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Welcome for visiting my blog. Hope you enjoy the visit and always welcome back again. Have a nice day!


Economic theories and economic policies

Comments on Tony Makin “Saddled with legacy of fiscal extravagance”, 30/08/2010, http://www.theaustralian.com.au/national-affairs/saddled-with-legacy-of-fiscal-extravagance/story-fn59niix-1225911594527
While the argument of fiscal extravagance is correct, it is problematic to use the point that "in mainstream macro-economics, arguments in favour of using activist monetary policy, conducted under the auspices of more independent central banks, have dominated arguments for deploying activist fiscal policy", as the support against fiscal extravagance.

Even that point was correct in actual policy effectiveness (it is doubtful at the best) in normal circumstances, the nature of the GFC should question the generality of that point in the wake of the GFC.

Any economists, especially those who prescribe to actual policies, need not to be ideological in theories and need to take into account the differences between the assumptions in a theory and the real world conditions and take a pragmatic approach to policies.

Stiglitz, a strong Keynesian, is probably wrong in his judgement about the appropriateness of Australia’s fiscal policies in the wake of the GFC, some strong monetarists have been also wrong in continue to use the argument against any use of fiscal policy as a tool to deal with the GFC.

Both sides of the macro economists need to be realistic enough to realise some of their views may be wrong or incorrect sometimes!


Reform to have rules for a hung parliament without back to the polls again

Comments on Peter van Onselen “Back to the ballot box if the talks just drag on”, 28/08/2010, http://www.theaustralian.com.au/national-affairs/commentary/back-to-the-ballot-box-if-the-talks-just-drag-on/story-e6frgd0x-1225911098798
While going back to the polls may be a better option than the current farciful bargains when the nation is at the hands of a few independents, the nation could do better to reform the election, parliament and government systems.

What should the nation do if another election soon also produce a hung?

The nation could do better to reform the election, parliament and government systems to deal effectively with a hung parliament.

The current situation has significant shortcomings:

the nation and the major parties are held hostages by a few handful parliamentarians;

there is a lack of fair and just method for the major parties to form a workable government;
there is a risk that the nation needs to go back to the pool again very soon; and

it is more difficult to have fixed term election.

So, ideally there should be a set of rules to resolve a hung situation when it occurs.

They may involve who should form government unambiguously in a hung, using a cascading rules.

They should also involve how the supply is decided if the government's budget can't be passed. Here there should some rule to let the government function with minimum spending, and some policy proposals not exceeding certain amounts should be allowed once they have passed pre-specified criteria by a parliamentary budget office.


China's challenges on road to prosperity

Comments on Wing Thye Woo “Avoiding economic crashes on China’s road to prosperity”, 26/07/2010, http://www.eastasiaforum.org/2010/08/26/avoiding-economic-crashes-on-chinas-road-to-prosperity/
The analogue of hardware, software and fuel/power is nice.

I agree that the "software" is likely to be the most important one among the three.

For softwares, China has both severe challenges and blessings, due to its size, speed of growth and its political system.

Challenges come from influences both within the country and abroad.

Blessings is likely in the form of rapidly rising living standards that would allow the government to mitigate domestic political challenges and smooth the political transition processes. How to successfully democratise and what the most optimal path for it is the greatest challenge of all.

That political transition will inevitably be associated and influenced by the state of play in the management of economic growth. In a sense, the interactions between economic management and political transition are likely to be most challenging to China's political leaders.

International challenges are also multi-folds, with the most likely potential challenges coming from hostilities in one form or another to its rapid growth, although from power supply point of view the challenges are not along for China as long as China does its share of responsibilities and obligations in dealing with global challenges like climate change (in which China has probably done more than its share of responsibilities, but it has lacked behind in tactics so a poor impression has been created out of Copenhagen).

An independent budget office and policy analysis

Comments on Sinclair Davidson “Replace this partisan treasury with an independent budget office”, 27/08/2010, http://www.theaustralian.com.au/national-affairs/commentary/replace-this-partisan-treasury-with-an-independent-budget-office/story-e6frgd0x-1225910613675
The state of play has not been satisfactory over the past years.

Bureaucrats are supposed to have dual roles: giving independent advice and serving the government of the day.

It is difficult to be completely independent when the government of the day is your master.

Further, inevitably, many government policy proposals may come from bureaucrats in some sort of version and they have a natural bias and hence thus they have a conflict of interest at hand when do costing of the major parties policy costings.

Also, government has the advantage of using bureaucrats and opposition parties don’t have.

In sort, it is the institutional setting that results in natural advantages and disadvantages to the government and the opposition parties and the natural biases and conflicts of bureaucrats.

Ideally, there should be a much more independent agency to do the costings and scrutinise government policies in general. A Parliamentary Budget Office or the sort may be the way to go.

A need for a Parliamentary Budget Office

Comments on Paul Kelly “Unique chance may be lost to brief distractions”, 27/08/2010, http://www.theaustralian.com.au/national-affairs/commentary/unique-chance-may-be-lost-to-brief-distractions/story-e6frgd0x-1225910632410
The independents have failed to understand the inherent problems of the Charter of Budget Honesty provisions for campaign costing.

They assume that Treasury and Finance are completely independent.

But that is a fatal and unrealistic assumption.

Opposition, whichever party it is at the time of an election, generally does not believe and trust that assumption.

Further, there is an unfair advantage in being government at the time of election, because it has had access to public services for costing/estimates that the opposition have not had.

PS: The following is Kelly first few paragraphs:
"AUSTRALIA risks losing its unique chance for better government.

The the three independents have failed to lodge a firm written request for either a Parliamentary Budget Office or a Debates Commission, both to be established by statute.
This failure is inexplicable. The lesson of this year's election campaign was the need for these two institutional reforms. They are needed because the Charter of Budget Honesty provisions for campaign costing are broken and the farce about leaders' debates demands to be resolved.
The independents can quickly achieve these real and lasting reforms. Yet they seem fixated by distractions - useless talk about "new paradigms", multi-party systems and consensus politics that will not last beyond the current, perhaps brief, parliament."


Illusion, delusion or what?

Comments on Miranda Devine “Loose lips among the tulips”, 26/08/2010, http://www.smh.com.au/opinion/politics/loose-lips-among-the-tulips-20100825-13s5v.html?autostart=1
It appears that at least one of your arguments is a delusion. You said:
"Delusion 7: We have to have an emissions trading scheme or price on carbon. The fact the government barely mentioned climate change in this election says a lot about the attitude of most voters to higher energy prices, lost jobs and slower growth, the price of a policy which would do next to nothing to reduce global greenhouse gas emissions."

Had Gillard had a credible, effective and convincing climate change policy, she should have won the election without too much difficulty!

For example, she could have proposed to have a moderate carbon price and distributing the proceeds to the voters/residents on a fair basis! That would have been seen as decisive, creative and visionary! (Then her citizens' assembly could have been used to discuss the distributing mechanisms and the levels of the carbon tax and its future direction; and the public wouldn't have been so cynical about her silly idea of that.)

Instead, Gillard has lost the unlosable election, unfortunately for her due to ALP's strategic errors and her lack of true leadership at the most critical time.

Costings should be really independent

Comments on Lenore Taylor “Abbott's refusal on costings does not stack up” 26/08/2010, http://www.smh.com.au/opinion/politics/abbotts-refusal-on-costings-does-not-stack-up-20100825-13s7z.html?posted=sucessful
The very argument that the two sides need to have their election policies costed by Treasury is problematic.

