In today’s AFR (subscription required) Bob Hogg argues

Yet the Iraqi question has similar ingredients to that which led to NATO’s intervention to end Slobodan Milosevic’s regime in Yugoslavia.

. The only problem with this incisive analysis is that there was no such intervention. Milosevic was overthrown by the Serbian people.

The NATO intervention in Kosovo was broadly analogous to the establishment of the no-fly zones and the expulsion of Iraqi forces from Kurdish areas.

Some interestingly-titled additions to the blog-roll include (relatively) new bloggers, a returnee from hiatus and a couple I’ve been meaning to link for ages. I assume William Burrough’s Baboon is some sort of allusion to the author of the Naked Lunch, but since I know him only as a minor character in Kerouac’s On the Road, I’ll wait for a reader to enlighten me. By comparison, Virulent Memes is straightforward (sometime I’ll address the question of whether the meme meme means much). New blogger Gianna has given her site the obscurely troubling title She Sells Sanctuary. vaara has recently returned from hiatus – his blog is called “silt”. Finally, except for a very mild pun in his alternate title, Martin Wisse plays it straight. A big welcome to all of them.

I’ve made room by dropping some blogs which have turned out to lie outside my corner of the blog ecosystem. To be less high-flown about it, I link people who link back to me or who I find interesting enough to comment on despite the absence of a reciprocal link. For a fairly comprehensive listing of Oz Political Blogs, visit Ken Parish’s blog, assuming he hasn’t moved it yet again. It was last sighted here.

Haloscan appears to have fixed up the server problem, and to have salvaged most of the comments that were posted immediately before the shutdown. I’m still thinking about a shift and have received some very kind offers of help in this respect. But I’ll put that off until I have a bit more free time. In the meantime, there must be a huge backlog of comments waiting to be made. The Monday Message Board has slipped a fair way down the page, so I suggest that non-specific comments be posted in the thread for this message.

The news that Australia has regained a AAA credit rating from Standard & Poors sounds good, but what does it mean?
The direct benefits of a higher credit rating are quite small. Typically, a one-step upgrade reduces the interest rate on new bonds by about 20 basis points (0.2 percentage points) Hence, for a gross debt of $50 billion, the total benefit would be around $100 million per year, and this would only be realised when the entire outstanding debt had been rolled over at the new, lower rate. Such a gain could easily be outweighed by marginal timing variations in the issuing of new debt.

In view of the small direct benefits of a credit upgrading, the emphasis placed on credit ratings in the Australian policy debate must be attributed primarily to the view that credit ratings represent an impartial judgement of the soundness or otherwise of fiscal strategy. In general, it is true that policies that tend to have a favourable (or unfavourable) impact on the fiscal sustainability of government policy will also have a favourable (or unfavourable) impact on credit ratings. For example, the introduction of unfunded expenditure programs, or cuts in taxes that are not matched by expenditure savings will tend to reduce credit ratings.

However, this argument does not apply in all cases. Credit ratings are designed specifically to inform and protect the holders of government debt. Policies that specifically improve the position of holders of government debt will be viewed favourably by credit rating agencies even if they are harmful to the state as a whole. In particular, reductions in the level of debt will tend to improve credit ratings even if they are financed by inefficient taxes and charges or by the sale of income-earning assets at inadequate prices. The imposition of inefficient taxes and charges will tend to discourage investment and employment while the sale of income-earning assets at inadequate prices will reduce the net worth of the public sector and, ultimately, the capacity to provide public services, even though both measures may improve credit ratings.

Similarly, a government will generally improve its credit rating by forgoing investment opportunities, even if the investments have an expected rate of return well above the cost of capital. The same is true for corporations, and it is one reason why very few corporations now seek to maintain a AAA rating – the cost in terms of foregone investments exceeds the benefits.

Corporations that do maintain a AAA rating are generally involved in financial activities where such a rating is required by regulation or where a short-term loss of confidence could prove fatal. Confidence is important to governments too. However, the availability of the taxing power means that there is no real danger of a run on government debt until finances get in really bad shape – far below the AA levels that have provoked concern in Australia.

