Ratings agencies & market instability

Today's Armidale Express column is on the evils of the rating agencies. This will come on line next week on the New England blog.

The crux of my argument is that we have institutionalised the role of the credit rating agencies to the point that they and their ratings have become destablising and destructive. Here I said in part:

The institutionalisation of agency ratings, their incorporation into so many regulations and arrangements, meant that variations in credit ratings had direct flow on market effects in ways that no-one had foreseen. The ratings system itself had become a direct cause of market instability and on a large scale.

It appears that we simply cannot help ourselves.

Yesterday, the Australian Government released its Mid-year Economic and Fiscal Outlook 2010-11. As part of the local discussion, the Treasurer and Shadow Treasurer exchanged verbal blows over the decision by the Fitch agency to award Australia triple A rating fore certain debts, meaning that all three of the major agencies now do so. The Treasurer crowed look how well we are doing compared to others, not so said the shadow Treasurer.

I found the whole thing slightly repulsive because it provided a further illustration of the way in which the agencies' roles have become institutionalised. There was also a beggar my neighbour element in the Treasurer's comments. Ratings intended, however poorly, to provide market information have become another weapon in the competitive battles between nations.

Neither the ratings nor the rating agencies themselves can support the roles now placed upon them. They don't inform the markets, they can actually determine the markets. To my mind, this is quite pernicious. Does anybody seriously believe that the Fitch change actually says anything about the Australian economy?  

Dreams past: Collective Wisdom, education & the NBN

This post today is a personal historical piece, However, it is also one that has a certain relevance today in the context of the NBN and other discussions on the application of new technology in education.

The following photo dates from February 1996. The scene is the Armidale Town Hall. The event, a Collective Wisdom Project Demonstration. This was the last major thing I did in Armidale before joining the family in Sydney. The photo shows kids and teachers, set against the backdrop of old and new technology. The bearded chap in the background is Martin Levins, head of IT at The Armidale School. He was the brains behind the exercise. Further comments follow the photo.

Background

In the middle of 1987 I left the Commonwealth Public Service to establish with my wife a new information, training and consulting business in Armidale servicing the electronics, aerospace and information industries. I had been arguing that Australia had a future in these new industry areas, so was putting my personal money where my policy mouth had been.

I met Martin Levins soon after my arrival in Armidale. He was then head of IT at TAS and was driving the school in the direction of new technology. Under Martin's influence, TAS was a very early adapter of new communications and computing technology.

One of the things that we were trying to do was to grow the Armidale base in the new technologies, drawing from University of New England staff and graduates. This meant a big education role, for we had to train our people and popularise the opportunities. As part of this, Aymever combined with Martin and his then business partner Tom Pollock in 1987 to mount in a local pub the first ever display in Armidale of multimedia, the English Doomsday project, itself one of the first global demonstrations of the potential applications that we now take for granted.

Aymever grew rapidly. By the end of 1989, we had seventeen staff, a monthly fees base of over $80,000, clearing $8,000 after operating and start up expenses. We were then hit by the pilots' strike (we had to travel all the time to get business) and by the sharp downturn of 1990. While the Australian economy itself actually bottomed in mid 1991, the business services marketplace collapsed much earlier. Over the first months of 1990, national fees dropped by a third. Our own fees fell from $80,000 in December 1989 to a bottom of $29,000 in March 1990. We bled money, loosing $190,000 over calendar 1990.

We clawed our way back. By mid 1991, revenues had reached record levels, but we were now carrying heavy debts. We then hit a very large bad debt that forced retrenchment and finally led to us appointing administrators in 1994. Even though we had work in place and good prospects of further work, the administrators closed the business a week after appointment.

I mention this history for several reasons. It sets a context for what follows. Further, the rise and then fall of Armidale's nascent high technology and associated services sectors is of itself indicative of a broader Australian collapse. by the end of 1989 there were more than a dozen Armidale start-ups employing several hundred people. All this vanished over the next few years.

Genesis of the Collective Wisdom Project

As a strong exponent of the new computing and communications technologies, Martin developed the idea of a communications network linking Armidale schools - private and public - that would assist sharing of resources and promote new approaches to learning. He had already tried many of the ideas at TAS and had been helping train people in other schools and especially Drummond Memorial Primary School. He began negotiations with Telstra on one side, the University of New England on the other, for UNE had its own ideas and was also negotiating with Telstra.

The next photo is another shot from the Collective Wisdom Project Demonstration contrasting the old and the new.

For my part, I had reestablished as an independent consultant still trying to follow the same dream. As part of this, I was project managing the bid for funding for an Armidale based cooperative multimedia centre under the Commonwealth Government's Multimedia Program.

This was proving a frustrating experience. Beyond a small grant given to all the NSW contenders, we could get no State Government support. UNE who should have played a lead role was in a state of turmoil that came very close to forcing the university's closure. Martin himself was experiencing similar problems in gaining UNE support. The University wanted to do its own thing, but just couldn't deliver anything.

In frustration and knowing that in the absence of something radical we were doomed by metro myopia and the NSW disease, I decided to take the New England CMC concept alive to try to provide proof of concept. However, we needed something dramatic to show that what we had was not just hot air. For that reason, Paul Holland (my then industry analyst) and I joined with Martin to try to support the creation of the Collective Wisdom network.

The Collective Wisdom Demonstration Project 

It was clear to all of us that we needed something to showcase just what was possible. Locally, we needed full involvement of the schools and university. More broadly, I wanted something that might break through indifference in Sydney and Canberra, that we could invite people too and gather support.

In retrospect, the demonstration project we came up with was remarkably ambitious. Remember, this is 1995. It involved:

• An exhibition in the town hall in which hundreds of primary and secondary school kids would combine to create web pages from material sent in via phone from groups at their schools
• To attract interest from locals, an exhibition of education past to contrast
• With the whole thing watched live from a NSW Government Centre in Sydney.

The next photo shows some of the participating kids, these ones from the New England Girls School.

We had very limited resources to do all this.

Telstra was one sponsor, and undertook the required network connections. Because of its own problems, UNE could not help in any real way. Paul and I effectively worked full time on the project for several months, while TAS provided considerable support. This included making the IT lab available for training purposes,  kids were trained at night in the week before to ensure that they had the required skills, as well as the supply of kit.  

The next photo shows some of the TAS boys at work on the day.

The demonstration was a considerable success, although we hit very real technical problems.

One that we did not make public at the time is that Telstra could not get the dial-up network to actually work. Instead of doing it all on-line, we actually had to courier material from the schools to the town hall! 

The Aftermath

Before outlining the results of all this, another photo, this time of the PLC girls at work.

In a way, the results for all this effort were not good.

We did not get Commonwealth CMC funding. Attempts to create cooperation among Armidale schools foundered on a simple practical reality that, with UNE cutbacks and the consequent decline in Armidale's population, all the schools were competing for a diminished student base. Without a strong support base and some cash, the establishment of a network at that time was just too hard.

At a purely personal level it cost me an arm and a leg, for I went well beyond the point that could be justified by any personally rational payback. And yet, and even though it all appears as a few words on my current CV under community, I cannot regret it.

You see, we actually showed what might be possible with the proper application of technology. Fifteen years later as the NBN is discussed in abstract, as a set of theoretical possibilities, I remember the Armidale Town Hall on that day in 1996.   

Random snippets

Brief snippets this morning.

Skepticlawyer's Snowtown is a brilliant piece of writing. I still don't want to see the movie, but she almost made we want to. 

This photo by Lloyd  Carrick accompanies Katharine Brisbane's story in the Australian, Audience left behind in the dark. It shows cast and audience close together at a performance of Jack Hibberd's Who at Melbourne's La Mama in 1970. its a rather wonderful photo redolent of that time and place.

Katharine focuses on a particular aspect of the changes that took place in Australia during the 1960s and 1970s. I have a different focus given that I am interested in regional differences, but that will have to wait until later. Hopefully, Katherine's piece will remain outside the fire wall.

