Personal Reflections

Wednesday, September 17, 2014

Blessed solitude in an internet world

I have spent a fair bit of my life just driving. That’s inevitable if you grow up or live in country Australia. I am not talking short commuter style trips of less than two hours, but long trips stretching into multiple hours.

I can no longer drive the nine or twelve hours that I used to without blinking, sometimes a drive or two a week. I think the most extreme was more than twenty six such drives in a thirteen week period. Still, while I have slowed down a little, I am still happy to get into a car for a seven hour drive.

I do take more breaks, now. When young, my daughters were greatly influenced by the NSW Government’s Stop, Revive, Survive campaign. This has to be one of the most successful and indeed sensible road safely campaigns. Drive for two hours and then take a break. My daughters insisted, and I got into the habit. Now it has become an integral part of my driving pattern.

On these long drives, I often listen to the radio  assuming, of course, that I can. There are large parts of country Australia where you cannot actually get the radio. Still, sometimes when there is radio reception, I just switch the radio off to listen to my thoughts. There is a sort of relief of tension. Even casual listening requires a degree of concentration.    

I was reminded of this by an interesting if short book review in The Economist of Michael Harris’s The End of Absence: Reclaiming What We’ve Lost in a World of Constant Connection. There is nothing especially profound there, simply a reminder that the constant need to stay connected, to keep in touch, has the same crowding out effect as the radio on those long car trips. Solitude, the time to think and process, is lost.

You can see the addictive effect of constant connection in the withdrawal feelings we get if, for any reason, our internet connections go down. I find myself feeling lost, facing time that I had not expected. There is also that feeling that says I may be missing something. What if something happens?

All this is silly, I know. I grew up in the pre-internet world. If something bad happens, I will find out. No connection? Do some reading, thinking or go for a walk. I wouldl be better for that rather than adding to my computer induced stoop. Yet its remarkably hard to break the addiction.  

Sunday, September 14, 2014

Quis custodiet ipsos custodes? Rationality, proportionality and the latest war on terror

I will continue Saturday Morning Musings - the use and abuse of the term business, but other things have been happening. In Monday Forum – the Ukraine, a new war on terror and corporate investment, I went back in part to an old post of mine and said in part:

I am not saying that Australia should not be providing a degree of military support against the Islamic State. I am concerned about the proportionality and common sense of some of the rhetoric and of the domestic measures that the Government is proposing to protect us all from home grown jihadists. To my mind, the side-effects from the preventative medicine are likely to be worse than the cure.

I do not share the views expressed by the Greens or some others on the left that Australia should not be involved. I think that we should. It’s the language that is now being used that scares the living daylights out of me Again, we are likely to create the enemy that we fear. To illustrate this, let me make just three points.

First, the West cannot defeat the ISIL by direct military action. That has to be done locally. The West can use power to hold the line and to buy time. That’s about it.

Second, the best way of containing ISIL is by marginalising it, letting it destroy itself, treating it with contempt. The more credibility ISIL is given by extreme language, by presenting it as a supreme threat, the more power it gathers.

Third, ISIL cannot actually damage the West in any real sense. Assume a worst case scenario with terrorist attacks in Western centres. Life goes on. The IRA couldn’t bomb the UK to its knees. They did damage, but didn't have the power. I am not equating the IRA to ISIL. I am simply making an observation about the reaction of the civil population.

ISIL is a disease like Ebola, just less dangerous outside the epicentre. I am only guessing, but I imagine that the most that ISIL could kill in Australia in any one year with maximum effort and effect is significantly less than the number of road deaths in the same period. I wonder, then, why we are treating ISIL as though it were a case of bubonic plague in the days when we didn’t know what that plague was? 

We have to be careful about our cures. When the Australian Government raised the threat level to high, Australians did not know how too respond. What did it mean? What could we do?  The answer, of course, was nothing. And yet, at the same time, ASIO wanted more powers. So a heightened threat level added to the apparent case for those powers.

Am I being too cynical?  Maybe. I live in a world where a few deaths leads to silly swimming pool restrictions, where the narrow risk of a septic tank leak leads to what has been called a poo tax.I fear I put the the latest security proposals in the same class.

i wonder. We do tend to create our own devils.

Saturday, September 13, 2014

Saturday Morning Musings - the use and abuse of the term business

The decision of the Australian High Court in the temporary protection case (here; a link to the verdict is included in the story) represents another set back to the Australian Government's stop the boats at all costs policy.

