Abbott loses credibility on carbon policy

The following letter was published in The Australian on 4 December 2009. I reproduce it here for your enjoyment.

The Liberal Party of Australia has lost all credibility with its rejection of market-based policy responses to climate change ("Abbott’s tax-free carbon plan”, 3/12).

Tony Abbott has committed the Liberals to meeting a 5 per cent emissions reduction target by 2020 through direct action. It appears that this direct action will be a combination of government investment and regulation. By supporting this approach the Liberals are, in essence, supporting the type of command-and-control Stalinist approach that they purport to oppose.

Foolishly the party has adopted a climate change response that involves picking winners rather than letting private market participants respond to incentives dictated by market forces. It seems that the Liberal Party is committed to losing its economic credibility and the next election.

Safeguards for energy users

The following letter was published in The Australian Financial Review on 12 October 2009. I reproduce it here for your enjoyment.

In your "Radical plan to guarantee energy supply" (October 9), much was made of the Australian Energy Market Commission’s recommendation to support greater flexibility in retail energy pricing.

Energy retailers praised the move arguing that the additional flexibility proposed by the AEMC should be seen “as a minimum”.

There was no coverage, however, of the fact that the AEMC emphasised the need for best-practice consumer protections as an important safeguard in a retail market characterised by rising prices under the Carbon Pollution Reduction Scheme and a more flexible price setting mechanism.

Energy is an essential service that all Australians require to participate effectively in society. Once the CPRS comes into force, compensation through the tax and transfer system will be insufficient on its own to protect the most vulnerable energy consumers from impending CPRS-related price increases.

A robust consumer protection framework is needed which provides consumers with access to payment plans and other hardship assistance as well as protecting them from unfair disconnection.

Victoria, the nation’s most competitive energy market with the most flexible price setting arrangements, provides a good model for the national consumer protection regime currently being considered by the ministerial council on energy.

Civil liberties

Jack the Insider commented on the new laws announced in New South Wales and South Australia to restrict the activities of Outlaw Motorcycle Gangs. He makes a very valid point about how quietly the Australian public accepts restrictions on civil liberties that are a foundation of our democratic system.

Since the September 11 attacks on New York and Washington, many governments hastily implemented "anti-terror" laws. Such laws often proved poorly designed, subject to abuse and a catalyst for sloppy investigative work. In countries like the United Kingdom, this led to the laws being water down. Australia has also had limited success in the application of similar legislation. It seems that police anti-terror investigations became lazy because the requirement for police to have sufficient evidence to charge a person within 24 hours of their arrest was removed. There have been few successful prosecutions despite a number of arrests.

Now, it appears that New South Wales and South Australia have not learned from the experience of poorly designed anti-terror laws and are hastily throwing together similarly draconian regulations. In light of recent violence perpetrated by Outlaw Motorcycle Gangs, both states are seeking to introduce laws that allow the government to ban any organisation that it deems to be "criminal".

I acknowledge that new laws may be needed to respond to organised crime and/or terrorism. However, it is important that any such laws are well designed, thoroughly debated and respect the fundamental freedoms that have maintained our democracy for so long. It is equally important that ordinary Australians examine government policy proposal with a critical eye and with thought to the potential consequences of such policy responses.

Schapelle Corby

I wrote a letter to the newspapers following the conviction of Schapelle Corby for drug trafficking in May 2005. They did not publish it. However, I came across it in my files and thought I would include it here. It responded to the emotive attacks on the Indonesian judiciary in the wake of their verdict. I read today in The Daily Telegraph a story about Corby and I remain amazed by the continuing interest in her case four years after she was convicted. The letter appears below.

Generalised criticisms of the Indonesian judiciary are unwarranted and unhelpful. The Schapelle Corby guilty verdict will inevitably lead to emotional criticisms of the Indonesian legal system from certain sections of the Australian community. This is an entirely natural response given the divisive public debate over Corby’s guilt or innocence. However, it needs to be remembered that many in the community applauded the guilty verdicts in the trials of the Bali bombers as evidence of reform and balance in the Indonesian judiciary. Criticisms of specific inadequacies of a verdict are preferable to generalised value judgements of a sovereign nation’s judiciary. These double standards can only serve to damage perceptions of Australia in Indonesia.

Quote in The Jakarta Globe

The Jakarta Globe quoted me briefly in their article on smoking. The editors of the Globe have taken a noble anti-tobacco stance. You can find the article here.

