Category Archives: Politics

Unintended Consequences

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I have just read a depressing article by Chris McGreal in the Guardian Weekly.  It’s headed ‘Beattyville: abandoned by coal, swallowed by drugs’ and describes the state of impoverishment and demoralisation that followed the closure of coal mines and other industries in Kentucky.

My stroppiness index rose when I read about the ‘pop’ scam, which works as follows. Supermarkets sell discounted cola to poor people, often for food stamps. The poor people sell the cola to smaller shops, cheaply enough to allow for resale at normal prices, and use the money to buy drugs – in particular an addictive pain-reliever called OxyContin that is supposed to be available only on prescription.

Here is a classic case of unintended consequences, though I’m not sure how anyone administering the food stamps programme could have confused fizzy drinks with food.  I’m not sure what conclusion to draw.  Perhaps it’s that no matter how well-intentioned a policy may be, and no matter how carefully it is crafted, people will find a way to subvert it, turn good to bad, and make poor people poorer still.

As it happens much of my recently published opus, The Eeks Trilogy, is about unintended consequences in the realms of robotics, human relationships and space colonisation.

Disruptive Technology

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Disruptive technologies are scary.  Uber is one of the scariest, in Australia anyway, because many people have invested 6-figure sums in taxi licences on the assumption that their value can only go up.  Airbnb is another one.  People have invested millions in hotels, meeting all the health, safety, traffic management and other government requirements, only to find that anyone with a spare room is a potential competitor.

My view is simple. In the long run the most efficient way of doing something will always displace the other ways.  Vested interests will howl in pain and rage, and for a while they will hold back the incoming tide.  But eventually, as King Canute found out, they will have to yield.

I remember attending a conference 20+ years ago at which the late James Strong, then CEO of Qantas, argued for a lifting of the ban on Qantas carrying passengers between Australian airports.  The purpose of the ban was to protect the Ansett/TAA duopoly of domestic routes, and it meant that Qantas was flying half-empty ’planes around.  It couldn’t go on forever and it didn’t.  Economic and commercial rationality prevailed – as it must in the taxi and accommodation sectors.

Instead of emulating King Canute, governments should:

  • Create sensible regulatory frameworks for the new technologies, to ensure public safety and payment of taxes.
  • Review the rules and taxes that make it hard for established businesses to compete on equal terms with the disruptors.
  • Ease the pain for the people whose lives and businesses are unexpectedly disrupted, eg by buying back taxi licences.

 

Hypocrisy and the Death Penalty

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I hate hypocrisy – my own as well as other people’s.  Today I choose to attack hypocrisy in progressive western democracies about the death penalty.

We are quite willing to bomb people whom we suspect of doing bad things, without any trial and in the knowledge that those bombs will kill, maim and dispossess people whom we suspect of nothing at all.  But we go bananas if some other country, after due judicial process in accordance with its own laws, dares to execute a convicted criminal.

I am thinking chiefly of the drug smugglers who were executed in Indonesia, over whom the Australian Government set fire to much of its political capital in that country.  That still makes me stroppy.

Donald Trump – In Trouble Again

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Like almost everyone else outside the Republican Party, I find myself staring in stunned disbelief at the popularity polls.  How could anyone consider Donald Trump to be in the Top Ten Million for consideration as the Leader of the Free World?

But I have to interpose my body between Mr Trump and the howls of protest that his latest reported remarks have drawn.  He said that refugees could be “the greatest Trojan horse of all time.”  Whatever the motives and prejudices that may underlie that statement, it is undeniably supported by two very obvious precedents.

First, US foreign policy has for many years been hostage to Zionist lobbyists, whose power depends on a Jewish population (only 2% nationally, but disproportionately influential) which derives in large part from past flows of refugees from persecution in Europe.

Second, the recent outbreak of sanity with respect to US-Cuban relations has been delayed for decades by the Cuban exile population – refugees from Castro and his communist regime, implacably opposed to détente.

Silly numbers

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Journalists are very good at challenging politicians’ evasive answers, but they often let people get away with silly numbers. Two Australian examples caught my eye recently, and made me stroppy.

First, an article in our local newspaper (the Advertiser, which has the distinction of being Rupert Murdoch’s first newspaper) quoted the Civil Contractors Federation (an industry lobby group) as claiming that SA Water could be sold for $13 billion. The story was also reported by the ABC and other news media.

SA Water is South Australia’s water supply and sewerage utility, still publicly owned. A private owner would require at least a 7% annual return on a long-term investment, so a valuation of $13 billion implies an annual net profit in excess of $900 millon.  SA Water’s total revenue in 2013-14 was $1,100 million.  The numbers just don’t stack up.

Second, ACOSS has put out a press release claiming that if the rate of GST (goods and services tax = value added tax) were increased from 10% to 15% low-income households would pay 7% more for the goods and services they buy*. Even if a poor household bought only goods and services that were subject to GST** the maximum increase would be (1.15/1.10) – 1 = 4.5%.  So ACOSS’s claim of 7% makes no sense.  But no-one has challenged them.

Footnotes

* Quotation from ACOSS press release: “An increase in the GST has a much bigger impact on low and modest income households because they spend more of their overall income to meet their living costs, in comparison to people on higher incomes who are better able to save. An increase in the rate of the GST to 15% would require people in the lowest 20% of the income brackets to pay 7% more, people in the middle 20% 4.2% more, and people in the highest 20% income bracket just 3% more of their income.”