In a comment on my Fin Op-ed piece on the aborted Telstra inquiry (coming to the Web Site soon – I plan to try and move to a two-week lag), Gary Sauer-Thompson discusses the broader issue of executive dominance over Parliament and endorses checks and balances and the role of the Senate. As a ‘born-again’ process conservative, I agree.
In fact, I think the system we have evolved with a constituency-based lower house that can generally provide stable executive government, combined with an upper house, elected on the basis of proportional representation and having a veto on legislation is a pretty good compromise. I’m also glad we have a federal rather than a unitary system of government. On the other hand, I don’t think the intersection of these two, that is the fact that the Senate is elected on a State basis is desirable, though it’s not so undesirable as to justify the massive changes that would be required to fix it. A proportional representation system with the whole nation as a single electorate would be preferable.

Update Ken Parish responds, making the point that the system I propose might lower the quota for election to the point where numerous fringe candidates can be elected. He suggests that the quota for election would fall from 14 per cent in a standard half-Senate election at present to near 1 per cent. Actually I think the correct number would be closer to 3 per cent, but Ken’s point is valid. However, his argument assumes we make no changes to the existing Hare-Clark system. It would be easy to impose a requirement for, say, a 5 per cent primary vote, and lots of PR systems in use around the world do this.

I should emphasise that there is no chance of this actually happening. Although Tasmania is, as far as I can tell, the only state that has ever actually gained any benefit from being over-represented in the Senate (and then only for the brief period when Brian Harradine’s vote was critical) the smaller states would undoubtedly oppose this deal. Since the benefits would be pretty modest, I can’t see it ever happening. Gradual growth may get us to the point where the quota is 10 per cent (9 senators per state) or a bit less, which would give more accurate representation than at present.

A lot of reports are suggesting that Britain and the US will propose the kind of UN resolution I’ve been advocating (and, on my optimistic days, predicting) for some time. The Economist says:

Along with Britain, America is working on its own version of a second resolution. Instead of asking for a clear mandate to topple Saddam by force, this could set a series of last-minute tests for the Iraqi regime—such as the immediate dismantling of missiles which, the inspectors say, have a range greater than that allowed under UN rules. If Iraq failed to pass these final tests, America would argue that Saddam had well and truly blown his last chance.

The game-theoretic analysis I’ve been proposing suggests that Saddam will in fact destroy the missiles. If he refuses, the missiles will be destroyed in the first five minutes of the war and he will probably be killed not too long after that. Working back, it follows that the supporters of inspection at the UNSC will agree to the resolution. Given that inspections backed by the threat of force will then be shown to be working, war will go on the backburner, probably until after the Northern summer.

This good news, but it raises a puzzle. If the analysis above is right, why would the US Administration put up such a resolution?

One reason would be that they sincerely want peace and disarmament. No comment.

Another is that they hope to include some demand which Saddam either won’t or can’t meet. In this context, the removal of conditions on U2 flights has been mooted. Given that U2 flights are already happening under the same conditions as in the pre-98 inspection regime, an attempt to change the terms now doesn’t seem like a goer.

A more plausible possibility is a demand for more unchaperoned interviews, but it seems unlikely on recent evidence that this is going to prove an ultimate sticking point. A requirement for documented evidence on the ‘missing’ weapons seems more critical, but is much more subjective. Some documents have already been produced, but aren’t adequate according to Blix. It seems unlikely that a demand of this kind will produce either an outright rejection or clear noncompliance in the short term (‘weeks rather than months’ in the words of the current cliche).

A third possibility is that we are seeing another misjudgement of Saddam’s responses. The US has clearly been surprised by Saddam’s willingness to back down, first on readmitting inspectors, then on inspections of Presidential palaces, then on interviews and U2 flights.

Having made disarmament the central basis of a casus belli, the US is finding that there is little alternative to seeing it through. In practice this means presenting Saddam with a series of clearly specified demands until either:
(a) he refuses the demands
(b) a substantial quantity of undeclared weapons is discovered
(c) the inspectors reach the conclusion that Iraq really has disarmed

Perhaps this process will be slow. But, it would surely be better for the US to wait a few months and have either a ‘smoking gun’ or clear Iraqi defiance of the UNSC than to rush to war on the basis of a subjective judgement about non-cooperation that is rejected by most UNSC members and the great majority of the world’s population. This point is argued forcefully by Jack Balkin and, surprisingly perhaps, endorsed by Ken Parish.

