Friday, March 31, 2006

Cereal Reform Laws Deliver

The Australian Council of Cereal Producers (ACCP) are outraged by the government’s new Cereal Consumption reform (CCR) laws. Under the new scheme, consumers are now able to purchase whatever brand and flavour of cereal they choose, regardless of how long they’d been consuming their old brand of cereal.

ACCP Secretary Greg Kellogg said “Under the old scheme, cereal rights were protected by the guarantees achieved by the Breakfast Award system. But now consumers will be able to pick and choose what they eat on a day to day basis.”

The first victim of the new CCR laws has been the Darren Hinch endorsed All-Bran. One consumer reportedly stopped consuming the cereal because he simply “didn’t like it.” Another cereal, Wheeties, was removed taken off a consumer’s permanent the shopping list and will only be purchased when desired. ACCP officials are claiming that this is simply a taste of things to come.

When asked whether or not ACCP officials believed that the high cost of cereal consumption forced many consumers to buy their breakfasts from other isles, ACCP heavy weight “Uncle” Toby argued back: “Buts that’s not the point. Cereal is vital to Australian breakfasts and to Australian families. Just think of where this system of choice will take us! Fruit for breakfast one day, toast the next. There will be no consistency whatsoever. A consumer could be eating dog food for breakfast.”

He added: “This government is filled with former consumers and toast-lovers. They’ve been buying breakfasts for years. We’ve all heard the stories of Howard having his breakfast in bed.”

Big Consumers see the reforms in a different light. HR Nicholl says: “We see the reforms as a positive step. The previous system, made breakfast a difficult and cumbersome task. Now, not only can consumers choose the breakfast they want, spend their money how they would like too, but they also have the option of getting breakfast on the fly or skipping breakfast altogether.

“Consumers have been complaining about this system for some time. We have one member who lost her four children because after they consumed metal pieces in the Fruit Loops. But because of the Breakfast Award systems, she is till forced to buy box after box after box.

“The scare tactics of the ACCP are absurd. Many consumers will continue to purchase the same box of cereal that they have for years.

“We’ve just removed the red tape from getting cereals off the shelf, and more importantly, on the shelf too. If consumers are worried about getting cereal off their shopping list, they may never put cereal on it in the first place.

“The bottom line is this. If the cereal is tasty, quality, value for money and fills you up. You’ll stay in the panty. If not, well you probably shouldn’t be there in the first place.”

Monday, March 27, 2006

Want to buy a pound of flesh?

In The Merchant of Venice Shylock, a Jewish usurer, enters a contract with a young lover's friend stipulating that if his friend fails to pay back a loan then he can claim a pound of his flesh. Since both parties entered the agreement voluntarily presumably it increased their ex ante welfare.

Arguing along similar lines, the latest Policy magazine leads with a proposal, by Joseph Clark, that there should be more opportunities to sell a portion of oneself. (Unfortunately the article is not available online.)

The basic idea is that I could sell someone the right to a percentage of my future income. Say, for example, I'm studying and expect larger income in the future, I could offer someone 5 per cent of my total earnings for the first 10 years out of uni. The value of this contract will be the net present value of the expected payments, further discounted by the expected risk that my income might not meet expectations. Effectively, it allows students to issue equity instead of just debt to finance their studies.

As Joe points out, such a new financial instrument would:
  • allow people to smooth consumption;
  • facilitate the financing of degrees that are more costly than current government subsidies provide for (if they deliver large returns); and
  • provide clear signals on the potential financial payoffs of degrees ('better' degrees would attract less onerous terms).
Such benefits are also available in debt markets (for example less lucrative professions would presumably attract higher rates of interest). Yet, most debt markets are not fully developed because they are crowded out by government involvement. Why get a loan (on which you have to pay interest) when you get an income-contingent HECS loan only indexed to CPI? As a result, many of the claimed benefits of this instrument would largely come from simply reducing government intervention and allowing for the emergence of more mature debt instruments.

That said, equity does allow for a greater transfer of risk. A student taking out a loan takes on much of the risk that their future income may not meet expectations (collateral can be repossessed). Whereas the owners of equity, having no power to repossess assets, essentially take on the risk that incomes are sub par. Considering that investors would probably be able to diversify with such instruments, and hold a lower amount of average risk than any individual student, this is likely to increase welfare.