You don't have to be for or against the policy to know that the policy has come at a considerable cost, financial and human. To those supporting the policy, these costs are acceptable. Those opposing it obviously take the opposite view. To them, the costs are part of the arguments against.

My argument has been a little different: even if you take the Government's objectives as a given, have they gone about it in the best way? Here I argued from early on that the Government's policy approach was unnecessarily clumsy, creating damage (among other things) to our relations with Indonesia. It's kind of a blunt crash or crash through ethos.

Down in Canberra, the changes that have been imposed on the public service by the Government continue to cause ripples. The Canberra Times remains the best source here. This is the latest example: Tony Abbott's indigenous takeover in 'disarray'.

From a practical perspective,  public servants in all Australian jurisdictions are struggling to deal with a multiple changes that interact with each other: budgets are being cut; services are being outsourced; new management models are being introduced, some not so new re-introduced; with the whole package wrapped up in the latest version of modern management speak whose practical effect it to make the process so opaque that even those inside the system struggle to understand what it all means, let alone explain it to those outside the system. Most public servants are just keeping their heads down, trying to keep things going as best they can.

It will be clear from my writings that I am out of sympathy with the changes.

I dislike the new jargon. Consider the use of the word business. University VCs talk of their institutions as businesses, while senior public servants sometimes talk of their agencies as the business. The business needs this

But what is a business? One definition reads: an organisation or economic system where good and services are exchanged for one another or for money. Wikipedia states:  "business, also known as an enterprise or a firm, is an organization involved in the trade of goods, services, or both to consumers." The concept of transactions, of exchange, is central to both definitions. So if an agency is a business, its core activities must focus on transactions, on exchange.

This leads to a second question. If an agency or institution is a business, what is that business? Put this another way. If a business is about transactions, what transactions are we talking about? Do those transactions actually represent the core of what we do? This gets us into slippery territory. You can see this clearly if you ask a simple question, who is the customer? 

In the case of Australia's universities, for example, they have multiple customers, including especially the Australian Government who acts as funder and regulator. Similar issues arise with specialist medical colleges. Each customer is involved in often overlapping transactions. In this mix, what are the core transactions? How do these relate to the business as defined?

In practice, very few organisations define themselves in terms of transactions or, indeed, business as such. Take BHP Billiton as an example. The company defines itself in this way: "We create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources." This statement has the advantage of being clear. Transactions are there, but the key thing is shareholder value on one side, a set of activities on the other. BHP Billiton knows that it is a business, doesn't need to talk about it.

Now compare this to Sydney University.  Its strategic plan begins:
The University of Sydney is a large and diverse institution with a broad range of disciplines and a strong shared identity that binds us together as a community and shapes our strategy.
At the heart of our strategy is our shared common purpose to create and sustain a university in which, for the benefit of both Australia and the wider world, the brightest researchers and the most promising students, whatever their social or cultural background, can thrive and realise their full potential. 
The introductory statement on the About page reads: 
Our scholars and students share a passionate commitment to the transformative power of education.
Our research makes a real difference to our understanding of today's world and how we work and live in it, and we enrich our community by bringing together people from all social and cultural backgrounds.
These are aspirations expressed in marketing terms that reflect that nature of Sydney University as a major tertiary institution.. But how do they link to the expressed concept of Sydney University as a business or the phrase "the business" used in internal meetings?

If we now turn to the NSW Department of Family and Community Services (FACS),we find that the About Us section begins:
We are committed to achieving the NSW Government targets and ambitions as outlined in the NSW 2021: A plan to make NSW number one. We measure our performance against these targets through indicators which we monitor and review regularly to improve our services.
Further information our performance can be found in the NSW 2021 Performance Reports.
 Our work is broad and challenging. Our objectives for 2014-16 are:
  • Children and young people are protected from abuse and neglect.
  • People with disability are supported to realise their potential.
  • Social housing assistance is used to break disadvantage.
  • People are assisted to participate in social and economic life.
  • People at risk of, and experiencing, domestic and family violence are safer.
  • Aboriginal people, families and communities have better outcomes.
We will achieve our objectives by improving the way we work:
  • We put people first.
  • We create local solutions tailored to meet local needs.
  • We work with government, non-government and community partners to reach more people with better services.
  • We build an agile and cohesive department that leads and delivers social policy reform
Again, aspirational relative to the role of the Department. But how do these goals link to the sometimes expressed concept of FACS as a business or the phrase "the business" used in internal meetings? As with Sydney University, the reality is that they don't. 

