Monaco: where the 1% gamble

Monaco is a tiny principality within a 40 minute bus ride of central Nice. There is also a train, however the bus is far more scenic (and cheaper).

Monaco is well known as a playground for the super rich - due mostly to its tax haven status and its famous casino at Monte Carlo. However it also has a small old town consisting of three narrow mediaeval streets near the palace. From here you can stroll through the gardens overlooking the harbour and the super yachts of the 1%.

View from the bus on the way to Monaco

View of a marina with super yachts

View of Monaco and the main harbour

The yachts in the harbour were true vulgar displays of super wealth. Each yacht seemed to have more extreme luxury features than the last - 5 decks, 7 decks, party decks, a helipad (meaning the owner also owned a helicopter).

From these yachts the super rich go on their shopping outings for frivolous luxury goods - such as a  $3 million watch bought by an American NFL player (according to a man I met on the harbour taxi). All with untaxed income stashed in Monaco, kept away from governments who might want to spend that tax on health or education.

Across the harbour is the world famous Monte Carlo casino - scene of Bond films and high rollers blowing millions on a single hand of cards.

Luxury cars outside the casino

Outside the casino were all manner of luxury cars: Ferraris, Rolls royces, Bentleys with the BMWs and Porsches relegated to the "cheap" parks down the side.

Tourists were fawning over the cars that they could never have while inside their owners were blowing ten times the average wage on card games (all tax free of course).

The irony is that the people inside are using their tax free wealth to influence policy makers to ensure that those outside fawning over the cars will never have a slice of the pie.

I can't say I was a big fan of Monaco.

Fraudband, entrenching the past to monopolise the future.

The Coalition has now released its broadband policy and it is heartening that the Opposition has finally realised that high-speed broadband is an important infrastructure issue.

However, beyond the technological differences (which others have comprehensively dealt with elsewhere), the policy fails on one of the fundamental advantages of the NBN - ubiquitous bandwidth over a single wholesale network.

A ubiquitous fibre network provides business certainty for the private sector to build and deploy high-bandwidth applications across Australia, the Coalition's hodgepodge of technologies and last-mile monopolies does not provide this certainty.

Only vertically integrated businesses will have the ability to cost-effectively deliver applications across the network proposed by the Coalition - which is good news for FOX and Telstra but bad news for any other business looking to provide high-bandwidth applications.

It seems that the Coalition is keen to replicate the previous mistakes of digital TV and datacasting regulation that has entrenched the status quo in the broadcast sector - little wonder that the "fraudband" policy was launched in FOX studios.

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.

Hockeynomics: Cut medicare, subsidise private health, save money

Shadow Treasurer, Joe Hockey, has attacked the "culture of entitlement" that has supposedly stemmed from Australia's welfare state - citing examples of our Asian neighbours as a yardstick by which to judge effective government spending on welfare.

An excellent analysis of Hockey's argument by Matt Cowgill shows that, in fact, Australia's welfare spend on areas other than health and ageing, is comparable to our Asian neighbours. It also compares strongly to other Western countries, including the US.

Cowgill's conclusion is that the only place in which welfare can effectively be cut is in either Health or Ageing:

"To achieve the sort of cuts that Hockey has flagged, to bring our social spending into line with Korea and other countries in our region, would involve huge cuts to health spending, pensions, aged care and help for people with disabilities."

However, there is no need to go into a depth of analysis to see that this is precisely what the coalition intends to do with its cuts to welfare.

In an interview with Lateline, in answer to a question on the Private Health Insurance Rebate, Hockey outlines a move to the US-style system of health care: heavily subsidised private providers providing the bulk of care, with a minor role for a public safety net. Hockey said (emphasis mine):

"If you reduce or remove the Private Health Insurance Rebate, you are simply pushing more people onto the public hospital system, which means they have an entitlement to universal health care, which means that the entitlement system grows."

Hockey is suggesting that an entitlement to universal health care is a bad thing and it is more effective to dismantle the universal system for a system of government subsidy to the private sector.

Hockey goes on further to say: "some entitlements [the Private Health Insurance Rebate] work to reduce other entitlements."

So, according to Hockey, the use of the Private Health Insurance Rebate - a subsidy to the private sector, will reduce the entitlement to universal health care [ie. Medicare].  The shifting of subsidies to the private sector and the dismantling of Medicare's universality smacks heavily of the current US system. In this system the publicly funded system is only available to certain classes of citizen with many falling between the cracks of subsidised private health insurance and the public scheme.

