The news that National Express, the main provider of privatised public transport services in Victoria is to walk away from its contract with two weeks notice follows a similar pullout in South Australia by bankrupt electricity generator NRG only a week ago. In both cases, Labor governments have been left to pick up the tab for deals done by their Liberal predecessors. This may help to wean them off the bipartisan assumption that privatisation is the best way to deal with government services.

More significantly, these episodes underline the point that, for essential services, government is the provider of last resort. It can sell the assets, and forgo the associated earnings, but it can’t divest itself of the obligation to step in (and pay up) when something goes badly wrong.

Until now, North Korea has appeared in the blogosphere mainly as a debating point. Right-wingers have used the North Korean government’s breach of its agreement not to develop nuclear weapons as a club with which to beat Jimmy Carter and Bill Clinton who made the deal with Kim-Jong Il. Opponents of war with Iraq (including me) have pointed to the differential treatment accorded to this highly unattractive member of the “Axis of Evil’ as evidence that the US Administration either lacked a coherent policy or was not being honest about its motives.

The news that the North Korean government plans to reactivate graphite-moderated reactors previously used in their nuclear weapons program suggests that the time for pointscoring is over. The much-derided print media particularly the NYT have already realised this.

Unfortunately, there are no appealing options in this case. It seems clear that the co-operation, or at least acquiescence of the Chinese government is going to be needed, and that any military option raises a severe risk of an attack on South Korea and perhaps Japan. The most promising solution is one where China applies the pressure required to force the abandonment of North Korea’s nuclear program and its missile development. The amount of pressure required will be large, and the diplomatic price correspondingly high. Unlike Saddam, Kim Jong-Il cannot be regarded as a rational bargaining partner – he and his father have pursued policies that have driven their kingdom into the ground, and, while it’s impossible to tell anything about such a closed society, it’s hard to believe he has a secure hold on power.

China could probably bring the regime down by opening its border. Even with tight controls on both sides there’s a steady flow of refugees with as many as 300 000 now hiding out in China), but this would be a hugely costly and problematic step. South Korea would have to accept most of the refugees and they would be highly reluctant to do this.

I find the prospect of a deal with the Chinese Communist Party even more worrying than than the deal with Musharraf that was needed to secure Pakistan’s overthrow the Taliban, or the various trade-offs that will be required in any Middle East deal. The partners in those deals are tinpot dictatorships that can safely be dumped when they are no longer needed. By contrast, China represents the only dictatorship left among the great powers (or even the second-rank powers) and its rulers have demonstrated a surprising capacity to handle succession problems. The Chinese government is the most important single enemy of democracy in the world today.

But there may be no alternative to a deal. Some juicy carrots will have to be offered, but if Bush has the moral clarity he claims to have he shouldn’t be afraid to show the stick as well. If the Chinese government is prepared to give aid and comfort to the Dear Leader Kim Jong-Il and his insane plans, they should be given the cold shoulder in every respect, starting with Most Favored Nation treaties.

Having taken this hard line, I have to say that, even more than with respect to Iraq, this is an issue where discretion is the better part of valour for Australia. We’re not as vulnerable as South Korea and Japan, but we are still mice in the cornfield when it comes to hard words between elephants like the US and China.

Whereas I’m still relatively optimistic about some sort of reasonable outcome in relation to Iraq and even Al-Qaeda, this business fills me with foreboding.

Yet again, it’s time for the thoughts you’ve been accumulating over the weekend to be spread before the select audience of Quiggin blogreaders. Anything goes, but the question that’s been worrying me for the last few days is “What is to be done about North Korea?”. I’ll be posting on this soon, so you may want to comment when I do, but if you’ve got a brilliant plan, I’d love to see it.

As always, civilised discussion and no coarse language.

This piece from the Oz discusses divisions within the US Administration over whether to release intelligence information. The story is attributed to the Sunday Times, but I couldn’t find it at their site. The discussion is pretty much identical to my posts of last week, which Ken Parish dismissed as ‘ridiculously premature’. On the assumption that bloggers are entitled to be more speculative than mainstream media like The Times, and that no-one wants to read blog speculation that lags what’s already in print, I’d say I published just in time. Here’s the Oz

Washington’s apparent reluctance to produce what it has claimed is “solid” evidence of Iraqi transgressions has fuelled speculation that the intelligence is flawed or owes more to propaganda than genuine information.

