This is a job for the Freedom Commissioner

John Quiggin35 Comments

The Minerals Council of Australia has just published a report it commissioned from Sinclair Davidson of the Institute of Public Affairs, responding to campaigns to encourage divestment from coal. What’s most interesting is the suggestion that Corporations Act and the anti-boycott provisions of the Trade Practices Act could be employed to silence critics of the coal industry. The relevant section, from the conclusion

Finally, the campaign may contravene the letter or the spirit of the Corporations Act. While activists argue that wealth portfolios without fossil fuel stocks perform just as well as those with fossil fuel stocks, the reality is that failing to hold a well-diversified portfolio has substantial economic costs in the form of higher risk and lower returns. So if investors make valuation errors based on the divestment campaign and relinquish high-performing stocks, a breach of the Corporations Act may have occurred.

There is a potential role for the Australian Securities and Investment Commission to examine whether the stigmatisation of the fossil fuel sector via the divestment campaign is a breach of the [Corporations Act].

The divestment campaign would amount to an unlawful secondary boycott if environmental activists were covered by those [anti-boycott] laws. They are seeking to restrict coal mining in Australia by targeting a critical supplier to the sector.

There are quite a few points of interest here. The most obvious is the threat to freedom of speech, something that ought to be of interest to Freedom Commissioner Tim Wilson, formerly of the IPA. In this context, it’s worth noting that campaigners against wind farms (notably including the IPA) would be potentially subject to the same kinds of penalties.

More generally, there’s the question of the anti-boycott provisions and the Trade Practices ACT in general. These provisions involve fairly substantial infringements on freedom, primarily for the benefit of business. The law originally focused mainly on protecting small businesses against a variety of anti-competitive practices of big firms. That sounds good, but there’s an equally good case to be made that the market should be left to sort itself out in such matters, or replaced by public provision when it can’t. The extension of Trade Practices Law to cover unions (under the Fraser government’s Section 45D) and public services (under National Competition Policy) makes the Trade Practices Act one of the central legal instruments for the imposition of market liberalism.

Note: Again, no personal attacks, please. There’s more than enough to criticise in the substance of this piece.

Lifters and leaners

John Quiggin33 Comments

I have a piece up at The Guardian looking at Hockey’s adaptation of the “47 per cent” line made famous by Mitt Romney. The focus is not so much on demolishing the claim (Greg Jericho did a more comprehensive job on this) but on the state of delusion that would allow Hockey to think that this kind of claim would be favorably received. After all, even Romney didn’t use the 47 per cent line in public: he was caught on video talking to rightwing donors.

Literally, Catallaxy on a bad day

John Quiggin34 Comments

A while back, I commented that the Oz was turning into a dysfunctional group blog, like Catallaxy on a bad day[1]. Now, it appears this piece of mild hyperbole has become literally true. The Oz has turned into a print version of Catallaxy, recycling their posts in support of tobacco industry propaganda. This really is Catallaxy at its predictable worst. The IPA, well represented there, started its career in science denialism with attacks on health scientists and, in particular, denial of the dangers of passive smoking. Like so many other tobacco industry fronts, it diversified into climate denial in the 1990s, using the same tricks and tropes.

I’m not sure if Catallaxy is the only blog source for the new Oz. The papers obsessive coverage of the AWU/Gillard case, which is looking rather quaint given the revelations of much more recent and clear-cut corruption on both sides of politics, seems to be a mixture of in-house stuff and lifts from the various extreme wingnut blogs devoted to the issue. In any case, it’s hard to tell the difference.

fn1. As previously agreed, no personal attacks on Catallaxy members, please.

Disaster in Iraq foretold: Well, not quite

John Quiggin142 Comments

Along with the rest of the neocon crew, Andrew Bolt is blaming the collapse of the Iraqi state on Obama’s withdrawal of US troops in 2011. Exactly how Obama was supposed to repudiate an agreement signed by Bush, and maintain an occupation force against the wishes of the Iraqi government (he tried, but failed to negotiate an extension) is not explained. But, no matter.

At least Bolt and the rest warned us that Iraq was still too fragile to be left on its own, and that an indefinite occupation was needed. Well not exactly. Here he is in 2009, gloating over the fact that Obama was going slow on withdrawal and thereby disappointing his supporters. That could be read either way, I guess, but there’s no warning that Bush’s timetable needed changing.

More striking is this piece from 2007, claiming that “the war has been won“. Here’s what he has to say about future prospects

Violence is falling fast. Al Qaida has been crippled.

The Shiites, Kurds and Marsh Arabs no longer face genocide.

What’s more, the country has stayed unified. The majority now rules.

Despite that, minority Sunni leaders are co-operating in government with Shiite ones.

There is no civil war. The Kurds have not broken away. Iran has not turned Iraq into its puppet.

And the country’s institutions are getting stronger. The Iraqi army is now at full strength, at least in numbers.

The country has a vigorous media. A democratic constitution has been adopted and backed by a popular vote.

Election after election has Iraqis turning up in their millions.

Add it all up. Iraq not only remains a democracy, but shows no sign of collapse.

If I were an American reading that, I would have said it was time to bring the boys and girls home, as Bush agreed to do in October 2008.

Game of Thrones (Spoiler Alert)

John Quiggin20 Comments

Apparently, despite all the past experience, lots of people were shocked by the latest developments in Game of Thrones. Still, not everyone is willing to wade through 700-page volumes just to avoid being surprised by a wedding episode on their favorite show. So, as a public service, I’ve listed, over the fold, all the important and exciting developments in Volumes 4 and 5.

