Observations from the US: The economy and partisan politics

In his recent speech to the American Chamber of Commerce (SA), Reserve Bank of Australia governor Glenn Stevens outlined Australia's exceptional economic performance in the face of global uncertainty. Stevens urged Australians to see the glass as half full even though many Australians have been determined to see that the Australian economy is in crisis - a perception that is helped by the hysterical campaigning of the opposition parroted by a captured Australian media.

According to Stevens:

"[...]the nature of public discussion is unrelentingly gloomy, and this has intensified over the past six months. Even before the recent turn of events in Europe and their effects on global markets, we were grimly determined to see our glass as half empty. Numerous foreign visitors to the Reserve Bank have remarked on the surprising extent of this pessimism. Each time I travel abroad I am struck by the difference between the perceptions held by foreigners about Australia and what I read in the newspapers at home."

I have recently spent six weeks travelling around the United States and this has been my experience as well. I observed a deeply depressed American economy and a highly polarised political climate. There was a general feeling of malaise from locals I spoke to about the current state of the American economy. Many of them knew about Australia's excellent economic performance and were bemused by the pessimism about the Australian economy expressed by Australians.

The middle class in America has been under sustained assault from a succession of policies promulgated from rent-seekers and interest groups through Congress.

According to the Congressional Budget Office:

"[...] over the 1979 to 2007 period, the highest income quintile’s share of market income increased from 50 percent to 60 percent, while the share of market income for every other quintile declined. In fact, the distribution of market income became more unequal almost continuously between 1979 and 2007." 

Any attempt to mitigate the outcomes of these policies has been systematically blocked by the partisanship that has pervaded the American political system.

This, combined with the unemployment rate that has exceeded 8% since February 2009, has gutted the middle classes. This has reduced the spending of the middle-class that is the underpinning of the economy.

One of the locals I spoke to (a small business owner) lamented "there is no middle class in America, just the rich and various classes of poor".

Everyone I spoke to was stunned by Australia's economic figures (particularly the unemployment rate) and even more stunned that Australians were complaining about the economy. However, once I explained the partisanship that had infected our political discourse, many of them recognised the political climate that has led the American economy to its current state.

There is a lesson in this for Australia: the sort of partisanship that is being pursued by the opposition and its pandering to rent-seekers and interest groups has consequences for the wider Australian economy. When even the central bank is warning about its effects on confidence, the opposition should take note and begin to act in the National interest, rather than their own interest in gaining power at any cost.

Australians should see the glass as half full: our economy is doing well, unemployment is very low and inflation and interest rates are also low - if Australians really want a view of how "Hockeynomics" and Abbott-style partisan politics works out: go the the US and observe the future.

Billionaires and Battlers

Labor back bencher, Kelvin Thompson, has recently become embroiled in the latest round of Australia's supposed "class war" by daring to suggest that the $50 million taxpayer funding of Australia's F1 Grand Prix might better be better spent on hospitals than funding the lavish lifestyle of Bernie Eccelstone's daughter.

The response from Eccelstone was typical of the recent responses of billionaires to criticism - that democratically elected representatives should resign for daring to criticise those of the moneyed elite. Similar to Clive Palmer's dummy spit to Wayne Swan's article in The Monthly, Ecclestone became indignant and rather than address the criticism, engaged in ad hominem attacks as if somehow the mere fact that he was rich was a shield to any sort of criticism.

Palmer and Eccelstone have attacked their critics variously as "communists" and "destroying the wealth of this country and robbing our children of their opportunities". They have both forgotten that it is the stability of the democratic civil society that has enabled their wealth including, in Palmer's case, the ability to exploit publicly owned assets. Yet the billionaire's view is that they are entitled to their position, and their position is immune to criticism. Those that criticise them, regardless of the fact that they may be democratically elected, "should be fired".