If the term business is so ambiguous and uncertain, why do people use it in circumstances where it is arguably not at all relevant or, at least, of uncertain meaning?

There appear to be three reasons. The first is just fashion, that being a business is somehow good. The second is that business appears to be used as a synonym for business like. The third and more complex reason links to implicit mental models about the importance of markets and the role of government.

I will extend this argument in my next post.




   

Tuesday, September 09, 2014

Scotland and the fight for New England self government

Back in 2009 in a piece exploring the question of identity, Saturday Morning Musings - on being British, I wrote in part: 
Growing up, my close identification with my maternal grandfather meant that I identified strongly with Scotland because he did. At one level, this did not make a lot of sense. Both my paternal grandparents were born in England, my maternal grandmother came from English stock, so the Scottish side through one set of great grandparents made me at best perhaps a quarter Scottish. However, it was a matter of emotional connection.  
The link was emotional, but it was more than that. 
I was a reader, and my grandfather used to give me books. One of the first more serious books I read as a child was H E Marshall's Scotland's Story (first published 1905). I read Sir Walter Scott (1771-1832), and browsed the books on the clans and tartans of Scotland..
I had a Drummond tie, while my mother and all my aunts had clan broaches with the Drummond motto Gang Warily. While I was at primary school my grandfather gave me a copy of John MacDonald MacCormick's Flag in the Wind (1955), the story of the Scottish National Movement. This book resonated since I was already a strong New England New Stater, so I became a Scottish nationalist by sympathy. We wanted self-government, so did Scotland. 
As an aside, all this reading had one odd, later, outcome. Many years after this I was at a cocktail party at the British High Commission in Canberra. Some of the younger staff I was talking too were puzzled about the rise of the SNP, Scottish National Party. I realised that they were all southern English and actually had no idea of Scottish history. They saw the SNP as a strange aberration.  
This was well before devolution, the creation of Scottish and Welsh parliaments in 1998. A slightly odd conversation followed, which saw an Australian public servant explaining to British diplomats something of Scottish history and the possible constitutional implications for the UK!
 I mention this now because it the latest opinion polls show that the yes case for Scottish independence has pulled ahead causing a degree of panic in Westminster. You don't need to vote for independence, the argument runs; here is another set of powers you can have if you stay in the UK.

Personally, I hope the no case wins,  if just. Scotland has already achieved major devolution of power and will gain more. The costs of full independence strike me as a tad high. I find also myself torn between my continuing sense of Scottish patriotism and other things, including my sense of UK history.   
   
In this context, the remarks of Australian Prime Minister Tony Abbott on the independence issue raised a degree of ire in Scotland. They were insensitive. More to the point, they displayed a complete lack of understanding of Scottish history. They also had Australian connotations that were not encouraging from my perspective. 

Agitation for self-government for Northern New South Wales is now 153 years old. That's half the time Scotland has been a member of the Union. We have not sought independence from Australia, simply the right to govern themselves within the Federation, to have a real say in setting directions and priorities. Looking at Mr Abbott's comments on Scotland, I wonder if he has any comprehension of this?

Our present request is simply the right to have another vote. We lost the 1967 vote 53% to 47%. The political dynamics then were very similar to those holding in Scotland now. The question of who might hold political power in New England, what would be the affect on political power in Sydney, drove party political responses. Scotland is further advanced than New England in that it has already achieved what we seek. The benefits to Scotland from devolution seem clear. Yet the pattern of arguments remains very similar. 

In 1967 as in the 1880s, the 1920s, the 1930s and the 1950s, we were told yes, you have real grievances, but you are better off staying part of NSW. There are other solutions such real decentralization and the devolution of powers and decision making via regional councils. There has been no delivery. Meantime, the structural decline that has gripped Northern NSW for over 100 year continues.

Is it too much to ask for and be given another vote on self government? Isn't that our democratic right?    

Saturday, September 06, 2014

Saturday Morning Musings - Jennifer Westacott's nostrums

Back in August, Business Council of Australia CEO Jennifer Westacott delivered a speech on the importance of innovation in the public sector. This resulted in somewhat stinging response from Paddy Gourley: 'Innovation' snake oil and other business cant: Jennifer Westacott's unwanted advice.