Range Voting

My Post article on the Indonesian electoral system provoked a number of email responses with further ideas on electoral systems.  Amongst these were emails from two campaigners who advocate in support of range voting (also known as score voting).  In their opinion (and I have some sympathy with their position) range voting is the ultimate democratic preferential voting system.  In range voting each voter gives each candidate/party on the ballot list a score out of ten or out of one hundred.  The winner is determined by the candidate/party with the highest average score at the end of counting.  It is very similar to the system of determining a winner in a diving competition.  

I maintain that this system is to complex and ungainly for most electorates.  However, the more I have thought about it, the more I find the system attractive at least in an academic sense.  If you would like to know more I would strongly recommend that you check out the range voting website to understand the beauty and complexity of this novel electoral system.       

Anti-smoking presentation

My recent presentation to the Jakarta Foreign Correspondents Club received some media coverage on Sky News Australia and on a radio programme called Asia Calling. Unfortunately, the selected quotes on that radio programme were not, in my view, the best of the presentation. Please enjoy the following linked stroies at Asia Calling (English, Bahasa Indonesia) and Sky News.

A preference for a better electoral system

The following article was published in The Jakarta Post on 2 April 2009. Unfortunately, the newspaper edited several sentences to render them gramatically incorrect. The unedited version appears below.

To select the composition of the House of Representatives and to choose the next President, Indonesian electors will go to the polls on three separate days over a period of five months. Does Indonesia need all of these elections?

On each of the three days, millions of Indonesians are engaged to assist the National Elections Commission (KPU) in administering the election across this vast archipelago. The sheer expense of overseeing these three polling days (it will come to over a billion US dollars for the 2009 poll) is a significant burden on the national budget.

Furthermore, the lengthy election season and seemingly endless campaign results in elector fatigue and apathy. In 2004, this was evidenced by a fall in participation by several percentage points in the second round of the presidential poll.

By September, most voters would like a government to be installed and tackling Indonesia’s public policy challenges. Instead, under the current system, time and money is wasted as the top two presidential candidates continue to campaign for the job. The House of Representatives, elected five months previously, does not know who will become President. Consequently, it cannot pursue its legislative agenda with certainty.

The current electoral system could be condensed in a way that still achieves a similarly fair and mutually acceptable result along with improved voter participation. Specifically, the second round of the presidential election could be foregone in a manner that still allows electors to express which of the top two candidates they prefer.

This would involve the replacement of the current presidential voting system with a preferential voting system called instant-runoff voting. Instant-runoff voting is currently used to elect the President of Ireland as well as members of the Australian House of Representatives.

Under this approach, electors would rank candidates for President in order of their preference. If no candidate receives a clear majority of first preference votes, the outcome is then determined by the flow of preferences. First, the candidate with lowest number of first preference votes is eliminated from the contest. The ballots that gave first preference to this eliminated candidate are then allocated to the remaining candidates according to who was the next preference on each ballot paper. This process is repeated until one candidate obtains a clear majority of votes.

Ostensibly, this system achieves the same outcome as a multi-round election on a single day. Voters make their choice clear with one ballot paper, at one polling station at one time. If their favourite candidate does not win, their preferences still influence the eventual result.

For Indonesia, there are many potential benefits to this system. First, it would be cheaper. It eliminates the need for a five month long campaign and three different election days.

Second, it would be more efficient. The President and Legislature would be elected in the space of two, rather than five, months. This allows the government to get down to business with certainty rather than wasting time and money on campaigns.

Finally, it would improve voter participation. Increasingly apathetic Indonesian electors are more likely exercise their democratic right to choose their president if they can do so on a single day.

It is too late to enact this important reform for the 2009 election. However, it should be considered in the development of the 2014 election laws. Indonesia’s democratic system is still young. Appropriate fine-tuning could improve it significantly.

The writer is an advocacy consultant to the Indonesian Consumers’ Organisation (YLKI).

Colless on the Governor-General

Malcolm Colless wrote an article on Australia's recently appointed Governor-General and her current controversial role promoting Australia's foreign policy agenda in Africa.  Unfortunately, his article contained an historical inaccuracy.  I corrected this and provided my own brief opinion on the issue on the article's online comments page.  

Populism lurks in the wings waiting to take centre stage as a villainous protagonist

It is likely that 2009 will be dominated by the global economic crisis. In the absence of some even greater disaster befalling the world, the most pressing item on the agenda of most national governments will be to soften the impacts of the crisis on their respective economies.