However, the transfer of this risk also lets the moral hazard genie out of the bottle. Once the equity issuer has less of an incentive to earn more, they will most likely sub to activities that have a lower income (but a greater level of net happiness).

Whether or not this problem will be fatal to personal equity issuance is an empirical question. Joe argues that such problems can be solved through contract design, limiting the amount of equity one can issue and perhaps including conditions that if you don't score so well at uni, you have to pay more.

I'm more skeptical. Contracts are difficult to cover all potentialities and may not be effective in this inherently uncertain case. (In this regard, it's important to note that Shylock failed to take his pound of flesh when a lawyer argued that the contract did not allow for bleeding and hence the flesh would have to be taken with no loss of blood. I can't recall, in this pre-Law and Economics world, whether the judge accounted for the dampening effect that such a literal interpretation would have on future flesh trades.)

Plus, there are already some methods to buy personal equity in a student. A firm could fund a degree on the proviso that the recipient takes a job with them. But, again, such contracts are usually hard to enforce and don't seem to be overly popular. Perhaps widespread equity issues would allow investors to more readily diversify risks and make them more attractive than these 'one-on-one' contracts.

However, opportunities to diversify risk would require there to be a large amount of students wanting to issue equity, from those of varying interests and ability. I am not convinced that the market is this deep. There is a substitute for the issuing of debt or equity: the use of retained earnings.

In the States most students, in the face of lower government assistance, appear to survive through inter-generational transfers from parents. This has the benefit of removing adverse selection (parents tend to know their kids quite well) and moral hazard (future costs won't be contingent on income). It also improves governance arrangements - parents tend to make a quite effective board of directors.

Overall though shares in people is a thought-provoking idea. It could probably serve at least a niche market and should at least be given a chance. Current government policies, not to mention 16th century Italian law, effectively mandate such innovations stillborn.

Saturday, March 25, 2006

If you don't like Mergeright, Get F^KED

I love my Mum. She grew up in country NSW (Bourke), and made us kids her first priority. She has often said that all she ever wanted to be was a Mum – and she succeeded admirably at her primary goal. I hold her in high esteem, as in consequence, am disposed to similarly maternal women.

It has been hard finding the ‘right’ woman, as the women I meet are usually city types, who do not share the outback NSW values system that I’ve inherited. The good news for folks like me is that women like my mum will be in better supply in the future – the reason being that non-family oriented ones will, quite simply, die out.

This and that will be said about rebellion from family values, and other factors that will keep the women’s movement alive, but the facts are as compelling as the cliché’s. Meet an Australian family with 10 kids and you’ll meet a family that’s tired of jokes about their Catholicism – but that takes their Catholicism seriously. And their kids are Catholic’s too.

Or perhaps the family are Muslim; or evangelical protestant Christians; or perhaps they just love kids. All kinds will be found, but the stats suggest that they are more likely to be on the conservative side of politics. The high water mark for liberalism has passed – the simple reason is that the high priests of flower power did not ground their dynasty. They died, and those they vanquished ignored the slogans, reproduced, and left their kids to fill the empty posts.

The conservative movement in the US is evidence of this. According to Phillip Longman, fertility rates are 12% higher in the Bush states, than the Kerry states. Bush took 25 of the 26 states with the highest birth rates; Kerry took the 16 with the lowest birth rates. The Bush states are also the pro-gun, anti-abortion, evangelical protestant states. They oppose positive discrimination, UN membership, gay marriage, north-east intellectuals, and the rest of the democratic / liberal agenda.

If they reproduce republicans 12% faster than the liberal states reproduce democrats, the republican increase will be 300% of the democratic increase by the 2016 election – which suggests that the democrats will be pitching for the middle ground with someone to the right of George W Bush.

In policy terms, this means no abortion, no gay marriage, no to welfare, no to the UN, no to public education, and yes to unilateralism, the military, and the church. This isn’t necessarily the Mergeright consensus, but it is closer than the Democratic agenda.

This is the case the world over. Conservatives are having kids in the suburbs, while liberals are having latte’s in the inner city. Australia’s birth rate is 1.76 pre female – we’re only kept afloat by immigration. The bulk of the new kids are coming from large families produced by old fashioned, religious, folks. By sheer weight of numbers, they’ll become the majority.