These indignant reactions to criticism are typical of the 1% - they do not see themselves as participants in a society that goes deeper than mere tax-deductable expressions of philanthropy. They see themselves as entitled to a special place in the operation of that society, free from its responsibilities - an unfettered plutocracy, geared to exploit.

We have seen the results of when the 1% are unfettered, first in the 1980's when Reagan removed lending regulations on savings and loans banks that eventually resulted in a financial crisis, and secondly in the 2000's when Bush similarly removed restrictions on banks that resulted once again in financial crisis. In both instances, the 1% were happy to use the removal of regulation to exploit those that were most at risk in society to the detriment of all, particularly the wealth generating middle-class which is now being squeezed out of existence by a rampant 1%.

The disproportionate intrusion of the billionaires to undermine the civil society by the mere size of their wealth is an expression of a sense of arrogant entitlement from those who do not think that a £1 million Mexican crystal bathtub is a vulgar extravagance. A sense of entitlement that was built out of the policies of Reagan and Thatcher in the 1980's.

Margaret Thatcher's declaration in the 1980's that "there is no such thing as society" became the rallying cry of neo-conservatives around the world. Neo-conservative governments began to remove the progressive regulation and taxation systems that had limited the excesses of the rich under the theory that the civil society was unnecessary and that the self-interest of individuals would be sufficient.

Ironically, these conservatives decried the entitlement culture and assumed that the emphasis on the individual would necessarily lead to a "trickle down" of wealth to those less fortunate.

Thatcher herself recognised the entitlement culture, stating: "People have got the entitlements too much in mind, without the obligations, because there is no such thing as an entitlement unless someone has first met an obligation"

However, both Thatcher and Reagan saw those obligations (including the tax burden) as rightly falling upon the poor and middle classes and not similarly upon the rich. The view was that by the very fact that the rich were wealthy, they had fulfilled any obligation to society. This position unravelled the social contract and led to the excesses that caused the financial crises. Far from these crises causing a re-evaluation of this position, Thatcher, Reagan and later Bush continued with their policies further squeezing the middle classes. This has led to an entitlement culture growing amongst the rich - that regardless of the damage caused by their exploitation, government should be there to pick up the pieces at taxpayers expense.

In the past, this sort of sense of entitlement from the rich was met with derision from both the working and middle classes because it was seen for what it was - a desire to exploit society for reasons of self-interest. The institutions of the civil society placed proportionate obligations on everyone.

However, the structures of the civil society have been eroded by successive neo-conservative governments, which has created a society built on exploitation and an indignant sense of entitlement.

The removal of these institutions by conservative governments has led to  the "trickle down" of the exploitative sense of the entitlement to the middle class such that the billionaire's dilemma can be related to by those who are less well off. Accusations of "class warfare" resonate with the middle class, even though the warfare is actually being perpetuated upon them from above.

In Australia, this sense of entitlement has been generated through the explosion in middle class welfare under the Howard government. Just as the 1% believe that they are entitled to be unfettered by responsibilities to society, the middle class believe they are entitled to subsidy-fueled mortgages, private health rebates, subsidised private schools and the like, regardless of the exploitative effect on civil society. In fact, when governments have tried to make these "entitlements" progressive, it has been met with howls of "class warfare".

We have become too relaxed and comfortable, demanding our share of the trough rather than accepting our responsibility to engage with our obligations to society. We instead have fallen to the cheap popularism of slogan inspired "comfort".

This is why the accusation of class warfare has such resonance. In the same way that the billionaires see criticism of their extravagant unsustainable lifestyles as unfair, the middle classes see criticism of their entitlement to an unsustainable subsidy as equally unfair.

The exploitation of the unravelling of civil society is most pronounced by the 1%, who lobby for more changes that entrench their influence and power, but it can also be seen by the subsidy demanding "Howard battlers" who parrot the demands of the 1% even as their own standards of living are eroded.