So how does this system compare for cost savings? According to the OECD the US health system costs 7.2% GDP compared to the Australian system which costs 5.7%. In terms of life expectancy, the US ranks 38th in the world, compared to Australia's rank of 6th. There appears to be little gained in the way of cost savings or better health outcomes.

Hockey has given us a glimpse of what a Coalition government would do to fund it's $70 billion in promises - Medicare's universality is to be dismantled, and not for cost but for an ideological antipathy to Medicare that has festered in the Coalition since Malcom Fraser first opposed it.

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.

Of pizza and the privatisation of public policy

Pizza has been declared a vegetable.

The United States Department of Agriculture's (USDA) proposed food standards were undermined by a congressional spending bill that enabled pizza to be counted as a vegetable. The bill was the result of lobbying by the frozen food industry to ensure that pizza and chips would still be available for school lunches.

In addition the bill will:

• Block the Agriculture Department from limiting starchy vegetables, including corn and peas, to two servings a week. The rule was intended to cut down on french fries, which many schools serve daily.
• Allow USDA to count two tablespoons of tomato paste as a vegetable - which allows pizza to be counted as a serve of vegetables. Federally subsidized lunches must have a certain number of vegetables to be served.

The intervention and lobbying by the fast-food industry to undermine the science-based public policy making of the USDA is yet another example of the increasing trend to privatise public policy making.

Interest groups and lobbyists have disproportionate sway over lawmaking, and in some cases have been able to  get lawmakers to completely abrogate their responsibility to legislate in areas of public policy. So much so that areas that were once the purview of government are now almost purely regulated and enforced by private interests.

This is particularly the case in intellectual property (IP) policy, where industry lobby groups have monopolised the public debate so that they virtually write the legislation for lawmakers to pass.

The recent "Stop Online Piracy" (SOPA) bill is one such example. The bill, if made into law, would give content publishers unprecedented powers to censor and control the publication of online content - making the content  publishers ultimate arbiters of what can be published on the internet. Through laws such as these, Governments have bestowed arbitrary quasi-judicial powers upon powerful interests, removing requirements for due process, natural justice or evidentiary rules - thus shirking their responsibilities to legislate public policy or protect the public interest.

The powers that the bill confers have been likened to the powers that the Chinese government executes over internet content through the "Great Firewall" albeit that the Western version is executed by private, rather than government interests. However, like the Chinese Firewall, the public can not dismantle this policy by excercising their democratic powers - the interests of this private plutocracy are just as dictatorial and totalitatarian as the Chinese Government.

In Australia too, the government has abrogated its responsibility to the public on IP policy by signing up to secretly negotiated "free-trade" treaties such as the Trans-pacific partnership.  The government is also refusing to take a leadership role in regulating IP infringement on the internet - preferring 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.

The pervasiveness of the ideology that advocates that public policy is best executed by private interests relegates lawmaking to mere administration and democratic power to tinkering around the edges of issues. 

This abrogation of public policy making by lawmakers has not only had a chilling effect on the rights and freedoms of people, but it has also had serious effects on the world economy (global financial crisis), environment (climate change) and public health and wellbeing (health policy). However, lawmakers are satisfied to leave these important issues up to private interests instead of providing political leadership in the public interest and when a government does try to allow its citizenry to have a say, it is loudly shouted down and decried by those powerful interests to which an appeal to democracy would disadvantage the most.

Various governments have handed over some of the most important areas of public policy to powerful private interests to varying degrees. The economy, the environment, public health and culture have all been privatised to varying extents.

The virtual privatisation of these areas of public policy has collectively given society the global financial crisis by handing the economy to bankers, global warming by acquiescing to industrialist interests, a global obesity epidemic by pandering to the fast-food industry, lack of access to drugs in developing countries by granting broad patents to pharmaceutical companies and limitations on free speech and  human creativity by the over-regulation of IP.

And as we complain about our politicians tinkering around the edges of what was democracy, at least we can drown ourselves in the vacuity of culture that is left to us by the plutocrats and reach for another slice of pizza.

Well, at least it's a vegetable.

Too relaxed and comfortable

In 1996, John Howard stated that he wanted to see Australians "relaxed and comfortable" and now, in 2011, we're seeing the economic results of this maxim. In four terms of government, keeping specific classes of people "relaxed and comfortable", the Coalition built a dangerous entitlement culture which has led to an unsustainable structural deficit within the economy. Middle-class welfare has made Australians so relaxed and comfortable that they feel that the government is responsible for maintaining their lifestyles when they make a decision that would normally make them worse off. In the past, Australians accepted that buying a house, having a child, sending children to private schools, having private health insurance, having a new large car and purchasing large consumer items such as plasma TVs would have financial consequences - consequences that they themselves would have to manage. However, the previous Coalition government have convinced them that these decisions ought to be funded by the government.

