Final Garnaut Climate Change Review

Final report of the Garnaut Review of Climate Change released today. Warning: it’s well over 600 pages in length but if you want to take it on the content page is here or the introductory chapter here.

Much better is a good one-page summary from crikey here.

I think there's much to be welcomed in the report. Clive Hamilton (author of Affluenza and sustainability activist) has done an excellent analysis of some of contradictions in the report so I won’t do an inferior duplication save to note a couple of the key points of debate.

• Garnaut recommends Australia aim for a 10% reduction on route to a 550ppm trajectory but go into next year’s Copenhagen conference pushing for 450ppm. Hamilton notes this odd - not only to pre-signal your negotiating position but also to expect others to sign up to deeper cuts than you yourself have committed to. In Hamilton’s words, lowering expectations is likely to become self-fulfilling.

• Garnaut argues the 550ppm is the most prudent economic approach for Australia, yet Hamilton notes the modelling itself finds little difference in the long-run between the different targets. For example, the 0.1% in GDP growth between the 450ppm and 550ppm trajectory would result in only having to wait another two years to double GDP (2042 to 2040). Essentially, Hamilton argues that the politics (and business lobbies) got in the way of the science. Always a difficult tradeoff in 'independent reviews'.

Paid family leave

On the back of a report from Australia’s Productivity Commission it looks like paid maternity leave may soon be on its way down under. If that sounds odd, it’s because it is – Australia and the United States are the only two OECD countries who don’t have state funded maternity leave (see chart below). So although some people are covered through their workplace, a sizable 51 per cent of employers don’t have any provisions for their employees. (One might note this isn't an entirely fair comparison though, for Australia have been paying a baby bonus of $5,000 for several years).

The PM today said he was prepared to ‘bite the bullet’ and accept the principle of maternity leave (though fudging the precise parameters).

What does the report actually say?

• It recommends paid 'parental leave' of 18 weeks, shared by either parent who is deemed the primary carer. This would be quite a progressive and welcome measure, for most countries provide maternity leave which clearly reinforces a gender bias and takes no account of modern family dynamics. However, either the media have failed to read the actual report (perhaps understandably given it's another gruellingly long 300+ pager) – or have failed to pick up the difference in what the PM is saying – for he has cannily and subtly said he’ll accept the report but switches into the language of ‘maternity’ rather than ‘parental’ leave.
  


• It recommends making all family types eligible, including same sex couples. Again to be welcomed, although may well get challenged by a number of the Opposition and fringes of the Labor party in the legislative phase.
  


• Suggests paying a rate equal to the minimum wage of $540 per week. This seems rather stingy compared to most European countries (who pay a rate based on a proportion of pre-birth income), but there are some decent arguments advanced for the flat rate e.g. that it’s more equitable, and many higher income families will have privately negotiated family leave benefits. It also means the scheme can be introduced at a relatively low cost to the taxpayer – establishing the principle which could be scaled in future.
  


• Estimates it’ll cost $530m per year – $450m picked up by the taxpayer and $75m by employers. Indeed, all that employers are being asked to pick up are employees' superannuation (pensions contribution), though business groups are still calling it an ‘excessive and unnecessary burden’.
  

Buried on page 248, the Commission rejected an interesting rival proposal from economist Joshua Gans for a 'return to work' credit – providing tax benefits to employers tied to family leave schemes. This would theoretically be more attractive because it incentivises effective return to work and also because the more income-based reward would encourage more men to take parental leave – but was ultimately rejected because of potential deadweight costs and uncapped cost exposure. A shame because they'll no doubt be a lot of deadweight in the preferred version and it's not as though costs would be that exposed. After the birth rate is pretty predictable and it's unlikely that many would go to the lengths of having a baby and manipulating income records solely to extract a few extra hundred dollars from the Government...

Kevin 747

During the election campaign Kevin Rudd was labelled ‘Kevin 24/7’ for his prodigious work rate and seeming lack of fatigue. Amusingly, he’s now been dubbed ‘Kevin 747’ for his supposed too frequent overseas trips. According to one Liberal frontbencher "he’s the Prime Minister of Australia, not the emperor”, which perhaps speaks more of his personality than propensity to jet off. However, it’s a bit reminiscent of criticisms of Blair in the early days, and there's growing rumbling about the trips, so is there anything in it?

• Too many? This was the PM’s eighth overseas trip this year (and 43rd day out of Australia). That doesn’t seem too many to me – you’d expect to have to do one or two more in your first year in office to establish yourself and there have been a number of extra things in the diary in 2008 (like the Olympics, G8 which Australia were invited to as a non-core participant, and the conference of the South Pacific leaders).
  


• Too costly? I’m sure they’ll be some ‘scandal’ in due course when a journalist FOIs and reports the combined cost of the trips. But in reality it’s likely to be a pretty insignificant amount in the scheme of things.
  


• Use the telephone? No doubt he does this too on a regular basis, but establishing the personal connections is pretty vital especially when new in office.
  


• Ignoring domestic priorities? The PM has a cabinet team of 18 ministers focusing on the domestic side, so Australia’s not going to fall apart because he’s out of the country for a few days. No doubt he’ll also be taking a whole host of domestic briefs with him, and his officials will have been tasked up with things to have ready for his return. In any case, the pretext to the current trip to the US – on the financial crisis – is a good example of where foreign and domestic issues overlap.
  


