Thursday, September 28, 2006

The End of Democracy

Now that is one heck of a title, but there is some interesting evidence mounting that democracy as we know it is coming to an end. That view of democracy that we have grown used to is one of representatives being chosen by the people and that this will be a process of merit, through the process of first convincing people to support you and then the electorate at large.

The creation of political parties was not a threat to that process, in fact it added to the process. The party brand communicated something about your philosophical stance, and the process of party pre-selection created a process of contest where potential politicians honed their skills.

However, in the modern era the collapse of party memberships and the creation of more electoral and ministerial staff has created the era of the "stack". This was a device most familiar to the ALP. Recently two leading (factional) warriors of the ALP have outed the behaviour in Fabian Society speeches. The first contribution by Rodney Cavalier asked Could Chifley win Labor preselection today? The second by Robert Ray asked Are factions killing the ALP?. They both conclude that it is not factionalism per se but the apparatchiks who are.

Back when Labor was still ruling supreme in Canberra and Alexander Downer was attempting to be Liberal leader, Gerard Henderson wrote a history of the Liberal party called "Menzies' Child". In it he opined that the Liberal party needed to learn the skills of developing the professional politicians that the ALP had learnt.

However, I don't think he expected the outcome that we saw described in the ABC Four Corners program The Right Stuff. That this was not merely inflammatory or one off has become clear with the more detailed description in John Hyde Page's excellent read The Education of a Young Liberal.

It is an extraordinary turn of affairs that the people of NSW and Australia at elections in 2007 will not be offered a team of candidates whose skill is policy analysis or their ability to argue a proposition, but their ability to survive in the battle of the application of patronage.

Wednesday, September 20, 2006

Political Blogs

Observant readers (if I have any still) will note I've added two politicians blogs to my blogroll. Join me in thanking Senators Andrew Bartlett and Kate Lundy for trying to keep democracy real.

I was hesitant to add them and sort of thought I should go looking for a good Liberal blog but relying on the Grods review of political blogs it just doesn't look like there are any out there yet.

If anyone reading this knows of good politician blogs they might like to let us all know.

Monday, September 18, 2006

The Coming Collapse of China

The Economist has included a survey that has again marvelled at the impact of the emerging economies of India and China.

The lead article concludes;

But regardless of how the developed world responds to the emerging giants, their economic power will go on growing. The rich world has yet to feel the full heat from this new revolution.

The Economist is of course but one of a growing list of commentaries on the wonder of the growing emerging economies. Living in Australia it is hard not to ignore the impact the growth in China has had, as it is the source of our resources "boom". However, it is fascinating to note exactly how little attention our politicians seem to give it.

Two examples. I was listening to Peter Costello's budget speech this year and noted how according to the speech all the wonders were of the Howard Government's making and no mention of China. And today I was at an ALP forum where WA Prenmier Alan Carpenter was extolling the wonders of their 14% growth as if it was all the doing of the WA Government and very little or no mention of China.

Yet I have on my bookcase a little book called "The Coming Collapse of China" by Gordon G. Chang. The volume poses some simple questions like how long the people will remain subjegated, how long the West will abide by the WTO Charade, how long investment can be expected to continue in a regime that doesn't properly secure the interests of investors, how the state owned enterprises will unfold and most significantly how stable the Chinese banking system is.

I would not dare to suggest I know one way or the other what the future will bring. However, the list of potential triggers is so great and the number of mitigants so low, that the possibility of collapse should be in everyone's scenario plans and quite reasonably in the near term. Certainly a collapse in China would be a far more significant shock than the Asian currency crisis (and one should note it was just before the collapse of these economies that commentators had decided to agree that the Asian Tigers would continue on their high growth paths for the foreseeable future). There seems little evidence that there are any reasonable plans for the sudden and severe contractionary effects it would have on the Australian economy.

The trade deficit and the further impact of loss of minerals exports would make any monetary expansion highly dangerous as the immediate consequence would be to increase imports against declining exports. Fiscal solutions of expanded Government programs of nation building may be ignored as being archaically Keynesian, but even if implemented would take a while to ramp up.

Perhaps all the talk about infrastructure planning might be well placed - but not for a to do list in the current expansion but as a to do list when we face a contraction.

How to measure Happiness

Under the heading We're richer than ever, but not happier the Sydney Morning Herald last weekend ran one of a series of articles all trying to make the point that growing per capita GDP is all very well but it doesn't seem to make us happier.

While the overall series of articles didn't make it absolutely clear how the measures for happiness were derived it seems there are two methodologies at work.