The cultural clash between the West, and Islam, will also intensify – as western nations fight rear-guard actions aimed at preserving their nations from changing demography. Europe will die, and Islam will rise. The global top 3 reproducers are Islamic: Somalia (6.91 kids per woman), Niger (6.83), and Afghanistan (6.78). By comparison, old Europe is dying: Germany and Austria are 1.3, Russia and Italy are 1.2, and Spain is 1.1. In the past 30years Islam has grown from 15% to 20% of the world population – while the West has shrunk from 30% to 20%.

And these people like Liberal feminism a lot less than George Bush’s republicans – so you can forget about international law or treaties protecting liberal institutions.

The bottom line is, if you don’t like Mergeright, you’d better get busy having kids, because the conservative side has an army of kids who are about to transform the agenda.

Friday, March 24, 2006

Gold medal for freedom - not awarded

Something tells me I should have learned by now, but I’m always surprised by the hypocrisy of the Left. I mean come on guys, have your cake or eat it.

With no real competition allowed to face Australia at the Commonwealth Games, poorer nations are acting as poor substitutes. Without the Americans and Continental Europeans, we’re winning buckets of medals in athletics, and without the Chinese and Russians we’re dominating gymnastics. We’ve even won a silver medal in table tennis. There seems to be an unprecedented number of black swimmers in the pool, and an equally unprecedented number of white guys on the basketball court.

But who cares? The Australian anthem is played (and sung) 30 times a day, there are Australian flags everywhere and “proud Aussie” back slaps everywhere you go. It’s like the Cronulla riots against Kiwis with referees and medals awarded. (Mind you, if it were a case of screaming “F@#$ OFF KIWIS” instead of “F@#$ OFF LEBS” there probably would have been medals awarded.)

By brining in competitors from the undeveloped world, it really hits home the differences between the rich and poor.

This past week we’ve seen the disappearance of nine athletes, who’ve used their state sponsored trip to Melbourne to do a runner (pardon the pun). Seven athletes from war ravaged Sierra Leone, a boxer from Tanzania and a sprinter from Bangladesh are now officially missing. The Sierra Leoneans lost 3 of 4 members of a relay team that was subsequently unable to compete. The Victorian Police have launched Taskforce Diamond to track them down.

This is not a new phenomenon, and was certainly not an unexpected outcome. The Manchester games saw the disappearance of 21 athletes from Sierra Leone, a number of Bangladeshis and a Pakistani swimmer (not a typo). The Sydney Olympics misplaced a Tunisian weightlifter and a Gabonese boxer. Atlanta lost a Pakistani hockey player. The 2002 British Open lost an amazing 40 Nigerian golfers.

To combat the repeat of such controversy, the Sierra Leonean team officials held the passports of all athletes, and the Bangladeshis passed a law that can retain an athletes family if a member of their team deliberately overstays.

The response has also been predictable: of course they’ve done a runner, you would too, they’ve come from places like Sierra Leone. Tim Costello: “There is not an Australian who, if they were in that situation wouldn’t make a run for freedom too.” Incorrectly accused sex offender and former guest of the Sierra Leone judicial system Peter Halloran: “If you had ever been there you would immediately understand why anyone who had the chance would endeavor never to return.” Commonwealth Games Federation President, Mike Fennell: “We are talking about an issue that is broader than sport.” I say this response is predictable as after all Sierra Leone has just emerged from a civil war that lasted 11 years, has a life expectancy of less than 40 years, nearly 10 per cent AIDS infection rate, and a GDP per capita less than my (small) weekly salary. Its war ravaged, rife with ethnic conflict, extremely poor and has a government more corrupt than Saddam.

Hang on. As I read the CIA profile of Sierra Leone, it did read vaguely familiar. It read like every other third world country run by a despot. (In 2000, Sierra Leone held elections and returned to a civilian government- but something tells me it’d still be safer to visit Beirut in an I HEART NY t shirt).

I genuinely feel sorry for those who live under the tyranny and oppression of regimes, as I am sure so does Tim Costello, the Greens, the French and the other Leftist power houses. But the way I see it we have two options? The first is open our borders, and let anyone with a sore toe to walk on in: invite them in and enjoy the cheap labour along with the Jihad. That is, we accept the problems of sub-Saharan Africa, Central Asia, China, Indonesia, Vietnam, Cambodia, and the Middle East under the guise of harm minimization.