• Not the role of the PM? Unfortunately there aren’t many elected emperors to compare with whether or not foreign trips are what PMs should be doing. But try the opposite – would you want a PM just sitting brooding in Canberra rather than getting out and about and bringing new ideas back to the country?

Compulsory voting

I discovered today that Australia’s well-known compulsory voting first began here in Queensland (in 1915) before being enacted nationally after the First World War. Australia is actually one of the few countries that not only makes it compulsory to vote but also enforces it, although the fines look pretty small at $20 a pop.

The arguments for compulsory voting seem to be that you get a better representation of the public (and hence presumably policies are more reflective of society), and that it ensures everyone is doing their ‘duty’.

I’m not convinced though for a few reasons:

• First, voting is a right not a duty. People might have died in defence of democracy, but that doesn’t mean you should be forced to participate in it against your will. In a liberal society you should have the freedom to opt out of decision making. Indeed, by not voting it could be interpreted as you implicitly saying you are broadly satisfied with how things are – with your right to vote a future safety valve if and when things get too bad.



• Second, if one is worried about representation there are probably better ways to increase turnout that avoid the costs of compulsory voting. Like postal ballots, e-voting, more conveniently located ballot boxes, lengthened voting periods, targeted campaigns on underrepresented groups, lottery rewards and so on.



• Third, forcing everyone to vote means the median voter will be significantly less well informed than in non-compulsory systems and may skew the sophistication of debate downwards. Imagine you lined up a randomly selected group of 100 people by order of how interested and knowledgeable they were about politics. In a compulsory voting system the median voter, and hence the level at which the terms of debate would likely revolve, would be the 50th in line. I’d imagine by the time you’re getting this far down they would be unlikely to have clue about what the parties actually stand for, the virtues of different policy approaches or perhaps even able to name any political leaders. For example, a few years ago a survey found 42% of British people were unable to name a single member of the Cabinet. Clearly, a lot of people just don’t give a damn. In non-compulsory systems we seem to be converging on around 60% of the electorate voting in a post-cleavage society. So the median voter is then the 30th in line – which is probably getting a bit closer to people who have a reasonable knowledge of what they are actually doing in the ballot box.



• Fourth, compulsory voting increases the likelihood of the ‘donkey vote’. This is where people vote solely on things like the order the candidates are listed in. A good example of this was the Werriwa by-election near Sydney in 2005. In this example, the ‘Australian’s Against Further Immigration’ Party managed to come fourth out of sixteen parties, polling a surprising 4.7% of the vote after they started top on the alphabetically-sorted ballot paper.

The storms continue...

With the sky still filled with electricity I've decided to make this weekend's specialist theme lightning photography. Managed to snap a few more good ones.

Let's face it, it's probably the same size of niche audience as the policy blogs...

Brisbane Weather

Was just about to head out for the evening and then the tropical weather started. Being close to the tropics is a bit of a tradeoff really - twice the rain, but then you do get 300 days of sunshine a year.

Just snapped these from my balcony while I wait for it to pass...

American Journeys

I went along to the Brisbane Writers Festival today, a small but growing annual event. (Rather ironic for a collection of esteemed wordsmiths that the title glaringly omits the plural possessive apostrophe but never mind).

Most interesting was a talk by Don Watson, the speechwriter to former Prime Minister Paul Keating, author of a bestselling book on this period, and one of Australia’s rare genuine public intellectuals. His latest book, American Journeys, offers his poetic reflections travelling the US by rail.

There are a lot of obvious things to say about America but Don Watson says them with particular wit, power and charming anecdote. The main themes are America’s religiosity, boundless optimism, pragmatism and heterogeneity around a small number of very strong common values and symbols (like freedom, the flag, respect in the Office of the President).

With the exception of religiosity his talk stuck many a chord with my own reflections of Australia. Like America, there’s a palpable frontier spirit Down Under, people are judged more on what they do than what they think, the underdog is championed while success unabashedly celebrated, there are high levels of national pride, and material values and popular culture prevail.

Yet… there’s a much stronger emphasis on social welfare here, and money isn’t seen as everything, so perhaps Australia’s something more of a half way house between Britain the US. Anyhow, another good read from a smart man.

Health prevention in Victoria

A novel preventative health – work insurance model is operating in Victoria and appears to be delivering impressive results. Under the ‘WorkSafe’ scheme employers pay variable health premiums based on their health and safety record and ability to safely return and rehabilitate injured employees back to work. So over time this should reward employers who invest more in the health of their workforce. And important too – with ever more of us spending our working days slumped over a computer and likely living with one long-term condition or another, the workplace is becoming one of the front-lines of modern health systems.

Anyhow WorkSafe has delivered savings (in terms of lower employer premiers) of $1bn since 2004, with Victoria now having the second lowest employee premium levels in Australia. In addition to recycling profits back to employers, the scheme’s further surpluses have enabled creation of a $600m preventative fund.

This is providing occupational therapy services and other health interventions to partner and locate with employers, particularly SMEs. Incidentally this was a big theme of the UK’s recent Next Stage Review of the NHS led by Lord Darzi, although with no such innovative funding model.


Could it work in the UK?