In a recent interview on 7:30, a 'typical Australian family' noted that "the big winners from the [2011] Budget will be caravan parks, because that's where we're gonna take our holidays for the next three years."

So, it appears that we've become so 'relaxed and comfortable' about living on government handouts that we expect them to fund our holidays too.

According to the opposition, the subsidisation of the lifestyles of Australian people can be funded without raising taxes but this does raise the question of just how the Coalition can fund this ever expanding welfare spend. Cutting 12,000 public servants and cancelling the NBN will be insufficient over the long-term to pay for it, but these are the only big ticket "saving" items that the opposition has put forward.

As with the opposition's direct action plan on carbon (which I have discussed previously), middle-class welfare of this nature will continue to expand pressure on the budget, necessitating cuts to expenditure that must extend beyond public sector job cuts and the rolling back of the government's programs. So once again the questions must be asked: "how much are they going to borrow?", "what are they going to tax?" or more likely, "what are they going to cut?" to keep Australia "relaxed and comfortable".

The paradox of neoconservative incentive

It has always been a feature of neoconservative economic theory that if a person has a large amount of wealth, then they should be encouraged to accumulate more wealth with generous incentives. These incentives have taken the form of tax cuts, subsidies and deregulation. However, at the other end of the scale the incentives are of more a punitive nature, such as income quarantining, welfare cuts, faux-employment (such as work for the dole) and other coercive measures.

There is an economic theory that describes this seemingly paradoxical position. However, it has become so distorted by the entrenched interests of those that use it to reflect their interests and beliefs - that the wealthy should be rewarded with more incentives from taxpayers, whereas the poor should be punished - that it has become unrecognisable as the original "marginal productivity theory". At its heart, this theory relies on the fact that it is inefficient for a company to pay more wages to an employee than they would produce in profits - which is true. However, the application of this theory tends to be distilled to "people who get paid more are more productive and therefore of greater utility to society" which may also be true up until a point. That point however gets lost when the class of those that are paid at the highest rates are also those who set those rates. It is then that the theory becomes distorted beyond its somewhat reasonable premise.

This is what we see when we examine the sort of executive salaries and bonuses that are handed out at the top levels. It is hard to see how these wages and bonuses are efficient, especially when companies perform worse under the stewardship of an ever more highly paid CEO. In fact, some of the highest paid CEOs in the world were responsible for the recent financial crisis which one would think was hardly an efficient allocation of the company's funds. That is probably why they cynically altered the name from "performance bonus" to "retention payments". However, these captains of industry still have the government conned arguing that any possibility of paying a reasonable share via tax will "send jobs offshore" or "destroy the productivity of the industry". They continue lobbying for even more subsidies, tax cuts and deregulation - arguing that the payment of these monies will spur further productivity which usually translates into a higher executive pay at the top and job cuts down the bottom - remember the marginal productivity theory?

At the other end of the scale we have the punitive measures that are bought to bear on the unemployed. The neoconservative theory goes something like this: "The unemployed are not productive; therefore it is inefficient to pay them". However, this makes the assumption that the unemployed are not made more productive (in the sense that they are more motivated to find work) by giving them money and the only way to give them more incentive is to remove it from them. This only works if the only reason why people are receiving unemployment benefit is for the money which, considering the paltry amount provided by the dole, is not as prevalent as "Today Tonight" and "A Current Affair" would have us believe. However, our very own neoconservative opposition leader is pandering to precisely those views. In a grab-bag of "bludger" bashing he has suggested punitive measures such as: income quarantining, forced re-location and the provision of labour at below minimum-wage cost (work for the dole). None  of these measures have been proven effective at lowering unemployment. However, they are effective at pandering to the ACA and TT crowds and to those that believe that it is inefficient to provide resources to the unemployed.

It is difficult to see how removing the unemployed from the usual workings of the economy by controlling their spending, removing them from their family support networks by forcing them to move to areas of higher employment or making them work at menial tasks at less than minimum wage will encourage them to find work. It is far more likely to marginalise them further.