Treasury was the subject of dispute between the two sides due to leaks and also the usual mistrust between an opposition and the government machinery departments. The opposition then went to its chosen third party for costing instead.

Now when the government is yet to be decided, whoever asks for costing done by Treasury shows a natural bias and inadequacy in politics and fairness.

For journalists to do that is even worse.

Why not asking an independent organisation to do the costings, as opposed to either party preferred one?

Treat different preferences differently

Comments on G. Campbell Sharman “Two-party preferred count is a two-card trick”, 26/08/2010, http://www.theaustralian.com.au/national-affairs/commentary/two-party-preferred-count-is-a-two-card-trick/story-e6frgd0x-1225910118844
Maybe a better one is some compromise, that is, to discount the second and lower preferences.

Arguably, second preference is not the same as the first preference. Then why should it be treated as the same?

I think the second preference should be treated as 50% of a preference; the third preference 25% and so on, that is, each lower order preference is discounted by 50%.

In that way lower preferences are not discarded, but they have different weights from the first preference.

That would be an improvement in the voting system.


Gillard's lost the unlosable election

Saturday's election is still being counted and the final exact outcome will not be known for days perhaps for more than a week from now. However, the most likely outcome is still a hung parliament with neither of the two major political parties has a majority. It is in the range of low 70s with 74 as the maximum, still two short of majority of minimum 76 seats in the house of the representatives.

Gillard could win or have won the election, but instead she is likely to lose it from the current state of count.

How could that be? The main reason was climate her change policy.

Instead of outlining a credible climate change policy, what she did was almost no change to what Rudd's one that saw his popularity plummeted and eventually costed his prime ministership. Pf course, there was a little spin or twist, that is, her citizens' assembly, a joke or laughing stock aimed at fooling the public and voters.

What she could have done on climate change policy?

She could have announced a significant change to the Rudd policy; say that she will introduce a moderate carbon tax on emissions. Out of fear of Abbott's attack on a big carbon price, she specifically ruled that option out towards the end of the campaign.

Of course, Abbott would attack a carbon price. But that attacking tactics would not be effective if the proceeds will go to the voters on an equitable distribution and make it revenue neutral. A revenue neutral carbon tax will completely diminish Abbott's ammunitions for attacking a big tax!

Had Gillard done that during the campaign or before it had started, the swings from Labor to the Greens would have not been that large and it would be completely possible that Labor would have got at least 76 seats and possibly more.

She said she would have three priorities, the mining tax, asylum boats, and climate change.

The first was handled reasonably well. The second one was done very poorly, but not fatal. Well, the last one was not just extremely poorly, but also fatal.

She is the first Australian Prime Minister and the public was excited and was willing to give her the benefit of doubt. But she squander the goodwill and lost the unlosable election, just as John Hewson did in the 1993 election.

So it has been Gillard’s climate change policy that has probably sunk her prime ministership.

What will be China's economic challenges in the next twenty years?

Comments on Geng Xiao “China’s economic challenges in the next twenty years”, 24/08/2010, http://www.eastasiaforum.org/2010/08/24/chinas-economic-challenges-in-the-next-twenty-years/
It is an interesting article, although some points are unclear. The point on a more market determined or linked interest rate to balance savings and investment is excellent.

Firstly, what is the concept of structural inflation? Does is differ in any way from inflation as that in economics? If not much different, why the term of structural inflation is used at all?

Secondly, why is inflation necessary for the exchange to go possibly up and down? Market factors and forces to determine the exchange rate are many and varied, both longer and shorter term. Did Geng Xiao mean that inflation should be high enough to counter the appreciation in the nominal exchange rate?

If that is the case, then how much that inflation should be? Why is that necessary to run that risk in manipulating inflation to such a degree?

I think as long as the Chinese are allowed to hold foreign currencies and exchange them freely both ways, the pressure for the rmb to appreciate will dissipate very quickly because of high demand for foreign currencies by them. Also a freer domestic exchange rate management system will reduce the current account imbalance, if that is a problem. More people will travel overseas and study overseas.

Thirdly using inflation to manage exchange rate is likely to be a poor policy to adopt.

Fourthly, the point on using exchange rate for asset pricing is quite novel, but that would be in favour of the US more than China in the longer term. Would the Chinese authority do that?

Fifthly, those macro policies are likely to be the easiest economic challenges for China in the next twenty years. Real structural economic issues, such as emissions control and energy policies, urbanisation, productivity growth versus non-productivity growth such as more inputs like investment and labour etc, regional growth, income distribution policies and effects on social stability and efficiency and growth, assets prices management, to name just a few.

More accountability for all - the government and the independents

Comments on Paul Kelly “Minorities will be held to account”, 25/08/2010, http://www.theaustralian.com.au/national-affairs/commentary/minorities-will-be-held-to-account/story-e6frgd0x-1225909585049
On parliamentary reforms, it would be nice if the election system could be changed to a fixed 3 or 4 year term, with no double dissolution and two houses should sit jointly if the supply cannot be passed in the senate.

As for a deal with the independents or the greens, maybe the best way is to set up a fund for addressing their demands, but the use of that fund should be based on some independent assessments (at least on how to be used), like by the Productivity Commission, or a parliament budget office in conjunction with the PC.

It is a potential danger that a weak minority government with the greens in balance in the senate and a member in the house will be very costly to the taxpayers in terms of too green in government policies. That danger will be greater if ALP forms the government.

There will be, however, some sort of counter balance from the conservative independent MPs.


Another reform to the election system needed

Comments on Mumble Blog “Who won the national vote?” 24/08/2010, http://blogs.theaustralian.news.com.au/mumble/index.php/theaustralian/comments/who_won_the_national_vote/
While the current system is as what you described, it may not be necessarily fair.

Leaving the current election aside, there is a case to reform the voting system to make it fairer.

One option may be to discount the second and third preferences to give them lower weights than the primary votes.

Such a system may combine the advantages of different voting systems.

But that reform should be done when there are no direct and immediate implications for the outcome of an election, or the implications are unpredictable.

Efficient government more important than talking about reforms!

Comments on Michael Stutchbury "For want of an agenda", 24/08/2010, http://www.theaustralian.com.au/business/opinion/for-want-of-an-agenda/story-e6frg9p6-1225909083120
While it is fashionable to talk about reforms, the most important issue of governing is to run a small and efficient government, spend as little as possible of taxpayers' money to achieve as much as possible.
Just imagine that the nation does not spend $43 billion and more on the NBN and just let private companies to compete for businesses.
Or we haven't spend billions in school hall programs?
Or the ill fated home insulation?
Isn't it much better?

ALP and the Greens - the worst combination for Australia

Comments on Matthew Franklin and Patricia Karvelas “Julia Gillard's Green path forward”, 24/08/2010, http://www.theaustralian.com.au/national-affairs/julia-gillards-green-path-forward/story-fn59niix-1225909144872
The most immediate and important question is:

Is that combination and stability good for the nation?

I have to say it is highly doubtful!

The Greens are too far to the left.

That combination would magnify the ALP's wastes by many times.

That would be costly to the taxpayers.

Gillard would be better off not to rely on that argument.

Having used that argument, she is continuing to show poor judgement!

Hope the independents can see the danger of that combination and prevent that from happening.


If no triumph for Abbott, what about Gillard?