The UK equivalent is something called Employers Compulsory Liability Insurance, or ‘ELCI’. In about four-fifths of cases ELCI premiums are non-variable, so there are very weak incentives for employers to actually stump up much to look after their employees’ health. In the past it’s been argued that reform would prohibited by the large asymmetries in the market – in other words that obtaining reliable information on employers’ health records is near impossible or very costly. Another argument made against reforming ELCI has been that it could be unfair to small employers who are less able to make investments to reduce likelihood of claims and who would be particular exposed to a spate of claims.

But I think the Victorian model goes someway to rebutting these. In the first place the asymmetries argument seems to have been got past in Victoria (and it’s less than a tenth the size of the UK) through clear statutory obligations to report health and safety records and risk-based use of inspectorates. And on the small employers point it’s quite easy to design in some rules which get past this – like limiting annual escalation in premiums for particular types of employers or in particular circumstances. Moreover, the Victorian model does all this in quite an efficient way. So rather than run the insurance as a state bureaucracy it has a list of preferred and accredited providers – so the state holds the ring and determines the rules but lets the market work within these parameters.


Anyhow a good excuse to show the classic health inspector clip from ‘That Peter Kay Thing’ – scroll in to 4 minutes….

Australian innovations in education and welfare policy

Two novel additions to the policy debate today.


In Canberra, National Party member John Williams reveals his thinking on how to more actively incentivise return to work. According to the senator the unemployed need only be given a "sharp poking with a cattle prod" to get them back to work. In justifying what some of those damn wooly liberals might consider a little too harsh a treatment Williams argues "the family farm cannot afford to pay wages when the person never shows up for work." Quod erat demonstrandum.


More details to be found here.



Meanwhile, Queensland parliamentarian Rosa Lee Long has today put the case for reintroducing corporal punishment in schools. According to Rosa, while the current "go soft" approach has failed, a "short, sharp caning" would be much more effective. Apparently, it's a "great deterrent". More details on her proposals here.

Rapid demise of the NSW Strategy Unit

More positive feedback following my visit to the now collapsed NSW Government in the papers (see post on strategy and subsequent collapse) :


"Several sources have told The Daily Telegraph that in the government's dying days Mr Walters spent more time in Ms Meagher's office than he did at his office in Mr Iemma's newly created "Strategy Unit".

The outfit, whose four weeks of operation still sends even the most hardened political insiders into hysterics, was immediately abolished by the new Government."

Another success in spreading the brand...

A Flawed Federation

Various folk from across Australia's political and policy world met last week at a grandly titled ‘Making Federalism Work’ conference organised by ANZOG (the Australian and New Zealand School of Government).

This was one of the most high profile of a raft of constitutional debates going on at the moment, all of which have been highly amusing to watch as an outsider. Everyone pretty much acknowledges there’s a major problem, but tred softly in suggesting how to solve it. What’s making it increasingly unsustainable though is having an active and progressive Labor administration in the form of Kevin Rudd in Canberra, where the previous Howard government stumbled through with the status quo because they had few ambitions.

What exactly is the problem?

• Vast duplication of roles: there are nine parliaments in Australia, each with their own entire government bureaucracy. (Note: under which there a further 673 local governments). So that’s nine police ministers and nine separate departments filled with bureaucrats each working on their own policing policy. In a country of 21 million people there just isn’t the talent to spread around either the political or bureaucratic arms – which is why you end up with dodgy politicians and poor performing public servants.
  


• Lack of policy coordination: different states often create radically different policy frameworks. That does give rise to some innovation, but is a major drag on productivity. For example, many states pursue highly protectionist policy – so qualifying in a trade in Victoria doesn’t necessarily mean you can practice that trade in New South Wales, which will have different qualification levels, professional associations and accrediting bodies. One estimate has put the various costs to the economy at $9bn a year.
  


• A political ‘weakest link’ game: even where is genuine desire to coordinate policy, in practice it requires the will of all the nine political governments to implement. This is a major barrier to progress, for it only requires one government to veto a policy for it to be held up (which happens all too often with governments of different political stripes).
  


• Funding not aligned with accountability: this is unnecessarily jargonised as ‘vertical fiscal imbalance’ but basically means the Commonwealth government control a lot of the funding but the States do most of the delivery of public services. So in the end neither level of government is properly accountability to the electorate – with an inevitably resulting political ‘blame game’ between the two.

The defenders of the Federation

A number of mostly bizarre arguments are made in the defence of the status quo. Though dressed up in different forms the basic argumentation goes:

• “Australia is such a varied and geographically huge country you need different governments to address the different needs.” This is odd, because the main point should not be size but rather diversity. In fact variations in service delivery challenges in Australia seem to me to be predominately within rather than between states. So Sydney (in New South Wales) and Brisbane (in Queensland) have much more common than the very rural and remote towns in each of their respective states. Australian states are much more homogenous than many regions of other countries.
  
  
• “It’s not inefficient as stands because we spend less of our national income on government services than other countries.” This is even odder, for efficiency is not generally about how much you spend but how good you are at spending it. Australia does spend less per head on public services than say France with its unitary government, but that’s mostly a function of the social preferences for a greater role of government than efficiency per se.
  


• “If we raise more money locally we can solve the accountability problem”. Sounds simple but raises another problem which is that tax and revenue transfers at the Commonwealth level help address some of the different rates of disadvantage and poverty between regions. Or horizontal fiscal imbalance if you will.
  