To this end, many governments are implementing fiscal stimulus packages. These packages usually include a tax cut/cash handout coupled with public investment in infrastructure. Such packages are aimed at immediately boosting demand and employment while improving the productivity of an economy.

Most countries have also responded to the crisis with deep cuts in interest rates, which are intended to stimulate demand and the supply of credit.

The contents of fiscal stimulus policies are contestable. The balance between cash and investment is hotly debated. As a general rule, parties on the right have generally favoured tax cuts while parties from the left lean towards infrastructure investment.

Despite frequent political disagreements on the composition of stimulus packages, there is an increasing consensus that such government expenditure is an appropriate response to the crisis.

Unfortunately, government and political responses to the financial crisis have not been limited to crafting prudent stimulus packages. If they had, we would have less to worry about. We could have braced ourselves for the rough economic ride in the hope that some relatively sensible responses to the crisis would help minimise the impacts of the bumps along the way.

Governments and political parties the world over are pursuing agendas other than simple fiscal stimulus in light of the crisis. It is these agendas that are great cause for concern because of their potentially disastrous long-term consequences.

In particular, it has recently become fashionable to push an anti-market populist agenda. There is an increasing propensity of mainstream politicians of a particular ideological inclination to use the financial crisis as an opportunity to push long their long held anti-market views.

Criticism of the market was an inevitable by-product of the financial and economic crisis.  There are many that blame the market system for wiping out trillions of dollars in wealth, ruining livelihoods and destroying hope for any economic growth in the coming year. A number of world leaders, from Russia to Venezuela, have been gloating over the apparent failure of the capitalist system.

Some of this sentiment has been infecting more mainstream political leaders as well. Kevin Rudd, the Australian Prime Minister, in an attempt to position himself as a global opinion leader, suggested that Hayekian policies and neo-liberalism had failed. He argued that the financial crisis was an epoch changing event that marked the end of “the great neo-liberal experiment”.

Mr Rudd’s position is flawed because there has in fact been no “great neo-liberal experiment”. Certainly, Reagan and Thatcher were zealous in their application of free market ideas but their worst excesses were tempered when they were replaced in government. The reality is that market fundamentalist policies have been softened by the strength  of social democratic parties, social realities and democratic political systems.  On the whole this has improved government policy.  

Admittedly, Mr Rudd does acknowledge the importance of markets and market principles. However, by painting a picture of vanquished Hayekians and the end of neo-liberalism, Rudd polarises debate when consensus should be sought. This serves to add fuel to the fire of anti-market sentiment when it is least required. Many of the more extreme European social democrats, who have long been wedded to regulations that stifle economic growth and social innovation, will no doubt be pleased by Mr Rudd’s intervention.

The trouble is that there are insufficient voices talking up the benefits of markets and market mechanisms as an approach to achieving beneficial policy outcomes. Even the leadership of economically liberal political parties are becoming reticent about vigorously advocating pro-market agendas even if they make sound policy sense.

Let us not forget the importance of market-orientated ideas in the regulation of greenhouse gas emissions and other negative externalities. The great efficiency gains that are a result of introducing market principles into standard government practice should not be overlooked. Let us also not forget the great benefits to consumers and overall wealth that have resulted from opening economies to global competition.

The potential consequence of the anti-market ideas that are currently getting easy traction is a return to inefficient and unnecessary command and control style government policies. These often serve to limit individual choice, reduce competition, increase costs/prices, disadvantage consumers and, ultimately, slow the rate of economic growth. Simply put, the drive to regulation that is now in vogue raises the spectre of suffocating over-regulation.

Without a pro-market consensus voice talking up the benefits of effective markets and the use of market tools/principles to achieve policy outcomes, some of the market orientated policy innovations of the last twenty five years may be lost in a wave of anti-market sentiment. I, for one, have been happy with 25 years of economic policy innovation in Australia and have not seen this time as a great neo-liberal experiment despite transgressions by the Howard government (most notably in labour market policy).  

The problem is that anti-market positions can be popular. It is dependent on our political leaders to avoid scoring political points in a time of crisis. They should be working to find economically sound policies to soften the crisis and shield the people from its worst effects without resorting to cheap anti-market populism. The view should be towards long-term sustainability rather than the ballot box.

Policy and regulatory responses to the crisis should pass the good policy test. New policies should be well targeted, evidence based, well designed, the least cost option and with expected benefits outweighing expected costs. In most cases populist and anti-market policies fail this test resoundingly.

