Gallipoli

It is that time of year again - getting close to Anzac Day - where the skirmish in the so-called "History Wars" where the significance of the Dardanelles campaign aka Gallipoli is debated.

One side - let us call it the left - argues the whole of WWI was a disastrous consequence of the pathetic European escapade to form global empires, and that the campaign in the Dardanelles in particular was a folly and that it represented the worst of imperialism (as so many tropps came from the colonies) and of the class system (the troops were regarded as expendable).

On the other we have the conservatives who think that the campaign was the making of Australia as a nation, where we came into our own and that it was a noble action as part of a noble cause.

An interesting point is that these two views don't necessarily have to be in opposition. It is just that the conservatives are so desperate to cling to the ANZAC glory story that they cannot admit that the Australian troops may have performed well and learnt a lot from a campaign that was itself futile.

VicN has previously put me on to the truly great The Pity of War by Niall Ferguson. It is an excellent account of the accounts of the war, suggesting in turn that it wasn't as easily avoidable as some might think, nor was it any easier to end. But that its till was monumental.

The latest contribution is from Ross Cameron in the SMH. In a deviation that also seems to want to embrace the "great man" theory of history, his take is to try to defend Churchill's role in the campaign.

It is a trite point to suggest that it was "an empire ending" decision by the Ottomans to enter the war on the side of Germany. An alternative history with the Ottoman's staying neutral probably results in the victors coming down to take them lout anyway, and the decision to side with the Germans was really created by the hostility from the British to begin with.

Both Bobbitt and Ferguson (see earlier posts)label the war that started in 1914 a long war that ended in 1990, it was the war that almost had to happen to end the era of empires, and to decide between totalitarian and democratic states.

The suggestion by Cameron is that if the Dardanelles campaign had been successful, the West could have supported Russia and then the Russians would never have been under the strain that led to the 1917 revolution(s).

The leap that Cameron goes through on communism is extraordinary. To argue that the presence of only 10 people at Marx's funeral in 1883 means that he was an "obscure radical" is to ignore the reality of how widespread socialist and communist organisation was in the first decade of the twentieth century. The revolution in Russia of 1917 merely followed that of 1905. The trigger in both cases was war, but just as France in 1789 ultimately it requires some national pressure to trigger the revolution.

But the fact the Dardanelles campaign failed is the important part, not whether its motives were right. The question is not whether getting relief for Russia was good, but whether this campaign was the way to achieve it.

The short answer is "no". It was a campaign that effectively relied upon accuracy of execution and speed - it failed because it was delayed six weeks waiting for troops from the UK, people were landed in the wrong place and the Turks were able to get defences in place (also in part because the extent of the Turkish defences were under-estimated).

The second planning error was to not have a plan B. What were they to do if they did not succeed in capturing the heights immediately? (That should be plan C because the land invasion was Plan B after the attempt using naval forces alone failed).

Cameron extends his Churchill praise to the calls he made to support the White Russians after the revolution. That intervention had disastrous consequences, as it more than anything else fueled the isolationism that was the hall-mark of the USSR. Leaving the revolution to the Russians was probably the better chance the West had of the eventual government being more democratic and less totalitarian.

Churchill was neither a goose nor a hero. He was a man in history who happened to be in roles requiring decisions, some of which were good and some of which were bad. Even his decisions that turned out good may well not have been the best available.

It is really hard to escape from the conclusion that the British with their empire and US friends were victorious over first the militaristic and imperial Prussian led Germans and then the totalitarians of left and right because of the strength of the idea of the democracies they ran.

Gallipoli was a stupid campaign, but no more stupid than the rest of that stupid war. For better or worse it was the first time the united colonies of Australia exercised themselves as a unified body in an external affairs way (one of the twin purposes of federation) and did okay. They might have done better in a different battle or with different leaders. But the very nature of that war was of pointless endeavour between armies that were able to incredibly damage each other without prosecuting victory.

It should be remembered for what it was - a tragic loss of life.

Note: I think Cameron seriously errs in writing "Three naval-only attempts failed to secure the Dardanelles so troops (principally Aussies and Kiwis at first) landed on Ottoman soil on April 25, 1915." They were Aussies and Kiwis at what is now known as ANZAC Cove but British and others in the main landing at Cape Helles.