Alternatively, we could, visa vie Iraq and Afghanistan, go to the source of the problem and do something about it. Why are these would-be national icons were free press available fleeing their homes? Its not because of too much cotton candy. We’ve got it so damn good in Australia, the US, Britain, France, and Germany. But we sit idly by while people suffer in silence. We even shun those efforts to do the right thing. Neocon is a dirty word.

This brings me back to opening point. What is it that the bleeding hearts want? Is it just to observe that government and militia induced death at 40 is a fact for so many, but not do anything about it? I’m amazed.

Is Europe heading for a new dark age?

I remember having dinner, with the indomitable Matt Johnson and some dickhead DFAT grads. The conversation entered some pre-scripted DFAT talk about the importance of Europe, and its influence on Australian foreign policy. At which point, Matt dryly pointed out that Europe has a declining fertility rate, and decreasing productivity. In other words, without significant change, their economy will dry up and they’ll be the new Africa.

Of course the DFAT grads had no idea what to say to these new thoughts, and all they could come up with were more pre-programmed meaningless DFAT dribble. To which Matt replied, it's mathematics, it will occur. I think dinner ended soon after.

Anyway, just saw a few articles on

  • violence in Paris as 23 000 protest against making employment of youth easier, i.e., reducing long term structural unemployment;
  • France making two of its utility companies to merge in order to stop one merging with an Italian company (in blatant breach of EU competition law);
  • EU opposed to trade liberalisation, damaging EU productivity and stopping EU firms from access to cheaper inputs and hence, reducing EU exports.

What does all this mean …. well the EU, and especially the French, are trying their hardest to reduce European productivity. A very very interesting approach to economic policy when, given the EU’s low and reducing fertility rate, it needs massive productivity increases in order to SUSTAIN their current living standards … lets not even talk about the implications for INCREASING living standards!!!!

I wonder how these facts will affect DFAT dinner table conversation?!? No doubt something about how Nairobi is the new Paris.

Thursday, March 23, 2006

Do the French look happy?

Recently, Clive Hamilton again argued that we'd all be better off if we consumed less. The reason we all want the latest plasma tv or fast car, according to Clive, is not because big TVs are better or driving a nice car feels good, it's simply because I want to make others feel jealous of me. If I pull into my driveway in my new Nissan 350Z, only to find my neighbour bought a just as good Alfa Romeo, then, despite the effort, allegedly neither of us are better off. In sum, there is a coordination problem: we should all just argee to be more lazy.

However, since it's unlikely that a whole country of people will cooperate, people like Clive generally advocate the government stepping in and doing it for us. Fortunately, most countries have not been crazy enough to implement Clive's ideas but there's one exception: the French.

In the late 1990s, the French Government decreed that, with few exceptions, everyone would be restricted to only working 35 hours a week. Ostensibly, it was introduced to increase employment (following a lengthy tradition of successful French labour policies), yet it also provides an interesting test of Clive’s theories. As a result of the laws, everyone in France simultaneously increased their leisure, so presumably they should all be better off.

Well, the results from the French guinea pigs are in and they are not good for Clive and his band of fellow ascetics. A recent paper from Marcello Estevao (from the IMF) and Filipa Sa (from MIT) show that French workers are now less satisfied with their working arrangements. As the author's state:
Overall, our evaluation of the effects of the 35-hours workweek law is negative ... The 35-hours mandate did not work as a coordination mechanism in the presence of strong complementarities in leisure. Instead, it apparently introduced a distortion in workers’ choices and made them less happy.
Indeed, many French actively tried to circumvent the laws. There was an increased probablity of a worker taking a second job (a proxy for wanting to work more hours) and of moving from a large firm to a small firm (small firms had longer to implement the changes).

So, not surprisingly, people seem to be happier if left to decide how to make themselves happy. As an aside, the policy also did not significantly increase employment and the immdeiate prospects for real labour reform in France seem to be interminably blocked by another great French tradition: riots.

Wednesday, March 22, 2006

Cyclone Bob hits soon after Larry

Nth Queensland Federal MP Bob Katter blew several gaskets last night on ABC news over the possibility of importing fresh bananas to deal with the destruction of Australian production due to Cyclone Larry.

Anyone watching Cyclone Bob might have been mistaken to believe that the importation of bananas is a fresh issue. But alas, it is another step in the long walk of protectionism that began afresh in 2000 after the banning of Filipino bananas (the Philippines is the world’s fourth largest producer).