Review: Roy Ayers

Java Jazz 2009, Jakarta Convention Centre, Cendrawasih Room, Saturday 7 March 2008, 23:30

Roy Ayers was the last performer of the night. Eight hours of jazz had preceded him on ten different stages. You would think that the audience may have been “jazzed out”. They were not. A slow hand clap preceded his slightly delayed appearance. When Ayers' irrepressibly smiling face appeared, the crowd cheered in approval.

The festival’s earlier performances suggested that Indonesian jazz fans were appreciative but not vocal. Polite clapping, as opposed to cheering, had greeted well-executed solos and performances. Roy Ayers, however, brought out the more base instincts from the well-heeled Jakarta crowd.

The reasons for this were clear. The jazz was hot and the show was great. The audience was engaged right from the start as the bass played the opening groove for an extremely fast paced and chaotic take on Dizzy Gillespie’s classic A night in Tunisia. Ayers’ version featured a screaming saxophone solo that at one point featured two saxophones from the one player. It concluded with a bass solo of such intensity that all the other band members were required to theatrically towel off the soloist as he completed his moment in the spotlight.

Ayers’ and his friends were excellent showmen. The towelling of the bassist set the tempo for the theatrical side of the show that featured many other crowd pleasers such as summarily choreographed dances by Ayers’ along with his back up vocalist. The awe-inspiring drum solo somewhere near the middle of the show combined musical prowess with the theatrical. At one point, the drummer’s hands energetically flailed his drums while his sticks remained perfectly balanced on his head. The crowd cheered.

Ayers' six piece ensemble, supplemented by two guests, was tight. Transitions between the inevitably frenzied solos back to the groove were smoothly executed and pleased the crowd, whose heads bobbed in time with the funk fuelled rhythms. The lack of a sufficiently large horn section was addressed with the judicious use of a synth horns to fill the gaps. Ayers’ was generous with his guests, a trumpeter and percussionist, giving them plenty of stage time to dazzle the crowd with their brilliance.

Ayers’ right hand man, who interchanged between a Rhodes piano and saxophones, was a star. His seamless shifts between rhythmic contributions on the keys to dynamic saxophone solos served provided excitement to each number.

Ayers’ own contributions on the vibes were not as frequent as one would have liked or expected. However, when they came they were smooth. His electrified vibes would sometimes produce strangely altered sounds that caused watchers to momentarily question the source (vibes or synth?) of the melody until they noticed his furious mallet work. The relative scarcity of Ayers’s soloing can be attributed to his role as the unquestioned band leader who was active in controlling the direction of each number. It was in this role that he directed such hits as Everybody loves the sunshine, Love will bring us back together, We live in Brooklyn baby and Hey uh, what you say come on over the course of the evening.

The clearest thing to be taken from the night was Ayers’ infectious love of performance. Smiles, laughs, jokes, dancing and crowd involvement were the order of the evening. More than anything else, it was this that transformed the usually placid Jakarta crowd into a more vocal animal.

Ayers’s thanked the crowd, they cried for more and the lights came up far too quickly. This was the biggest disappointment of the night.

Greg Sheridan article

Greg Sheridan wrote an opinion article on the Victorian bush fires in The Australian. I agreed with most of what he said. The majority of his views on the issue were well reasoned and appropriate. The fact that Greg Sheridan wrote an article that contains quality opinion that I largely agreed with is remarkable. Such an occurence is so rare that this alone was almost worthy of note on these pages. However, returning to his usual form, he ruined his article with divisive concluding remarks that linked the response to the bush fires with Israeli responses to terrorism. I criticised this on the article's online comments page.

Victoria burning

I am deeply saddened by the consequences of the fires that have burnt out of control in Victoria for the last few days. I have spent good times and have great affection for a number of towns/hamlets that have been severely damaged by the fires. Marysville, Narbethong, Buxton, Taggerty and the beautiful strip of country at the foot of the Cathedral Range that I love so much will be reconstructing and recovering for many years hence. I feel for the large number of other Victorian communities that are similarly affected. It will take years, if not a lifetime, to relieve the pain associated with the loss of close family and community members. My thoughts are with all Victorians who have lost friends, family, property and treasured environments as a result of this disaster.

Soccer match

I am introducing an editorial policy of including all of my media appearances, where possible, on this blog. Therefore, I furnish you with the following link from ABC radio's AM programme: Socceroos held to a draw in Jakarta.

The same story was also broadcast on Radio Australia's Asia Connect programme and is available here.