In David Duffy & the Bertrand Russell award for service to humanism, Rafe records that he plans to use the proceeds from his wife's (Kilmeny Niland) on-going book sales to provide modest awards designed to perpetuate the memory of others who have shown the way in various fields, hence Bertrand Russell in humanism. Others under consideration are a James McAuley award for poetry, criticism and scholarship, and a Brian Penton gong for high journalism. What a good idea.

Neil Whitfield has been digging back into his family history following the death of his Uncle Roy. Turns out he (Neil) has a cousin who also did archeology at UNE and has made something of a profession of it through High Ground Consulting, a heritage consulting business. We UNE people get around!

I too, have continued my digging back through family photos. This postcard shows where the Belshaw's came from, or at least where they lived for a time. 

Nationals win in New Zealand

November three years ago I wrote a full post (Sunday Essay - New Zealand elections 2008) on the results of the New Zealand elections, including an analysis of the electoral system. Yesterday's elections saw: 

• John Key's National Party returned to power
• Labor's lost seats quite heavily
• The Greens seem to have picked up four seats, but unlike Australia are still effectively locked out
• ACT, big winners from the last election in relative terms, are down to one seat with former Reserve Bank Governor Don Brash out of Parliament
• New Zealand First and the mercurial Winston Peters are back in Parliament after electoral annihilation last time.

For those interested in more details, the NZ Herald coverage is here.   

Giving up smoking

Comment:: I wrote this post originally because I thought that some some type of public statement would actually help me, because I thought that the issues were important. I then pulled it because it was actually a bit personal, risked being misinterpreted. I then decided to reinstate it because of its original intent.

Some two months ago I decided to give up smoking. I did not wish to do so.

Many of the happiest memories of my life are associated in one way or another with cigarettes or my pipe: social occasions, smoking a pipe by the fire, a cigarette to celebrate a success. I have also used cigarettes to aid thinking, both sitting and walking along smoking.

I have also enjoyed the conversation of other smokers, and the information obtained, in those ghettos gatherings that we smokers are now condemned too. As a trainer, I consciously used my desire to smoke as a way of creating breaks in sessions and in getting feedback as smokers and indeed non-smokers wandered outside with me. I am also counter-suggestive, deeply resenting the increasing prescriptive and coercive forms prescribed by the anti-smoking bigots that have turned smoking from a social to a drug culture, actually damaging the health of smokers in the process.

I have known for some time that I could give up smoking. I can go for considerable periods without a cigarette on, for example, international plane flights. I have noticed how my smoking drops, more than halves, on holidays when I am relaxed, swimming or walking. I have also noticed how my smoking sky-rockets when I am under tension. I go from five or six a day when on holidays to perhaps twenty when I'm in my normal life up life but relaxed up to forty or fifty a day when under severe tension.

I finally decided that I must give it all up for a number of reasons.

Part of the reasons for this were health and direct enjoyment. To understand this, and very few non-smokers do, you have to understand what the anti-smoking prescriptions have done to the way people smoke.

When I first started smoking, smokers would light a cigarette, take a draw and then put it down. A twenty a day person would actually smoke perhaps half or less of a cigarette in terms of direct smoke into the lungs.  Smokers actually looked down on what were then called chain smokers, people who lit several cigarettes in a row, smoking each very quickly.

Today, all we smokers have been turned into what what might be described as serial chain smokers.

 Huddled outside in breaks, we smoked fast and often have two quick ones before rushing back inside. Not only did more smoke from each cigarette go into the lungs, but the smoke from the previous draw would still be there when the next lot came in. A twenty a day pack person was now not only doubling actual inhalation, but was concentrating it into powerful bursts.

I first noticed that my tongue was getting a black coating in 1999. By then, I had been smoking for over thirty years without that side-effect. I found out by accident. I saw a photo of me talking with a black coated tongue out. I also found out, although this was a slower process, that it was affecting my teeth in a way that had not occurred with my parents or their friends even though they smoked the same as or (often) more than me in terms of cigarettes per day.
       
The tongue is probably a pretty fair measure of the impact of smoke on the lungs. I suspect that in twenty years' time, epidemiological studies will show that while the rate of smoking related diseases has declined on average with the growing number of smokers, smoking related diseases actually increased among those who did smoke as a consequence of the anti-smoking campaigns.
 
I had been thinking about giving up smoking for some years since I was conscious of the impacts of changed smoking habits. I was also enjoying it less. Indeed, I actually did give it up several times.

As I said, one of my problems in maintaining this was my personal response to the increased controls. I really didn't want to give up smoking just to be a good boy. I also still enjoyed it.

Like many smokers, I went for lower tar, lower nicotine cigarettes, although past a certain point I found that this increased the number of cigarettes smoked. I also tried to reduce the number of cigarettes I smoked a day, and started smoking a pipe again. Smoking a pipe has different pattern with less drawback. And I do find a pipe so relaxing!

As an aside, I still don't understand why anti-smoking campaigns don't incorporate a harm minimisation element along the lines of if you must smoke, then here are ways of reducing harm. But then, most anti-smoking campaigns are designed by non-smoking zealots who see things in the simplest black and white terms.
    
Finally, personal reasons dictated a decision that I should give up completely.

I have found this remarkably hard, and not just because of the addictive effects of nicotine. As I said, I know that I can go without smoking for considerable periods. During the last two months since I decided to give up, I have gone for as much as a week without a cigarette.

My problem is that smoking is so entwined with my patterns of enjoyment and behaviour, with my very performance, that giving it up has quite significant effects. I found myself, for example, thinking about a problem and then, because I couldn't smoke, trying to find a behaviour substitute that would have a similar focusing effect. My personal productivity dropped. I also became more difficult to live with.

Let me give an example.

Say I am in a tense personal discussion. I used to be able to say, let me have a  cigarette and think about that or gather my composure. This is acceptable because, as a smoker, your addictions are known. It's actually much harder to say I need to have a walk and will come back to you. It's harder still if you do smoke because you actually want a smoke.

Why am I sharing all this with you in such a public way?

Well, it's partly that I want to make a point about the nature of the anti-smoking campaigns. It's more that having decided to give up, this is actually best done in public because it probably makes it easier. I also think that there needs to be more discussion among smokers about the issue and approaches adopted towards us.

How do we manage this?

Non-smokers really don't understand. Too many ex smokers become zealots. Both non and ex smokers become absolute pains in the arse on the question. There has to be a middle way.

In memory of Anne McCaffrey

The death of science fiction writer Anne McCaffrey  (and here, Wikipedia here) marks the end of an another era in my mind.

At the time her first novel Restoree was published 1n 1967 I was an avid science fiction reader. In a way, I suppose that I just kept reading along as other books came out.

Anne McCaffrey is best known for her Pern series This is a world threatened by non-sentient threads that drift to the surface of the planet from space at certain times and which burn and consume land borne life. Sentient dragons with telepathic powers combine with their riders to defend the planet. Other series include the crystal singer, brainship and tower books.

I have always enjoyed her books, although some of her later books became formulaic. I am also not so keen on those she wrote with other authors.

Anne McCaffrey was remarkably good at bringing alternative worlds alive.  Her The White Dragon, one of my favourites, was apparently the first science fiction book to make the NY Times best seller list.

Her books can be read on a stand-alone basis, but most addicts read them as series because the people become friends. In the Pern series, later books filled out gaps in the story from the first settlement of Pern.

I think of her books as part of my comfort reading, books that help me escape from a world that sometimes seems just too complicated; my own concerns are still there, but they recede to the background a little.

Thank you Anne for the pleasure that you have given me.

Slippers, feather dusters & the mining tax

Here in Australia, the Slipper matter continues to dominate the political news; here is another example.