Cyclone Bob crowed on the ABC that Larry will destroy up to 4 000 jobs in banana industry in Nth Queensland. Of course, this isn’t the first incidence of Cyclone Bob claiming job losses for the banana industry. In response to a draft proposal to allow Filipino Bananas in 2004, the ABC reported:

‘Federal Independent MP Bob Katter says Queensland producers have been dealt another blow, with the Government clearing the way for the importation of bananas from the Philippines.

Mr Katter says the banana decision could cost up to 7,000 jobs, many in marginal seats.

"It's dreadful news for the Australian economy, for the people of north Queensland, northern New South Wales and ... it's very bad news for the Australian Government politically," Mr Katter said.’

I don’t doubt the 4 000 job losses associated with Cyclone Larry. But it does put into perspective the ‘realism’ of claims that free trade would wipe out 175% more jobs than the actual physical destruction of 90% of Australian banana plantations. Apparently Cyclone Bob comes with a hyperbole warning.

Quarantine is all about risk management. However, if the risk of importing disease is above zero, it does not mean that a blanket ban is appropriate. Where is the detailed economic analysis of the true costs of import bans on bananas (like those done for TCF and motor vehicle tariffs). Experience tells us that there is little doubt that the consumer benefit outweighs the potential Australian producer detriment.

Quarantine restrictions are just another tariff. Unfortunately, the government has been unwilling to perform a true economic analysis on its trade restricting effects. Hopefully Cyclone Bob will quickly pass and we, the consumers, will have access to fresh, cheap and plentiful Filipino bananas.

Tuesday, March 21, 2006

Vouch for it

Jenny Macklin recently attacked the Government for the alleged failure of a voucher scheme aimed at helping kids struggling with reading to access tutorial services. The media release is noteworthy for two reasons: (1) it does not use the word 'extreme' in relation to the Howard Government; (2) it is blatantly hypocritical.

Macklin accuses the government of being wedded to ideology in preferring a market-based solution. So what? Markets work. Somebody tell Jenny that the Russians lost.

She then goes on to claim that the money spent on the vouchers should go directly to schools. Yet nowhere does she explain why money should be given to a school that presumably must take some of the blame for the poor kid failing in the first place.

Perhaps I'm being unfair to Macklin. Ideology assumes that you have a coherent framework guiding your judgments. Macklin's arguments are based purely on interest-group politics, in particular the interests of teachers over students.

Macklin's main claim is that the voucher initiative has failed because there has been a slack response in most states. However, this can almost entirely be blamed on State Labor governments, influenced by teacher unions.

To access the vouchers students had to be behind in their literary development. However, parents in some States didn't know how their kids' were going because Labor Governments refused to release results, so as to protect under-performing teachers. Eventually all relented but not until the rollout of the scheme was delayed.

Even then, many States refused to promote the scheme to interested parents. Queensland didn't notify parents at all, while Victoria sent out letters on September 12; the scheme closed on September 13.

And in NSW the teachers' union actively tried to inhibit the scheme. The Department of Education requested schools to provide facilities for tutors and students. The teachers unions responded by engaging in a campaign of 'civil disobedience' on the grounds of duty of care, security and cleaning arrangements (I kid not). Public education: "It's time to give student's less."

Fortunately, despite such 'extreme' opposition, the scheme is likely to run another year. Although take-up has been slow, the initial results are promising; nearly 90 per cent of parents are satisfied with the program. I've always thought that, given a chance, vouchers would be popular with the punters, hopefully this small scheme can start building a constituency.

How costly are tax cuts?

Peter Costello's recently announced tax inquiry is now 4 weeks in. By my calculations they would have just finished downloading the relevant OECD reports and now have a week to reformat the tables and graphs so they look like original work.

All in all the whole exercise is a waste of time and effort. Instead of looking at what other countries are doing we should instead examine our own recent history, applying Milton Friedman's dictum that, "if a tax cut increases government revenues, you haven't cut taxes enough."

Surely there is no better initial question to ask. If we can cut taxes without hurting revenue why don't we do it. Unless one believes there is something beneficial in paying taxes in and of itself, or there is something wrong with economic growth, then it's a no-brainer.

