price increase resulting from more competition.
    BTW – I did read several of the articles – I searched in vain for anything that would amount to some economic analysis, even of the scale done by our gracious host here. The only one I could locate was a discussion on housing affordability in opposition to some imagined idea of what rational economics means. Most of them, like yours, are pushing the populist line based on polling. Unless you are prepared to say that the polls should be the final arbiter of these decisions, please desist and make another argument. Again – I am looking for rational, reasoned argument, and not some quasi law discussion about the constitutionality of selling Telstra by Don Ditchburn.

  42. September 23rd, 2005 at 05:06 | #42

    Andrew Reynolds,

    There have been great reductions in the costs of all forms of technology in recent years, most obviously, in desktop computers.

    The article you mentioned does not prove that greater cost reductions would not have occurred if, instead, the Swiss mobile phone system had been a publicly owned monopoly.

    Other than that, you are truly leading this debate around in circles. I responded to your point about what appears to be popular support for the death penalty a long time ago. I will simply have to give up, as a lost cause, any hope of being able to get you to understand my earlier response and, instead, allow others to judge for themselves.

    You are clearly are not bothered by the extraordinary lengths that the Government went to, recently, in Parliament, and, in the election campaign last year, to avoid having its privatisation policy subject to scrutiny by a public, whom you seem to believe, to be too stupid to have been able to comprehend the overwhelming case for privatisation.

    As with the Commonwealth Bank, “Strengthening Medicare”, WMD’s, IR ‘reforms’, etc., etc. the Government clearly knows, better than the public, what is good for it, and is therefore justified in taking whatever steps it feels is necessary in order to bring this about.

  43. Andrew Reynolds
    September 23rd, 2005 at 10:08 | #43

    James,
    I answered your point on the ‘popularity’ of the Telstra sale long ago as well and that has not stopped you quoting reams of polls since.
    I am bothered by it – I would prefer that the public had the time to fully understand the issues, weigh the arguments and comprehensively refute the balderdash that they are being fed on this. Unfortunately, most of us have lives outside the political issues. We therefore hire politicians to do this thinking for us. Sometimes they get it right and sometimes not – but to say they should only govern according to polls, as you appear to be, is nonsense – as is the idea that no-one knew that the privatisation of Telstra was on the agenda. When critising the government, as I do regularly, I try to restrict my critism to the rights and wrongs of the argument – the polls do not matter. When they do something that the believe to be right, but unpopular, of course they are going to try to restrict any damage to their popularity – it is only natural. They want to keep their jobs at the next election.

  44. September 24th, 2005 at 00:35 | #44

    Andrew Reynolds wrote (earlier) : If the jobs being “exported� are low value add, like call centres and IT support, all the better. It leaves the higher paying, more interesting ones for the Aussies to do. It is interesting to see you lamenting a net transfer from low value to high value jobs.
    Yes, there has been a shortage of skilled employees – this has resulted in the current high real wages growth. The value placed on education is also increasing – long term, this will increase the numbers of trainees. Not a bad thing; temporary market squeezes are a clear price signal to people to pay more for their education.

    Did you even read what I wrote earlier? The jobs being lost include IT jobs as well as all the jobs entailed with the manufacture of telecommunications equipment. Outside of Telstra, well-paid skilled manufacturing jobs are being lost all the time. Hundreds of former employees of Mitsubishi in Adelaide are still out of work, and I, myself, have personal experience of manufacturing jobs having been lost to overseas.

    If you happen to be a white collar worker, or an IT professional, who has suffered personal misfortune, or has made one or two mistakes, you don’t get a second chance. You go straight to the bottom of the unskilled labour maket, or to the unemployment queue.

    When I read the utter crap, such as I saw above (and not only that particular crap), it confirms that you have no idea of what is going on in this country today, or else, you pretend not to know.

  45. Andrew Reynolds
    September 24th, 2005 at 18:51 | #45

    I thought you had just failed to answer that one – it was not the only one you have missed.
    .
    Hmmm – ‘utter crap’. I think you should have a good look at reality. My firm has been trying to hire good IT professionals and, at the moment, they are simply unavailable at anything like the rates they were a couple of years ago. That would mean that those whose jobs have been ‘exported’ have found new ones that pay well. The same goes for many other white collar professions – accountancy springs to mind. The number of second chances out there is staggering.
    To put it bluntly, if an Australian IT developer cannot compete against one in India then they are in the wrong part of the profession. The high value add stuff is all done here – it is just the utility code that is crunched overseas.
    If the ex-Mitsubishi workers (or any others) cannot find jobs in Adelaide tell them to come over here. We need lots of skilled workers in WA.