I’ve now worked through the backlog of AFR opinion pieces. The most recent one to be posted is A deal not in our interest from 30 January 2003, dealing with the proposed Free Trade Agreement between Australia and the US. The main point is

On the Australian side, there are hardly any traditional barriers left to remove. We still have tariffs on textiles, clothing, footwear and motor vehicles, but these industries are just as beleaguered in the US as they are here, and any impact on trade will be small.

What, then, does the US want from us? One issue stressed by Trade Representative Robert Zoellick is ‘intellectual property’. To see what this might mean in practice, we need to look at the case of Eldred vs Ashcroft, decided recently by the US Supreme Court.

This case was a constitutional challenge to a recent Act of Congress which extended the term of copyright protection from fifty years after the death of the author to seventy years (ninety-five for corporations). The ‘Copyright Term Extension Act’ is often referred to as the ‘Mickey Mouse Act’ because of the observation that the term of copyright is extended whenever the Disney copyright on Mickey is about to lapse.

The constitutional challenge failed, but the case did elicit an unusual degree of interest from American economists , seventeen of whom submitted a brief to the Supreme Court opposing the Act. The list is striking not only because of the eminence of the signatories (five Nobel Prizes and more to come) but because it represents all shades of economic opinion from free-market luminaries like Buchanan, Coase and Friedman to interventionists like Akerlof and Arrow.

Australia still has the term of copyright fixed at fifty years after the author’s death and publishers interested in making public-domain works accessible to the general public are increasingly taking advantage of this. There can be little doubt that the negotiating demands of the US in any agreement will include an extension of our copyright terms.

Jason Soon commented on this piece when it came out, referring to me and Kim Weatherall (who shares these concerns)as ‘Cassandras of academe’. As I’m sure Jason is aware, Cassandra was subject to the curse that her prophecies would be always right and always ignored.

Update Scott Wickstein responds, arguing that bad copyright laws would be a small price to pay for “20 years worth easy access to US markets for our farmers? ” On the implausible assumption that the US will in fact offer this, he may be right. But Scott’s argument reinforces my main point, which is in the opening para of the article

Advocates of agreements for freer trade have had an easy run in Australia in recent decades. In much of the world, such agreements are seen as a form of barter – we give up our trade barriers in return for you giving up yours. By contrast, standard trade theory tells us that, as a general rule, we benefit from reducing our trade barriers regardless of what other countries do.

In this case, as Scott concedes, we are essentially engaged in barter. Fine if we get a good deal, but on past experience of US-Australia agreements, I doubt it. Ken Parish who’s moved yet again (making the shift to MT that I only talk about), has more useful discussion on this.

From the AFR on 16 January 2003, a piece called Our worst policy failure. Concluding para is:

At no time since the election of the current government has unemployment been an issue of real concern. Second-order trivia like the GST and waterfront reform have had far more attention. And, sadly, the Australian public has become inured to chronic mass unemployment. In the absence of a severe economic downturn, the government will pay no real political price for its worst policy failure.

In my last post, commenting on Tony Blair’s moral case for war against Saddam, I accepted Blair’s claim that Saddam’s war of aggression against Iran, involving the extensive use of poison gas and the loss of hundreds of thousand of lives was an indefensible crime against humanity. But it can be defended, as witness this counterargument:

Opposition to communism and the rampant Islamic fundamentalism of the Ayatollah Khomeini might actually have required an expedient war. The real world must never intrude into Quigginland. All must be black and white, no room for shades of grey or difficult moral choices where evil will be done either way – we simply avert our eyes and ignore the evil flowing from the choice that our ideological prejudice dictates should have been taken.

OK, I cheated a bit. In the original, this was a defence of the US alliance with Saddam in the war against Iran, and had the phrase expedient alliance in place of expedient war. Still the defence works just as well for Saddam as for Reagan and Bush Sr, and the basic point is pretty clear. If you want to justify a war against Iraq don’t do as Blair did and invoke considerations of morality. Above all, don’t do as Quiggin did and try to assess what a moral case for war would really involve.

PS: In the continued absence of Haloscan, Ken and I have ratcheted up the thermostat, to make up for the absence of the redhot barbs that normally fill our comments threads. Civilised discussion will resume shortly.