  
• “Can’t we just devolve everything?” This is known as subsidiarity, and is an argument commonly employed by the States. It’s a slightly odd argument to use for two reasons. First, in its derivation from the EU Maastricht Treaty it should properly be discussed as the subsidiarity principle. It’s a principle because one is supposed to apply some tests to when and where it should be applied. Applying them correctly won’t always lead one to conclude everything should be devolved. Second, the States seem to forget there are 673 local governments beneath them – if it’s so great to devolve power down then why stop at state level?

Garnaut Report on Climate Change

The long-awaited Garnaut report on targets and trajectories on climate change was released this week. Its central recommendations are:

• Support for a target of 550 parts per million of concentration of greenhouse gases in the atmosphere.


• Australia to cut greenhouse emissions 10% by 2020, and 80% by 2050, in order to curb the effects of climate change.
  
• A fixed carbon price of $20 per tonne between 2010 and 2012, settling at $23 after 2013 and rising 4% annually (plus the percentage increase of the consumer price index).

Bizarre comment of the day from Australian Industry Group chief executive Heather Ridout:

“…cost rises in this range would test the viability of many businesses and would give rise to significant restructuring.” Errr, yes restructuring of the economy is the whole point.

Two charts caught my eye. The first shows the per capita convergence different countries would need to make in order to reach the 550ppm scenario. I hadn’t realised Australia was the highest per capita emitter at two-and-a-half times average EU levels. So adjustment here will clearly be very painful.

Second, the chart that points to that very tellingly, is a costs and benefits model to GDP growth of mitigation to 550ppm. It’s all costs well into the 2060s before benefits start to come on line. Like the Stern Report, it then uses two dodgily low social discount rates of 1.4% and 2.7% to determine the cost-benefit of mitigation finding a net cost of around 1% of the economy over the 21st century.

Garnaut asks: “Is this worth paying… for the benefits, insurance value and the enhanced value beyond the 21st century?”. I know we always accuse people of being myopic but really expecting the case to be sold on net benefits accrued to four or more generations in the future is quite an ask.

So with the economics ambiguous at best Garnaut pulls some heart strings, suggesting even some of the mitigation scenarios would be expected to lead to the destruction of the Great Barrier Reef and other coral reefs and lead to (more) species extinction. Very disturbing of course but I thought that it a little odd to appear the next page after the not so great findings from the macro model.

Over to Lord Giddens at the LSE and Policy Network next on the ‘Politics of Climate Change’ who among other things are looking at the implications for social justice.

Australian Politicians

More dismal evidence of the low bar for antipodean political office today…

The Police Minister in the already embattled New South Wales Government (see previous post) has been forced to resign. According to news accounts from witnesses, Minister Matt Brown:

“Stripped to his ‘very brief’ underpants” and then “mounted the chest” of fellow Labor MP Noreen Hay. He then simulated a sex act on Ms Hay, shouting to her adult daughter “"Look at this, I'm tittie-f****** your mother!”. Really quite shocking.

The Minister had been given an initial warning from the Premier, but has today been forced to resign. (Incidentally he denies the exact quote but admits the sex act).

A few other examples:

• The chair-sniffing tendencies of the former WA Leader of the Opposition, Troy Buswell
  
  
• A NSW Parliamentary punch-up in 2005 where one MP had to be dragged out of the building by the serjeant-at-arms
  
  
• The Aboringal Affairs Minister in NSW now serving a 13-year sentence for drug and child-sex offences.
  
  
• Widespread fraud and sleaze like the bungs and backhanders that led to the 2006 resignation of the Tasmanian Deputy Premier.

Update on the Western Australia election

After starting discussion of the WA election in context of the NSW debacle I thought I'd better see this through.

Where are we up to?

With Parliament hung, the three parties continue to horse-trade terms under which they'd form a coalition government. What's made it particularly difficult is the personal acrimony in WA between the Liberals (the main right-wing party) and the Nationals (a centre-right party originally known as the Country Party and more popular in rural constituencies). They have traditionally united in such circumstances (and indeed have often stood on the same ticket).

Labor have been reaching out to the Nationals for a coalition, though this is starting to look less likely (see here). A consequence of which is that the Labor leader and current Premier Alan Carpenter is about to be dumped. An amusing satire on how he got it all wrong by calling the early election he's now lost to be found here in today's The Australian newspaper.

Six films that define Australia

Six films worth a watch to understand what Australia is all about...

• Phar Lap (1983). Phar Lap is the film about a racehorse of the same name that won 32 of the 35 races it entered after the age of three until it died it mysterious circumstances in America in 1932. It’s a real Australian legend and goes to the sporting heart of this country. What you are not supposed to mention is that it was actually, horror-of-horrors, from New Zealand.
  
  
• Ten Canoes (2006). Set about one thousand years ago in Arnhem Land in the now Northern Territories, Ten Canoes is filmed entirely in Indigenous Australian languages. Watching it you get to understand a lot more about how mythology and storytelling was central to the regulation and continuity of Aboriginal society. It’s also quite revealing about the extent to which highly localised tribes existed alongside each other yet with some remarkable different cultures (and indeed languages).
  
  
• The Castle (1997). A comedy that follows the exploits of the Kerrigan family who are faced by eviction following the nearby airport expansion. It really shows the self-image of white working class Australia – lots of latent racism and classic Aussie lingo to boot.
  