Mr Gourley has his own biases. They come through clearly. Still, he makes some valid points.
in

In her paper, Ms Westacott says in part:
The fundamental value proposition in the public sector context is better outcomes: 
services that are easier to use

  • regulation that empowers rather than impedes
  • a better customer experience
  • better value for money for the taxpayer
  • The greatest challenge in a highly constrained public spending environment is to extend the value afforded by the dollars we spend.
Can you spot what’s missing here? There is absolutely no context: there is no reference to the role of the public sector in providing advice; there is no reference to politics, minsters and the nature of our democratic system; there is no understanding of roles. The public sector does the best it can, but it operates in a highly constrained environment.  Ms Westacott refers to a highly constrained public spending environment, but it’s a little more than that.

The public sector has many different roles. Each of those roles has different dynamics. Each needs to be addressed separately, if within a unifying framework that starts with the role of Parliament, of Government, of ministers.

Consider the first dot point, regulation that empowers rather than impedes. Who is finally responsible for regulation? I guess it depends on just what regulation and what indeed is meant by regulation. Still, in the end it is ministers and governments who actually set the framework here. Those are the audiences that Ms Westacott must address if she wishes to achieve her first point. It has little to do with either management or public administration.

Turn now to better value for money for the tax payer. There is an obvious definitional point in term of what we mean by better value for money. Leave that aside, from my experience most public servants are concerned with better value for money. I am constantly astonished by their commitment. But they can only do so within their scope and also have to cope with increasingly complex and burdensome policies, processes and procedures.

If Ms Westacott really wanted to make a difference she would focus on simplification. How do we reduce administrative overhead, break the bounds of command and control systems? 

If Ms Westacott really wanted to make a difference, she would focus on structures and decisions at the top within the bounds set by our Westminster system. What has happened to the role of the minister? Is she or he just a cipher within an increasingly presidential system?

If Ms Westacott really wanted to make a difference, she would say how do we maintain innovation and creativity within increasingly cash constrained mega-agencies where everything is centralised?

Each day, I hear public servants say things like this: that’s very silly; how do we change it to minimise the effects on our clients?

Each day, I hear public servants say things like this: we have to deliver; how do we keep business as usual going given these changes?

Each day, I hear public servants saying go with the flow, do as you are told. It’s silly, but we can’t change things.
  
There is a very old saying: the fish rots from the head.

For over 20 years Ms Westacott, and I quote from her CV, “occupied critical leadership positions in the New South Wales and Victorian governments. She was the Director of Housing and the Secretary of Education in Victoria, and most recently was the Director-General of the New South Wales Department of Infrastructure, Planning and Natural Resources.”

To my mind, Ms Westacott is part of the problem. I accept that this may well be unfair. I accept that her speech was delivered to a particular audience in a particular context.  I am sure that she did many good things in her official roles. Yet in her speech there is nothing that will actually help. It seem to me to be a set of nostrums set within an intellectual framework that has already failed.

Thursday, September 04, 2014

Would an emissions trading scheme have helped the Abbott government handle the renewable energy target mess?

You have to be careful about locking yourself in via rhetoric and targets. A case in point is the abolition of Labor’s emission trading scheme. I mention this now because of an interesting piece in yesterday’s Australian Financial Review by economics editor Alan Mitchell, Abbott misplays  greenhouse policy.

The crux of Alan Mitchell’s argument can be summarised thus: “Abbott should have seized the opportunity presented by the Senate to keep Labor’s emission trading scheme.” Hang on”, you might say, “isn’t this a core promise? How could Alan Mitchell say this?”

The challenge can be summarised this way.

During the election campaign, the opposition committed to the abolition of the ETS (Emissions Trading Scheme) and its replacement by a direct action program. The second involved the expenditure of real money. It was actually a slightly odd response in ideological terms for a market oriented government; the replacement of a market mechanism by direct action and Government cash.

Now the Government has a problem with its Renewable Energy Target. This is where things get complicated for simple mortals like me just trying to understand.

Back in 2001, the Howard Government introduced a Mandatory Renewable Energy Target of 9,500 GWh of new generation, with the scheme running until at least 2020. This represented  a doubling of renewable generation from 1997 levels. So far so good.

In August 2009, the Rudd Labor Government passed new legislation extending the target to ensure renewable energy obtained a 20% share of electricity supply in Australia by 2020. This was expressed not in percentage terms but as an absolute number; 45,000 gigawatt-hours by 2020 equal to 20% of projected electricity demand.