** That would mean no purchases of basic foods, medicines, medical services, water bills, educational services, childcare and other exemptions.  See here for the GST-free list.

Fairness

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Australian politicians, commentators and interest groups have embarked on a public discussion about tax reform. The main focus is the GST (goods and services tax = value added tax).  Should the rate, which has remained at 10% since inception in 2000, be increased to 15%?  Should the base be broadened to include some or all of the 53% of goods and services that are GST-free?

There is one thing that everyone agrees on: whatever changes are made to the tax system, they must be fair. I haven’t heard anyone say, “What this country needs is unfair taxation!”  But I suspect that the concept of fairness is not universal.

The Australian Council of Social Service (ACOSS) describes itself as “the national voice for the needs of people affected by poverty and inequality.” In their eyes ‘fairness’ means not increasing the share of the tax burden born by the poor.  In a radio interview this morning an ACOSS representative expressed the view that no household with an annual income below $100,000* should have to pay more tax than they do now.

But some other people see fairness differently. They think that people who work hard, learn productive skills, practise thrift and invest prudently should, in fairness, be allowed to reap and keep the harvest that results from this pattern of behaviour.

What do I think?

  • We cannot continue running a fiscal deficit forever.
  • The cost of health care will continue rising faster than GDP as more ways are found to cure illnesses and keep people alive.
  • The cost of supporting and caring for old people and disabled people will also rise faster than GDP.
  • Richer people are better able than poor people to minimise the amount of tax they pay – ultimately by emigrating.
  • Multinational corporations will always find ways to avoid paying normal rates of tax in the countries where they make their money.

Putting all these thoughts together, I don’t see how anyone but the very poorest can avoid paying more, either through taxes or by paying the full price for things that they have been accustomed to getting free or at subsidised prices.

Footnote

* From official statistics for 2013-14 I infer that about two-thirds of Australian households fall below this threshold.

Do You Believe in Fairies

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When I was a lad In London, Peter Pan was always put on during the Christmas holidays in the West End. Perhaps it still is. And there was always excited speculation about which famous actress (yes, we still had actresses in those days) would don tights and a pointy hat and play the part of Peter. Margaret Lockwood was the one when I was taken to see it, and I still remember the thrill of seeing her fly across the stage on a barely visible wire.

Even more vivid is my memory of the terrible moment when Tinkerbell was on the point of death. Her tiny light flickered and Peter begged us all to shout our affirmation of belief in fairies, for it was only that belief which could restore her. Tears streamed down my innocent face as I yelled, “Yes!!!” They turned to tears of joy as her light stopped flickering and came back strong and vital. My eyes are moist as I write, just thinking about it.

And now the global economy is flickering – as China’s growth rate wanes, the Euro Zone flounders, commodity prices droop, and Christine Lagarde frets about indebtedness. And only our belief can save it. Join with me now, I beg you. Do you believe in economic growth? Do you?! I can’t hear you!!!

Peace Prize

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Do you remember Tom Lehrer? He was a mathematician and satirist in the 1960s and 70s (Vatican Rag, Poisoning Pigeons in the Park…).  When Henry Kissinger was awarded the Nobel Peace Prize in 1973, Lehrer remarked that political satire was now obsolete.

I had the same feeling in 2015 when Tony Abbott, then Prime Minister, announced an Australian knighthood for Prince Philip. But the Government of the People’s Republic of China has gone one better by awarding the Confucius Peace Prize (the Chinese alternative to the Nobel-branded one) to Robert Mugabe.

Robert Mugabe. The one in Zimbabwe.  Not a typo.

Magpies

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It’s springtime in Australia and the magpies are aggressively defending their nests. All day we hear clunks as they collide with our windows, mistaking their own reflections for marauders.  I admire their persistence.  Time and time again the same magpie will fly at a pane of glass, bang its head, fall down, flutter up and repeat the exercise.

It occurred to me this morning that the magpies’ behaviour is very like that of many humans. Whether it’s deposing dictators and waiting for secular democracy to bloom in their place, or calling on corporations to mitigate the socially harmful effects of their operations through voluntary self-regulation, we keep crashing into the same windows, falling, fluttering up…

Wasn’t it Einstein who characterised this behaviour as the very definition of insanity?

Cayman Islands

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There are plenty of tax havens in the world, but one stands head-and-shoulders above the rest when it comes to notoriety: the Cayman Islands. One never hears or reads of the Cayman islands in any other context.  President Obama singled it out when he spoke about the need to close tax loopholes that are abused by US corporations.  Indeed, he singled out one building in the Cayman Islands – Ugland House – saying that it houses over 12,000 businesses.  He characterised it as “either the biggest building or the biggest tax scam on record.”

So when Malcolm Turnbull, Australia’s new Prime Minister, was looking around for a home for much of his very considerable wealth, why did he choose two investment funds headquartered in the Cayman Islands?

It is normal and proper for senior politicians to place their private wealth in a blind trust, insulating it from their decision-making while in office. Malcolm Turnbull has done this.  But why, when the very fact of his great wealth makes many Australians distrust him, would he choose investment funds domiciled in the Cayman Islands, a territory whose very name has become a synonym for ‘shonky’?

It should be no surprise that the Labour Party has picked this up as a stick to beat him with. He maintains that the tax efficiency of the fund will produce larger profits on which he will in due course pay Australian income tax.  I have no reason to doubt this.  But in heaven’s name why the Cayman Islands?!