  
• Ned Kelly (2003). Haven't seen this and heard mixed things but Ned Kelly has a real iconic status in Australia. A bushranger turned outlaw, Kelly became a figure of Irish Catholic and working class resistance to British Colonial ties. Perhaps the equivalent of Robin Hood.
  
  
• Gallipoli (1981). Great and very moving film, don’t think I need to elaborate on the plot. One can’t go very far in Australia without realising the extent to which the First World War and the sacrifices it entailed was the first defining point of this nation.
  
  
• Australia (2008). Okay a bit premature to add this to the list as it’s still a few weeks from launch. But it’s going to tell the story of the bombing of Darwin by the Japanese in 1942. Why I think this is worthy of the list is the bombings mark the period when Australia began to turn away from Britain as the mother country and towards America for protection (which did eventually come). If the First World War definied a nation, the Second determined its sovereignty.

Randomised Policy Trials

Good paper from Australian economist Andrew Leigh on the merits of ‘Randomised Policy Trials’.

What’s the idea?

Essentially the idea is to use the more scientific approach to experimentation in the design of policy. So, rather than just rolling out an idea, or doing simple before-after analysis, policy makers would subject an idea to the scrutiny of controlled tests. For example, a new approach to school exams might be trialled in several schools in a way that attempted to hold constant for other factors that influence performance before extending on a national scale (of course only if it proved effective).

If it’s so simple why don’t we do it?

Andrew debunks a number of arguments made against randomised policy trials in social sciences. My take on the most compelling – but ultimately wrong – arguments against randomised trials:

• Because they might involve denying treatment to worthy individuals. Some would, for example, argue that it is unethical to deny all the opportunity to the new school exams if they were thought to be superior to what everyone else got. But try the counterfactual: surely it’s more unethical to try the new school exams on everyone, rather than a small group first.
  


• Because there are other alternatives. Yes there are other ways to test the effectiveness of policies. But all too often we get stuck in a simple before-after analysis. So the government claims success on the new school exams because results turn out to be higher than they were ten years ago. But, of course, it may not be the new exams that actually caused the increase in results, instead being a consequence of other things like school investment, better teaching or inflation in marking. Randomised policy trials are the most scientific way to isolate the causal effect of policy.
  


• Because qualitative results are better. A simple rejoinder to this is that doing quantitative trials doesn’t preclude doing the qualitative analysis too – surely we’ll get a better result from doing both together?
  


• Because politicians are interested in re-election, not results. I think this is perhaps a slightly harsh phrasing that Leigh uses but probably gets to the heart of the problem. There are strong incentives for politicians to roll out and start doing. After all, elections come around pretty quickly and no-one is interested in a small scale pilot if the rest of the system is failing. Yet clearly over the long-term this leads to sub-optimal policy paths being taken.

Anyhow it turns out that it is in the US where most randomised policy trials occur, with Canada and the UK a little behind. Would be interesting to see this as a proportion of all new policies though – I suspect it’d be pretty low…

Foreign policy hubris

A common observed pattern from behavioral economics is that when asset portfolios rise people get freer and more risky about spending it than when they fall by the same amount. In other words the rising wealth goes to your head.

So it seems in foreign policy.

Britain’s foreign policy capital (i.e. ability to influence other countries and global events) has long been falling although has arguably now stabilised. You can’t get through a social sciences degree without having to read painful and detailed accounts of how and why this happened, like David Sander’s classic ‘Losing an Empire, Finding a Role’. And reports setting out the rise of other global giants like the so called BRICs (Brazil, Russia, India, China) implicitly suggest Britain’s days are further numbered.

But for some it’s helped drive more focus in recent years. That’s in part why progressives believe in using our remaining influence to drive reform into international institutions, spend bilateral aid in a way that contributes to sustainable and equitable growth in developing countries, and (more contentiously) build institutions and coalitions ready to adopt the ‘responsibility to protect’ doctrine to protect and secure citizens beyond our own borders.

I think the new Rudd Government here shares many of those progressive international values. But with Australia’s foreign policy capital on the rise (admittedly from a smaller base) it seems to have gone slightly to old-Kevin’s head. Witness Rudd’s:

Desire to ‘spearhead’ the creation of an Asia-Pacific Union. Yes, because 4 billion inhabitants of this vast continent have just been waiting for an island of 20 million people totally disconnected in geography, history and culture to help lead them forward.

Demands to Russia to pull back troops from Georgia. Thanks for the help but given the combined efforts of the Europeans and Americans seem to have little effect on the Kremlin, I’m not sure they’ve just been waiting for that call from Canberra to persuade them otherwise.

Belief in a strong America-Australia alliance. Actually this is less associated with Rudd but Australians generally think that America see them as one of their first and best allies. Slightly comic really. I doubt most Americans would even have heard of Australia, except perhaps from that classic Simpson’s episode which probably best captured matters. A more serious source to indicate the relationship: Bill Clinton’s 957-page memoir covering his period as one of the most internationally engaged Presidents mentions Australia but once in a comment about ‘touring a wildlife preserve, cuddling a koala and snorkeling on the magnificent reef’.

That said, Australia does have a growing global role, so how best to use it?

First, they should have a bit of stock check and review:

• Australia doesn’t have a lot of the things other big countries have. It’s not part of the G8, it’s not on the UN Security Council, the military is pretty average and at 0.3% of GDP it spends well below comparable countries on international aid.
  