  46. September 25th, 2005 at 09:24 | #46

    Andrew Reynolds wrote : My firm has been trying to hire good IT professionals and, at the moment, they are simply unavailable at anything like the rates they were a couple of years ago.

    And what do you mean by a ‘good IT professional’? Please post a URL of a current or past advertisement so that we can all judge for ourselves what ‘staggering’ number of ‘second chances’ exist out there for all of us, who, often through circumstances beyond our own control, don’t have resumes bulging with accomplishments and post-graduate qualifications.

    Pehraps, for those of us, in the Eastern States, who might hesitate to make the move all the way to Western Australia, you might also care to show examples of where the ‘staggering’ number of ‘second chances’ exist over here.

  47. Andrew Reynolds
    September 25th, 2005 at 12:54 | #47

    James,
    If you do not want to move if you cannot find work, then it is your own fault if you remain out of work. With the unemployment rate at thirty year lows it is up to you to find it.

    Have a nice day.

  48. September 25th, 2005 at 13:34 | #48

    Andrew Reynolds,

    So, you are not prepared to back up, with the hard evidence I have asked for, your assertions that ‘the number of second chances out there is staggering’?

    And I take it you also accept the ABS’s definition of an ‘employed’ person as being anyone who works for more than one hour per week?

    You have shown yourself to be an insulting, totally insensitive, cycnical and uncaring as, I have argued, is consistent with the core of the belief system to which you adhere.

    How dare you presume that I am unemployed in the first place, and, secondly, that I have not been prepared to move. How can you know how many times I have moved interstate, intrastate, and back in order to educate myself and find work in recent years?

    And, in any case, how can you presume to sit in judgement of people who are not prepared to move to the other side of the country to find work.

  49. Andrew Reynolds
    September 25th, 2005 at 19:04 | #49

    James,
    I was going to leave this thread, but I cannot let gratuitous abuse go unanswered.
    I will start with an apology. I was using ‘you’ in the wider sense – perhaps I should have used ‘someone’ in its place. If that has led to confusion, I apologise. I do not know who you are, just as you do not know me. I would argue that I am sensitive and caring, as I hope, would my kids, wife and wide circle of friends. What I do and how I feel in my private life is, and should be (IMHO), divorced from any policies I advance that involves spending other people’s money. As I have said many times before: there is no virtue to be gained by an individual in spending other people’s money obtained by the use of force or its threat. What money is obtained by the government in this way needs to be spent in such a way as advances the whole community – not just sections. I would strongly argue that the community as a whole does not gain by imposing tariffs, subsidies or other distortions that aid only small parts while disadvantaging the vast bulk of the rest of the population. If that makes me ‘uncaring’ then I am prepared to wear that label, or any other, if it means a better life for the future of this federation of ours.
    I do not presume to sit in judgement of anyone – I was merely pointing out that if you someone chooses not to move to get work then that is their right, but (IMHO) the community should not have to support that descision through our taxes.
    If I only missed one of your challenges I am doing well. The number of points you have glossed over is large.
    If you want hard evidence of jobs in the WA I suggest you look up seek. There is plenty there. For WA specific positions, try our local rag – The West. Not a brilliant newspaper, to put it mildly, but lots of jobs at all levels.
    As a final note – I have moved around the country and overseas to get work. There was not much happening in WA about 10 years ago so I got off my backside and got a job overseas. I have also worked in several areas outside my profession while things were slow. I have also been unemployed for periods. I know the difficulties and effects that brings. I would also argue that excessive taxes, and any tariffs, subsidies and other distortions makes it more likely that there will be periods of unemployment. Again, you can call me insensitive and uncaring, but I will continue to argue for what I believe will lead to a better future for all. I believe that a government that gets out of the way will do that.
    .
    Please do not insult me or question my motives as a debating tool.