Listening to the commentary suggests that my own reactions are a little of of kilter in terms of the weight I place on it. It may, as Tony Abbott is trying to suggest and as The Ages' Michelle Gratton believes, go to the question of the PM's moral integrity. I think that people are missing the point here, and in any event this will play out in the electorate as it will. 

I remain of the view that I expressed in Labor gives Abbott the slipper:

Of more importance was the passage of the Minerals Resource Rent Tax through the Parliament. I say this only because I expect this tax to trigger events that are likely to have a much bigger political and public policy impact.

On Wednesday (23 November), the ABC's  Alan Kohler had a scathing piece Mining tax outcomes: everyone's a loser. I have a high opinion of Mr Kohler, and the piece is worth reading. However, I believe that he misses or understates certain point.

One is simply the growing international economic gloom. I have made the point before that we shouldn't  count our chooks until they actually get to the roost. I remember too many previous mining booms. Given that the projected revenue from the tax has been more than allocated, the Government faces a significant risk.

The second is one that I have also referred to before, the implications of the growing clash in Commonwealth-State relations.

During the lead-up to the vote on the mining tax, the Commonwealth agreed with the Independent Member for New England, Tony Windsor, for new procedures for the treatment of coal seam gas proposals. The stated aim is "to ensure that all future decisions about coal seam gas projects and large coal mining developments are based on the most rigorous scientific evidence available."  The key elements are:

• Provide $150 million to establish a new Independent Expert Scientific Committee that will provide scientific advice to governments about relevant coal seam gas and large coal mining approvals where they have significant impacts on water; oversee research on impacts on water resources from coal seam gas and large coal mining projects; and commission and fund water resource assessments for priority regions.
• Establish a new National Partnership Agreement with the states through COAG, agreeing that the Commonwealth and states have to take into account the advice of the Committee in their assessment and approval decisions.
• Provide $50 million in incentive payments to the states to deliver this outcome.
• Mandate that the Independent Expert Scientific Committee publicly disclose its advice to ensure local communities have all the best information available to them.

I have no particular problem with the idea of objective scientific assessment. However, this decision effectively creates a new decision making level limited to water and coal seam gas and large mining proposals. Other mining proposals such as gold mines that may affect water are excluded, while other environmental issues associated with coal seam gas and large coal mining approvals will continue as at present.

Water is important. Further, many of the projects in question are in the Murray Darling Basin where water supply including ground water is a very important issue. However, the decision was taken by the Commonwealth in isolation and was, as so many of these things are, primarily a response to a single symptom. The form of its decision with its focus on approval processes intended to be implemented through yet another National Partnership Agreement was characteristic. We have to many of these now, and they haven't worked very well. In practice, Partnership is a euphemism for Commonwealth controlled conditions.

Our present Commonwealth Treasurer is a bit of a feather duster.

In debate on the legislation, he continued to assert that the states could lump it or like it, that the Commonwealth would retaliate with reduced funding in other areas if the mining states continued to increase royalties. With two of those states under Liberal-National Party Governments, with Queensland likely to go the same route, with WA already refusing to participate in a number of Commonwealth proposals, the Commonwealth will need to be prepared to do more than spank a state's hand with a feather duster.

In our present system, the States increasingly have responsibility without authority. The Commonwealth's command and control approach compounds the problem.

Wars over the environment and the share of benefits from resources are working their way out across the country. National politicians and those who report and comment on their activities really adopt a helicopter approach, looking down from on-high onto a landscape flattened by height. In doing so, they fail to see the ripple effects across the country, ripple effects that actually feed back.

It should come as no surprise that WA National Party cross-bench member Tony Crook should be working so closely with the Association of  Mining and Exploration Companies on the mining tax. After all, Resources for the Regions has been central to the resurgence of the WA Nats.

It should have come as no surprise, although it did to many, when coal seam gas blew up as a major issue; it had been brewing for several years. It should come as no surprise that the Newcastle Herald is fulminating against both state and Federal Governments and calling on the Hunter's Federal Labor MPs to ensure that the coal rich Hunter gets a fair return from local mining.

The Herald's call is a symptom of another problem, the way in which role confusion actually centralises local and regional lobbying in Canberra. Increasingly, the poor Federal MPs have to taken on the role once filled by their State counterparts, and they can't really do it. Their electorates are just too big, the coverage too wide.  

Looking down on the height flattened landscape, these things can be ignored until the cumulative effects reach a point where the carriage overturns, throwing all into the street. I may be wrong, but I think that we are close to this point. That is why I regard the mining tax as important rather than the speaker question.

Mr Slipper's decision affects immediate political power, the constitutional flow on effects of the approach adopted to the mining tax may affect our very structure of governance.    

Labor gives Abbott the slipper

Interesting times just on present on the Australian political scene. Today we saw the Labor Party speaker of the House of Representatives resign to return to the cut and thrust of Labor politics. He was replaced by Liberal, now ex-Liberal, Peter Slipper giving the Government an effective extra vote in a hung Parliament.

I watched all this unfold with great interest. To say that the Opposition was displeased would be an understatement. Deputy Opposition Leader Julie Bishop's face resembled a prune on the news.

The photo from the ABC shows Opposition Leader Abbott passing in front of the new speaker. The body language says it all!

The high political drama of the day dominated the news. However, from my perspective the practical effect is uncertain since I was already expecting the Government to survive. It does strengthen its position, however, and has certainly ignited hope among Labor supporters who had become very dispirited.

Of more importance was the passage of the Minerals Resource Rent Tax through the Parliament. I say this only because I expect this tax to trigger events that are likely to have a much bigger political and public policy impact.

I am too tired tonight to spell this out, but will return to the issue in the morning. 

Running shoes, education & the sometimes insanity of it all!

A rather neat comment on The education trap, by Evan captured part of the problem I was talking about. In passing, Evan, I have linked  to your blog, but the link wasn't working this morning.

Evan wrote:

Imagine a sprint. We decide to study the winners. We note the winners have shoes and the losers don't. Imagine there is perfect correlation. We conclude that if we give everyone shoes then everyone can win. Replace shoes with credentials.

Evan actually captures two problems here.

The first is correlation as compared to causation, the second is the importance of relative impacts.

Obviously many factors come into play in athletic performance. However, a focus on one apparent important statistical connection can act to conceal others. Further, the giving of shoes to all may improve the performance of those without shoes as compared to those with shoes, but does not affect overall relativities since these are primarily based on athletic ability, not shoes.

Assume now that the Government cannot afford to give shoes to all, or at least not comparable shoes. Some people get cheap shoes, some good shoes, some no shoes at all. In these circumstances, the National Shoe Program will create new relativities; some people (those who don't have shoes) may actually be worse off.

The statistical averages used to evaluate the National Shoe Program may show an overall increase in athletic performance since those previously without shoes do a bit better and pull the statistical average up. The Government may then decide to extend the Program. Further, since inequities are now clear, special programs are introduced to address them.

The Government now faces a difficulty in that the national benchmarks used to evaluate athletic performance show no improvement in performance. In fact, the country's performance appears to be falling behind.  New steps need to be taken.

A national shoe design committee is appointed to set national standards for running shoes. New quality control and reporting procedures are mandated for all shoe suppliers. And so it goes on!

University of Sydney cuts staff

According to a story by Jen Rosenberg in the Sydney Morning Herald, the University of Sydney will shed 150 academics and up to 190 casual staff as part of an attempt to save $63 million next year. Academic salaries and administrative costs will be slashed by 7.5 per cent of their 2011 levels, by $25 million and $28 million respectively.

On the income  side. student fee income has been below budget for both international and domestic students. No surprise on the first, but the second is interesting because demand for SU places is such that the University has no problem in filling places. Apparently, more domestic students are deferring or lightening load, thus reducing fee income.

On the expenditure side, the University has to find money for a maintenance backlog and to meet new IT expenses.

I have written on the maintenance issue before, for all Australian universities appear to face similar problems. You can rob Peter to pay Paul, and that's what they have all done, but you then you have a problem when you have to pay Peter back.