Scepticism has been fuelled by uneventful inspection visits to several nuclear and biological sites that were previously identified as suspect by the US or Britain. UN officials have so far not disclosed any serious irregularities. British officials admit the intelligence they have seen is not as dramatic or as easy to publish as the satellite photos that exposed the presence of Soviet missiles in Cuba.

“The evidence is assembled from random bits and pieces, quite a lot of which cannot be explicitly revealed,” an official said. “It adds up to a picture we are confident of.”

The Oz observes

Spreading that confidence to a wider public is beginning to prove a problem

I can only agree.

In my link to Electrolite I wrongly described it as a joint project of Patrick & Teresa Nielsen Hayden. Actually, it’s just Patrick. Teresa has her own blog, devoted to ” Language, fraud, folly, truth, history, and knitting. Et cetera.” Check out yet another online quiz, a better-than-average one about Science fiction writers

This piece on unpaid overtime gives more support to my view that the alleged boom in productivity in Australia is largely driven by increases in the pace of work and by unrecorded increases in working hours.

The NYT has an interesting interview with Jeffrey Sachs who’s moved his sphere of concern from Eastern Europe (where he was a prominent advocate of ‘shock therapy’) to the Third World, where he is pushing with some success for more, and more effective, aid programs particularly with respect to AIDS and malaria.

I mentioned The Economist’s praise for the US system of Chapter 11 bankruptcy a few posts ago. This close-up look from the NYT doesn’t go so far as to deny the superiority of the US approach, but it is certainly a more jaundiced view.

The NYT also mentions an auction-based proposal by well-known economists Hart and Moore. Auctions are where the action is in economics nowadays, and I am edging into the field myself.

I’ve mentioned before that Ozplogistan is more politically balanced than it was in ancient times (that is, June 2002). Two additions to the blogroll maintain the balance. Stewart Kelly is generally left of centre, while the self-explanatory Wog Blog is generally right of centre.

On the US scene, I’ve already linked to Patrick & Teresa Nielsen Hayden’s excellent Electrolite, and now I’m adding them to the blogroll.

And I should mention that David Morgan is back, after a prolonged absence due to new fatherhood. He’s had some excellent posts on the Windschuttle-Reynolds row recently.

The Lovely Bones by Alice Sebold. Weird, but moving, it’s narrated from heaven by a 13-year old murder victim.

Also England Under the Tudors by GR Elton, reprinted in the Folio History of England series. Some striking numbers are that the population of England at the time was around 3 million and that the King’s annual revenue was less than 100 000 pounds. Here are some thoughts on this.

(a) Given that 80 or 90 per cent of the population were peasants who had no real chance of an education, the pool from which English governments drew their talent was smaller than that available to a lot of city councils in Australia. Did this make a difference?

(b) Estimating Mr Darcy’s income, Brad DeLong says, with suspicious precision, “In 1810 the pound had a present-day value of £27.28”. As I recall there was a fourfold inflation following the discovery of the New World goldmines, so lets say that the price level has risen 100-fold since Tudor times. This gives a government budget of around 10 million pounds per year or $30 million Australian dollars, which is less than it costs to run a medium-sized university.

On a related theme, Brad riffs off Virginia Postrel’s observation that

CHEAP STAPLES: I bought a five pound bag of Gold Medal flour yesterday for 69 cents. I find that amazing.

to estimate a 400-fold improvement in standards of living since the 16th century.

Over 500 years, this would imply a doubling time of around 60 years or, using the rule of 70, an annual growth rate in income per capita of about 1.2 per cent . I think this overstates things a bit because the relative price of food has been declining at least for the past century, suggesting more rapid productivity growth in agriculture than in the economy as a whole. However, some of the price decline is due a lower income elasticity of demand reflecting the finite capacity of the human stomach – the treatment of this is complicated.