Like millions of others, I went to a peace rally yesterday. There were about 50 000 people in Brisbane*. I think it’s clear that the case for an immediate war aimed at getting rid of Saddam’s weapons of mass destruction has not convinced the majority of Australians. That could change, given new evidence, but it’s clearly going to take a lot more than we have seen so far.

[* Crowd estimates are always tricky. The march took about an hour to pass any given point. Assuming 15 people per second passed each point (the marchers were about 15 abreast) that would make 3600*15= 54 000.]

Faced with similar protests in Britain, Blair switched to the moral case that has been his primary motivation all along – that Saddam is an evil dictator who has caused immense suffering in a sequence of wars and that his overthrow would be a blessing. This is a strong case, but it implies a totally different approach than that adopted over the last year.

A starting point would be an admission by the US government that it actively assisted or passively encouraged Saddam in the commission of his worst single crime – the war of aggression he launched against Iran, in which he made extensive use of chemical weapons. When Blair correctly says that Saddam’s wars have killed more people than were marching in London, he should be remined of this. I don’t say that the past crimes of the US government mean that it should not do anything about Saddam now, but an open declaration of the US role and an apology for US complicity are necessary if the moral case against Saddam is to have any standing.

The second requirement is for some sort of just basis for asserting that a particular leader is a criminal who deserves to be overthrown. We have such a basis in the International Criminal Court, in which Britain is a participant. Blair should demand that Saddam be tried before this court. Of course, a precondition is that the US should drop its own objections.

Third, there is the problem of equal justice.The moral case against Saddam is compromised by US complicity in the occupation of Palestine. If Bush were to demand acceptance by both sides in this dispute of a peace plan similar to that put up by Clinton and back his demand by a threat of sanctions and a willingness to enforce an agreed peace, the moral case against Saddam would be lot stronger.

Finally, there is the problem of multiple agendas. A moral case for war can be made only by forgoing all attempts at seeking strategic or economic side-benefits. Yet many (most) of the US commentators supporting war are pointing to such benefits as a primary or secondary motivation. A moral case would require a clear commitment not to use Iraqi oil to the benefit of the US, not to use Iraqi territory as a base for further military action, not to make side deals with countries like Turkey etc. So far none of this has been forthcoming.

To summarise, a moral case for war requires clean hands. Arguably Blair has clean hands on this issue. Bush certainly does not.

Update Ken Parish responds, missing the point pretty thoroughly in my view. I’m not claiming that the moral case for war is the only possible one. War can be justified as a defensive response to aggression. In fact, the interpetation of international law prevailing until very recently suggested that this is the only justifiable ground for war. In this case, the considerations I’ve set out above are largely irrelevant.

A second possible case for war has arisen recently, namely that clear and direct defiance of the UN could justify military actions to enforce its resolutions. Since this case lowers the bar for war substantially, it requires convincing evidence. At the moment, the evidence hasn’t been enough to convince anyone who wasn’t already committed to war. In particular, only a handful of members of the UNSC accept it. This could change, for example, if Saddam refuses to destroy missiles, but the need for a clear case can’t be brushed aside on the basis that the US wants to fight before the weather gets too hot.

The claim that there is a moral case for war is quite different to either of the two considered previously. This claim is that war can be justified simply on the basis that the government to be overthrown is a bad one. I’m sympathetic to this claim in principle, but it’s obviously an idea that needs to be handled with extreme care. It must require more than a decision by one government that some other government ought to be overthrown. That’s why I suggested a range of considerations that would apply in this case, broadly summed up as the need for ‘clean hands’.

Ken argues that all of these conditions are totally unrealistic. I’d argue on the contrary that few of them would be particularly problematic for Blair. He’s joined the ICC, supports pressure on Israel for a peace with the Palestinians, does not appear to be seeking strategic or commercial advantage and so on.

Ken argues for a consequentialist justification of war, namely that it is justified whenever the anticipated benefits outweigh the costs. Although he covers himself with the caveat ‘That sort of exercise is not without its own difficulties when many of the consequences can’t easily be measured with precision in advance’ he doesn’t ask who is to make the judgement. The implicit answer is that the government that decides to go to war should make it. I’d suggest that, given this answer, every war in history would pass Ken’s test.