As I have also indicated before, I have real problems with current university budget approaches because they actually build in instability. I am not sure that I have a proper answer to the problem. 

Postscript

Sydney University Academics Speak Out (New Matilda 5 December) provides further insight on this matter.

Life in the Australian Army...

This one came to me from Ramana.

"Text of a letter from a kid from Eromanga to Mum and Dad. (For Those of you not in the know, Eromanga is a small town, west of Quilpie in the far south west of Queensland, out where the crows fly backwards to keep the dust out of their eyes ! )

Dear Mum & Dad,

I am well. Hope youse are too. Tell me big brothers Doug and Phil that the Army is better than workin' on the farm - tell them to get in bloody quick smart before the jobs are all gone! I wuz a bit slow in settling down at first, because ya don't hafta get outta bed until 6am . But I like sleeping in now, cuz all ya gotta do before brekky is make ya bed and shine ya boots and clean ya uniform. No bloody cows to milk, no calves to feed, no feed to stack - nothin'!! Ya haz gotta shower though, but its not so bad, coz there's lotsa hot water and even a light to see what ya doing!

At brekky ya get cereal, fruit and eggs but there's no kangaroo steaks or possum stew like wot Mum makes. You don't get fed again until noon and by that time all the city boys are buggered because we've been on a 'route march' - geez its only just like walking to the windmill in the back paddock!!

This one will kill me brothers Doug and Phil with laughter. I keep getting medals for shootin' - dunno why. The bullseye is as big as a bloody possum's bum and it don't move and it's not firing back at ya like the Johnsons did when our big scrubber bull got into their prize cows before the Ekka last year! All ya gotta do is make yourself comfortable and hit the target - it's a piece of piss!! You don't even load your own cartridges, they comes in little boxes, and ya don't have to steady yourself against the rollbar of the roo shooting truck when you reload!

Sometimes ya gotta wrestle with the city boys and I gotta be real careful coz they break easy - it's not like fighting with Doug and Phil and Jack and Boori and Steve and Muzza all at once like we do at home after the muster.

Turns out I'm not a bad boxer either and it looks like I'm the best the platoon's got, and I've only been beaten by this one bloke from the Engineers - he's 6 foot 5 and 15 stone and three pick handles across the shoulders and as ya know I'm only 5 foot 7 and eight stone wringin' wet, but I fought him till the other blokes carried me off to the boozer.

I can't complain about the Army - tell the boys to get in quick before word gets around how bloody good it is.

Your loving daughter,
Sheila

Education & the need for simplification

Staying with the education theme that began with The education trap and continued in A note on the economics of education & the reasons for the mess in Australian education, Tom Hyland's Sick system keeps doctors out of practice indefinitely (Sydney Morning Herald) looks at the mess created in Australian medical training through supply decisions dating back to the 1990s.

From my own perspective. Mr Hyland's conclusions fit with my own experiences during the two years that I was CEO of a specialist medical college. The Australian doctor mess, and it is a mess, is due to the interaction between three very different things:

• Government decisions to limit the number of doctors in training to reduce health care cost funded by Government. There was a fear at the time that an oversupply of GPS was leading to over servicing.
• Government decisions to change the rules for GP registration requiring prospective GPs to jump through more hoops. This was part of growing credentialism, the desire to turn GPs into "specialists", but was also influenced by the first factor, perceived oversupply.
• Government decisions on recognition of overseas qualifications. This combined the desire to create common national standards and to reduce the power of the Colleges to assess medical qualifications because this was anti-competitive. The resulting system was complex and became more so because of concerns about standards and the need to avoid scandals such as the Patel case. 

These three very different things interacted in complex ways. The result was a mess.

I do not agree with skepticlawer's argument in Inflating ourselves into irrelevance that the expansion of mass university education was a mistake, although I do agree with some of her other points, I think that this, mass university education, was a good thing. I do think, and argued thus in my earlier posts, that just because an initial action made sense does not mean that consequent actions based on the same arguments make sense. I also think that our constant desire to improve standards through rule and mandate, our desire to avoid risk, has led to a complex mess.

Every one of current Australian Government education initiatives at all levels involves controls and rules. Most deal with perceived problems in isolation. All add to systemic complexity.

One of my constant plaints, and it's not limited to education, is the need to simplify. If we don't do this, Australian education will continue to go backwards.     

A note on the economics of education & the reasons for the mess in Australian education

This post is a brief follow up to The education trap.

The original interest in the economics of education came about because, among other things, of work on the causes of growth that suggested that economic growth was faster than could be explained by simple factor of production analysis. Further analysis linked this to increased education increasing the productivity of both labour and capital.

At the same time, research attempted to measure individual returns from education, showing a significant correlation between greater education and higher income. In turn, this led to policies designed to make students pay for education; HECS is an example. Part of the personal return from education was captured by progressive taxation, part by fees that people paid now and in the future.

One of the difficulties in the evolving policy approaches lay in the presence of externalities, benefits from education to the nation that were not directly reflected in salaries.

It was in the national interest to invest in education if it provided national benefits. It was equitable that students should pay a proportion of the economic benefits they gained. But how to strike a balance between the two? Puts student costs too high and national benefits would suffer.

The problem of externalities carried over into training. It was in a firm's interest to have a well trained workforce. However, staff moved. A firm that invested in training bore the full costs, while other firms benefited from that training as staff moved. Under profit maximisation, the greatest returns came from low training expenditure instead recruiting those trained by others.

Economists call this the free rider problem. If all firms followed the same approach attempting to free ride all firms would suffer. Governments responded by trying to compel firms to invest in training, while still extracting a return from students. 

Both the labour and education markets are highly imperfect. Both students and governments make judgements about the value of particular education and training that may or may not pay off. The lead times in education and training are such that short term ism nearly always fails.

One core objective of the 1980 Dawkin's reforms was to free up the education marketplace. Those reforms were driven by the narrow rigidities built into Australia's industrial system. An industrial relations and performance problem drove educational change. Sadly, the result was an increase in market rigidities with an ever increasing proliferation of rules.

One key and sad result is that the proportion of the labour marketplace requiring a formal ticket expanded. In turn, this distorted economic analysis because returns from education became increasingly based on barriers to entry.

If you limit the higher paid, and sometimes not so highly paid, areas of the economy to those with formal tickets, if you reduce the area of the economy occupied by those without tickets, if you then compare incomes of those with tickets to those without, you will get a result that shows a positive return from education. In fact, you are really measuring the return from the barriers to entry that you have created.

To my mind, Australia's education and training system has become a rigid mess that no longer delivers the desired benefits.

Manners, morality & the return of the wowser

The last few years have seen a rise in nostalgia for the Australia of the 1950s, a world seen as a safer and more ordered time despite the fear of communism and nuclear Armageddon. There were good features. Younger Australians find it hard to imagine a world in which one per cent unemployment could be an election wrecker. This was real unemployment, not the statistical construct used today. However, I cannot share that nostalgia.

According to Wikipedia, Australian and New Zealanders use the word wowser to describe one whose sense of morality drives them to deprive others of their sinful pleasures, especially liquor. The The Australian writer C.J. Dennis defined it thus: 'Wowser: an ineffably pious person who mistakes this world for a penitentiary and himself for a warder'.

The word appears to have come into popular use around 1900. The timing is not coincidental.

The second half of the nineteenth century was marked by the rise of the town. In the newly formed towns, the respectable citizens were determined to impose social order and Victorian morality on a population that had had very different moral views. By the end of the century a reaction had set in, with conventional social morality under challenge from those arguing for a more bohemian life style. Wowser was a contemptuous response from those challenging the restrictions and rigidities of conventional bourgeois life.

The relationships between the wowser and bohemian streams were always complicated, with the weighting shifting between the two sides. Attitudes to liquor and and especially sex were central.