A teensy, weensy problem now emerged. Sadly, or perhaps good depending on your views, demand for electricity actually declined. Now that 45,000 GWh is not 20% but far higher. If the target had been expressed as a percentage, then it would have left the marketplace to make its own estimates. Now all sorts of investment decisions have been made not on a percentage but an absolute number. You see the Government’s problem?

The Warburton report into the future of the target has not been of especial help to the Government. While Mr Warburton’s appointment was much criticised because of his views on climate change, the report appears to be an objective assessment of trends and options. In this sense, it has handed the problem back to the Government where, indeed, it rightly belongs.

I have no idea just what the Australian Government might do. However, and this was Mr Mitchell’s point. the Government might well have had more flexibility if it had gracefully accepted the retention of the ETS. 

Perhaps I’m wrong. I often am. But emissions policy is emerging as another Government mess.      

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Wednesday, September 03, 2014

Ramblings – abolition of the mining tax, superannuation and the long term

So, the Australian mining tax has finally been repealed. The passage came after the Government struck a deal with the Palmer United Party and was supported by the Day/Leyonhjelm block. I suppose that we can call them a block. They generally vote together. 

The passage is a reminder of the need to stand above the daily turmoil. The Government has been forced to compromise since it doesn’t have ultimate unfettered power, but that has been the case for much of the time since Federation. The Howard Government might still be in power if it had not won control of the Senate and consequently found itself able to push through legislation regardless.

The deal came at the price of what is, effectively, an indefinite  deferral of the increases in deductions of compulsory superannuation that were intended to fund longer term retirement incomes. Labor and the Greens have attacked this quite savagely, as you would expect. However, my simple point here is that the business of government does go on.

You would think listening to some of the comments from the business lobby and others that this was not the case. It’s the same type of criticism and commentary Julia Gillard had to deal with when she depended on the New England independents for survival and passage of legislation. It was silly then and is silly now.

What is really important is the longer term impact of the measures being passed. We tend to lose sight of this in the daily cut and thrust. The mining tax itself was no longer very important beyond its role as a political symbol and election issue.

In simple terms, it was a tax designed to extract a share of super profits in a boom now passed. The problem lay in the way that that the then Government hypothecated hypothetical revenue to specific expenditure proposals. The new Government was committed to the tax’s removal, but the real fight was around the future of the expenditure proposals linked to the tax.

All the Government had to do to avoid a fight on the tax as such was to deal with it and associated expenditure items as separate issues. Repeal the tax; whatever the original arguments, it doesn’t make sense. Tick. Now deal with the associated expenditure in a budget context. Instead, the Government locked itself into a trap of Labor’s making by attempting to deal with both sides of Labor’s equation at the same time.

Now we have the effective ending of the Keating vision of a system in which the Government facilitated a compulsory saving program for future retirement needs. Lord knows, I am not a Keating supporter. I have a visceral dislike of the man based on the symbolic drums he banged, as well as my perception of his arrogance. That vision is largely gone now.

So what have we gained?

The Government has gained some extra tax revenue because, If my understanding is correct, more tax will be paid on incomes. I count retention of the low income super contribution as a plus since it appears (again I stand to be corrected) that this addresses a situation in which the current tax on superannuation is higher than the personal tax rate. The abolition of the mining tax may be a small plus as well since it yielded little revenue and was complex.

I do not count retention of the school kids bonus as a plus. This is just another of those patch work quilt of ad hoc welfare measures that fall in the “it seemed like a good idea at the time” category.  Our welfare system does need rationalising and simplification, if not on the lines proposed by Mr Hockey’s Commission of “Audit”. It also needs a fundamental re-think as to rationale. Keeping the school kids bonus does not help the process, although its real importance is not high.

So what have we lost? Obviously I think that we have lost or at least deferred the chance to build  better retirement support system. However, it seems to me that we have incurred two further costs.

The first is that we are going to be paying more in old age pensions. This sees clear, although I couldn't put a number on it. The second is a further erosion in trust in Government at the most basic personal planning level. I think that’s the biggest long term cost.

Tuesday, September 02, 2014

A note on dividend imputation

I hadn’t realised that New Zealand, Malta and Australia are apparently the only countries to have dividend imputation built into their tax systems. For those who don’t know dividend imputation, it is intended to reduce double taxation on the same profit stream.