Comments on Michael Gawenda “This is no triumph for Abbott”, 23/08/2010, http://www.businessspectator.com.au/bs.nsf/Article/Election-2010-hung-parliament-Gillard-Labor-Abbott-pd20100823-8KSTS?OpenDocument&src=sph
While Michael Gawenda's analysis may have some appeal to some, it is nevertheless very one-sided and biased.

Let me state first that I am not political either way, but as a reasonably neutral observer. I have no ill feelings towards Gillard. To the contrary, I think she is a good PM material. But this is an election not just for one person, but for parties.

Yes, it is the fact that the coalition should have won a majority seats but didn't.

But the same is true that a first term government has lost its majority. In that sense, it could be said that it has lost the moral authority to govern. Clearly it has lost the confidence and trust of the voters.

For a first term government that should be fatal, if Australia history is used to judge the result of the election.

On the primary votes, it is bankrupt. The reason it didn’t fare too bad on the two party preferred basis may be some voters didn’t want to admit that they made a mistake in the 2007 election in voting the ALP into government.

While politics is rarely like this, Gillard should have the courage to give up the prime ministership to acknowledge Rudd and her government huge failures.

Don't abuse the word reforms

Comments on Jessica Irvine “Big-picture reforms now most at risk”, 23/08/2010, http://www.smh.com.au/opinion/politics/bigpicture-reforms-now-most-at-risk-20100822-13aze.html?posted=sucessful
Let's forget the notion of big reforms for a moment and think about real issues that are important to the nation.

The biggest issue is to reduce government spending and wastes. On this account, the current government is not scoring well - the NBN is a white elephant, the CPRS takes households money to pay for big polluters and the mining tax would enable it to spend and waste more.

So don’t just label those as reforms, consider whether they are good or not!

The most sensible policies in those three areas should be:

1. A carbon tax with proceeds returned to households and distributed on an equal per capita basis.

2. No mining tax, because mining profit is taxed through company income tax.

3. Adopt the coalition’s broadband policy approach with minimum modifications.

As to the Henry review, the problems with its RSPT should be a summary of the quality and judgement of that review. It is not and should not be a blueprint for the future.

What federal politicians should do now?

The hung federal parliament presents both weaknesses and opportunities.

Most commentators tend to argue that it means weak government because of the need a government has to compromise to the demands from the handful of independents and the Greens who hold the balance of power.

That however, is not necessarily a bad thing for the public, even though it may not be good for the government. The reason is that such a situation can certainly reduce the possibility of big government mistakes and wastes, such as those shown in the past three years. And that is an unambiguously good thing.

Further, only a hung parliament has the best opportunity to reform government and the parliament for the good of the nation as opposed to the benefits of the government itself.

I would like to see the following reforms undertaken by the current parliament, even though the Greens may present a serious problem because its position as the balance of power in the senate.

1. Reform election system to a fixed term to to make it fairer to all parties and to reduce the costs to the public and taxpayers of frequent elections.

2. Reform federal relations to make the federation structure clearer in terms of responsibilities and power.

3. Strengthen government accountability.

4. Independent assessments/evaluations of policies. An independent policy assessment organisation/office under the parliament, and more use of independent and public institutions.

5. Public services should be at arm's length from the government of the day.

6. Population growth and productivity study.

7. Make most sensible changes to NBN plan.

8. Tax and welfare reforms based on an independent review based on the Henry review, but including the GST in it.

9. A revenue neutral carbon tax on emissions, with the revenue proceeds going to every residents on an equal per capita basis to change emission prices. If there is little action from the international community, an equalisation carbon tax on imports and refund for exports could be imposed so trade is not distorted. That is the most efficient and effective way to do it.

The election a blow to the government

Comments on Paul Kelly “Seats, not votes, the critical measure as Tony Abbott gains momentum” 23/08/2010, http://www.theaustralian.com.au/national-affairs/seats-not-votes-the-critical-measure-as-tony-abbott-gains-momentum/story-fn59niix-1225908615772
The election outcome, though still uncertain, has been a referendum on the government's policies and implementations over the past three years.

On that account, the government has lost the confidence and trust of the Australian people.

It is unfortunate for our first female prime minister, Julia Gillard, since she is an inclusive leader and would be shown as a very good prime minister even though she was part of the gang of four.

She just did not have enough time to show her ability and prime ministerial leadership to the Australian people.

But such is politics. It is no different to the case of Peter Costello – a prime ministerial material was not given the opportunity.


Australia's got a hung parliament

Yesterday's federal election in Australia has delivered a hung parliament, with neither of the two major political parties having the majority of lower house seats.

The next government will depend on how the independent and Greens MPs. There are 5 of them, labelled as the gang of five.

The ABC's election estimate predicts 73 seats for the coalition and 72 for the current sitting ALP government. 75 is half of the 150 MPs in the House and 76 is the minimum majority.

If this prediction is realised, it means the government has lost its huge majority. As a result, it appears it has lost the trust and confidence of the nation, even though it has managed to avoid a recession that has plagued most industrialised nations over the past years.

The nature of a hung parliament means the next government is unlikely to be very reformative in terms of major policies. But it may also mean that it is unlike to see the major blunders a government could make if it has the majority and does not care much others' opinions.

As I have written earlier, I do hope that the Labor would change its NBN policy and reduce the government exposure to investment, and the coalition would change its climate change policy to use market mechanisms to deliver emissions reductions.

I also hope that a hung parliament would improve the current democracy. There are a number of things they could do:
  1. To change the election to a fixed 4 years term.
  2. To improve government policies by having more effective and independent scrutiny. What it means to strengthen more independent institutions, such as a government spending assessment by a parliament managed body.
  3. To have most government policies assessed independently by independent and reputable bodies/institutions.


Let's hope positives after rather a negative campaign

Comments on Matthew Franklin and Patricia Karvelas “Gillard and Abbott resort to scare campaigns to finish election”, 20/08/2010, http://www.theaustralian.com.au/national-affairs/gillard-and-abbott-resort-to-scare-campaigns-to-finish-election/story-fn59niix-1225907702732
The leaders of the two main political parties are resorting to scares and negative campaigns at the eve of the election.

It shows the lack of a clear vision with effective policies from both sides.

But it is the government that is more problematic, because it has been running out of ideas to use its positive achievements in the past 3 years.

It is a legacy of the change in the prime ministership in June.

It is also a result of poor political judgement that had to rush to the polls to capitalise on the honeymoon of Australia’s first female prime minister. Instead, the government, especially the prime minister should have allowed the prime minister more time to demonstrate her ability.

Of the three major issues she stated to resolve at her first prime minister press conference, namely the mining tax, the boats and climate change, only one can be said to have been resolved by her reasonably satisfactorily.

The East Timor offshore processing centre has been a farce and there has been no progress on the climate change front beyond the silly idea of a citizens’ assembly to get consensus.

What implications does that have for the nation’s future?

Very negative indeed!

Notwithstanding that, let’s hope that whoever wins the office after the election they will get serious on policies and governing for the next three years to improve the living standard to the maximum possible and make Australia a better place to live.

A poor argument on population by Norberg

Comments on Johan Norberg “Populate or live in boredom”, 20/08/2010, http://www.theaustralian.com.au/national-affairs/populate-or-live-in-boredom/story-fn59niix-1225907494898
A rather poor argument with the bottle half-empty at the best.

It is a bad mix of micro and macro issues. Can population ever increase on the earth without hitting big problems of environment sustainability and degradation?