This exploitative culture has thoroughly distorted the economy, such that everyone looks to Government to provide the conditions by which they can exploit society - rather than to provide conditions under which society thrives. The rampant individualism set in motion in the Thatcher and Regan eras has engendered the exploitation culture - a culture that led us to the global financial crisis and a culture that has created a crisis for the civil society.

Linux.conf.au 2012 presentation: The harbour is no longer safe: AFACT v iiNet

This presentation examines the AFACT v iiNet cases. The presentation will draw on some of the ideas that I have written about in these previous posts:

• The harbour is not as safe as it looks; and
• AFACT appeals against reason

I also provide some analysis of several of the proposed solutions in the AFACT case and what their potential impact could be on end users.

This talk was presented at the 2012 linux.conf.au in Ballarat.

The Communications Alliance proposal: a kinder, gentler 3-strikes

The Communications Alliance has released its proposal for dealing with rightsholders' complaints about ISP's customers engaging in alleged copyright infringements over their networks. The basic structure of the proposal is to provide rightsholders and ISPs a clear way of dealing with allegations of copyright infringements. However, in effect it is another variation of a graduated response system, albeit a kinder, gentler three-strikes.
The key features of the model include:

• An independent panel for the assessment of alleged infringement and appeals;
• A system for accrediting rightsholders (including the systems they use for detecting alleged infringements);
• A system of notices with an emphasis on compliance and education (including specified time frames for alleged infringers to respond or amend their behaviour);
• A "reset period" when further infringement has not occurred for a specified timeframe;
• A system of discovery of an alleged infringer's details with a view to private legal enforcement by rightsholders (where compliance has not occurred); and
• A funding model

This proposal broadly reflects the comments of Emmet, J in Roadshow Films Pty Limited v iiNet Limited[2011] FCAFC 23 and the proposal put forward by iiNet [PDF] in the wake of the case.

Considering that the Australian Federation Against Copyright Theft (AFACT) rejected this proposal and have appealed to the High Court (HCA), it is unsurprising that rightsholders have rejected this model, instead continuing to push for models that curtail alleged infringer's right to the presumption of innocence and due process.

In addition to the possibility of a HCA win, rightsholders are also relying on a legislative response from the government who have indicated that they would prefer to hand that process over to vested interests in the ISP and content publishing industries rather than legislating in such a way that provides a balance between industry interests and the public interest.

In the current litigious environment, the Communications Alliance proposal is a relatively balanced approach to the issues that AFACT identified in its complaint while maintaining the interests of ISPs.

Fundamentally, the proposal does not address the issue of the over-regulation of copyright that has created the problem in the first place. As the Communications Alliance itself states:

"Australian consumers' ability to legally access this content in a timely and affordable manner does, however, vary significantly from sector to sector (eg; release of TV programs and movies in Australia can lag months behind US releases). This difficulty, combined with a proliferation of access technologies, such as file-sharing software, has reportedly seen a growth in the frequency of unauthorised access to online content and therefore copyright infringement."

With vested interests controlling government policy on copyright regulation (particularly through international treaties such as the Trans-pacific partnership), it is understandable that rightsholders would refuse to accept that their own actions contribute to online infringement. It is also not surprising that they would continue to push for unbalanced anti-consumer laws to maintain their business models.

To their credit, at least ISPs have made an attempt to balance some of the concerns that have been raised about graduated response systems. However, this proposal has been developed through the prism of ISP interests to avoid being held liable for infringement. The model itself is largely a reflection of the comments of a Federal Court judge ruling on a law that successive governments have largely allowed to be influenced by the interests that are advantaged by those laws.

It is the government's responsibility to legislate to balance the interests of all stakeholders. However, its irresponsible abrogation of its responsibilities to vested interests has resulted in the litigious environment that regularly ignores the interests of the citizens that the government is supposed to represent.

It is time that the market failure that has been created by the over-regulation of intellectual property is re-examined through the prism of efficient and effective regulation. This regulatory analysis ought balance the rights of rightsholders, ISPs and citizens to encourage a dynamic market sparking the innovation that the protection of intellectual property was supposed to achieve in the first place.