Looking at the Howard Government's record it appears that we haven't cut taxes enough: income tax revenue has increased by 25 per cent despite three income tax cuts:
  • The biggest cut came with the introduction of the GST (according to Costello the biggest income tax cut in history). Treasury estimated that income tax revenues would fall by $12 billion. They only fell by $4 million and by the next year income tax revenues were back to their level before the cuts.
  • In 2003-04, the Government delivered the 'sandwich and milkshake' tax cuts forecast to cost $2.4 billion. Revenues rose by $4.5 billion.
  • Last year the thresholds rose and are to be lifted again in July. The cost was forecast at $1.9 billion this year and $3.4 billion next year. Data is not yet out on the true 'cost' of these cuts but given reports of another bumper surplus, revenues will probably rise again.
Quite simply, then recent tax cuts have not actually cut revenue. Although there are no doubt other effects I'm not controlling for (population growth, bracket creep and economic growth not itself caused by the tax cuts) there is a clear cut case on the relatively costless nature of the recent tax cuts.

This is important since many of the agitators against large tax cuts claim that it would cost too much, the good times won't last forever and we should put money away now for a rainy day. There are two things wrong with this argument.

First, the cost estimates that it is based on are flawed (as shown above). In the US they are making an effort to calculate the effect that cuts have on stimulating growth and simultaneously boosting revenues. This is not a simplistic Laffer argument (that all cuts raise revenue) it's just recognition that multiplying the size of the rate reduction by the size of the existing tax base is not a very accurate estimation of cost.

Second, you should never overfeed pigs at the trough. There is no need to shore up government future claims on our money since if we do they'll just spend the sinking fund and ask for more anyway. Plus if we do cut now and things turn really pear shaped, we can always raise taxes later. Or, even better, if there is a squeeze on then this will put pressure on government spending. Hardly such a bad outcome when government spending has been rising just as fast as its revenues.

In sum, let's stop navel gazing at our bulging tax revenues and start slashing away, at least until government revenues actually start falling.

Wednesday, March 15, 2006

Official Government Pronouncement

Quick update

The Australian Government has released its Discussion Paper on Media Reform Options.

It is official, according to the Australian Government, the decision about whether to allocate another free-to-air television licence is too important to be left to unelected bureaucrats in ACMA.

The Australian Government plans to amend legislation so as to make the government of the day the decision-maker.

So, logically, this means that according to the Australian Government, the decision to allocate television licences is more important than the decision to approve a drug that murders unborn children.

Interesting priorities .....

Friday, March 10, 2006

I never knew any pancakes that got nuked by India

That’s the punch line to a Krusty the Clown joke from an episode of the Simpson’s set in a future to come. The joke: “What’s the difference between Pakistan and a pancake?”

This past week, the world’s two largest democracies began constructing what could be the strategic alliance to define the 21st Century. The United States has agreed, in principle, to cooperate in the development of India’s civilian nuclear energy program. The “deal” is to allow India access to US nuclear technology, and in turn, international inspectors will have access to India’s nuclear facilities.

Unsurprisingly there has been some criticism of US policy. (Mind you: “President Bush sneezing” would be met with some criticism). I thought international security, world peace, and finding a safer, cleaner source of energy was on the top of the left’s agenda? This even has a hint of multiculturalism. Is it a case of Bush-bash first, save the world second? Or are they worried that once the neo-cons achieve all “their” goals, they’ll be out of work?

Why not let India have better nuclear power? With 8 per cent growth in GDP, its hardly as if they’ll want to reinvent the bomb they already have. 1.1 billion Indians are on the verge of developing into a real economy. The only thing that will stop India from maximizing its potential is having access to enough cheap energy to do it (compare with China, who’s having the same problems now).

We spend billions and billions of dollars on exotic alternatives. We are polluting the earth to the nth degree, risking lives in cola mines and on oil rigs, and if you want - but only because it serves my argument - selling “blood for oil” in wars overseas. Nuclear energy is available, it is clean, cheap and safe but the “no nukes is good nukes” crowd keeps it out of our hands.

Part of President Bush’s rationale for the deal with India is to alleviate some of the pressure on oil demand. Rising energy costs are adding significantly to the cost of manufacturing, of shipping and of living. Substituting India’s oil with nuclear energy (in a market of 1.1 billion persons) will keep prices down world wide.

But that’s not what this is about. The deal is being criticized for supporting India as a nuclear power. This is, after all, the same India who hasn’t signed the nuclear non-proliferation treaty, and the same India that is on icy terms with neighbors Pakistan and China. The deal is being read as a shady act of power balancing against China in particular. (Despite India already having nuclear weapon technology, and having tested a bomb in 1998).