Method one simply asks individuals the question if they believe "life is getting better". The fact that 25% say it is getting better and 40% that it isn't is then the conclusive proof.

Another method is discussed in another article on the same day - this being asking people to rate their happiness on a scale of 1 to 10 and then comparing results between countries and between time periods.

Both these methods are, however, basically relative scales. They are both in their own way seeking the measure of hapiness from zero to the greatest imaginable happiness.

If, as seems likely a priori, the greatest imagineable happiness is in fact a function of our current happiness or indeed material well-being, it seems highly unlikely that one would ever see significant shifts in happiness.

This might be thought of as causing some kind of problem for a classical utilitarian operating on the basis that a moral society (and indeed an economically efficient one) operates by having each individual operate to maximise his own happiness - but that confuses the direct comparison of the degree of happiness from State A versus State B with the concept of "overall happiness".

And ultimately the article itself revealed the weakness of the survey method. 77% of respondants thought that Government policy should focus on maximizing happiness not wealth. Yet 60% of respondants responded that relationship with their family were the most significant contributor to happiness. Conjoining these would result in a conclusion that Australian people want Government to take responsibility for their family relationships.

It seems to me that this article reflects more on the dangers of letting journalists near surveys than it does on happiness.

Note - this doesn't mean that I actually believe that single focus on the pursuit of wealth is right. It just does mean that I don't think you can conclude that people aren't getting happier.

Tuesday, September 05, 2006


Better late than never. While I've had some success in getting letters published in daily newspapers (including once in the South China Morning Post when in HK for a week) I seem to have lost the knack of writing for the SMH. And really only about half of my AFR letters get a run. So my new policy is to blog any unpublished letters. This one was sent the Wednesday after the Sydney Swifts mighty win in the CBT Grand Final.

I am extremely disappointed in the SMH and its readership over the coverage the paper gave the Sydney Swifts mighty Grand Final win. They have become the first premiere sports team to go through a season undefeated since St George in 1959 and the only one in the era of national competition.

Did their photo make the front page? No - look in sport. Front page of the sport section? No the sixth page.

Meanwhile, on Monday, there are the Swans on the front page for scraping into fourth spot to make the finals.

Perhaps the paper is right to ignore women's sport judging by the lack so far of any protesting letters. Of course, they too may have been simply confined to the "unimportant bin".

And full marks to Senator Kate Lundy as the only actual Minister or Shadow Minister for Sport in attendence. Even the Commonwealth Bank let down the show - not sending the CEO Ralph Norris but some bloke from marketing whose job title sounded like second assistant to the janitor.

Probably a bit unfair on the poor guy from the bank (and a reason for non-publication) but Ralph Norris should have done better.

Friday, September 01, 2006

A question of governance

I have resisted blogging about matters relating to my day job here - but recent trevails over Telstra and its privatisation raise some interesting questions of corporate governance.

The first is about the meaning of "the company". On the Friday of the announcement of T3 we saw the Telstra communications chief repeat some comments about regulation, we saw the CEO back the executive and we saw the Chair say the views expressed were not those of the company. Now the latter of these means the company as constituted by the Board, and I trust the Chair did not purport to speak on behalf of the Board without some clarity from the whole Board as to their view. If that is the case, the CEO expressed a view contrary to the view of the Board of which he is a member. In normal circumstances this would be a terminal position for one or the other.

But not in the case of Telstra. One of the key assumptions of corporate governance is that Boards are responsible to shareholders, but because the average shareholder owns such a small slice it is not in the cost/benefit payoff to any shareholder to put the effort in to address Board issues. Usually though there are big institutional shareholders or proprietorial shareholders who do take that interest. In the case of Telstra there are none.

Telstra does have one majority shareholder, but that majority shareholder wants to sell because its leader (the PM) has a philosophical belief that Government shouldn't run businesses. We know the PM looked at a number of options for "intervention" but didn't. Why? Fundamentally because the overriding philosophical belief takes presedence over the expediency of sorting out the management issue.

Will the situation change post T3? Unfortunately not, as no institution will want to be "overweight" this stock. Worse, the other governance saving grace is the possibility of takeover. But that discipline doesn't apply to Telstra because of shareholding restrictions.

The contrast to how the 6% shareholder of Telecom NZ reacted when they received bad results is stark. There the investor basically demanded the head of the Chair or the CEO - he got the chair's.

So the privatisation of Telstra perhaps leaves us in the embarassing position that no one is running the show.