Prior to dividend imputation, a company would pay tax on its Australian earnings. If it then paid a dividend to shareholders on post tax profits, that dividend was taxable in the hands of shareholders. So every dollar of company profits distributed as dividends was taxed first at the company tax rate and then the personal tax rate.

This was seen as having certain negative effects. To begin with, it was inequitable. It provided an incentive for the the use of tax structures such as trusts designed to avoid double taxation. It also arguably created a market distortion by skewing investment returns against dividends in favour of interest bearing securities.

The system that Australia introduced allowed shareholders to effectively claim an income tax credit on dividends paid from Australian profits. Tax was now payable only on the difference between the company tax paid and the shareholder’s marginal tax rate. For example, if the company tax paid represented 28% but the individual’s marginal tax rate was 40%, the dividend was taxable at 12% in the hands of that shareholder.

There is now pressure to remove dividend imputation as part of possible tax changes targeting taxation “concessions”. As with all these things, the immediate effect of removal is likely to be greater than the original introduction. 

I do not have the knowledge to track the detailed effects since these depend in part on the varying tax positions of individuals and entities. However, on the surface, the removal of dividend imputation is likely to have considerable impact on the return from shares for certain classes of investors. There are also likely to be differential impacts on share prices. The impact here would be greatest for shares and dividends in companies earning the majority of profits in Australia since dividend imputation only applies to dividends paid to Australian shareholders from Australian profits.

Interest rates were relatively high at the time dividend imputation was introduced. In these circumstances, dividend imputation had a considerable impact on dividend versus interest returns, encouraging a rise in share prices. Interest rates are now so low that the immediate asset price impact of the removal of imputation is likely to be muted. However, as interest rates rise (and they will), there are likely to be considerable asset price effects.     

Monday, September 01, 2014

Monday Forum – the Ukraine, a new war on terror and corporate investment

I accept that I have been very slow in posting. linesmen In the meantime, kvd sent me this photo. It was, he suggested, the Tesltra lineman and his apprentice inspecting kvd’s ADSL connection!

The Ukraine

The international scene is a proper cheer up, just at the moment.

I haven’t commented on Ukraine for a while. I guess that my core feeling is one of sadness as exemplified by this story. This is a proxy war in the sense that those in the east have become victims of games played in Kiev and Moscow. Mr Putin can’t let the rebellion that he helped inspire and supported fail. That’s clear. But how far does he go and at what price?

In all this, there is one point that I noted. Europe is so dependent on Russian gas that it constrains their political freedom. I suspect that if it were not for that, the European response would have been far more robust.

I have always been cautious in an Australian context about arguments that say we must maintain capacities for strategic reasons. It does lead to special pleading. However, I do wonder now whether we have actually got to the point that the country might grind to a halt if the sea lanes on which we depend were interdicted to any substantial degree.

The Middle East and the New War on Terror

Meantime, the Middle East can best be described as a mess. Here I do wonder about Government responses.

Back in June 2007 I looked at terrorism and related issues in Moral Courage, Fear, Technology and the Decline of the West. It’s quite a good post and still relevant today.

I am not saying that Australia should not be providing a degree of military support against the Islamic State. I am concerned about the proportionality and common sense of some of the rhetoric and of the domestic measures that the Government is proposing to protect us all from home grown jihadists. To my mind, the side-effects from the preventative medicine are likely to be worse than the cure. 

Investment Strike and the Corporate Tax Rate

Over the last few weeks there has been quite a bit of commentary including from Australian Reserve Bank Governor Glenn Stevens on the failure of Australian business to invest. Animal spirits appear to be lacking.

In the days when I bought shares, I aimed for a mix of dividends and capital gain. That made sense in a more stable business environment since you could largely depend upon reinvestment in the business to increase value over time. It seems to me that that is no longer true. When any business pays out to much of its profits in dividends, its investment capacity declines. It becomes worse when the decline in investment seems to be associated with an absence of investment opportunities.

All this makes me cautious about supporting further cuts in business taxation at this point. The argument usually runs that if you reduce business taxes  then you will increase investment. That’s far from clear at this point.   

Wednesday, August 27, 2014

NBN and the Vertigan Report - economic modelling gone silly

Wednesday! Where has the first part of the week gone? Tonight, just the national Broadband Network.

Communications Minister Turnbull has released (part released; some of the content is redacted) his cost benefit study into the NBN. I haven’t had time to read it yet. I do want to comment, however, on some of the reporting.