  50. Peter2
    September 28th, 2005 at 14:58 | #50

    Andrew Reynolds,

    I’ve read the link you referred to, and I’m afraid I’m not convinced. I’m not talking about you personally, but I still think it is fair to say that neo-libs are driven by abstract notions of efficiency rather than by communal wellbeing. They argue that communal wellbeing is the result of market efficiency, and perhaps this is true, but I dont get the impression that they empathise with the rest of the commune at all.

    If I can illustrate like this:

    stereo-typical neo-lib says :
    1) ‘An efficient market is better for everyone’
    2) ‘I care about everyone, so I will argue for freer markets’.

    I believe the neo-lib when he says (1) but do not believe him in (2). This doesnt make (1) less true, of course, but thats for another argument.

    This is why neo-libs are perceived as cold and heartless. And I have to say I think the general perception is accurate…. they believe in abstractions but dont seem to care overly for people. No compassion. No heart.

    Of course everything I have said here is a generalization. Some neo-libs have hearts, some wishy-washy wets are heartless, but overall I think the stereotypes are accurate….

  51. Peter2
    September 28th, 2005 at 15:12 | #51

    And one more thing … :-)

    Dont you think that the belief in the utility of an efficient labour market (as characterized by the typical attitude that people should be compelled to move away from family, friends, and community in order to find work) is a bit extreme? Its only got utility if you take a very narrow view…..

    I think most people would find it a bit of a harsh line to take that people should be compelled to move interstate, say, to find work…..

  52. Andrew Reynolds
    September 28th, 2005 at 15:17 | #52

    Peter,
    This discussion should be occurring in the other thread if you want to have it.

  53. Andrew Reynolds
    September 28th, 2005 at 15:22 | #53

    Sorry, it is here. My mistake.

    I do not think people should be compelled to move anywhere. If people choose to live in the middle of the desert it is fine with me. If they want to bring up their children there – no problem.
    All I am saying is that the community should not be compelled to pay for their choices. If their family wants to support them, find them work or anything else – no problem.

  54. Peter2
    September 28th, 2005 at 15:37 | #54

    Andrew,

    OK, compelled as in ‘compelled to move or else they get no welfare’. I still think it is a very hard line approach to take, and, whats more, a line that is bad for society as a whole.

    It also typifies the neo-lib concern with efficient systems over people….

    Even if you admit that it costs more to have a welfare system that doesnt force people to move for work (and I dont admit this), we are a wealthy enough nation to bear the additional burden, and I think it is a nicer society for it.

  55. Andrew Reynolds
    September 28th, 2005 at 18:44 | #55

    Peter2,
    Before we go further, perhaps I should ask you to clarify what you mean by ‘neo-lib’. James (above) seems to use it as a term of abuse. I do not call myself a ‘neo-lib’ – whatever that means – I regard myself, if any label needs to be found, as a liberal – or perhaps what a person from the US may term a libertarian. I regard John Stuart Mill as reasonably correct on the social policy outlook and David Ricardo (no, not the commenter on this blog) and Hayek as roughly correct on the economics.
    .
    To answer your specific point from a not totally uncaring point of view: I do not know if it does make for a nicer society. To me at least, people on welfare for any real length of time tend to lose hope in the future. The ‘culture’ of welfare dependency is not a good thing, long term. So, if we are talking about a ‘nicer’ society perhaps we should also be looking at what the policies we regard as being nice are actually doing – if they are assisting people to stay where they are, stay unemployed, give up hope and not do anything to fix it, then, maybe removing the support would be a good thing – leading to a ‘nicer’ society, even though the actual measure may seem harsh.

  56. MB
    September 29th, 2005 at 08:01 | #56

    I resent the fact that the unemployed have been portrayed as lazy, greedy and unwilling to work. As someone who comes from a family of modest means (who has received assistance in the past) I have some idea of the reality of welfare. Far from wanting to remain on welfare, we never viewed it as anything but a temporary means of assistance, not as a substitute for paid employment. Most of the unemployed feel this way.
    I am quite sure that anyone who thinks people actually choose idleness has never actually experienced unemployment, or the frustrations that go with it (or the stigma that is attached to it). Should one seek a more likely explanation of why people are forced to accept assistance, perhaps one should look at the lack of full-time employment, particularly outside the capital cities, and particularly among young people and older workers.