As had happened during the First World War, the Second World War saw a dramatic relaxation in moral restrictions under the constant fear of death. At the end of the War, society returned to order, to structure in a last great flowering of Victorian morality. That is why I cannot share the nostalgia for the 1950s. I have no desire to return a world in which sexual angst made it very difficult for young people to access contraception, a world of backyard abortions, of illegitimate children forcibly taken from their mothers. This was also a world entrapped in a double standard, between attitudes as to what was right and what actually went on. Society was confused, but so were the young with sometimes tragic consequences.

Manners and morality are entwined, but serve different purposes. Manners are designed to make society work more effectively, morality says what's right. The two are entwined because the form taken by manners reflects social attitudes: young people stood when elders entered the room; men walked on the street side or opened doors for women; there were rules as to what could be discussed in social conversation. These courtesies reflected underlying social structures.

Today we live in a very odd world today, for beneath the apparent freedoms associated with changing attitudes to sex and gender roles, the wowser is back with a vengeance. Legal enforcement of behavioural rules has exploded, the role of manners and customs has progressively shrunk. 

To my mind, there is very little difference between the social responses that we saw during the rise of the town and those applying today. Then as now, fear of civic disorder and threats to property or persons are drivers. Then as now, the need to protect and to control is central. Then as now, much debate centres on sex, liquor and gambling. Then as now, women are key drivers. 

The big difference between societal responses during the colonial period and today can be summarised in one word, the computer. The computer allows data to be collected, processed, stored and disseminated. It allows things to be tracked and is central to evolving technology such as GPS.

In colonial Australia, the capacity of central governments in the individual colonies to enforce their writ was limited. In turn, this constrained the extent to which the forces for social order and improvement could use government as a vehicle. They had to rely more local action and on social means. They also had to focus rather more on the positive, on actions intended to address problems rather than control behaviour.

If you want to get a real feel for the change, read the reports of the NSW Child Protection Board as compared to those coming from its modern equivalents.

Over ninety per cent of current reports are concerned in one way or another with compliance, risk or reporting, along with a multiplicity of individual programs. The NSW Child Protection Board did have a compliance role, but its reports focus on reporting actions carried out within limited resources.

Like the modern reports, the Board spent much time discussing child welfare problems. In fact, it spent relatively much more time doing this because it did not have to worry about other things.

Time to finish.      

The education trap

In a post on the Lowy Institute blog, Development: A misplaced emphasis on education?, Danielle Romanes said in part:

The idea of education being a 'trap' is the complete antithesis of conventional development theory. Education is commonly defended in the human development literature as vital to the empowerment of individuals. However, if education precludes a person from economic participation then the opposite of empowerment results. Lacking economic opportunities for social contribution, self-reliance and even survival, the individual ends up deprived of self-worth.

Her post focuses on Papua New Guinea and includes a link to a post by Martyn Namorong on his experience. Again I quote:

The system of education in this country (Papua New Guinea) is a failure trap. It is supposed to groom Papua New Guineans but all it does is it produces a lot of failures. In grade 8 ten thousands get thrown out, in grade 10 and 12 thousands more fall through the crack in the system. This is the failure trap. Students spend much of their lives learning about ideas in arts, science and mathematics and are not prepared for both the cash economy and the subsistence economy. I my case, I regret going to medical school because now I am just an unskilled person. I am definitely not skilled to survive in the savannah of East TransFly nor do I have formal qualifications to be recognised in the cash economy. Thus by default I sell betel nut on the street like many other disenfranchised people.

I was interested in Danielle's argument and in Martyn's story of his own experiences because they crystallised something that I had been musing over, what I had been calling in my own mind the education fallacy. My thinking was largely set in an Australian context, but the Romanes/Namarong posts provide a vivid illustration from another context.

We all think that education is a good thing, and indeed it is. If education is a good thing, then extra education must be a good thing. However, this does not automatically follow. If the extra education is misdirected, if it is then enforced through a variety of narrow performance measures, the results may be quite negative.

Consider, as an Australian example, the weighting placed on this country's relative performance in international rankings in literacy and numeracy. Moves up or down the pecking order gain headlines and affect local policy and performance measures. However, there is no evidence that I know of to suggest that such movements actually have any substantive meaning.

Consider, as a second Australian example, the length of time spent in the education system. Time devoted to "full time" study has exploded. I have put full time in inverted commas for reasons that I will explain in a moment. 

School used to finish at year nine for the majority of students, year eleven for those going on to Teachers' College or University. Teachers' College was two years, most university courses were three years. By 21, the great bulk of young people were in the full time work force. Since then, we have added time to every link in the education chain. We have also increased the proportion of the population passing to the next stage. We have added in a whole set of links as credentialism proliferated.

GPs used to complete their initial studies as early as twenty one, a specialist twenty six. Today the equivalent ages are around twenty five and thirty two or thirty three. This process has been replicated across the workforce.

In What was it all for? (Train Reading - Don Aitkin's What was it all for? 1, Decline of the professions in Australia, Sunday Essay - What was it all for? part 2), Professor Don Aitkin argued that the expansion of school and university education from the 1950s was one of the great Australian achievements. I think that he's right. However, I doubt that the subsequent process has actually had much in the way of benefits.

Earlier, I put the words "full time" in inverted commas. One of the paradoxes of educational expansion is that the age of entry to the world of work probably hasn't changed all that much, although the nature of work may have.

I don't have proper statistics to support this claim. However, my impression is that the proportion of school children working is much higher than it was thirty years ago. I base this on a comparison between my own experience and that of my daughters' age cohorts. Certainly, the proportion of university students working part time has exploded. There is a chicken and egg issue here. In a way, we almost had to increase formal study time because the actual time available for study in any period has declined.

The paradoxes don't end there. Youth unemployment has been a problem in Australia since the 1970s. One of the repeated justifications for increased education has been the need to give young people better skills so that they can get jobs. However, since the 1970s the proportion of long term unemployed young people and especially young men has increased.

This is normally explained in terms of structural adjustment in the economy. It's a little more complex than that.

Full time jobs that used to be filled by school leavers and especially early school leavers have declined.

One factor in this has been the rise in competition from those still in education. Work has been restructured to facilitate part time employment. The once full time entry level position has diminished, replaced by part time positions occupied by birds of passage. A second factor has been the rise in credentialism; the proportion of jobs requiring some form of "ticket" has exploded.

I sometimes think that it's all become a bit of a self-fulfilling mess in which a problem partially created by education then requires more education to solve, but that then creates its own problems. The education industry has a vested interest in the whole process because it is central to the growth in student numbers on which their planning is based. If I'm in any way right, Australia would appear to face its own education trap.   

Mudmaps, centrality & the fear of failure

From time to time in my writing I have explored the way in which our mental mudmaps, the frames we use to interpret and simplify the complex world around us, affect our thinking.

One thing I have focused on is what I call centrality, the way in which our perceptions centre on us, where we live, the groups we belong to, what we do, the views we hold. Centrality can be thought of in terms of circles moving out. It can also be thought of in terms of hierarchy, the ranking of things by importance.

We all recognise this. The common phrase putting yourself in someone else's skin simply means understanding things from that person's perspective. Another example is thinking outside the box or the square. However, while we recognise the effects, it is quite remarkable how often the existence of centrality blinds us.

Some of my most productive work and writing has come because  of my recognition of the blinding effects of centrality in particular cases.

Wearing my historian's hat, it has provided new insights into Aboriginal life. Wearing my management consultant's hat, it has helped me to identify particular organisational problems. Writing on current events especially in Australia, it has helped me stand back from the immediate froth and bubble, sometimes providing new insights.

Yet in all this, there are problems. I find it very hard sometimes to exercise the discipline and imagination required to overcome my own mental constructs, although I have developed techniques to do so.

More importantly, our mental mud maps exist for good and practical reasons. They actually help us manage day to day life. The world is simply too complex to manage otherwise. We are therefore reluctant to give them up, we can react badly if they are challenged.