However, this is a paradox that the neocons feel comfortable with because of this distorted perception of the efficient allocation of resources. When those perceptions are built from the perspective that only those that have access to wealth and resources should have access to further wealth and resources courtesy of the state because it is efficient merely because they have access to those resources. Not only does this allocation at the very top of the economy have no connection to productivity but it also feeds the distorted belief that the allocation of resources to those that have few resources is inefficient merely because they have few resources. Of course, the fact that this view has lead to a distortion of wealth distribution and a severe financial crisis does not seem to register with them, probably because it is in their interests to ignore it.

"Carbon Dioxide is essential to life": the stupidest anti-carbon tax argument

During the recent debates on carbon pricing, the opposition has more closely aligned itself with those that ague that global warming is not man-made. Tony Abbott has even reflected these views in various recent statements, including buying into what is quite possibly the stupidest argument against anthropogenic global warming (AGW) and the carbon price. Abbott said that carbon dioxide is not a proven "environmental villain", which echoes the comments frequently stated by AGW-denialists that carbon dioxide is somehow not a problem because it is "essential to life".

This is quite possibly the stupidest argument against AGW and carbon pricing - there are plenty of other elements and gases that are "essential to life" that are pollutants and are priced and regulated.

Just to take one of them: sulphur. Sulphur is an important trace element that is required by the body for the manufacture of amino acids. It is also a component of many preservatives (particularly in wine). So it could be said that sulphur is essential to life.

However, like carbon, human activity has greatly changed the natural sulphur cycle which has resulted in the atmospheric concentration of sulphur increasing. This has had serious environmental impacts - the most striking of which is acid rain.

To tackle the problem of acid rain governments have used international treaties and a successful emissions trading scheme - sound familiar?

Saying that because carbon dioxide is "essential to life" it can not also be a pollutant is a completely spurious argument, and if we look at the regulation of another element that is also "essential to life", sulphur, we see a similar model to tackling the problem that we have seen proposed for carbon dioxide.

TPM & TPP: The constitutional nexus

The US trade representative's (USTR) IP chapter for the Trans-pacific Partnership Agreement (TPP) suggests significant changes to the regulation of technological protection measures (TPMs). These changes extend the scope for causes of action and specifically limit exceptions to the circumvention of TPMs.

According to a leaked document the USTR has proposed the following exceptions:

• Reverse engineering for interoperability
• Research into flaws and vunerabilities in encryption
• Inclusion of a component to prevent access to inappropriate content by minors
• Security analysis and testing
• The removal of private data gathering components - so long as their removal does not then allow access to the work
• Law enforcement
• Access by public libraries for the sole purpose of acquisition decisions

There is a further exception allowed for when a a legal or administrative decision deems that the effect of the TPM makes the non-infringing use no longer available - but that exception can only be existent for 3 years.

So, the total exceptions are extremely narrow, even taking away some of the narrow exceptions existent in the Australian Copyright Act such as region encoding in s10(1)(c). Outside of these exceptions the TPP prescribes a "separate cause of action, independent of any infringement..." (emphasis mine). So the circumvention of a TPM becomes a cause of action per se.

This significantly changes the landscape of copyright. Making a modification to your own property, regardless of whether it infringes copyright, can now be a cause of action. Ultimately this breaks the nexus between a TPM being a copyright-related device to being a device that limits rights to chattels. This breaks the nexus between the TPM provision and the constitutional head of power that enables the Commonwealth to legislate with regard to copyright, section 51 (xviii).

In the 2005 Stevens v Sony case, at [218] Kirby, J comments:

"To the extent that attempts are made to push the provisions of Australian copyright legislation beyond the legitimate purposes traditional to copyright protection at law, the Parliament risks losing its nexus to the constitutional source of power."

This is not to say that the imposition of the TPP would necessarily be unconstitutional as the Commonwealth has other heads of power upon which it could rely, such as the external affairs power in s51(xxix). However, it is of concern that external treaties such as the TPP should be used to enable the Commonwealth to legislate for the regulation of the use of an individual's private property.

Needless to say, the invasion of copyright into the realm of the regulation of chattels represents a significant intrusion by the international treaties system into citizen's ordinary enjoyment of their private property. It significantly re-balances the rights inherent in intellectual and real property and has the potential to fundamentally change the rights that one has over their own property.

TPP turning ISPs into copyright police

The 6th round of negotiations for the so-called Trans-Pacific Partnership (TPP) are set to occur from 28th March 2011 - and if we were to rely on DFAT's website the TPP treaty is merely to:

"develop a high-quality, comprehensive 21st century Free Trade Agreement (FTA) that increases economic integration in the Asia-Pacific region, particularly as membership expands over time."