It is a blind and poor application of scale economies without taking into account of diseconomies of scale, say those associated with the largest cities in the world. Can the size of cities ever increase without running into big problems of congestions and too little space for comfortable living?

Overall it is an argument without analysis or with poor analysis. There is no or little serious intellectual thinking involved.

Gillard's poor promise of carbon pricing

Comments on Paul Kelly and Dennis Shanahan “Julia Gillard's carbon price promise”, 20/08/2010, http://www.theaustralian.com.au/national-affairs/julia-gillards-carbon-price-promise/story-fn59niix-1225907522983
Gillard's carbon price promise is rather disappointing, based on cowardly short term political motives as opposed to sound economic principles.

She has explicitly ruled out a carbon tax - the most effective and efficient way among all market based mechanisms, due to fears of being attacked by Abbott as a big tax.

This is falling to the same traps that the Rudd government fell into in the Henry tax review by ruling out any possible GST changes from its terms of reference.

This is especially poor since it comes on the eve of or two days before the day of the election.

It is completely unnecessary and self constraining. It is a bad move. It is unlikely to get any additional votes.

It is as ill conceived as her proposal of a citizens' assembly on carbon pricing!

Two policy wishes

Comments on Dennis Shanahan “Leaders prove their mettle under campaign fire”, 20/08/2010, http://www.theaustralian.com.au/national-affairs/leaders-prove-their-mettle-under-campaign-fire/story-fn59niix-1225907494666
Both have shown a remarkable ability in the campaign.

While the public may be disappointed to see no visions from either of them due to the particular nature of the campaign, they both have been very disciplined and made nearly no mistakes.

Let's hope whoever will be the prime minster after tomorrow will continue as disciplined in government over the next 3 years.

Although they sound like dreams and are impossible to contemplate, I personally wish that:

A Gillard government would change its NBN policy, at least to build to the nodes first to test the water before further rolled out to the premises. Build to the premise will take much less time and less investment to start with and to bring benefits to more people more quickly. Further, it will allow the system to be much more flexible. Billions and possibly tens of billions dollars of taxpayers' money could/would be saved. Or

An Abbott government would adopt a market approach to emissions reduction like a carbon tax and rebate to households. Such a scheme will be much more efficient and effective than the direct government action approach advocated by the Coalition.

It would be achieved by having an independent and possibly a joint two party study/investigation into the best ways to implement those policies to allow the leaders grace to change their prior positions.


Immigration issue complex

Comments on Paul Kelly “Battle of ideas that will make or break this nation”, 18/08/2010, http://www.theaustralian.com.au/national-affairs/commentary/battle-of-ideas-that-will-make-or-break-this-nation/story-e6frgd0x-1225906535690
Paul, the point on immigration can be misleading.

It could be interpreted that the migrant intake has been driven by economic and labour-market needs. Alternatively it could be interpreted as a failure in government policy in education and training, as well as in welfare policy regarding the unemployed.

Further, it could also be interpreted as a subsidy to business profits and a tax to labour already within Australia, because it increases business profits and lowers wages – a typical political economy between labour and capital.

Of course, there are also other externalities such as infrastructures and the living environment.

It is a complex issue than most commentators think it is.

The argument for headline GDP or economic growth is a big problem.

The battle of ideas is an important point, in the sense of this complex context.

Does Labor deserve a second chance?

Comments on Ross Gittins Labor deserves some credit, not death at the ballot box”, 18/08/2010, http://www.smh.com.au/opinion/politics/labor-deserves-some-credit-not-death-at-the-ballot-box-20100817-128at.html
To start with, Stiglitz's poor understanding of the Australian case showed he's out of touch with reality and his self interest as a “special interest group" in some strange Keynesian intellectuals.

A Nobel prize winner in economics does not mean whatever that person will always be right and correct when he or she talks about every aspect in economics, economic policy and goernment actual economic policies.

Anyone who uses his remarks on Australia’s GFC case without rigorous analysis their soundness is either ideological driven, no economics and purely intellectually corrupt.

If purely in terms of economic and budgetary management by the current Labor government, it does not deserve to have a second chance to continue governing, although an election is not just on economic issues.

It is the most irresponsible government in federal government in many decades.

Big failures are so abundant. More importantly, more will come if it continues to be in government and the NBN will be one of them to be of no uncertainty.


Growth is still good but needs to be sustainable

Comments on Tim Jackson “Prosperity without growth?” see http://dicksmithpopulation.com.au/wp-content/uploads/2010/08/prosperity_without_growth_report-by-tim-jackson.pdf
It is a long report.

But the title is interesting but discouraging and disheartening.

It is like a religious ideal.

Do people really read this when they see the title?

One has got to realise that growth will continue to be a part of our lives and human beings progressive nature.

The key is sustainability and technological progress.

One should not be blinded by lack of creativity and being stagnant.

That is not human beings nature and will not be accepted by the majority of human beings.

We should not be extreme, one way or another!

How to make Telstra profitable?

Comments on Alan Kohler “Telstra's dividend danger”, 16/08/2010, http://www.businessspectator.com.au/bs.nsf/Article/telstra-nbn-google-android-apple-pd20100816-8CSYJ?OpenDocument&src=rot
No doubt Telstra has to change its business model altogether. It should move beyond the traditional communication infrastructure provider and focus on how to be a successful service provider.

It could also move to other businesses than communication, as long as it increases its value and profits.

For example, when in the height of the GFC, had Telstra moved to invest in Rio Tinto using its revenue and finance available, what would have been its bottom line now? That would not need too much experience and business acumen!

It should abandon the current rigid thinking, management and operations.

Telstra has been draining shareholders; value for too long.

Its board and management must change their mindsets. They need to be innovative and creative.

They need to combine technical engineering with financial engineering!

Two policy proposals for Japanese economy

Comments on Peter Drysdale “Can Japan deal with shrinking?” 15/08/2010, http://www.eastasiaforum.org/2010/08/15/can-japan-deal-with-shrinking/comment-page-1/#comment-144942
Clearly Japan needs to make significant and effective changes to get out of its economic difficulties.

Government policy makers and advisors must be creative in thinking and policy development.

Two additional measures might be able to help its causes:

1. Given its fiscal situation and the ineffectiveness of monetary policy at present conditions, why don't the government use revenue neutral measures to stimulate domestic demand and the economy? Revenue neutral measures, for example, could be done by increasing income taxes, but those taxes are refundable once consumption expenditure meets certain criteria. So it is a pure price mechanism to encourage consumption and demand.

2. To deal with population aging, Japan could set a policy of moderate immigration programs specifically linked to population aging for specified period. At the same time, the government should encourage higher birth rate by young people. This measure may change the public's psychology and fear of population aging and implications for future hardship.

Both policies can be designed in such a way to achieve agreed objectives.

Of course, the government needs to foster consensus on those policies and their objectives among the public.


More transparency from Treasury needed

Comments on George Megalogenis “Hypocrisy shared, now costings reform is due”, 14/08/2010, http://www.theaustralian.com.au/national-affairs/commentary/hypocrisy-shared-now-costings-reform-is-due/story-e6frgd0x-1225905098085
Another solution is that Treasury and Finance have their models and assumptions available to all major parties that have to get their policies costed by Treasury.

While it may not politically correct and appropriate to say that the two departments may be biased politically, to have their costing as a black box is hardly satisfactory.

