There’s an interesting story in today’s Fin (subscription only) about a study of a remote NT Aboriginal community which found that government spending per person there was substantially less than the average for NT residents in general. I don’t know how general this is, but I’ve seen similar results before. The idea that “we have spent massive sums of money on Aboriginal problems and have nothing to show for it” is based on dubious empirical assumptions. A common source of this thinking, at least when ATSIC was around was to look at the total amount allocated to Aboriginal health, education and so on, without netting out the amount that would otherwise have been spent through the mainstream health and education budgets.

Also in today’s Fin, I have a piece on oil prices. Most of it will be familiar to readers, but I’ve put it over the fold anyway.
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Should we be scared of Uncle Sam ?

This poll showing that 57 per cent of Australians thought US foreign policy to be as great a threat as that of Islamic fundamentalism provokes a variety of thoughts. I happened to read the poll results on the same day as this NYT story about Maher Arar, whose ‘extraordinary rendition’ has been covered in detail at Obsidian Wings.

There are various ways of assessing threats, and most Australians rightly regard terrorism as an overstated danger. But, as far as terrorism is concerned, there can be few instances more horrible and terrifying than the kidnappings and televised beheadings we’ve seen in Iraq. There are, however, equally awful things going on that are not televised, and that are carried out by the United States government.

An unknown number of people have been kidnapped, then shipped to torture chambers in unknown locations. We’ve found out about this from cases like that of Maher Arar, who was eventually released after his captors gave up on the idea that he was a terrorist, but it’s likely that in most cases, the victim simply disappears and is never seen again. Arar was in transit through the US when he was grabbed, but there have been similar kidnappings in Italy, Sweden and Macedonia and of course, countries like Iraq and Pakistan are free-fire zones.

As with quite a few of the worst policies of the Bush administration, the practice of extraordinary rendition apparently began under Clinton, but has been greatly expanded by Bush[1].

As far as I’ve seen so far, all of the victims in this cases have been Muslims. If that comforts you, perhaps you ought to read Martin Niemoller

As long as extraordinary renditions and similar practices continue, Australians are right to regard at least some aspects of US foreign policy as a threat comparable to that of Al Qaeda.

An update In the comments thread at Crooked Timber, Katherine observes, correctly I think, that arguments about moral equivalence are counterproductive. As she says ‘“Are we better or worse than Zarqawi and Bin Ladenâ€? is the debate people like James Inhofe and George W. Bush want us to have. ” So, I shouldn’t have said “equally awful” above. But what is being done is awful, and such things are contributing greatly to the fear of US foreign policy I referred to.

fn1. Supporters of the Clinton Administration might usefully think about this the next time they are tempted to take a small step on the slippery slope of curtailing civil liberties. Supporters of the current Administration might want to give some thought to the likelihood that the practices they are now defending or assiduously ignoring will sooner or later be directed by Hillary Clinton, who might well choose to use them against the vast right-wing conspiracy linked, at its extremities, to Oklahoma City (the apparent starting point of extraordinary rendition) and to terrorist attacks on abortion clinics.

The case for federalism

Having established that the idea of ‘regional government’ makes no sense in the Australian context, let’s look at the real issue of centralism versus federalism. Would we be better off without a unitary system in which a single national government controlled everything [1]? I don’t think so[2]. I’ll present my case over the fold. You might also like to look at Ken Parish, Gary Sauer-Thompson and Andrew Norton. The Currency Lad disagrees, endorsing Keating’s view of the Senate, and Whitlam’s view of the states.
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Another terrible earthquake

There’s not much to say about the latest earthquake in Indonesia, except to hope that no worse news comes in from places that have not yet been contacted. Our thoughts go to those who have lost homes and loved ones.

Regional government

I’ve long promised a post on why regional government, an idea favored by both Whitlam and Howard, is a silly idea. If people want a unitary system of government, with the national government absorbing all the powers currently exercised by the states, they should say so, instead of flirting with this figleaf.
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Nasty easter eggs

I’ve been trying to resolve my comment spam problems, including false positives, but without much success, as you can see from the recent comments. Please bear with me, and put up plenty of real comments to push these guys off the front page, while I try to delete them once and for all.

Howard channels Whitlam, part 2

The increasingly centralist tendencies of the Howard government have been obvious for a while. Howard’s latest statement that Australia would be better off without state governments is only a bit stronger than what he said last year. As I pointed out at the time, both Whitlam and Howard are wrong on this, and the whole idea of regional governments won’t stand up to even cursory scrutiny.

What makes the statements more significant now is the fact that Howard has control of the Senate and can therefore repudiate the GST deal had, more generally, do whatever he likes. It will be interesting to see whether professed defenders of federalism, like the National Party, stand up to him on this.

Bankruptcy again

I’ve been reading Todd Zywicki’s paper An Economic Analysis Of The Consumer Bankruptcy Crisis (1Mb PDF). Zywicki’s approach is to look at aggregate time-series data on a set of suggested causes of rising bankruptcy, suggest that the pattern for these time-series doesn’t match the observed increase in bankruptcy, The main point is, as he says,

Static or declining variables, such as unemployment, divorce, or health care costs, cannot explain a variable that is increasing in value, such as bankruptcy filing rates.

Hence, he says, the ‘traditional model’ of bankruptcy as a “last resort” outcome of financial distress is no longer valid. He therefore falls back on the residual hypothesis of changes in consumer behavior in the form of an increased willingness to resort to bankruptcy, possibly due to the rise of impersonal modes of lending and the decline of moral sanctions. Zywicki doesn’t mention the other obvious residual possibility: an exogenous increase in willingness to lend to high-risk borrowers, but symmetry suggests he ought to.

I don’t think Zywicki’s is the ideal research strategy (see below) but it has the advantage that anyone can play, armed only with Google. So let me point to a variable that has risen in the right way and could reasonably be expected to lead to rising rates of bankruptcy. That variable is the volatility of individual income, or, in simpler terms, the economic risk faced by the average person.

What this means is that the bankruptcy ‘crisis’ is an outcome of the general changes in the US economy over the past 30 years or so. If it weren’t for expanded credit and increased reliance on bankruptcy, the distress caused by growing inequality and income volatility would have been substantially greater. If bankruptcy laws are tightened, distress will increase. To put it simply, bankruptcy is the lesser of two evils.
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