The procedural fairness of unfair dismissal

There has been considerable agitation by previous Howard Government Ministers to re-animate the corpse of WorkChoices with calls for the Liberal Party to consider further changes to the industrial relations system.  The current shadow minister for Industrial Relations, Senator Eric Abetz was quick to hose down the potential restoration of WorkChoices, however, he could not help but throw in the usual Liberal Party lines attacking the current Fair Work system. In particular Sen. Abetz alluded to a "burgeoning industry" of "go-away money" to settle unfair dismissal claims.

Unfair dismissal has been a particular focus of the Coalition, often stating that is is a brake on employment, despite evidence to the contrary. It is worthwhile to examine the Fair Work regime of unfair dismissal to see just how 'unfair' unfair dismissal actually is to the employer.

A person is protected from unfair dismissal if they have been employed for the minimum employment period (between six months and one year) and if they are covered by a modern award, enterprise agreement and are under the high-income threshold.

Unfair dismmissal comprises of the following elements:

(a) the person has been dismissed; and

(b) the dismissal was harsh, unjust or unreasonable; and

(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and

(d) the dismissal was not a case of genuine redundancy.

So, in the case of a small business, there is a simple way to avoid any claim, and one would imagine that if a larger business followed the Code and employee would have difficulty proving that the dismissal was unfair, unjust or unreasonable.

The fair dismissal code merely applies the principles of procedural fairness to dismissal situations. The principles of procedural fairness require that a person has a fair hearing, free from bias, a decision based on evidence and an ability for the person affected to respond.

So in the industrial context, a person who is to be dismissed should be dismissed on the basis of evidence and also allow a person who is affected by a decision to know the accusation against them and to respond.

At its most basic, the code requires that an employer makes the employee aware that there is a problem with their performance and give them a chance to respond an rectify the problem. It does not protect an employee who has committed serious misconduct such as theft, fraud or occupational health and safety breaches.

The ability of an employee to have the chance to be informed of and respond to any identified performance problems is consistent with the principles of procedural fairness, so it is not unreasonable to apply this administrative burden on business.

So one must question where this burgeoning industry of "go-away" money is coming from.

Firstly, it is likely that this "industry" is being fed by small businesses not following the code, preferring to summarily dismiss under-performing or disliked employees due to a disconnect between the employers perceptions of serious misconduct and those that are actually proscribed by the law.

Secondly,  it is likely that employers and employees are coming to a settlement outside of the remedies imposed by Fair Work Australia (FWA) rulings because the most frequent remedy for unfair dismissal is that of reinstatement rather than compensation (except where the relationship has soured to such an extent that it is impractical). If this is the case, then the employers themselves are choosing to "pay out" employees (something which they probably could have done before going down the dismissal route). This is not imposed by the Fair Work regime, it is created by employers who have not dismissed employees correctly.

Ultimately it is up to businesses to follow the law, and considering that the law only incorporates the principles of procedural fairness and natural justice, it is hardly onerous. Furthermore this only really relates to summary  dismissal, there is nothing that prevents an employer from dismissing an employee so long as the necessary notice is given (or pay in lieu of notice) and entitlements are paid out.

What businesses are really after is the ability to avoid their responsibilities for notice and entitlements as they do not see these as part of the total pay package to which employees are entitled - putting it under the guise of not being able to sack under-performing employees.

The media too, is rife with stories of seemingly outrageous conduct by employees successfully being appealed to Fair Work Australia. However, when one actually looks past the media reporting to the actual facts of the case, it is often the employer who has been unfair, unjust or unreasonable or merely has not provided evidence.

It is not an unreasonable burden on business that they treat their employees fairly, nor is it unreasonable to expect them to follow the law. What is unreasonable is that businesses expect that the law ought to be changed to allow them to sack at will for whatever reason and avoid paying entitlements - all under the guise of 'flexibility'.