Just consider the change in the proposed mining tax revenue as a case. Treasury changed its assumptions and used two different assumptions for two different taxes. Was that satisfactory, or confidence building or enhancing?

Growth misty nostalgia

Comment on Michael Stutchbury “Anti-growth stance a misty nostalgia for the 'little country that could'”, 14/08/2010, http://www.theaustralian.com.au/national-affairs/commentary/anti-growth-stance-a-misty-nostalgia-for-the-little-country-that-could/story-e6frgd0x-1225905085879
Growth based and relying on population growth is no different from no growth.

What we need is productivity, not gross growth based on population growth.

It is equally a misty nostalgia for whoever argues simply for growth based on population growth.

What is the use of no per capita growth but only gross growth?

Why does productivity growth have to rely on population growth?

That is really a no brain assumption or thought inertia, isn't it?

Gillard and the Greens

Comments on Paul Kelly “Gillard leans to the Left”, 14/08/2010, http://www.theaustralian.com.au/national-affairs/commentary/gillard-leans-to-the-left/story-e6frgd0x-1225905084394
I like Gillard as a person, but have some questions on her policy approaches. More specifically, I found the way she defended the BER programs spending and wastes unsatisfactory and unacceptable. That was a typical politician's way.

While Gillard may be a competent leader, the move to Left can be dangerous and bad to taxpayers because she has been closely involved in those government decisions that resulted in huge wastes and failures.

The Left is associated with big spending and welfares using taxpayers' money. They don't care too much about the costs and impact on efficiency.

The combination of a Gillard government with the extreme Left Greens having the power of balance in the Senate will be very bad for taxpayers indeed.

That is the worst combination of Australia federal politics. I'd like and hope that won't happen!


Inconsistent macroeconomics

Comments on Yiping Huang “Focus upon the Chinese yuan on both sides of the Atlantic”, 12/08/2010, http://www.eastasiaforum.org/2010/08/12/focus-upon-the-chinese-yuan-on-both-sides-of-the-atlantic/
The point that PBOC should shift focus on to the basket of currencies from the $US is excellent. In fact, China should be much more transparent on the basket of currencies the yuan is managed to be pegged to.

It should publish the weight of each currency in the basket the yuan pegs to, at least the framework how it works or the central bank manage it. It is hard to understand why that can't or shouldn't be done.

While official statistics shows inflation has been low in China, has that been consistent with the reality and people's experiences? It is highly doubtful probably. It is likely that the real story about the Chinese real exchange may be different from the official statistics tells, with significant real appreciation than its nominal appreciation has suggested.

I would be very cautious in using deliberately higher inflation as a tool for exchange rate adjustment, because that is very dangerous with playing of expectations on inflation.

Of course, 1% annual inflation would be low, especially in the context of high economic growth. If that was true, it would mean there could be room to allow a modest inflation target.

An inherent inconsistency in macroeconomics is the policy for domestic price stability and the wild swings shown in international exchange rate market under the flexible exchange regime. Economists do not seem to have a consistent framework to deal with both domestic and international macroeconomic stabilities.

It is the same issue of market and the management of aggregate demand and supply, albeit with international borders involved.

Why is that difficult to do for managing international issues?

That is question economists have to realise, ask and answer.

Further, they need to come up with a satisfactory solution.

It should not be too difficult task for the economic profession.

Bring the best of competitive and cooperative politics

Comments on Greg Rudd “Forget about Kevin, Julia and Tony and fix politics”, 13/08/2010, http://www.theaustralian.com.au/news/opinion/forget-about-kevin-julia-and-tony-and-fix-politics/story-e6frg6zo-1225904630598
It is a matter of competition and cooperation in politics, as in economics.

The question is how to get the best of both competition and cooperation.

Is it possible and feasible?

Further and more importantly, what kind of mechanisms or institutions should be in place to ensure the best combination of both?

Clearly, the current state of politics in Australia does not allow that kind of best combination and we should be asking those questions urgently and loudly.

PS: Greg is brother of Kevin Rudd, a former Australian prime minister who was very popular for the first two years of his prime ministership. But his popularity dived after some policy mistakes in the first half of 2010 and was deposed but his party caucus and replace by his deputy in June.

NBN welfare

Comments on Grahame Lynch “NBN is welfare for tech-heads”, 13/08/2010, http://www.theaustralian.com.au/news/opinion/nbn-is-welfare-for-tech-heads/story-e6frg6zo-1225904633837
This is a rare and excellent piece.

Most of opinions voiced are from special interest groups which pursue their own interests and profits but ignore the costs to taxpayers.

This one points that out.

It shows the hypercritical nature of those communication businesses.

Further, it also states the fact that most users of super speed can be accommodated under the coalition’s model.

I applaud the author for his valuable contribution.

Telstra's appalling performance

Comments on John Durie “Telstra chief executive David Thodey lowers benchmarks after profit fall”, 13/08/2010, http://www.theaustralian.com.au/business/opinion/telstra-chief-executive-david-thodey-lowers-benchmarks-after-profit-fall/story-e6frg9if-1225904631795
Telstra must change its business culture and management.

It must compete in the market as a small to media communications firms do in terms of pricing and services.

Its current pricing of services is not competitive enough to keep its market share, let alone to increase its share.

Its attitude has been "don't care" to customers must stop immediately.

After all its management structure has to change and be accountable for underlying business performance and profit.

If anyone cannot achieve good results, they should be sacked.

The CEO should specify his/her performance indicators with the total profit and key market shares as the core to be assessed and evaluated.

The company’s performance has been appalling. Even with its monopoly advantage, it could not compete with others which don’t have that and generate at least the same profits as them.

They have lost share holders’ value for too long and that has to stop.


What saved Australia from a recession?

There are different claims of what has or have saved Australia from a recession in 2009. The government has been saying it was its stimulus packages that did the work, while some others argue the government's packages played a minor role. There is also the fact there have been some wastes in the government's programs as a part of those packages.

The government has been supported by Treasury and some big names including Joseph Stiglitz, a Nobel Prize winner in economics professor and former World Bank chief economist.

On the other hand, there are also well known and respected economists and people who have argued against the government's claim, including economics Professor Warwick Mckibbin - a board member of the Reserve Bank of Australia since 2001, and history Professor Niall Ferguson of Harvard University.

The following is a link to Professor Niall Ferguson's article on the Australian (online): "ALP's knight is a thief in rusty armour", 12/08/2010,


Of course it is debatable and involves judgment.

I personally, however, tend to agree with the nay side.

PS: the first few paragraphs of Niall Ferguson's article are as follows:
TO a visitor's ears, there's something very Australian about using the acronym "GFC" to refer to the biggest global financial crisis since the Depression.

In the US GFC brings to mind the recipe for deep-fried chicken devised by Colonel Sanders. KFC stands for Kentucky Fried Chicken. Here, GFC should stand for Gillard's Fraudulent Claim.
The claim in question is that it was the fiscal stimulus injected by the Labor government that saved Australia from much more serious recession. According to one recent election ad, "Labor did what it had to do to avoid recession and protect jobs." The ABC's Kerry O'Brien unthinkingly recycles this line when asking Tony Abbott how he would have saved the 200,000 jobs Labor "created". It must have been music to Julia Gillard's ears when Nobel Prize-winning economist Joseph Stiglitz gave her his seal of approval recently. He praised the government's debt splurge as "one of the best-designed Keynesian stimulus packages of any country".
Now, I like Stiglitz. Unlike some Nobel prize winners, he hasn't allowed the Swedish central bank's gong to super-size his self-esteem. But this is not the best argument I have heard him make, for three reasons.