  
• But… it does have lots of raw materials and is becoming an increasing trade partner selling the materials that other countries turn into products. And the legacy of its involvement in East Timor and Afghanistan mean it’s well placed for global peacekeeping missions.
  
  
• And the previous Prime Minister, John Howard, didn’t have a very sophisticated strategy – more pro-America, and let’s not mention the Asians than anything else. So it’s right to take a more engaged approach.

Second, forget grand ideas about leading a whole-of-Asia partnership and focus down to get some real impact:

• On the South Pacific. Australia is far and away the lead nation in the South Pacific region. There are major development issues here – not just entrenched levels of poverty but also serious ramifications of climate change to contend with.
  


• Scale up bilateral aid to international levels. There’s a strong case for focusing on East Asia rather than Asia as a whole (the concept of South and Central Asia seems a little lost from the debate here). China’s a crowded field but the three of the south-east Asia countries (Vietnam, Cambodia, and Laos) would be crying out for more engagement.
  


• Continue the conflict management role. Australian troops have been doing a good job of training up local Iraqis and could be something to continued longer term either in the Asian region or in Africa like through the African Union.
  


• Focus on sectors. No clear evidence which sector best, but with limited influence it’s worth deciding what you really want to prioritise. For example, it could be the environment, or education, technology or health. Any would do.
  


• Don’t forget the Commonwealth. One institution where Australia is a key player and a much underrated one I think. Admittedly nothing close to being an EU, UN or World Bank but at 2 billion people around one-third of the world are part of it and does have reach in places the other big organsiations don’t.
  

Looks like the Fox lawyers have been busy wiping out the youtube clips from the Simpson’s episode but the following snaps give a hint at this highly amusing show…

Affluenza

I met with the authors of the Australian book ‘Affluenza’ recently.

What’s the book about?

The argument is a familiar one. The Western world is in the midst of a consumption boom – we’ve never had it so good with seemingly unlimited availability of new goods and services to meet our wants and desires. We measure and define our progress on GNP indicators of economic growth. Yet, there’s little evidence we’ve become happier for it (see chart below). Indeed rates of depression and stress continue to rise. And meanwhile we run down the world’s resources at an alarming and unsustainable pace.

It’s trendy to think this is something new that humankind has hit on. It’s not – it goes back at least as far as the Epicurean school in 4th century BC ancient Greece. Of course, the lines of argument have evolved and changed since but the fundamental question about the relationship between material wealth and human happiness remains.

Is anything different now?

Yes, at least to some extent. First, prosperity has been growing at historically unprecedented rates since the industrial period and particularly since the Second World War. Essentially the first 6,000 years of human history were punctuated by marginal gains in wealth followed by major slumps and setbacks. So the last fifty years gives us a good opportunity to assess things.

Second, the science about what makes us happy and the evidence linking wealth and happiness has got much better. For example, lots of interesting findings are coming out of the field of neuroscience alone. Third, the sustainability trends have started to get really quite irreversible, particularly of course on climate change.

Time for a grand alternative?

This is where books and theories like ‘Affluenza’ rapidly deteriorate, as they amateurly try to create a grand-alternative narrative. It’s too easy to fall into the unthinking tradition of left-liberals from Hampstead. The consumer-orientated, economic-centric model of society won because its arguments are simple, powerful and complete. So it’s not a midnight session ‘solving the world’ over a bottle of Bordeaux, or a Hippie-like tendency to say ‘why don’t all businesses start being nice’, that’s going to make any difference. More to the point there isn’t any sufficiently robust alternative that can be systematically used for policy development. Indeed, that’s self evident in the terms of the debate – an offensive on materialism rather than promotion of a coherent set of rival solutions.

Give up and resign ourselves to a never-ending spiral of rising wealth but growing misery and depletion of the environment?

Personally, I think there’s much to be said for taking an admittedly less sexy but more focused approach to the debate. What might this involve?

First, some subtle shifts that have potential to add up to something more substantive:

• Let’s try to develop and mainstream some alternative measures of progress. The UK DEFRA’s attempt to look at wellbeing is to be welcomed even if it’s little known within Whitehall let alone beyond at the moment. Linked to this we also need some more systematic policy-testing of what the science and evidence on happiness is telling us. (We need to get over our social fear of randomised policy trials for a start).
  
  
• Reintegrate economic thought with other social sciences. The post-war debates between the likes of Milton Friedman and Ludwig von Mises against the Keynesian and Galbraithian schools were not just about what the right economic models were, but also how to think about economics. The legacy of which was the sad divorce of economics from other social sciences in which its roots lay (particularly politics, philosophy, psychology, sociology and geography). I think reintegrating the practice of economics with the developments of these other social sciences could start leading us some different policy conclusions – like the importance of making short-term transitionary adjustments to effects like globalisation or the value of labour market policies to reduce the harshness of tradeoffs that people have to make between work and leisure and family.
  


• Invest in community and public assets. A clear trend in the evidence is that we systematically over-invest in the individual things we think will make us happy (DVDs, clothes, cars, homes) but under-invest in some of the community and social assets that also contribute to our happiness. So it might sound old-fashioned but actually having high quality parks, civic institutions, public spaces and cultural activities is important to happiness and something government needs to initiate to overcome the free-riding problem.
  