But again, so what? The proliferation of nuclear weapons was what stopped the cold war getting hot. So long as there was balance, there was peace. The strength of one super power stops the hostility from the other. Granted, the arms race was certainly costly, but at least we’re not all speaking Russian. No one wants war between China and India, especially not the Chinese nor the Indians. The US would suffer immensely from a war between two of its largest trading partners. But peace between the regions, benefits everyone.

Australia’s response to the Indian requests started as a Dawson and Joey: will they or won’t they. Viewers were denied when the verdict came out as no: we don’t sell to Uranium to those who haven’t signed the non-proliferation pact. This is a missed opportunity. Australians will miss out while the Indians will merely get there uranium from somewhere else. “Principled” our stand may be, but I’m not sure what principle we’re serving.

Monday, March 06, 2006

Mason dumps Terra Nullius

According to Blackstone, writing about settled law prior to 1788, there are three ways of acquiring sovereignty over land: you may acquire it by force, acquire it as a gift, or take land that has no owner. The latter, taking ‘vacant’ land, is often confused with the infamous doctrine of terra nullius, but it is not quite the same thing. Age is the easiest and best way to distinguish the two doctrines – Blackstone was inherited at foundation, whereas terra nullius arrived, via Algeria, in the 20th century.

The stench coming from the corpse of terra nullius has driven away the star attraction of the black-armband circus: the courts. Historian Michael Connor’s work on the origins of the legal doctrine has caused quite a fuss in legal and historical circles, and has forced the divorce of terra nullius and Mabo - the case that introduced Australians to the term.

Chief Justice Anthony Mason has denied that his court's Mabo decision had anything much to do with the doctrine. According to Mason, the decision was about the common law: but how, then, did this obscure Latin term appear in the public mind with more force than a Dan Brown novel?

The simple answer is that Mabo was about terra nullius. CJ Mason, and his court, at least enjoyed the limelight they shared with Reynolds - until that light turned harsh and exposed some uncomfortable problems with his historiography. Historian Henry Reynolds had constructed a historical narrative, with the dark secret of terra nullius at the heart; however the dark secret is Reynolds’ – terra nullius is a lie.

Now, no one is arguing the facts from Captain Cook onwards; everyone agrees that there were once only Blacks, and that there is now Australia, the English language and the English law. The law was settled prior to the discovery of Australia, and that law was Blackstone. The facts secured the acquisition of Australia for the British crown – at law. Though this may have been harsh or unfair, it was not because the land was terra nullius.

The term was a telephone booth into which the court shoved plain old vanilla law – and out from which emerged the anti-hero, terra nullius, freshly minted and ready for the court’s dismissal. The tragic thing about the excision of this error was that the High Court, in 1977, had dismissed Paul Coe’s terra nullius based case for aboriginal title, on the grounds that the doctrine was not up for debate in an Australian court. Justice Brennan said that the question of weather a territory has been acquired by the crown was a question of international law, and that an Australian court could not decide the issue.

The inspiration for Coe’s case was the advisory opinion of the ICJ in the Western Sahara matter. In it, the ICJ had found that occupation was a valid means of acquisition only if the territory was terra nullius. Whereas the ICJ would not find terra nullius in the case of nomadic and relatively backward inhabitants, the Australian High court had previously held that land was available for occupation if, by European standards, there were no civilized inhabitants or settled law.

The difference in the two doctrines is now immediate: the ICJ recognized acquisition by occupation only if the territory was terra nullius; Australian law allowed acquisition via occupation because the Aboriginal population was uncivilized, and without settled law. While this condition would be met if the land was, terra nullius, it did not require that to be the case.

In Mabo, the court cloaked the existing law in new language, and found an opening for native title. This may have been (morally) the right thing to do, but the decision will forever be burdened with the corpse of terra nullius. Legal sentiment is probably too fixed to allow for a reversal of Native title, however the stench from the historical and legal rip-off may make legislative restriction an easy sell in the electorate.

The loss of legal legitimacy will be the lasting body blow against the black-armband circus. Mason has hung Reynolds’ and company out to dry: terra nullius was not a part of our history, and the High Court no longer considers it a useful legal fiction. I guess it is back to the boring work of practical reconciliation.