First, he is appraising his own handiwork, since he was involved in the package's design. Second, he falls into the "post hoc ergo propter hoc" trap. Just because event B, an economic recovery, happens after event A, fiscal stimulus, doesn't mean that A caused B.

ALP 10 fold stunt on NBN speed

It is reported that government communication minister Stephen Conroy (and prime minister Gillard) announced that the government's NBN can deliver gigabit internet speed this morning, 10 times of what they have been saying of the NBN speed of 100 megabit up till today. See: ABC online report “Big gig: NBN to be 10 times faster”, http://www.abc.net.au/news/stories/2010/08/12/2980752.htm?section=justin
One has to wonder how could this happen? Suddenly in an election campaign, it has become 10 times faster? How could all experts who had been involved in assessments or evaluations have got it that wrong technically?

It is a well known and mature techonology. It is too good to be true! It begs belief! It defies logic and common sense!

To me, it is unconvincing and unbelievable.

It is highly likely to be a mistake or a hyper spin. If it turns out to be a spin, then a big scandal if not a criminal offence, has been committed.

A more independent watchdog is better

Comments on Sid Maher and Joe Kelly “Tony Abbott pledges watchdog to prevent waste of taxpayers' funds”, 12/08/2010, http://www.theaustralian.com.au/national-affairs/tony-abbott-pledges-watchdog-to-prevent-waste-of-taxpayers-funds/story-fn59niix-1225904249141
It is a good idea, though it is announced in the heat of an election campaign.

It is in the right direction and can be improved.

A better one is to have a unit under the control of the parliament, as compared to one under the PMC department.

If it is under the control of the parliament, it will be more independent from the government of the day, and be much more transparent and accessible.

Of course, it should be effective and not be used politically by any parties.

It should work in the interests of the nation and taxpayers.

Hope Mr Abbott will keep his promise to be a government responsible and accountable for taxpayers' money, if elected as PM.

Dick Smith's population myth

This is an edited version with changes of a correspondence to Dick Smith Population website, 12/08/2010, see http://dicksmithpopulation.com.au/
Dear Sir/madam

A couple of points/issues to make/raise with you.

  1. First, about the big award. I was greatly encouraged when I first read some news reports on it and then looked for what exactly how it would work. Then I was equally greatly discouraged and also disappointed by the condition that it is for young Australians under 30, for I am not qualified for that age category.
  2. To me, while it is understandable to broom young next generation leaders, the most important thing is to get the job done, that is, to get the best ideas on optimal population growth and put them into practice and achieve the results, I would assume. But the conditions of the award do not allow that to happen, not necessarily at the least.
  3. That is non optimal - an inherent contradiction to the basic purpose of that cause of population.
  4. Second, I looked the blog page and didn’t find how people can contribute to blogs that presumably can enrich ideas and exchange of ideas. Hope someone can do something about it.
PS: I would hope Dick Smith can set up a real award for innovation in population ideas, irrespective to age.

Differences in broadband policies

Comments on Alan Kohler “A broadband future in the balance”, 12/08/2010, http://www.businessspectator.com.au/bs.nsf/Article/NBN-broadband-Telstra-Election-Abbott-Gillard-pd20100812-88RNV?OpenDocument&src=rot
Alan, unfortunately you seem to be on the wrong side in your preference, from the public point of view or from their interests’ point of view.

Taxpayers will be better off if government not try to spend their money casually and wastefully.

Inequality will always exist and the only difference is in what form.

Government borrowing excessively to build the NBN will be inequitable for many taxpayers even though they are dispersed in every part of Australia.

The gradual approach to broadband development proposed by the coalition with much less taxpayers money tied to it, is the better public policy.

One should not ignore that the gradual approach is expandable and also has the insurance for further technological development, in case other technologies emerge in the future.

So, the majority of the public or taxpayers should not be hostages to businesses which would benefit more from government spending on the NBN.

It seems your preference might have been influenced by your business perspective.

But that is not necessarily completely consistent with taxpayers' interests.

That is my view on your preference.

PS: you seem to have ignored an important point, that is, the NBN will be a monopoly for quite some time, albeit a government monopoly. In many instances a government monopoly is worse than a private monopoly.

Another point you seem to have ignored is that the current ALP has already shown to be wasteful and almost reckless in spending and is not as competent as an average government in managing programs, large and small. That just doesn’t inspire confidence in its $43 billion multi-year NBN project.

Under this circumstance, everyone is entitled to be more cautious about its NBN policy and the extremely large amount of money attached to it.


Fallacy of structural budget deficit argument

Comments on George Megalogenis “Rivals run the other way to avoid gaping hole”, 11/08/2010, http://www.theaustralian.com.au/national-affairs/commentary/rivals-run-the-other-way-to-avoid-gaping-hole/story-e6frgd0x-1225903707457
George, while you have been arguing for the problem of structural budget deficit for a while in line with what some of Treasury official have said, why you don't include the potential effects of bracket creeping of personal income tax over time on the structure of budget balance, assuming the tax rates are fixed?

It is very hard to understand why you and some other people like those in Treasury could conveniently forgot that obvious fact.

Is that possibly due to what Treasury head said what he learnt from secondary economics?

The argument of structural deficit brought by the previous government is a joke and laughable.

It lacks common sense, not to mention elementary economics.

It is myopic and extremely short sighted.

It is also likely to be partisan and ideologically driven to have big government and big spending, as opposed to let workers keep their own earnings and money.

That is appalling.

PS: in retrospect, the former coalition government’s tax cuts had another unexpected dividend, that is, left smaller room for the current ALP government to squander and waste. Money in people’s own hands is much better than in the pollies’ purses.

Both speed and costs are important in broadband

Comments on Paul Budde “The Coalition's broad-bland plan”, 11/08/2010, http://www.businessspectator.com.au/bs.nsf/Article/NBN-Internet-telecommunications-election-broadban-pd20100810-877PX?OpenDocument&src=rot
I am an outsider to the debate of NBN and the alike. But I am not sure the view in this article is only based on visionary of grandiose without properly considering the costs and practical businesses.

There is a little difference in the costs of over $36 billion between $43 billion and $6.3 billion between the two models. It is a multiple of nearly 7. Isn’t that striking enough?

To me, the other article of “Taking the glitz out of broadband” by Stephen Bartholomeusz appears to be more balanced. It at least mentions the huge differences in the costs between the two models. Further it also mentions the flexibility side of the coalition’s model in terms of betting on future technologies in communications.

Understandably, the coalition model also has the flexibility to expand, if the needs warranted it, to households or premises, while at the early stage hospitals, universities and schools and other organisations, which may have stronger needs for super fast connectivity, can be accommodated by building fibre connections. That plan is expandable. There is nothing to prevent that from happening.

The black and white brush approach to characterise the two is unhelpful and misleading.

The key point is that a technology only approach without cost benefit studies is clearly not good for public policy. If any private companies do that, that is that businesses. But for public projects using taxpayers’ money, business case or cost benefit studies are a must.

We should not be hostage to any particular businesses or industry sectors or special interest groups.

Gheyret Niyaz's sentence unfortunate but not ethnic discrimination

Comments on Rebiya Kadeer “Beijing silences voices for freedom”, 11/08/2010, http://www.theaustralian.com.au/news/opinion/beijing-silences-voices-for-freedom/story-e6frg6zo-1225903619671
Rebiya Kadeer says the sentence of Uighur journalist Gheyret Niyaz to 15 years jail is harsh.