• Teach young people some broader social and emotional skills. There’s long been an obsession with teaching the skills that most contribute to productivity. The focus on science, maths and literacy and numeracy is broadly the logical result of that. As too are political calls to meet the challenges of globalisation through developing ‘hard’ skills. All of course right in part but we shouldn’t under-value the importance of personal and social education – providing young people with the skills in order to make better choices later in life that will impact on their happiness and life satisfaction.

Second, a focus on reducing unhappiness, misery and want:

• Attack on the scourge of mental health. This was Lord Layard’s focus in his book on ‘happiness’ and there’s actually some positive developments here like the UK Government’s commitment to fund cognitive behavior therapy (e.g. see Scotland's recent initiative). I think this is only a start to tackling not just the high rates of mental illness we find today (one in six people will suffer from depression at some point in their lives) but also the attached social stigma.
  


• Prioritise health activity on long-term conditions and other ‘life-course’ ill health events. Proportionally too much health activity is on the visible, event based, and invasively-solved ill health. But, like mental health, there are 17 million people in the UK suffering from long-term conditions that materially impact on their quality of life. Getting really serious about this (and not just a few words about care planning) could have a dramatic impact on their wellbeing.
  


• Don’t surrender the fight on poverty and disadvantage. I think one of the as yet under-recognised achievements of New Labour was the shifting of the terms of debate on poverty. Admittedly, progress has been mixed (e.g. on child poverty), and in some cases has got worse (e.g. on relative inequality). But the Thatcherite legacy of implicit social acceptance of poverty in society is now in retreat. Even Cameron’s Conservatives now too have social and community policies where they would once have been unthinkable to them. The progressive left needs to continue to push the fight and not surrender this territory.

I’d meant to keep this one short but it’s already become too long and I haven’t started to do the topic justice. So I’ll stop for now and return to at another point…

NSW Government collapses...

So... just a week or so after I visited the Government of New South Wales and being deeply underwhelmed (see previous blog), they yesterday collapsed. I hope it's not some contagion I've brought over from the UK; the next test for that will be the Western Australia election tonight where the ruling Labor Government are looking pretty shaky despite the state coffers overflowing with resource-boom revenues.

What happened in NSW?

• They became tired. The NSW Labor Party have been in power since 1995 and have inevitably run out of steam. There was a quite palpable sense a lack of direction I picked up there.


• Unsuccessfully transitioned leaders. The previous popular party leader who had originally won the Labor party power, Bob Carr, left in 2005 after a decade in power. Morris Iemma who took over the reins (uncontested by others) never managed to successfully lead and the polls continued to head down.


• Failed to lead. For example, there's been a long running fight over whether to privatise the state's power network. The Government failed to take the argument on and instead of argue it on their terms (e.g. on the principles and evidence) they got stuck in a ideological fight with the unions. They lost.


• Allowed party infighting. The immediate trigger for the Premier's departure (along with most of the other senior memebers of the NSW Cabinet) was a failed attempt at a reshuffle between different party factions. Government without unity is always doomed.


• Mismanaged the economy. Interesting side story was the ex-Treasurer revealing how bad the state's finances were in -- but it was pretty common knowledge that NSW had long been in the red.

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-- UPDATE --

Oh dear.

The Western Australian Labor party have now lost their parliamentary majority in what's been billed as 'Labor's Fright Night'. It's now a hung parliament in WA but looks like the Nationals could be king-makers for a Liberal-National coalition. If so, it'd be the first state to fall with NSW looking likely to follow next year.

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Rudd's School Reform

Interesting package of school reform on its way in Australia soon, set out in a paper entitled 'Quality Education: The case for an Education Revolution in our Schools' and a speech by the PM.

What's it all about?

Like most advanced countries, Australia is worried about skills. The goal, it seems, is to improve economic productivity through broad skill development and to improve economic participation and inclusion through targeting measures at the people and places suffering from disadvantage.

The recently announced schools part of this includes:

• First, to measure school performance on their 'value-added' and to hold schools to account for this
  
  
• Second, to invest in weak schools (with c$500k per school) to do things like provide additional coaching or learning support and to create robust networks of parents, other schools, local communities and businesses to help students transitioning to FE or work
  
  
• Third, to close or merge underperforming schools or replace the senior management
  
  
• Fourth, to improve the quality of teaching through higher rewards for principals and through developing an accelerated graduate pathway
  
  
• Fifth, to spread the talent more effectively by offering higher pay for those starting in challenging posts
  
  
• Sixth, pedagogic reform to spread specialist teaching throughout schools
  
  
• Seventh, offering give more autonomy to schools on pay and conditions (presumably only to high performing schools although it's not clear)
  
  
• Eighth, to free up teachers' time through reducing administrative burdens

How's it all going to happen?

This is essentially all out as a discussion paper at the moment. A slight snag in the federal system here is that the Commonwealth government can't just announce and do these things. It has to negotiate (blimey - what's all that about?) with the States - who do most of the public service delivery - on exactly how to implement it all. So expect some delay. Nonetheless, the Commonwealth do have the funding levers as well as the political captial at the moment so most will get through.

Lessons from the Blair years?