I said that some of my most productive work and writing had come because  of my recognition of the blinding effects of centrality in particular cases. It is equally true that some of my worst professional work, my biggest consulting failures for example, has come about because I pushed too far outside the boundaries.

Excluding work done in line or management roles, I have now completed well over three hundred consulting assignments for over 100 clients. Depending on how you define it, my failure rate has been around five per cent. That's actually not too bad, although few consultants will talk about their failures. In a world where your income depends on the latest success, it's not a good look to talk about failures.

I actually write a lot about management failure. I do so because I am convinced that some current management approaches are having quite pernicious results.

People are locked into models, mental mud maps, that don't actually work very well anymore. They know it, but the models have become institutionalised, locked into computer systems, process manuals, structures and performance measures.

As both a manager and as a consultant, I find it increasingly difficult to get new things in place that will deliver results and improve performance.

Just at present, I have moved away from consulting to contracting because I want to focus on completing current writing projects. Whether as  a consultant or contractor, I find myself on marketing calls or interviews saying to myself that's not going to work, you could do that better. Then I have to bite my tongue.

I have no answer to this.

Based on what I have seen, the average organisation could cut its costs by up to ten per cent while actually improving performance if they would simply reduce controls while  empowering their staff.

Of course, they would also have to accept a measure of failure, and that in itself has become an increasing problem. Failure is no longer allowed. Better that the organisation fail if the alternative is to allow failure at individual level.

The TPP & Australian trade policy

This is a brief follow up to yesterday's post, Trade diversion, trade creation & the Trans Pacific Partnership.

Background

In a comment, Winton Bates wrote: "Hmmm, TPP seems to be yet more political diversion rather than trade creation." Now there is a back story here that I should explain.

Winton is a former senior official with what is now Australia's Productivity Commission. We actually did our initial economics together at the University of New England.

Previous posts that I wrote on Australian trade policy and free trade agreements led to a dialogue between Winton and myself about the potential gains from such agreements. I think it fair to say that Winton is more negative than I, although both us would agree that the benefits (I would exempt Australia/New Zealand CER from this comment) have not been huge to this point.

Part of the reason for this, I think, is that I place greater weight on the longer term dynamic aspects in an imperfect world.

In an email, Trevor from the Newsy community asked:

If Japan joins the agreement, the TPP would be 40 percent larger than the EU. I was wondering if you had any thoughts on the possibility of something the TPP evolving into an EU-like organization. Right now the thought seems extremely unlikely, but many world governments are beginning to pool their resources together in light of the recession.

I hadn't heard of Newsy before, it's a multisource video analysis news site. Having heard the following report I am happy to give it a plug:

A Trans Pacific EU

I think that many Australians would shudder just at present at the idea of another EU equivalent. The EU and the problems of the euro are dominating  economic analysis in the country in terms of threats to  Australia's immediate prosperity! However, there is a broader issue as well.

Australia drove the creation of APEC. Australia then tried to use the APEC forum as a device for encouraging reduced trade barriers within APEC, but with limited success. In this sense, the TPP is a fallback from the broader Australian goal.

The Australian position generally focuses on trade, although political and foreign policy considerations do enter. There is no desire at this stage to create a political union, and that is what the EU is. Indeed, in terms of current EU troubles, it is easy to forget that the great success of the EU has been to unify a continent previously riven by large scale conflict.

The TPP and Australia's Free Trade Agreements

One of the difficulties of the single issue short termism that drives much Australian analysis at the moment is that it ignored broader patterns. To illustrate this, the following table sets out the trade agreement position with TPP countries.Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam

TPP Country	Trade Position
Brunei	Brunei is a member of ASEAN and is covered by the ASEAN-Australia-New Zealand FTA
Chile	Australia and Chile have a free trade agreement
Malaysia	Malaysia is a member of ASEAN and is covered by the ASEAN-Australia-New Zealand FTA. Australia is trying to negotiate a direct agreement with Malaysia
New Zealand	CER covers Australia and New Zealand. New Zealand is also a member of the ASEAN-Australia-New Zealand FTA
Peru	Peru falls outside current Australian agreements
Singapore	Singapore is a member of ASEAN and is covered by the ASEAN-Australia-New Zealand FTA. Australia also has an existing FTA with Singapore
United States	Australia already has a direct FTA with the US
Vietnam	Vietnam is a member of ASEAN and is covered by the ASEAN-Australia-New Zealand FTA

If you look at the pattern here. you will see that with the exception of Peru, the TPP actually reinforces existing Australian moves.

Now look at Japan. Australia and Japan have been trying to negotiate an FTA for some time, but keep striking problems. The TPP is another way of getting to the same point.

Conclusion

As I have indicated before, Australia's relative ranking in population and economic size must decline. Australia's economic success also depends on free trade in a world where protectionist tendencies are rising, where WTO talks have stalled. The approach to FTAs is a response.

I find it interesting that across time and governments, Australia's trade policy has been remarkably consistent. Further, that policy is solidly based on the country's changing economic position.

The TPP may or may not work. If it doesn't, Australia will simply regroup, go another direction. The country really doesn't have a choice.  

Welcome to visitor 130,000

Visitor 130,000 arrived today searching on Google Thailand for "how many city do cyrus empire have". They found Persia, Greece & the Delian League. Welcome.

Trade diversion, trade creation & the Trans Pacific Partnership

In an earlier post, A PhD student, 1983, I mentioned that one of the first things that I did upon returning to the Department of Industry and Commerce early in 1983 after a period as a full time student was a study into the possible benefits to Australia of a Pacific Free Trade Area. I noted that, somewhat to our surprise, we reached a positive conclusion despite the obvious implementation problems.

I was reminded of this today by the announcements that Japan was considering joining the Trans Pacific Partnership Agreement (press release here, Australian PM/Minister for Trade press conference transcript here).

   In earlier posts I explored Australia's evolving position and the way that was reflected in the Government's attempts to negotiate fee trade agreements. In Australia's Free Trade Agreements I simply listed current agreements.

In considering the benefits of trade agreements, economists distinguish between trade diversion and trade creation. Trade diversion occurs where trade is diverted from an external to an internal supplier. Trade creation involves an overall increase in the volume of trade.

Trade diversion can involve direct costs and is an especial feature of customs unions such as the EU or the Australian Federation.

In a customs union, the members impose a common external tariff. This leads to trade being diverted to higher cost suppliers within the union. Buyers face increased costs because new tariffs force them to buy more expensive union product. Those supplying that product benefit. Part of the increased costs flow to them in greater sales. However, overall income can be reduced.

Unlike a customs union, free trade agreements leave external barriers as they are. Trade diversion may still occur, but now buyers experienced lower costs as trade is diverted from higher price external suppliers to lower price internal suppliers. Internal suppliers still benefit, but the purchaser's retain benefits.

Both customs unions and free trade agreements may lead to trade creation because trade in goods and services is facilitated. Here there are likely to be net benefits.

As a general rule of thumb, trade creation is greatest where economies produce similar mixes of goods and services and also have significant barriers to trade. Herein lies the rub with the Trans Pacific Partnership. The countries involved -  Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam - are different and have very different trade patterns. Even adding Japan, the scope for short term trade creation is limited.

I make this point because some of the reporting in this country on the TPP has focused on local jobs benefits. Don't hold your breath!

We concluded that a broad Pacific Free Trade Agreement would benefit Australia because of the way that it would reduce impediments to trade within a a very large group. Our view was that over a long time period the scope for benefits was substantial. The TPP is far more limited. 

This doesn't mean that it isn't worthwhile at a time when general trade liberalisation has slowed. Just that the benefits should not be over-hyped. 

The magnificence of King Tut

Thursday by happenstance I ended in to Melbourne to visit the King Tut exhibition at the Melbourne Museum.

The exhibition was, quite simply, magnificent. 

It focuses on a small slice of Egyptian history, the period around the short rule of the  Pharaoh Tutankhamun.