Novae Meridianae Demetae Dexter delenda est

Politics, Economics and Climate Change

Following the idiotic controversy over the comments of Kevin Rudd on climate change it is time for some more analysis of the fundamentals.

Writing in the SMH today Jessica Irvine did a very good job of describing the difference between "income effects" and "substitution effects" of a tax on a specific good, and how you could both impose a tax and pay compensation and hence get a change in behaviour.

She notes that Tony Abbott has said "At best it's a giant money-go-round" but retorts "Sorry Tony, but good economists know better."

In this she is putting more economic theory around the straight-forward explanation that I praised the PM for in her appearance on Q&A.

But is the economics as simple as that? There are two ways of pricing carbon - one is the straight tax, the other is emissions trading. The latter is the ultimate economic orthodoxy on dealing with a negative externality. We lost that because the Greens didn't support it, not because of the coalition.

The Greens have preferred the tax route because they want to spend money directly on climate abatement programs. Gillard has been forced to go the direct tax route because that is the price of Greens support.

All of which makes the slagging off about the Greens and economics interesting. Gillard thinks they "wrongly reject the moral imperative to a strong economy", Albanese says they "tend to be a grab-bag of issues, tend not to have a coherent policy that adds up" while (M) Ferguson says they want to "sit under the tree and weave baskets with no jobs".

Yet the Greens are closer in their policies to the prescriptions of the Henry tax review than anyone else on death duties, health rebates,and higher taxes on super profits.

The criticism of either emissions trading or a carbon tax has a very wide support base - because people just don't understand how it works.

Frank Stilwell in a thoughtful piece outlined a very good reason for this lack of belief in response to price. He wrote;

In the real world market responses can operate quite differently. For example, you would expect to see a market disincentive incentive effect happening now as the price of petrol rises to $1.50 a litre and beyond. However, I don't observe less crowded roads. The availability of good, readily available alternatives to the car is a precondition for getting people to switch. And those alternatives do not just arise spontaneously.

To put it bluntly - for their to be a substitution effect there has to be a satisfactory substitute. In the case of carbon those substitutes will take time to be available.

Industry has argued that it won't make the investments in the alternatives until there is certainty on the price for carbon. But as Henry Ergas has neatly argued (yes I said that)there are reasons why investors should not have faith in the price for carbon being increased to reach the desired levels.

There is nothing in the mere fact of introducing an MBM that irrevocably commits to steadily and progressively increasing the implied tax on emissions. Moreover, it would not be rational for a potential investor in technology development today to assume such an increase in the implied tax rate would indeed occur.

This can be seen by considering two broad scenarios.

In the first, the technologies needed to dramatically reduce emissions do not become available in the relevant future. In that event, it is implausible that governments, merely so as to honour commitments made many years earlier, would increase tax rates on emissions to levels that would cripple their economies. Rather, the likelihood is that any commitments made would be revised or ignored, so that effective tax rates on emissions would remain low.

In contrast, in the second scenario new effectively decarbonised technologies become available at some relevant future date. In that event, governments could, if they so chose, abide by commitments to substantially increase the tax on carbon; however, it is still unclear whether they would do so.

This is quite simply because once those technologies are available, even a modest tax will suffice to create an incentive for their deployment in the marketplace.

While much of this is the kind of reasoning Jessica Irvine pointed out explains why an economist will not bend down to pick up a $100 note (if it were really someone would have already picked it up). But it does flag the fact that there are plenty of reasons why the tax MAY NOT (rather than will not) have the desired behavioural effect on R&D investment.

The error here is probably in thinking that the solution has to be exclusively one or the other - either pricing carbon or merely regulating industry, or regulating down output while compensating for investment in alternatives (the latter being as best I can understand the Abbott alternative).

It seems to me that the best outcome is a bit of everything.

Oh, and one final point for the "we shouldn't act unilaterally brigade". Irrespective of climate change the world's fossil fuel reserves continue to decline. Investing now in creating new energy industries from Australia's abundant resources is the way to building new comparative advantage for the future.

Novae Meridianae Demetae Dexter delenda est