All in the family

John Quiggin22 Comments

If you need to know why New South Wales is in urgent need of a change of government, and why the ALP there is in urgent need of intervention, go no further than this SMH story about how a change of policy to support prison privatisation was pushed through a party committee.

A victory for the Government was assured. The committee chairman is Richard Tripodi, the brother of the Minister for Finance, Joe Tripodi, and husband of the Drummoyne MP Angela D’Amore.

Another committee member is Anna Collins, the wife of Mr Robertson’s chief of staff, Chris Minns, while another member is Mark Hay, the son of the Wollongong MP Noreen Hay.

A member of the party’s powerful administrative committee told the Herald that “a fix [was] in” to prevent embarrassment to the Government and to advance Mr Robertson’s status as a future leader.

“It’s a complete stitch-up, sending it to a dodgy committee run by a minister’s brother, an MP’s son and a key apparatchik’s wife,” the member said.

This kind of nepotism is rife in Australian politics, but in the NSW Labor Party it’s beyond a joke, on both (all) sides of the factional fence. People like Belinda Neal and Martin Ferguson would never have made it into Parliament on their own merits, and would probably have been on the other side if not for their family ties, but Neal made it to the shadow ministry back in the 1990s, and Ferguson is now a senior minister.

More bad news for the Murray-Darling

John Quiggin5 Comments
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Thanks to a combination of continued drought and the long-term increase in temperatures, exacerbated by land-use changes such as increased use of farm dams, inflows to the Murray-Darling system have hit a new record low

It will take quite a few years of above-average rainfall to restore the system to anything like the pre-drought situation and there is, so far, no suggestion that we are going to see this. On the contrary, the reverse is more likely, both in the short run and the long run.

A lot of my work with the Risk and Sustainable Management Group deals with adaptation to climate change in the Basin. There’s quite a bit of scope for this, but if inflows fall as far as the most likely climate scenarios project over the next century, irrigated agriculture will cease to be feasible.

The broadband revolution

John Quiggin68 Comments

Like most people, I was surprised by the announcement that the Rudd government proposes to build its own Fibre-To-The-Home network, covering 90 per cent of the population, at an estimated cost of $43 billion. I haven’t seen enough to make an informed judgement, but since this is a blog, I’ll offer some uninformed judgements instead

* Something had to be done about Telstra, and its continuous attempts to hold the country to ransom by virtue of its monopoly ownership of the copper wire network. The plan includes a breakup of Telstra and will, if successful, imply that the new network will largely supplant Telstra’s. The obvious alternative, canvassed here by Paul Kerin, would be to renationalise Telstra, keep what was needed and sell the rest. Politically, that’s probably an even harder sell than the current proposal, but it has some significant attractions

* On the assumption that the network needs a 10 per cent return to cover capital costs and depreciation, it needs revenue of around $4 billion a year, on top of operating costs, say $1 billion a year. That would require 5 million households and small businesses to pay $1000 a year (about $80/month) each. Not beyond the bounds of possibility, given the increasing centrality of the Internet, but unlikely if all that is on offer is a faster version of the existing product

* This implies the need for a “killer app”, and the obvious one, to my mind, is video-telephony/video-conferencing. It can be done, just, with existing technology, but the possibilities would be radically transformed by the advent of near-universal fast broadband.

* The idea of eventual privatisation reflects the government’s residual attachment to the ideas of the past 30 years. But, if this is a success, and if current interventions generate an economic recovery, I doubt that any government will be in a hurry to sell. Of course, if it’s a failure, they’ll be keen to sell, but won’t get much of a price.

* This is clearly a case of ‘picking winners’, but where technology is characterized by huge scale economies, that’s more or less inevitable. Certainly we haven’t done well with the notionally hands-off approach we’ve adopted for the last fifteen years or so.

* The chance of getting this through the current Senate is just about zero. If the government’s popularity holds up, the case for a double dissolution will become steadily stronger over the course of 2009

Republican Courts

John Quiggin19 Comments

The US Supreme Court has just brought down a 5-4 ruling, written by Clarence Thomas, denying workers the right to sue over age discrimination if their union agreement calls for arbitration. As the New York Times says, it’s hard to believe that Congress intended this.

It seems likely that we will see a lot more of this kind of thing, since the Bush Administration has packed the courts with movement conservatives. Fortunately, there is a simple response available, at least in cases of statutory interpretation. Every time the Supreme Court comes out with a decision like this, Congress should pass a tightly worded act, repudiating the Court’s interpretation. Sooner or later, they will get the message.

We had this problem in Australia with a Chief Justice (Garfield Barwick) who continually undermined the tax laws on the basis of an extreme form of textualism. In this case, it wasn’t sufficient to fix the law after he broke it, since new tax dodges arose with great regularity. Eventually Parliament passed amendments to its meta-legislation, the Acts Interpretation Act, stating that the courts should take into account the intention of Parliament as stated in the second reading speech that normally introduces the law. Barwick resigned about the same time.