As I write, my local area network connection shows a nominal download speed of 100 Mbps. As we all know, actual speeds are always lower than nominal speeds. I am on 100 MBps because I have my computer plugged directly into the wall socket. If I go though the modem, my nominal download speed drops to 50 mbps. That’s with one user.

I am on an ADSL connection over copper. Working via the modem, the connection speeds are sometimes so slow, not always, that I cannot watch a You Tube video, properly download some software. If I were to really set the house up in the way I want with the main computer in the front office plus wireless connectivity that would accommodate visiting friends  or another device of my own, my connection speeds are likely to drop to blazes.

I mention this now because the Vertigan report is based on some modelling by Communications Chambers. It is that modelling or more specifically some of the underlying conclusions that I want to address. Now before going on, I want to quote some of the reported conclusions from Communications Chambers (CC). I am quoting reports. I am happy to accept corrections.

Subject to that qualification, it seems that according to CC:

  • in ten years’ time, only 5% of Australian households will demand internet speeds of 43Mbps or more
  • The 2023 household median demand will be just 15 Mbps. CC reckons that this low demand needs to be seen in the context of the continuing benefits of video compression and the fact that 58% of households only contain one person
  • The growth in the number of households who use (the internet?, broadband?) had risen from 64% to 83% from 2007 to 2014, but this growth was driven by older single-person households who place significantly less demand on the networks than families.
  • At the busiest time of the evening, the average connection was used to just 1.7% of its capacity.

Sorry CC and Vertigan, you have really annoyed me. Let’s leave aside the question of what demand might be like if the bandwidth was there at the right price and just focus on me as a user, one who already has to pay a considerable price and cannot do all the things he wants when he wants at current connection speeds even though his nominal 

Now this single person older household demand driver is, just at the moment, writing this post. The email connection is on, one just arrived, but but my bandwidth usage is very low. Silly me, bringing down the average. Even when I post in a few minutes, my usage will be low. You see, what is relevant to me is not the average but the peak, and there I am already in a degree of trouble.

Our blogging friend AC has been in Poland. Poland has quite good bandwidth, apparently better than Australia in terms of top speeds, real connections over 100 Mbps. To save money, AC went for a 25 Mbps connection while she was there, then found that that 25Mbps did not work when it came to Skype video conference or even phone connections. The low bandwidth made for very poor quality, especially in reproduction.

This is 2013, not 2023. I am not getting value for money at the moment on my phone/broadband connection. I can’t upgrade the service to meet my peak needs because the pipes aren’t there, and I’m in a densely populated part of Sydney. Think what it’s like elsewhere.

None of this means that the NBN is the best solution. But economic modelling carried out to support a case does not help. That may be unfair. Perhaps the modelling is simply bad.

As I read this stuff, I thought what planet are these people on? The Vertigan report appears to give me a 2023 solution based on a 2103 reality that already makes me unhappy. Thoughts of tar, feathers, sharp poles with splinters came to mind! Not happy, Jan. 

Postscript

A brief follow up now that I have had  chance to at least skim the underlying reports.

We are all influenced by our own experiences.

I am clearly not a typical internet user, nor are most people I know. I use the internet quite heavily for a mix of personal and professional reasons. So do they.

I am on a notional 50 Mbps download ASDSL broad band connection. That puts me already on Mr Turnbull’s notional target speed connection.

As of this morning, speed test shows a 6.34 Mbps actual down load speed, an 0.71  Mbps upload speed.  In a previous discussion, commenters explained the reason for the divergence between rated and actual speed. I won’t revisit that discussion at this point.

In broad terms, I generally don’t have a download problem, although this does get very slow from time to time. I do have a recurring and sometimes frustrating upload problem because I use photographs. Yes, I  can compress the photos, but sometimes I require high res and, in general, it’s just easier to use the photos as is.

The new things that I would like to do centre on upload. I wish to develop and upload new material. To do this, I have to learn new skills and will probably require new kit. However, once I have all this, it is nor clear to me that I can do what to do with my current upload speeds. I don’t think that I can.

Herein lies the rub with all these arguments. They rely on averages. They just don’t dig down deeply enough to find a Jim who already finds the 2023 projected usage patterns inadequate.

Sunday, August 24, 2014

Sunday Essay – slogans, politics and the misuse of language

Following up on the discussion on Problems with Team Tony, this morning’s short Sunday Essay takes these words from Tony Blair as an entry point:

The way in which information is exchanged so quickly has forever changed the way in which people want to consume information.They demand that things be condensed into 20-second sound bites. With complex problems, this is exceedingly difficult, but to be an effective communicator and leader you need to be able to condense complex items down to the core and be able to do this quickly.” – Tony Blair, former UK Prime Minister.