That may be true by western standards.

However, whether that is harsher than other sentences of similar cases of Han people in a comparative sense is not clear and neither are its ethnic implications. China is notorious and very harsh in sentencing.

Another point, one has to be in an appropriate perspective on the issue of migration of Han people to Xinjiang. Nowadays, the Chinese government does not force Han people to move here or there.

Most migrations are voluntary in response to economic activities and opportunities, and are not dissimilar to internal migrations in any other countries.

I don't have information and therefore don't know how much Han migrations to Xinjiang in recent years.

But saying migrations to there is ignoring the fact that that is part of China and every Chinese is equal and should be entitled to have the freedom to seek opportunities there.

That is not different from racial or ethnic discrimination. To the contrary, one needs to know that in China ethnic minorities including Uighur people enjoy better policies than the majority Han people.

The "one child" family planning policy, for example, have only applied to Han, not to ethnic minorities. That has been a big policy in China in terms of human rights and ethnic policies.
The right thing to do is treat everyone equally irrespective their races and ethnicity, and afford the same freedom to everyone. The country belongs to all its people, every and each one of them. They should together determine how the country should be developed.


Swan's unique stuff of mathematics

Comments on Peter Hartcher “Role reversal from Swan and Hockey”, 10/08/2010, http://www.smh.com.au/opinion/politics/role-reversal-from-swan-and-hockey-20100809-11u1w.html?posted=sucessful
The argument of federal debt to peak at 6% GDP is equivalent to "which is like someone who earns $100,000 borrowing $6000", demonstrates another simple mathematics by the unfortunate Treasurer, because the federal government does not own 100% GDP: to be correct - what it can take is only the tax part.

How can the Treasurer make this sort of arithmetic? No wonder the federal government has been plagued with wastes in its programs with such a man as Treasurer.

He has been acting as if he owned every cent of the nation's GDP! Bet, bet and more and bet using others' money.

Whose money? Taxpayers, of course!

Is this another stuff learnt from primary or secondary school, in Australia?

Or is it because of logic and numbers as opposed to simple numbers?

It seems that is really some stuff hard to understand.

Laughable stuff? You bet!

Coalition's broadband policy much better

Comments on ABC report “Coalition unveils $6b broadband plan”, 10/08/2010, http://www.abc.net.au/news/stories/2010/08/10/2978634.htm?section=justin
It seems that the coalition's approach is much superior to the government's.

What any government should do is to create the necessary environment for the private sector to invest and build communication infrastructure like broadband networks.

The government, if it continues, is very likely to cost the taxpayers many billions of dollars more than necessary on its NBN, if the past two years can be used as any guide.

Government should be very cautious in committing big spending and should establish clear accountability for using taxpayers’ money and do the honourable thing if accountability requires it to be punished.

I am apolitical, but I am certainly not confident at all the Labor government will be able to get the NBN project completed without wastes billions and possibly tens of billions of taxpayers’ money.

Certainly there is no need to be adopting a model of almost "one size fit all" in national broadband network. Let the private sector do its innovation. Government is very poor in doing businesses.

Some businesses or organisations argue video conference or medical procedures etc. Surely they are true.

But that is not every household's need, is it? Why should every household to be equipped for what most of them don't need but have to pay for have them?

Whoever needs those things, they can arrange for that to be done at the lowest costs.

Global body also needs to be accountable

Comments on MARIE DELA RAMA “Only global body can sideline saboteurs”, 10/08/2010, http://www.smh.com.au/opinion/politics/only-global-body-can-sideline-saboteurs-20100809-11tzo.html?posted=sucessful
For most people it is difficult to know who are telling the truth and who are telling lies.

It is easy to labelling others as saboteurs, or saying some activities as "an exercise in industrial espionage of breathtaking proportions".

But why shouldn't the public be entitled to know those leakings any way, as opposed to just one side story?

Dealing with climate change as proposed by climate actionists is costly and should be properly scrutinised by interested parties and organisations. The IPCC should publish views and arguments of both sides of the debate, including for and against as well as neutral views whether they are sceptical on either side.

Any scientist could or can come out defend their reputations and works and no one can prevent them from doing it.

In terms of funding to the IPCC, either the UN or governments can increase its funding if they see it as priority.

But has it been accountable for its own failings, such as the publication of the melting of the Himalaya glaciers? How could that happen with such a body?

So easy to attribute disasters to climate change or warming

Comments on Paul Gilding “Feeling the heat”, 10/08/2010, http://www.climatespectator.com.au/commentary/climate-change-extreme-weather-security-geopolitical
While we are seeing severe natural disasters now happening, are they all really unprecedented in our known history of the earth or human beings?

That is perhaps one of the reasons many people may be doubtful about some highly exaggerated claims.

Can anyone say honestly that if the global temperature was one or two degrees lower than it is now, we would not have any natural disasters as severe as some of the current ones we are experiencing?

Different meaning of economic growth and population

Comments on Dick Smith “What's the big idea? The answer is not more growth”, 10/08/2010, http://www.theaustralian.com.au/national-affairs/commentary/whats-the-big-idea-the-answer-is-not-more-growth/story-e6frgd0x-1225903163394
Dick Smith has made an interesting point on growth, though that point is a tricky one.

When people talk about growth, some talk about headline GDP growth by how many per cent. Businesses like to talk about that. But that growth includes the effects of population growth in it and does not necessarily mean an improvement in people's wealth or income.

A more meaningful growth is per capita growth without the effect of population growth. It is growth in productivity.

It is this latter growth where population growth including immigration should be considered. But businesses don't like to talk about this growth.

However, Dick Smith is a rare exception in this regard. He is a successful businessman, but has been arguing for constraining or limiting population growth.

Dick's no growth or limit on growth, unfortunately, also ignores this productivity growth.

When efficiency improves and productivity increases, it is possible to have per capita growth without consuming more resources. That is to say, we can have sustainable per capita growth.

We need to be clear about that. Otherwise the argument for a slower population growth will be attacked by unnecessary scare campaign.

In that sense, Dick would be better off to distinguish different growth arguments.


Lucy Turnbull's affirmative argument for capitalism

Comments on Lucy Turnbull “Capitalism is still the only system that works”, 9/08/2010, http://www.smh.com.au/opinion/politics/capitalism-is-still-the-only-system-that-works-20100808-11q55.html?posted=sucessful
I note that Lucy has used China as an example to support her argument for capitalism.

However, Lucy did not say whether China is a capitalism system or not.

Most people argue about capitalism and communism as two extremes. But the reality is that most systems are not in those extremes and are somewhat in the areas not too far from the centre of the spectrum.

In most capitalism system, there are elements of socialism and in the few official socialism systems left, they are introduce capitalism elements.

Socialism or communism in its original and extreme form is dead, but it does not mean no other less extreme ones are left.

Capitalism has also evolved quite a lot from its original extreme form. Social welfares, though still swing around, are not based on the extreme capitalism. Government interventions or regulations, are not that either.

What is the future of the two systems?

It is highly likely that they will become different parties within a country; all will try to win the voters and become the government. In doing so, they will all adopt or evolve to become relevant.

There will no extreme capitalism, nor extreme socialism. Neither will exist for long, if any one or party adopts them.

It means both will coexist and compete.