Of course, this won’t work if the Republican majority on the court relies on constitutional interpretation to strike down legislation. This ought to (but certainly won’t) provoke an outcry from conservative opponents of “judicial activism”. But, as Roosevelt showed, it’s a political struggle in which the courts are not as well-placed as they might seem. A determined legislature with popular backing can make it very hard for courts to defend strained interpretations of the constitution.

Summit anniversary

John Quiggin13 Comments

As this snarky Crikey/LP post by Jeff Sparrow reminds me, it’s now a year since the 2020 Summit, though the change in the global scene, both economic and political, makes it seem a lot longer.

Looking back at my post immediately after the event, my main point was that, on water and climate (the issues I worked on), “the real message was not so much the need for new ideas (though there were some good ones) but the need to act much more urgently on what we already know”.

As regards water, things have, in general, gone as I would have hoped. There has been more progress on such issues as buying back water for environmental flows in the last year than in the entire term of the Howard government. And while there are still plenty of problems, my general sense is that we are moving towards a much more coherent policy. Of course, a bit more rain in the Murray-Darling catchment (and Brisbane!) would help.

It’s a very different story on climate change. The government started pretty well, but caved in to the big emitters (and maybe to the spurious idea that it could get the backing of the Coalition) when it announced its policy in December. Still, given that it seems impossible that the current plan can secure the support of either the Coalition or the Greens, there’s still the chance of something better.

On openness to new ideas, the government has a mixed record. It’s done pretty well in relation to the financial crisis, making some big policy changes without panicking. And at least in rhetorical terms, Rudd has recognised that there is no going back to the status quo ante. Whether this is reflected in the Budget remains to be seen.

Finally, there’s the Republic, about which, as Sparrow points out, nothing has happened. As I said at the time, this is as I hoped and expected. If the Rudd government can get us through the financial crisis, and produce a sustainable response to climate change, I doubt that it will have much trouble securing support for a republic. But until that happens, let’s leave the Republic as it came out of the Summit – inevitable and desirable, but not at all urgent.Underworld film This Girl’s Life download Spectacular! dvdrip

Some arithmetic on retirement income

John Quiggin22 Comments

I’ve been thinking about the impact of the financial crisis on retirement income policy and individual strategies, and have come up with a reasonably simple way (I hope) to illustrate the core problem. Pre-crisis, it seemed reasonable to base a retirement strategy on the idea that a long-term investor, focusing on stocks could average a 7 per cent real return over 30 years, with relatively little risk. Now it’s clear that assumption has been proved wrong for lots of people. So it seems reasonable to ask how retirement strategy would look if, instead, you assumed a 2 per cent real return (what you might get with a portfolio of government bonds and the safest stocks).

To answer this question, we can use the magic of compound interest. At 7 per cent, money doubles in 10 years (the rule of 70), so a dollar invested today will be worth 8 dollars in thirty years time. That means someone with a stable real income, who starts saving 10 per cent of their income at age 25 and retires 30 years later at age 55, with a further life expectation of 30 years, can retire on 80 per cent of their pre-retirement income, as compared to 90 per cent net of saving in the working years. Quite attractive!

At 2 per cent, though, money doubles in 35 years. To get a more less stable consumption stream you need to change the balance above by a factor of four. A simple way to do this is to double contributions, to 20 per cent of income and shift the work-retirement balance, so that you work from 25 to 65 to finance an expected 20 years of retirement income.

Among other things, this means that the flow of savings into superannuation will have to increase a lot in the medium term which may help to resolve some of our many macroeconomic imbalances. But how this is to be brought about remains to be seen.

Trailing the world

John Quiggin23 Comments

For a brief period after the election of the Rudd government, Australia wasn’t right at the rear of the pack in the race to cut emissions of CO2 before irreparable damage is done to the global environment. The ratification of Kyoto and a strong performance at Bali deprived both the Bush Administration and would be backsliders in Japan and Canada of a crucial ally.

But, with the release of US plans for cuts in emissions, and the deplorable 5 per cent target of the CPRS (with a conditional maximum of 15 per cent) we are now further behind than ever.

Its obvious now, that even the watered down CPRS will never get the support of the Libs/Nats. And its hard to see the Greens settling for the quarter loaf on offer here. So, it’s time for the government to do a drastic overhaul of the legislation and come back with something serious.

The idea that we could just decide that it’s all too hard is untenable, and not merely in terms of environmental responsibility. Just like the EU, the US is now talking about carbon tariffs on non-complying countries. Some commentators think the WTO will stop this, but it’s equally likely that by declaring carbon dumping to be an unfair trade practice, the WTO may judge it can divert other protectionist pressures.

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