Tutankhamun was born around 1341BC, dying in 1323.

The 1922 discovery of his tomb by archaeologist Howard Carter attracted global headlines because of the richness of the material remains.

The sheer wealth of the material remains and the glamour of the discovery are well presented in the exhibition. However, the exhibition is far more than that. It actually brings alive that small slice of Egyptian history in a way that very few museums manage. This is not just the material remains themselves gorgeous though these may be, but an actual narrative that places those remains in a context of the time.

I was completely astonished at the depth of information available. This wasn't limited just to the artifacts, but extended to family trees, politics and international relations as well as the detail of daily life.

I do not know who designed the exhibition, but whoever they were I would give a score of 100 out of ten. It was just that good.

As Denise and I stood in the line waiting to enter, both of us had our doubts. We inched forward in batches, all tightly controlled. There were marshals everywhere. I started counting up the cost!

That control was absolutely critical. With these big mega exhibitions, you can find yourself fighting to view things within a maddening throng. Here, once inside, there was a biggish crowd. However, there was also space to move, no feeling of claustrophobia, no feeling that you had to rush on because you were holding others up.

Again, I congratulate those who designed the individual exhibit stands. It wasn't just that the descriptions were clear. They were repeated multiple times at different levels and at front and side. This allowed people with different eye sights to see without clustering just at the front and bending over. It also allowed people to see the sides and backs of particular artifacts.

I was going to try my hand at an another piece of history, at a description of some of the things we learned. However, I really do think that I should limit myself here to just what I have said.

The exhibition closes shortly. If you can go, please do. You will never have another chance like this.  

Netball, Gruen Planet & ballistic anger

This will be the last post until Sunday. I am going away.

Yesterday's post here was Carbon tax, the Sydney/Gunnedah/Bowen Basin & coal seam gas. As it happened, last night's ABC Gruen Planet focused on mining advertising including coal seam gas.

Watching the program I got so angry. I had to take eldest to a late night netball match after the show, and I was trying to explain my anger to her. It wasn't easy.

The Gruen Planet focuses on the tricks used by advertisers and can be quite funny. Trying to articulate my anger to Helen, I ended by defining it in this way.

The panelists had moved from judgements about advertising to comments on the issues on which the advertising was based. And in their judgements on issues they knew bugger all. They got laughs through playing to certain stereotypes. They had no idea of history or context, so their comments on the target market place for certain ads completely missed the point.

Helen is remarkably tolerant where her father is concerned, one of the reasons I love her so dearly. She explained context, purpose etc. But I remained angry, stewing about it overnight.

I suppose that I should explain here that I have something of a natural sympathy for the anti goal seam gas protestors. If I wear that hat, then the biases built into the Gruen Planet actually help the cause. But I also want good policy, policy that takes varying needs into account. And we don't have that.

Stewing overnight, I wrote Coal seam gas & the rise of political and policy stupidity, the first in a two part series. I will follow up when I get back from Melbourne.

Carbon tax, the Sydney/Gunnedah/Bowen Basin & coal seam gas

Late yesterday the heavens opened. The torrential rain that followed beat in through partially open windows, overflowed gutters and ran down inside the glass. Water on power boards blew the circuit breakers. We put new boards in and got the power back on, but the internet connection was not properly restored until this morning. Sigh.

Yesterday the carbon tax legislation passed the Senate. In Sydney today's Daily Telegraph carries the banner headline "Just who's going to pay our bills?"  An editorial is headed Heaven-sent tax for the select few and begins: "THIS government never learns."

To my mind, the debate is a bit silly.

One side says the sky will fall, costs will sky rocket. The other side and especially the Greens talk in almost millennial terms about a bright new future. Nice atmospherics within the political theatre perhaps, but in a way it all misses the point.

Now that the legislation is through, the final political results will be determined by what actually happens over the next few years as a consequence of the legislation. I don't think that we really know that yet. We just have to wait and see.

The Government is talking about an advertising campaign to promote the legislation. Why bother? It's not going to have any real impact on public opinion, other than perpetuating current debate.

In an apparent segue, the popularity of geography and geology in Australia has declined somewhat since I was a kid. That's a pity, for it helps understand some current political issues in this country.

Australia is often described as an ancient continent in geological terms with the western two thirds of the continent having a basement of Precambrian rocks between 570 and over 3,000 million years old. Eastern Australia is much more recent, although "recent" is a relative concept.

At the risk of gross simplification, I am still writing up my own notes in this area, the eastern seaboard of what is now Australia lay well to the west of the current coastline.

Deposition into the eastern sea occurred. In places, the water was shallow enough for corals to form. Subsequent folding and faulting, the break-up of the giant continent  now called Gondwana and volcanic activity all worked on the geology. One result was the creation of a large basin - the Sydney, Gunnedah, Bowen Basin - flanked on one side by the Lachlan Fold Belt, the New England Fold belt on the other. That Basin reflects the old sea. The original deposition resulted in the creation of huge coal deposits that run from south of Sydney well into Queensland.

  Coal mining and especially the extraction of coal seam gas has become a major political issue. Initially the discontent was a little below the main media horizon, although I did write about it on the New England Australia blog as one element in New England's environmental wars. The possible extraction of coal seam gas from coal seams under urban Sydney then brought the issue within the metro purview. We now have a 3,200 kilometre arc of political discontent.

The issue has now become politically significant to three Governments, Queensland, NSW and the Commonwealth. Key parts of the Gunnedah portion of the Basin - the Liverpool Plains -  fall within Tony Windsor's New England electorate. The Government depends upon Tony Windsor for its survival in general and for the prospective passage of the proposed mining tax legislation in particular. Mr Windsor has made it clear that some form of action on coal seam gas will be the price of that support.

The disputes over mining and coal seam gas raise some quite complicated and in some ways intractable issues. The domination of political discussion by refugees, the carbon tax and Labor's leadership issues as well as the country nature of the protests means that main stream reporting of the coal and coal seam gas imbroglio has been quite superficial. You can expect to hear a lot more about it over the next two months.    

CSIRO & industrial development

This photo was taken some three years after that in A PhD student, 1983. It is on a CSIRO (Commonwealth Scientific and Research Organisation) lab visit looking, I think, at a new piece of semiconductor equipment. The photo was taken by a CSIRO photographer.

I have lost both the beard and a fair bit of hair! The beard had gone for female, not career reasons. At this stage I was having too much fun to worry about career issues!  The hair loss was involuntary.

It's quite a high powered group. I am sorry that I cannot remember the name of our guide, but from left to right.

At back left, Dennis Cooper. He was then 2IC in CSIRO Radio Physics, and was appointed head in 1988. To his right is Tommy Thomas who ha been appointed Foundation Chief at the new CSIRO  Division of Information Technology in 1985. In front is Dr Bob Frater who was then Chief of the Division of Radiophysics and also Director of the Australia Telescope Project. The Australia Telescope opened in 1988 and is the premier instrument of its kind in the southern hemisphere. Bob Frater maintains that it was the Mills Cross experience that:

• provided him with the insight to marry up astronomical instrument development and related industry development that proved so important later in obtaining funding and building the Australia Telescope
• gave him an appreciation of the huge spinout benefits that come from meeting the demanding needs of new instruments.

In 1988 Bob became head of the newly created CSIRO Institute of Information Science and Engineering (a group of CSIRO Divisions) and then Deputy Chief Executive, CSIRO in 1999. Further comments follow the photo.

    

We had a close working relationship with CSIRO for we regarded it as a critical player in our attempts to build Australia's place in the global electronics, aerospace and information industries. However, our approach was not quite the same as that holding today.

One of the things that used to (and still does) frustrate me about some of official colleagues and especially those in Treasury is the generalised application of universal models.  

I was concerned with a practical question.

The electronics, aerospace and information industries  - all those industries based on electronics and systems and including services as well as manufacturing - were clearly going to be global growth drivers over the next two decades. Australia's performance in these areas had been very poor. What could we do to turn this around?