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The “job-killing” carbon tax

John Quiggin155 Comments

Tony Abbott hasn’t exactly covered himself in glory on his overseas trip. But he has found one ally: Canadian PM (at least until next years election) Stephen Harper, also a climate denialist. They made a joint statement denouncing carbon taxes as “job killing”. I didn’t notice any massive destruction of jobs when the carbon price/tax was introduced in 2012, but rather than do my own analysis, I thought I’d take a look at the government’s own Budget outlook, to see how many jobs they claim to have been destroyed by the carbon tax, and what great benefits we can expect from its removal. Here’s the relevant section of the summary (note that the outlook is premised on the Budget measures being passed)

The Australian economy is in the midst of a major transformation, moving from growth led by investment in resources projects to broader?based drivers of activity in the non?resources sectors. This is occurring at a time when the economy has generally been growing below its trend rate and the unemployment rate has been rising. During this transition, the economy is expected to continue to grow slightly below trend and the unemployment rate is expected to rise further to 6¼ per cent by mid?2015.

In this environment, the Government is focused on implementing measures to support growth and jobs while putting in place lasting structural reforms to restore the nation’s finances to a sustainable footing. The timing and composition of the new policy decisions mean that the faster pace of consolidation in this Budget does not have a material impact on economic growth over the forecast period, relative to the 2013?14 Mid?Year Economic and Fiscal Outlook (MYEFO).

Since MYEFO, the near?term outlook for the household sector has improved. Leading indicators of dwelling investment are consistent with rising activity, while household consumption and retail trade outcomes have improved recently, consistent with gains in household wealth. This is partly offset by weaker business investment intentions, particularly for non?resources sectors.

The outlook for the resources sector is largely unchanged from MYEFO. Resources investment is still expected to detract significantly from growth through until at least 2015?16, as reflected in the outlook for investment in engineering construction which is forecast to decline by 13 per cent in 2014?15 and 20½ per cent in 2015?16. Rising resources exports are only expected to partially offset the impact on growth. Overall, real GDP is forecast to continue growing below trend at 2½ per cent in 2014?15, before accelerating to near?trend growth of 3 per cent in 2015?16.

The labour market has been subdued since late 2011, characterised by weak employment growth, a falling participation rate and a rising unemployment rate, although outcomes since the beginning of 2014 have been more positive. The unemployment rate is forecast to continue to edge higher, settling around 6¼ per cent, consistent with the outlook for real GDP growth. Consumer price inflation is expected to remain well contained, with moderate wage pressures and the removal of the carbon tax.

The reference to the CPI effects of the carbon price (around 0.4 per cent) is, as far as I can tell, the only mention in the whole of the Economic Outlook statement.

Travel

John Quiggin58 Comments

I’m travelling, which explains the total absence of recent activity. I hope to resume posting soon, but probably on a limited basis for some time. In the meantime, please keep it civil and constructive.

Piketty and nitpicky (updated with link to Piketty’s refutation of FT)

John Quiggin168 Comments

I have a couple of pieces up on the topic that’s likely to consume much of my attention for some time to come: Piketty’s Capital in the 21st century.

Here’s a long review article at Inside Story focusing on the conditions that have made Piketty a bestseller. And here, at The Drum is my take on claims by Chris Giles at the Financial Times that Piketty’s data is fatally flawed.

Update Piketty has responded to the Financial Times. To sum up, as I said in the Drum piece, the criticisms are (mostly incorrect) nitpicks except for the point about UK wealth inequality. Here Piketty’s demolition is convincing. The FT hasn’t used a consistent series. Rather, it’s taken a recent survey estimate (likely to underestimate wealth) and spliced it onto older estate data to produce the counterintuitive finding that the inequality of wealth hasn’t increased.

Campus reflection

John Quiggin54 Comments

That’s the mild pun the Chronicle of Higher Education picked for my article (paywalled, but I’ve put my draft version over the fold) making the point that a higher education system is, in important respects, a mirror of the society that created it, and that it helps to recreate. I make the point that, like the US health system and labor market, the US higher education does a great job for the 1 per cent who go to the Ivy League Schools (and whose parents are mostly in or close to the top 1 per cent of the income distribution), does an adequate but expensive job for the next 20 per cent or so, and leaves everyone else in the lurch.

This is important in the context of the Abbott governments proposed removal of caps on fees for higher education, explicitly aimed by Education Minister Pyne at creating a system in which we might have institutions like Harvard and Yale. I plan to write more on this, but the central point will be that, far from creating more places at existing universities, fee deregulation will give them incentives to shrink, pushing students out to the alternatives now being funded under HECS: for-profit institutions and the TAFE system (which has its own funding crisis), corresponding to the bottom tiers of the US education system, where all the recent growth has taken place.

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If it looks like a debt, walks like a debt and quacks like a debt …

John Quiggin11 Comments

I’ve finally got around to checking out the big-ticket item (estimated value $28 billion) in the Queensland government’s privatisation program, involving the electricity distribution sector. It’s called a Non-Share Equity Interest, and the Treasury web page explains its appeal to the government.

Under this option the State retains 100 per cent ownership of the ordinary shares in the network businesses and assets. Private sector participation occurs through a hybrid security instrument, a Non–Share Equity Interest (NSEI).

The private sector contribution will equate to the net funding for the capital expenditure requirement and therefore represents new capital injections.

The NSEI security is debt in its legal form, but classified as equity for tax and accounting purposes and these characteristics give the security it’s (sic) “hybrid” form. (emphasis added)

The returns on the NSEI are sculpted to reflect the holders proportionate interest in dividends and tax equivalents paid by the network businesses separately.

In other words, the government is replacing debt raised by the Queensland Treasury Corporation from the private sector with an instrument that’s almost identical, but is classified as equity, and can therefore be presented as a reduction in debt

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