This all sounds very reasonable but what it doesn't mention is that, amongst other things, the TPP has a significant section devoted to copyright.

The US Trade Representative to the treaty negotiations has put forward a number of proposals which would "harmonise IPR provisions strictly upwards", these include:

• Banning parallel imports
• Increasing the term of copyright
• Criminalising Digital Rights Managment (DRM) circumvention - even when there is no copyright infringement
• Imposing ISP liability for the infringement of their users, including providing incentives for ISPs to become copyright cops for the content industry
• Requiring ISPs to identify users at the behest of the content industry
• Expanding the scope of what is patentable and limit objections to patents

This, of course, reads like a wish-list of the content industry and it would probably not surprise anyone to know that there is an extremely close relationship between the content industry and the US government.

Furthermore, the TPP contains provisions for "dispute resolutions" which means that countries that are not compliant with the increased scope of the IP provisions can be fined.

So what does this mean for Australia?

Firstly, the TPP IP provisions exceed those in the AUSFTA and even further than the completed-but-not-in-force ACTA treaty, especially the "exceptions" provisions for DRM and the expanded scope for patentable material.

Secondly, it will impose a regime of ISP copyright enforcement that goes much further than the suggested model put forward by Emmet, J in the AFACT v iiNet case. The Internet Industry Association (IIA) has already stated that it is prepared to draft a code to address the uncertainty regarding the steps that ISPs should take in responding to allegations of copyright infringement by their users. However, the imposition of the TPP will make this attempt at industry self-regulation redundant by substituting an industry negotiated code, which will likely contain at least some consumer protections, to a legislative regime which does not. Furthermore, a country is prevented from implementing more consumer friendly provisions by the "dispute resolution" clauses that may result in the country being fined.

So there is a real danger that the TPP will further tip the balance in favour of big content and away from consumers, but then this seems to be the modus operandi  of these FTAs and is hardly surprising. The irony is that the more big content punishes consumers and refuses to provide content in a way that their customers want, the more their customers will pirate their content using the ever-more sophisticated tools available to find and download content and to hide their tracks while doing so - making a legislative regime ineffective.

As IIA president Peter Coroneous said recently:

"Market failure remains a core contributor to the infringement problem. If users have access to more and better content, when, where and in the form they choose to consume it, and at a realistic price, we're quite confident the motivation for infringement will decline. We certainly don't condone the infringement of copyright - but internet users need attractive, lawful alternatives if we are to see positive behavioural change. There's no reason why Australia shouldn't be leading the way here."

And maybe that is the area in which Australia can lead the way, rather than continuing to implement an ever-more draconian legislative regime under the guise of "free trade".

Carbon pricing: The really simple explanation

I've really, really simplified this and used an 'ideal' model but the principles are the same and it will serve for comparative purposes.

Assume that both Company A and Company B produced widgets at $10 retail. The widgets are identical - apart from their production method.

Assume that the most efficient carbon use for the production of widgets is 1 unit of carbon.

First, let's examine the effect of a carbon price:

Assume 1 unit of carbon is priced at $1

Company A makes a widget that takes 10 units of carbon and pays the carbon price of $10 for its widget which now retails at $20 (the original $10 plus the carbon price).

Company B uses a less carbon intensive method to produce its widgets which only take 1 unit of carbon and pays the carbon price of $1 for its widget which it can retail at $11.

All of the money that the government collects from the price on carbon is used for compensating consumers - let's assume that the redistribution is $1 per person in compensation. All of this compensation coming from the price on carbon and not from the budget. This is important because things that are paid for out of the budget have to be funded by one of three things: tax, cuts or borrowing (deficit)

Now, our average consumer is used to paying the non-carbon priced price of $10 for their widget. They have received $1 in compensation for the government so they now have a potential spend of $11 for widgets.

Now if they buy the $11 widget they are no more worse off than before the carbon price and Company A has a rather imperative reason to reduce the price of their widget - for example, by reducing its carbon use.

Now let's look at "direct action" aka a carbon reduction subsidy:

Direct action pays polluters to reduce their carbon use.

Company A requires $100 in capital costs (with a $20 p.a subsidy to keep their carbon use at this level) to change its production process to bring its carbon use down to the ideal 1 unit of carbon. These costs are now subsidised by the government (funded from either tax, borrowings or cuts).