  57. MB
    September 29th, 2005 at 08:24 | #57

    I would also add that, far from being the result of individual choice (the classical liberal explanation) or a slave-like dependancy (the conservative explanation), poverty is the result of economics. In other words, people are poor because they have no money. Without it, they can’t obtain medical treatment, send their kids to school, start their own business, or even find a place to live. It therefore becomes necessary for the government to act on their behalf by providing the necessary services: employment services (the CES), free medical treatment (Medicare), access to educational opportunities (public education, HECS), social security, public housing, adequate local utilities and infrastructure, public transport, etc. This is what was meant by the “welfare state” not this notion that the state should pay people not to work.**

    ** It should also be noted that, this being designed to assist the needy, access, at least for things like social security, should be limited to the genuinely needy (i.e. means-tested)

  58. Andrew Reynolds
    September 29th, 2005 at 12:11 | #58

    MB,
    I have never portrayed the unemployed as lazy, greedy or unwilling to work. I have been unemployed in the past, so it would be a little bit too close to home.
    I would disagree with it being the result of ‘economics’ – say ‘the economic system we live in’ and I would agree. I would also argue that high taxes and other barriers to employment are the primary cause of long term unemployment (short term frictional unemployment being the result of a normal, functioning economy).
    You are right in what you seem to be saying – that those in poverty tend to suffer from a vicious circle and that some form of community help is needed. I would also argue, however, that creating a huge government bureaucracy with the resulting high tax rates is not necessarily the right way to tackle it.

  59. Peter2
    September 29th, 2005 at 13:35 | #59

    Andrew,

    I dont find the argument that removing people’s welfare is good for them very convincing. I’m happy for there to be reasonable compulsion for welfare recipients to look for and accept work within a reasonable distance, but I think a universal welfare safety net is necessary in a civil society.

    As for my definition of ‘neo-lib’, I’m not sure I can give you a concrete one. If you’ll let me be fuzzy about it, I would say that neo-libs are those who believe that manipulating various economic levers is the fix to almost any problem. Their view of the people is essentially as economic agents/consumers, not as lovers, brothers, artists, spiritual beings, friends. They attempt to reduce all other dimensions down to an economic one.

    I’m not accussing you of being a neo-lib (or anything else), by the way. I dont care to speculate about this, as I dont know you well enough and in any case, it’s not helpful. I do think we occupy very different positions on the political map though, based on what you have said. I would call myself a libertarian on non-economic issues, but it seems we differ substantially on the economic front.

  60. MB
    September 29th, 2005 at 16:27 | #60

    You say you have never portrayed the unemployed as lazy, greedy and unwilling to work, and yet you talk about a “culture of welfare dependancy” and people losing hope over time. You then advocate “removing the support”. Your underlying assumption remains the same–that people will grow accustomed to idleness.

  61. Andrew Reynolds
    September 29th, 2005 at 17:27 | #61

    Peter,
    I would not say it is an ‘accusation’ to be a neo-lib, but I would disagree with your definition. An economic libertarian believes (IMHO) exactly the reverse of what you have said. It is those who believe that governments have the solutions who believe in pulling levers and other manipulations. They are also fixated on economic gain, measuring the success of government programmes by this or that measure. As I have said above several times, a libertarian (again, IMHO) is someone who believes that people should be free to live their own lives with minimal interference from the government (or anyone else). If they choose to work hard and increase their economic welfare – great, but that is their choice. If they want to live on a commune, sharing their worldly goods with each other, also great. Their choice. The vast government infrastructure we have built up restricts us in so many ways from achieving what we want with our own lives.
    MB,
    Welfare dependency and growing accustomed to idleness are not the same as laziness. There is laziness amongst those of us in work as well.
    Moving (or any other major change) is always a wrench with uncertain consequences – all major changes to someone’s life always are, particularly if the person has a family. An open ended, poorly targeted welfare programme just makes it easier to stay and grow used to the situation. This is the typical government welfare programme.
    The psychological changes that occur to most people during a period of joblessness are well documented and I presume you do not want these re-proven. If you do I will find some links.