This should tell if Lucy’s argument is correct or not.


A Japan vision? What vision?

Comments on Ryo Sahashi “Japan’s vision: Building an East Asian Community”, 5/08/2010, http://www.eastasiaforum.org/2010/08/05/japan%e2%80%99s-vision-building-an-east-asian-community/
While the desire to have the US play a role in maintaining peace in the region is understandable, what outcome that desire will translate into may not be clear.

What if any can the two wars the US has been involved and is still being involved in, namely the Afghanistan and the Iraq wars tell us?

One may be viewed as justice and the other may not necessarily be so.

So, is the US always a force of peace?

That is a question one has to ask and answer.

Further, history of changes or transition in world powers has not always been pretty.

The world has always been changing and will change further.

Will the existing distribution of interests be always maintainable indefinitely?

Will the US always be hegemony in the world forever? Or is that realistic?

For example, the US may claim interests in many places of the world now. What if those interests be conflicting with the interests of other nations in the future?

What effective rules to govern the Chiang Mai Initiative?

Comments on Joel Rathus “Are the Philippines equal before the Chiang Mai Initiative?” 6/08/2010, http://www.eastasiaforum.org/2010/08/06/are-the-philippines-equal-before-the-chiang-mai-initiative/
I am not familiar with the rules of IMF or CMIM.

But surely, when emergence occurs in a country, there should be some emergence rules, in addition to the normal rules of those multipliers.

It seems there should be some autonomous as well as emergent rules. The emergent rules may require a more stringent approval mechanism.

It should be practical and flexible to be most effective and helpful to members.

Otherwise, the fund would not be very helpful.

Timid election and budget deficit

Comments on Paul Kelly “Post-election, we'll be heading for a train wreck”, 7/08/2010, http://www.theaustralian.com.au/national-affairs/commentary/post-election-well-be-heading-for-a-train-wreck/story-e6frgd0x-1225902293275
This election is abnormal and strange indeed.

The prime minister has her problem and the coalition leader has his problem. As a result, each has been cautious.

Post election, it is highly likely there will be resurrection of braver leadership, irrespective who is in government.

In terms of government deficit, given the economy is doing so well now, why does the government have to produce a deficit?

We didn't have the recession and unemployment rate is low. There is no need to continue to stimulate the economy by the government.

What that means is the coalition, if elected, should have no difficulty to return to surplus.


Bilateral and multilateral diplomacy

Comments on Ernest Bower “The JMSU: A tale of bilateralism and secrecy in the South China Sea”, 3/08/2010, http://www.eastasiaforum.org/2010/08/03/the-jmsu-a-tale-of-bilateralism-and-secrecy-in-the-south-china-sea/
Ernest Bower's argument sounds seemingly good, although one is never certain the US has been consistent in its international policies.

Doesn't the US selectively use international practices in its foreign policies?

It is not long ago that it advocated unilateral approach of pre-emptive use of force, because it suited its interests.

Similarity and differences between China and Indonesia

Comments on Sherry Tao Kong “Economic and political transition in China and Indonesia”, 4/08/2010, http://www.eastasiaforum.org/2010/08/04/economic-and-political-transition-in-china-and-indonesia/
It is an interesting comparative study of China and Indonesia.

Although the two countries have shared certain similarities, the past decade or so following the Asian financial crisis has seen them parting considerably.

I would characterise the two as:

China - politics follows economics

Indonesia - economics follows politics

For the former, its strategy has been to develop its economy as rapidly as it could, taking advantages of its existing political system and at the same time it reforms its political system slowly and surely as the economy grows. It has used that strategy in the past decades and it is likely to continue that strategy in the foreseeable future. In one sense, it is a tried and successful formula.

For the latter, the Asian crisis has forced its political reforms and its economy has developed along the reformation and evolution of its political institutions. Given its democratic system, its strategy for the future may be to strengthen its political institutions to provide the best policy environment for the economy to grow. It will need to get the best combination of politics and economics under democracy.


Testing time for Gillard

Comments on “A whack in the polls?” see the Numble Blog, 2/08/2010, http://blogs.theaustralian.news.com.au/mumble/index.php/theaustralian/comments/a_whack_in_the_polls/
If Gillard can turn her campaign around, she will be a genius.

If she can't, she will regret for two things, timing of the election and the lack of new policy ideas.

One was that she called the election a bit too early before she has established herself in the electorate's mind. An October/November election would have given her more time to show the authority of her prime ministership, including developing better policy strategies.

The other was her almost indistinguishable climate change policy from her predecessor and premature announcement of the East Timor solution on boat arrival issues.

On climate change, she should ideally have announced a policy on carbon pricing, and possibly the citizens’ assembly to discuss the best design and implementation.

On boat arrival, a better strategy would have been only announcing offshore processing centres without any specific locations, but indicating intention of considering all options.

The election campaign - murky and confused

Comments on Craig Emerson “Phony Tony's money schemes pose a risk we can't afford”, 2/08/2010, http://www.theaustralian.com.au/news/opinion/phony-tonys-money-schemes-pose-a-risk-we-cant-afford/story-e6frg6zo-1225899734577

It is a complex issue for the nonpartisan in the public to consider and analyse.

While Emerson is a very competent ALP minister and has performed well in the past two years, the overall records of economic management by the government in past two years, unfortunately, diminish his argument against Abbott.

The government achievement in avoiding a recession should have been a trumpet card, but has been marred by poor policy designs and implementations, shown in some of the significant failures, as well as broken promises.

It is no surprise that the election campaign so far has left many voters, especially Labor’s, bewildered.

China's next economic transformation

Comments on Ross Garnaut “The turning period in Chinese development”, 1/08/2010, http://www.eastasiaforum.org/2010/08/01/the-turning-period-in-chinese-development/
Excellent analysis and insight into China's next phase of economic development.

The impact of diminishing labour surplus and the consequential rise in wages are likely to be complex and will require very prudent management of both macro and micro economic issues. The rise in raw material and energy costs will further erode China's international competitiveness.

While currency appreciation may offset some of the pressures of inflation due to constraints from labour supply, it would further exacerbate the loss in its international competitiveness associated with supply side issues. It could lead to significant slowdown due to a potential double whamming effect, if currency appreciation is excessive. Any benefits from lower inflation due to currency appreication is likely to be insignificant, as compared to its negative effects on growth.

Adding to that is that further real urbanisation is likely to expand domestic demand not only from housing and urban infrastructure, but also general consumption.

A prudent course is likely to be:

1. Focuse on structural change and raising labour productivity to compensate the rise in labour costs, by investing in more capital intensive technologies, industries and products, using the currency surplus as a temporary buffer for adjustments

2. Adjust the exchange rate at appropriate time when productivity transformation is showing dividends in international competitiveness and well entrenched

3. Further focus on sustained expansion of domestic demand

From micro point of view, labour market reforms to reduce discriminations and better reflect productivity, reforming capital market to increase the efficiency of capital allocation especially accessibility to capital by the private sector including small and medium sized firms, reduce monopolies by increasing effective competition and barriers to entry, reduce transition costs for industries and firms by deregulation especially government red tapes and barriers (including local government's land management), as well facilitating industry adjustment to raise labour productivity.

However, one factor may facilitate this productivity transformation process is the currently under employment of its higher education graduates. Those would become one of the key factors in upgrading the skills of its labour forces.

Nevertheless, the adjustments will be a very complex and difficult process that must be accompanied with prudent management.