Now Company A is not going to pass the subsidy to the consumer because its going to use the money in its carbon reduction scheme - we might get a few dollars handed on, but essentially subsidies don't significantly reduce prices (they might decrease the rate of price increases but one only needs to look at subsidies for private schools to see this not working).

Company B doesn't need any money to bring it to its peak efficiency of 1 unit of carbon.

So at the supermarket both Company A and Company B's products still cost $10 - except that, thanks to the fact that there is no price signalling to the consumer, the consumer has no way of knowing that Company A's widget cost the budget bottom line $100 with a recurrent budgetary cost of $20 p.a.

Direct action is expensive. It either means cuts, taxes or borrowing, there's no way around it. And no amount of bleating about "great big new taxes" by the opposition is going to change this economic reality.

So next time you hear the opposition going on about "direct action" ask yourself: "how much are they going to borrow?", "what are they going to tax?" or  more likely, "what are they going to cut?"

The new gatekeepers- internet freedom has a price but no way to pay

Much has been made of the internet being the great 'leveler'. Citizen journalists and bloggers have challenged the model of traditional publishing, file-sharing has challenged the business models of the music and movie industry (and here, I mean not just file-sharing that infringes copyright but file-sharing as a distribution mechanism) and open source software has challenged the models of software development and distribution. Each of these mechanisms have removed, to some extent, the gatekeepers of content production and distribution, allowing an expansion of the sharing of ideas, content and culture. In the post-wikileaks world, the removal of the traditional gatekeepers of media and government has thrown the spotlight on government practices and the ability of the internet to spread information, culture and ideas has led to significant pressures being placed upon government (including, some would argue, the fall of several governments).

The reaction of government has predictably been to attempt to crack down on the internet through both censorship laws and the expansion of laws that further empower the private sector to move against the leveling influence of the internet (such as expanded copyright laws and domain seizure laws). In this case, at least citizens have the nominal right to reject these laws by excercising their rights at the ballot-box (and yes, practically this  is more difficult due to entrenched interests and money politics, but that's a rant for another day) and rejecting the government's intrusions.

However, more worryingly, a new danger to internet freedom has raised its ugly head and begun to exert its influence.  Another set of gatekeepers, ones that have not yet succumbed to the leveling influence of the internet, have begun to flex their muscle as gatekeepers of content and information and as these are private entities citizens have no way to counter their power.

I am referring to the financial gatekeepers of the internet. The duopoly of Visa and Mastercard (along with PayPal to a lesser extent) have begun to exert their power over the financial flows to entities and websites that they deem to be undesirable - and governments, recognising this power, have sought to use these gateways to censor and undermine websites and entities that threaten their power.

The most obvious recent case is that of PayPal, MasterCard and Visa halting payments to Wikileaks under the spurious auspice of 'violating their terms and conditions', something which the KKK or NAMBLA somehow don't do. It is quite obvious why the payments were halted - 'pressure' from the US government. There was no actual legal power upon which the government could rely, so they turned to the gatekeepers to block finances and attempt to hamstring Wikileaks. It was a frightening display of State power combined with the power of the gatekeepers brought to bear on an organisation which, to date, has not been shown to break any laws.

The UK government has also discovered that using the gatekeepers is easier than having  to pass legislation - since legislation has to go through that pesky transparency process known as parliamentary scrutiny.

In this case, the content industries, through their industry group IFPI, have bypassed the legislative step entirely and gone straight to enforcement - using  the police to protect their private interests through the police's "economic crime directive" which is ostensibly to combat fraud rather than copyright infringement. Basically, the police verify that the site appears to offer unlicensed copyrighted material and hand the details to Visa and MasterCard to effectively cut of the finances of these sites. There is no recourse, no appeal and no judicial oversight. Whether the accused have violated Visa or MasterCard's 'terms and conditions' is a matter for Visa and MasterCard and not for the courts.

It is not difficult to see this model being extended to other types of activities that either governments or big business find undesirable - they've already done it to Wikileaks. It is in a way similar to the corporate strategic lawsuit against public participation (SLAPP) suit - a legal threat to close down criticism - but at least with a SLAPP suit there is a way to fight it in court. A financial SLAPP from Visa and MasterCard is almost impossible to defeat - it is their terms and conditions and as private entity they can choose who to do business with, or not.

The dominance of these financial gatekeepers represents a dangerous bottleneck to internet freedom. Although we still may be able to publish and distribute information - the ability to finance this distribution also forms an important part of this freedom.

It is often said that "freedom has a price", the problem is that it may become increasingly difficult to find a place to pay.