The video linked to this ABC Online article also includes a brief appearance by me.

Oil price decline: A lost chance to get rid of a bad policy

The following article was published in The Jakarta Post on 2 January 2009. It was syndicated in The Brunei Times on 3 January 2009. I have reproduced it for your reading pleasure.

The Indonesian government has once again lowered the subsidised price of petrol. Since last week, the price of premium petrol sold at Pertamina has been set at 5,000 rupiah per litre. The falling international price of oil has allowed the government to take this step without seriously jeopardising the budget bottom line. President Yudhoyono must feel great relief that he has been able to reverse the most unpopular decision of 2008 before he faces re-election in 2009.

Unfortunately, the government did not make the decision that was needed. In saying this, I am not suggesting that the petrol prices should have remained constant. On the contrary, the current circumstances would seem to warrant a reduced price of petrol. However, this price reduction should have taken place outside the constraints of retail price subsidies. The government should have seized the opportunity to allow retail petrol prices to float in line with market prices. In all likelihood, the price of petrol would have fallen from the previous high of 6,000 rupiah a litre. By following this course, the government would have been in a stronger position support the economy and the people of Indonesia in a time of increasing international economic uncertainty.

Subsidising the retail price of petrol is poor public policy. It is of far greater benefit to the rich and middle classes than it is to the poor. The subsidy represents a government welfare payment to middle class people in place of development and welfare projects that benefit Indonesia’s most disadvantaged. To highlight why this is the case allow me to provide you with two hypothetical examples.

The first example is that of Suparman. Suparman lives in Bogor. He works in central Jakarta in a bank. His monthly salary is 13 million rupiah per month. He has recently received a pay rise and has saved enough to purchase a house and a brand new Toyota Kijang Innova. Each day he drives to work along the toll road that links Bogor to Jakarta. On his salary, Suparman does not struggle to pay for food, healthcare, education and other essential goods/services for him and his family. Each month, he spends around 1,500,000 on subsidised premium petrol. Assuming a petrol price of 5,000 rupiah per litre and a government subsidy of 300 rupiah per litre, the government subsidy is worth 90,000 rupiah each month to Suparman.

The second example is that of Suprapto. Suprapto is a farmer just outside Wonosobo, Central Java. He grows chillis. His small landholding provides an income of 700,000 rupiah a month. He lives in a small wooden house on his land. He is the proud owner of a 1976 Vespa that his father gave him as a younger man. Suprapto uses his old Vespa to get around the village, to take his products to the market and to purchase supplies for his farm as he needs them. Although Suprapto can afford to buy food for his family each month, he struggles to cover the costs of educating his children. He is afraid that if he or his family were to get sick they would not be able to afford the high cost of healthcare. Each month Suprapto spends 80,000 rupiah on petrol. Assuming a petrol price of 5,000 rupiah per litre and a government subsidy of 300 rupiah per litre, the government subsidy is worth 4,800 rupiah each month to Suprapto.

How can the government justify a policy that can result in a relatively well off person like Suparman receiving 90,000 rupiah a month from the government while a poorer person like Suprapto receives only 4,800 rupiah a month? Can parties like the PDI-P, which protested against the reduction of the petrol subsidy earlier in the year, honestly claim to represent the wong cilik if they support the perpetuation of such inequitable policies?

Continuing to subsidise the retail price of petrol is a misuse of public money. Investment in infrastructure, schools, hospitals, public transport and programmes that provide a social safety net to Indonesia’s poor are all better options that will provide returns long into the future. Furthermore, it is investments such as these, particularly in infrastructure, that will have a stimulatory economic impact to support Indonesia’s economy in the global downturn.

Policies that involve subsidies on the retail prices of goods are devilishly hard to reverse. If a government artificially insulates consumers from price rises, the consumers become dependent on the low price of the good. As prices rise, pressure is placed on the government’s budget as it maintains the price. Any attempt to remove the subsidy is greeted with anger by the consumers that have built artificially low prices into their expectations.

Significantly lower oil prices were a gift for the government. They presented the opportunity to remove a damaging policy and not have their budget held hostage to a fluctuating international price for oil. They should have seized this opportunity. It was perhaps one of the only times that they could have taken this welcome step without unduly affecting the nation’s consumers. Unfortunately, however, Indonesia is entering an election year. Undoubtedly, this fact guided the government’s hand as it took the politically easy road.

The writer is an advocacy consultant to the Indonesian Consumers’ Organisation (YLKI)