  62. Terje Petersen
    September 29th, 2005 at 23:54 | #62

    QUOTE:-

    a libertarian (again, IMHO) is someone who believes that people should be free to live their own lives with minimal interference from the government (or anyone else). If they choose to work hard and increase their economic welfare – great, but that is their choice. If they want to live on a commune, sharing their worldly goods with each other, also great. Their choice. The vast government infrastructure we have built up restricts us in so many ways from achieving what we want with our own lives.

    RESPONSE:-

    I think Andrew has very accurately described what it is to be a libertarian. What he describes certainly fits with my worldview.

  63. October 3rd, 2005 at 04:53 | #63

    Andrew Reynolds wrote: I will start with an apology. I was using ‘you’ in the wider sense – perhaps I should have used ‘someone’ in its place. If that has led to confusion, I apologise.I do not know who you are, just as you do not know me.

    Whatever your intentions, it was an unwarranted slur against hundreds of thousands of Australians, particularly those in their forties, fifties and sixties who are unemployed, underemployed or not employed in the vocation in which they have been trained through no fault of their own.

    If you had read my earlier post you would have read my point that anyone who works more than one hour per week is absurdly counted by the ABS as ‘employed’. This one statistical fiddle, which is only one of many, should surely cast doubt on the validity of the official unemployment statistics of today.

    And this is not the only statistical fiddle that allows Howard and his neo-liberal backers to paint an undeservedly positive picture of what his Government has allegedly achieved for all Australians. Others include :

    Removal of housing costs from ABS inflation statistics.

    The use of the Gross Domestic Product as a measure of prosperity, when it even includes economic activity necessary to fix up the consequences of natural and human caused disasters as contributing towards our prosperity. It is for this reason that Simon Kuznets the originator of the GDP measure warned the US congress in 1934 against its use in the way that it is currently being used by economists

    How ever much you try to evade my point and the points also made by Peter2 and MB above, your system of beliefs clearly has a dismal view of most members of this society. No worker will give his/her best unless driven by the fear of unemployment that would be the consequence of their business failing, and should they become unemployed, they are not even worthy of receiving unemployment benefits unless they are willing to go to extraordinary lengths of moving to the other side of the continent to find work.

    Whether or not those belief have any basis in what you say are your own observations, those are clearly your beliefs.

    Andrew Reynolds wrote: The vast government infrastructure we have built up restricts us in so many ways from achieving what we want with our own lives.

    This is nonsense. The tragic experience of Cyclone Katrina shows precisely the consequences of having the functions of Government cut back over the decades to suit the needs of a greedy selfish minority, who resent contributing any of their, quite often ill-gotten, wealth to the benefit of the overall community.

    Just imagine the headaches that would be caused by a fully privatised Telstra, if after a major coastal town were hit by a cyclone, it decided that there was insufficient money to be made by meeting the community’s needs to restore its telecommunications services.

    If our society is to stand any chance of dealing with the environmental mess mostly caused by unfettered free-market forces, then it must, as a matter of urgency, ditch the major assumptions of neo-liberal economics.

  64. Andrew Reynolds
    October 3rd, 2005 at 22:21 | #64

    James,
    Good to see you back – I thought you had given up.
    Do I really have to answer the same points again? Perhaps I will start with the question I posed earlier that you have still not answered – what do you define as ‘neo-liberal’? Unless I know what you are against, I find it difficult to fight against this straw man you are trying to construct.
    You accuse me of having a ‘dismal’ view of society, yet you are the one that seems to be arguing that compulsion, through taxation, is the only way that redistribution will work. I disagree – I think that human beings are quite capable of helping each other without the threat of force from the government to push it along. Your argument implies that ‘unemployment benefits’ (I take that to mean taxation revenue redistributed) is the only way to help. Again, if that is what you are arguing, I disagree.
    .
    If you insist on using a tragedy to make your argument, I feel I must respond in kind. The real problem with Katrina were the dams and levee systems, built by the US government, that made the low lying land habitable and the mangrove swamps that had been converted into housing, again by legislative fiat. Without that the destruction would have been much less. Or do you disagree?
    As for Telstra not restoring service, great. Their competitors in a free market would have a field day. The less we rely on the old, slow moving, dim-witted monopolies, the better. Somehow, I do not think even Telstra would be that stupid, though.
    BTW, James, even by the ILO definition of unemployment, a much more restrictive one that the ABS, Australia is doing well.

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