The list might strike you as quite familiar to much of the education reform implemented by Blair. Notable absences are acadamies or such an equivalent programme (though perhaps will come later) and emphasis on parental choice (although that's partly due to the school catchment area thing being less relevant here). I'm broadly supportive of much of the reform, though there are probably a few lessons from the Blair years:

• Keep the professionals on side. It's a difficult balance to be made here as the public rightly should demand results for their taxes. But schools aren't McDonalds and it's quite a unique profession that once lost is hard to regain the confidence of. Rudd's had a pretty tough line here so far -- "arrive in the 21st Century" was the message the unions got last week which may have to be nuanced.
  
  
• Recognise supply constraints. Ultimately there'll never be enough money, nor good teachers and headteachers to go around. So sticking resources somewhere (like in high cost academies) does have opportunity costs elsewhere. It's importance to face up to this, as indeed that one parent's choice will impact on another parent's choice.
  
  
• Keep a market-maker. Opening up public services to incentives is a high risk, high return affair. Too many financial flows rewarding all sorts of performance can start creating distortions and perverse outcomes that no-one could anticipate (e.g. like funding surplus places in below capacity schools). Better to start slow and increase over time if necessary than go for hard edged incentives straight away.
  
  
• Be patient. It's hard turning around schools, particularly in areas of entrenched disadvatage. It's all very well expecting results, but you can't recreate leadership, cultures, or teaching practices overnight.
  
  
• Get the measures right. An obvious one but you'd be surprised -- defining exactly what 'value-added' means and how to control for a host of variables outside the control of schools is pretty tough.
  
  
• Don't forget about those that opt-out. A much bigger problem here where the private sector accounts for a large share of education, in part a result of the previous government's subsidies for private schools. If you don't have a policy that takes account of this sector (even though government leverage is weak) and the second-round effects as parents transfer then it's not a coherant package.

The Art of Strategic Government: ten principles for modern government

After spending the last few weeks on visits to several state and commonwealth departments I've become strongly of the view that strategic capabilities really need beefing up down under. I'm intending to test the waters on this soon based around the following principles.

I'd be grateful for views -- anything missing, need adding or re-framing?

1. Have a clear sense of the big picture - after all governing is about more than just a technocratic exercise, it's about that society which an elected government seeks to create and that which it seeks to avoid.
   
   
2. Organise people, programmes and resources around this - for example through a clear and consistent approach to public service reform.
   
   
3. Create institutional spaces for strategy and high-level policy analysis, and to act as an innovation bridge between local and national.
   
   
4. Establish rules and incentives for the strategic and long-term - for example through targets, performance management, accounting reform.
   
   
5. Use strategic systems management to drive results - New Public Management mostly worked well for the Democrats and New Labour. But now we need a more nuanced and differentiated account of public services - for example harnessing various approaches from information and accountability to customer transformation to choice and empowerment when and where they work best.
   
   
6. Recognise the different roles and relationships between the state and citizens in today’s society (e.g. as citizens, subject, service users etc…).
   
   
7. Build public value through debate and dialogue on the key long-term issues (e.g. climate change, obesity).
   
   
8. Make ready to test, trial and evolve policy ideas over time.
   
   
9. Invest in the capacity and capability of the workforce.
   
   
10. Be decisive on making tough choices, especially where these involve costs now.

More Aussie beers

Two more excellent Australian beers to look out for....

• Monteith's Summer Ale: this is a really tasty and refreshingly spiced golden beer. It's made with four different malts and then spiced and finished off with rata honey. It comes in at 5% volume. (Monteith is actually a New Zealand brewery but it's close enough)
  
  
• Little Creatures Pale Ale: hop flowers, some selected malts, two yeasts and a six week brewing period make for an excellent beer from the Little Creatures brewery. Again finished off with some honey it's slightly bitter on the aftertaste and comes in at 4.9% volume. If you find a bottle anywhere make sure you roll it first to spread the yeast before pouring.

The MCG

Just back from Melbourne where among other things I went along to the Melbourne Cricket Ground, better known as the 'MCG'.

It's truly an awesome experience. With a curent capacity of 100,000, and record attendance of 130,000, it's one of the world's largest and most famous stadiums. It plays host to the AFL, rugby, and cricket, as well as the odd football (soccer) game and music concert. I'd definitely rank it up there with some of my other favourite stadiums like Old Trafford, the Maracana, and the Camp Nou.

Originally built for the '56 Olympics it's a 5 minute walk from the city, in Yarra Park. Indeed, the square mile around here must be one the greatest concentrations of sports arenas anywhere in the world. Next door to the MCG is the 15,000 all-seater Rod Laver Arena, host of the annual Australian Tennis Open. The neighbouring 56,000 'Telstra Dome' looks after another 5 of the 9 AFL teams in Melbourne. A 18,500 Olympic Park caters for those after some athletics action. And a 11,000 venue called the 'Hisense' hosts more tennis as well as basketball and concerts. Finally, a 8,000 'Lexus Centre' features swimming. And as if these aren't enough, a new 32,000 Melbourne Rectangular Stadium is being built adjacent to all of these to host rugby league and football (soccer).

You can see why Melbourne has three times been voted the world's most livable city. It's very sophisticated with lots of great cafes and bars, first-rate galleries and musuems, and plenty of parks and green spaces in and around the city centre. An excellent tram system gives it quite a European feel. It's close to the beach and has a river (the Yarra) running through the centre so you're never far from water. And with 29 stadiums of 10,000 people or more you get all the sport you could ask for - the Melbourne Cup, the Tennis Open, the MotoGP, the AFL final to mention but a few.

I'm really very envious...