I found Mr Blair’s words to be deeply condescending because they seem to imply that I need to be spoon-fed, to be given my information on a spoon in the way my mother gave me medicine as a child. The discussion that threw up this quote dealt in part with the need for simplification. Winton Bates even tried his hand at twitterising the Gettysburg address! 

There is no doubt that short phrases or sentences can be powerful. “Not happy, Jan” entered the Australian language from a TV ad because it so aptly captured that feeling of discontent that we all feel from time to time. In the newspaper press, the role of a good sub-editor is to create the headline that will both capture the essence of a story and persuade people to read it. This is a highly skilled craft form. It is also one in which the two objectives, capturing the essence while persuading people to read, can conflict. We have all seen dramatic headlines that do not properly reflect the content, We have also seen headlines that are influenced by a third factor as well, the campaigns or particular political stances that the paper happens to be pursuing at the time.

In politics, Mr Abbott’s “Stop the Boats” is effective because it both plays to prejudice and succinctly captures a Government objective. Interestingly, people were actually surprised at the fervour with which the Government pursued this objective to the exclusion of other considerations. It appears that many of us reacted as though it were just a slogan rather than a Government objective writ in stone that must be delivered no matter the cost.

In the religious arena, “love thy neighbour as thyself” and “do unto others as you would have them do unto you” are powerful phrases because they capture the essential message of Christianity.

Sadly, we live in a world where Mr Blair’s views have come to occupy the high ground. That is the way we are all treated. If I am to be fed on a diet of slogans and simplified messages, then I appear to have reached a position once defined by Adolf Hitler: All propaganda has to be popular and has to accommodate itself to the comprehension of the least intelligent of those whom it seeks to reach. I am in no way equating Adolf Hitler and Mr Blair, but Mr Blair’s views as quoted above would seem in many ways to carry something of the same message as expressed by Hitler those years before.

Things tend to correct themselves, although there is a price to be paid for that correction. We live in an age today where every initiative, every policy statement, every new business cost cutting measure  has to have a title attached to it, to be expressed in a particular visual form, to have its own communications strategy. As with so many things, communications strategies have become de rigueur because communications itself has become so poor that people have largely tuned out. The price we pay is to be served unadulterated pap. A further price is that things that are important can actually be concealed, can escape attention.

I, for one, would like to have less communications and more information, less communications and more analysis. I want to be given time to think about things, to understand.

Australian Treasury Secretary Parkinson talks about the increasing difficulty of bringing about “reform”, contrasting the present period with Bob Hawke’s time. I think that he is fundamentally wrong in one important respect. Presently, Australians (and others) live in a world of constant change, of constant calls for reform all constantly packaged and re-presented. How do Australians (and others) identify what is important when the goal posts and rules shift so often that nobody can understand just what game is actually being played?

That’s the nub of it. We don’t have a communications problem as such. We have an approach problem in which “communications” itself has become part of the problem. 

In addition to being the Sunday Essay, this post also acts as the Monday Forum post.    

Friday, August 22, 2014

The rise of the European trading company – imperial creation in the pursuit of profits

This post is a signpost, a post intended for later use. It’s creation was triggered by my reading of Emily Hahn’s Raffles of Singapore with its detailed descriptions of aspects of the operations of the British East India Company.

I had obviously been aware of the operations of the various trading companies such as the English later British East India Company (established 1600), the Dutch East India Company (1602) or the Hudson’s Bay Company (1670). There has always been a degree of romance and a sense of adventure associated with such companies,  one captured rather nicely by the original title of Dutch East India Company Ship Buildingthe Hudson’s Bay Company: The Governor and Company of Adventurers of England trading into Hudson's Bay. How could one not be attracted by a title like that?

While I was aware of the companies, I don’t think that I was properly aware of just how early they began, how big some of them were, nor of the critical role they played in gathering capital, organising trade and laying the basis for the outward expansion of Western Europe.

The illustration shows the shipyards of the Dutch East India Company in 1726.

To get a feel for what I mean, and assuming that you have some spare time (do any of us today?!), this Wikipedia page lists some of the trading companies.

Take an hour some time and just click through on the links. You will quickly get a feel for just what I’m talking about.