The four most pernicious universals that we were trying to deal with were:

• Australia's comparative advantage lay in agricultural and mining. We should not be trying to create new industries outside those areas. They would fail. Australia did have comparative advantage in those traditional areas. However, that of itself need not rule out other options. Our analysis showed that Australia as a whole performed badly on key indicators (trade intensity, trade diversity) as compared with countries with comparable resource endowments. Comparative advantage as such could not explain that performance. Other factors must be involved.
• Let the market decide. This combined comparative advantage with neoclassical nostrums. Our analysis showed that in an imperfect world, competitive as compared to comparative advantage was often created through state action. There was no evidence that simplistic application of free market nostrums in a globalising world could of itself guarantee any form of optimum outcome.
• Horizontal is good, vertical bad. Policy measures must be universally applicable, not tailored to varying needs. We tried to point out that diversity meant that a universal measure was in fact vertical because its on-ground application created differential and often persevere results. By contrast, vertical measures could be better tailored. As a current example, look at the continuing failures in policy towards Australia's indigenous people. 
• Results for individual policies must be measurable in advance. We were trying do new things, to create a climate for growth. We could not be certain that individual things would work in advance. Our focus was on totality with constant adjustment through experience. A measure of failure was inevitable.

There are always questions of balance in these things.

I mentioned in my last post my reaction to existing industry assistance measures, that crazy patchwork quilt of tariffs and other assistance measures that, to our mind, had had such a devastating effect on Australia. We considered that we were dealing with a globalising world, that Australia's best chances lay in a world of reduced trade barriers, that free markets and competition gave the best results. We focused on the best adjustment processes.       

In looking at CSIRO, there were two very different world views.

In the old view, CSIRO was practical, existing to provide the benefits of scientific research to Australian development. The new world view accepted this, but added to it a generalised overlay focused on narrower commercialisation. The question now asked what not whether or not CSIRO research would or had benefited Australia in a general sense, but whether the best direct commercial returns on individual discoveries had been achieved.

We were concerned with general questions, but our focus was on our industries. Just as CSIRO research had so benefited Australian agriculture, we now wanted that research to benefit the electronics, aerospace and information industries. The question of the direct return on specific research activities was related, but different.

The true pioneers, and I would include Messrs Cooper, Thomas and Frater in this, are those who pursue dreams and are driven by passion, by curiosity. They may play the game, but this is a means to an end.

Another such was Ken McCracken. He had a vision of Australia in space, of the benefits that might be offered by things such as remote sensing. I quote:            

As Professor of Physics at Adelaide University between 1966 and 1969, Dr McCracken led a team that pioneered X-ray astronomy of the southern sky with instruments launched on Skylark rockets from the Woomera Rocket Range.

In 1970, Dr McCracken was founding chief of the CSIRO's new Division of Mineral Physics in Sydney. His first official task was to attend a research meeting in Canberra which was preparing Australia's response to a NASA invitation to make use of satellite images of Australia obtained by its recently launched Earth Resources Technology Satellite (later renamed LANDSAT).

"I knew nothing about remote sensing, but I had been building satellites for 15 years and knew of the enormous revolution satellites had brought to communications," he said. "It was clear to me that if somebody could put an eye into a satellite orbiting 800 kilometres above the earth, it would be another sea change in technology. "I was also attracted by the physics involved in satellite images - it seemed to me that it could overcome some of the limitations of conventional aerial photography."

From 1970, Ken pursued his vision. In the early 1980's he became concerned that Australia's space industry was fragmented and lacking direction, and had already missed out on commercial opportunities that had been seized by other Western nations.

In, I think, 1984, Ken persuaded CSIRO to investigate the establishment of a special office of space science and applications. A working party was established. I was invited to join because CSIRO had just been transferred to the industry portfolio. One outcome was the CSIRO Office of Space Science and Applications.

I am not making any claim as to responsibility. Ken selected me because of my official connections, because he knew that I would be sympathetic as indeed I was.

In 1995, Ken won the Australia Prize for his work on remote sensing. And yet, and I am sure that Ken would agree with this, the sense of lost opportunity remains. Perhaps I should let Ken have the last word in his remarks on the prize:

Dr McCracken said the CSIRO administration of the 1970s must take some of the credit for the award of the Australia Prize to his team. "They set the broad research goals and stipulated that I and my colleagues should develop the techniques and instruments the industry would need 10 years into the future," he said.

"At first, much of what we did was against the industry wisdom of the day, yet after half a decade, the industry was using virtually all our research results and making a major financial contribution to the research program".

"Because Australia was among the first countries to develop these new techniques, the minerals exploration industry gained an enormous competitive advantage over the rest of the world".

"It would not have done so if it had been forced to import the technology, or if research had started three years later - in practical research, the early bird really does get the one and only worm".

"Anticipating the technologies of the future is a very tricky business and very few people have the ability to do so. I was lucky to answer to a very small, stable group of scientific managers - leaders, really - who possessed that rare skill and who had the confidence to back young Turks like me".

"I believe Australia has scientists today who are just as good and who are thinking about what their client industries may be doing in the future. Some will be right, others will be wrong, but Australia has to accept this as a cost of progress. Industries must also be prepared to take a chance and invest in their own future".

"Research is the key to the competitive industries of the future. The key to our future is that the very best of our research minds should be harnessed to deliver what our industries will need ten years hence. The challenge for our research managers is to know what to back when everyone seems to disagree with them."

A PhD student, 1983

Once again, Denis Wright managed to bring a smile to my face with his two post story. The Melbourne Cup and Mr Gudekunst 1, The Melbourne Cup and Mr Gudekunst 2. It was just so Australian.

I needed a smile.

In an earlier post I mentioned shifting boxes associated with a move to a smaller storage shed. Further sorting, including photos, continues. It is all part of my attempt to clear out elements of my past life, to consolidate, to try to move forward.

The process gave me a bad back. As I said, I simply can't lift heavy book boxes with the gay abandon I once could. Gay abandon is the wrong phrase, of course. There is nothing gay about shifting more than one hundred boxes! Still, at least those who do it for a living don't have to worry about the subsequent sorting!

Sorting in this way brings back elements of my past. I guess that you can expect to get a bit of that past as the process continues. 

This photo is from mid 1983. Comments follow the photo.

I spent 1981 and 1982 in Armidale on leave working on my PhD thesis. I met Denis there; we saw each other daily in the staff room that History shared with English and Drama.

At the start of 1983 I resumed work in Canberra as an SES (Senior Executive Service) officer in the Department of Industry and Commerce.

Initially I worked with Noel Benjamin on a special project for the Bureau of Industry Economics on the economic feasibility of a Pacific Free Trade area, an idea being pushed by Doug Anthony, then Minister for Trade and Deputy PM. Somewhat to my surprise, we concluded that the idea would benefit Australia, although the barriers to implementation were enormous.

After a brief period back as head of my old Economic Analysis Branch, I took over the Electrical and Metal Products Branch. This was my first full exposure too the crazy patchwork quilt of assistance measures protecting Australian industry and I did not like it.

I had already developed ideas as to what I thought was wrong with industry policy. Now I firmed them up through exposure to the minutiae of industry assistance. My new role was to be short lived, for I had been appointed to create a new branch focused on Australia's high technology industries, the Electronics, Aerospace and Information Industries Branch.  This reflected the Department's view that too many resources were tied up in smokestack industries.  

I spun off the main branch, and started building a new branch focused on one section concerned with computer hardware. In doing this all this, I essentially had to build from scratch.    

While working, I still had to complete the PhD. To do this, I worked from the back room at home (Ross Road) supported by Sue Rosly, my housemate, and her friend David.They were great. They proof read, vetted my arguments and focused on consistency, a major task in a large document.

This photo taken by Jim Somerville, someone who has appeared in various posts, shows me at work on the thesis. The books behind are some of those I used.