Category Archives: Politics

In defence of Israel

Every country is deserved of criticism. I've yet to find a country whose domestic and foreign policies I agree with in their entirety. As such, it is entirely justified to level criticism when criticism is due. What I object to however is criticism that is mounted in a highly discriminatory and ad-hoc manner. I have Israel in mind.

There are most certainly Israeli government policies of which I am critical. I criticise the Israeli government for not being as pro-active as it could be in regard to finding a solution for peace with the Palestinians. What I object to however is exaggerated and discriminatory criticism. I find, ever increasingly, particularly amongst the so-called 'intellectual elite' in Australian society (i.e. academics with an overinflated sense of self-importance, who consider themselves the pinnacle of mankind's intellectual achievement) that criticism of Israel is disproportionate and rife, hypocritical and downright discriminatory. Sure, I don't agree with everything that Benjamin Netanyahu says or does, but does this really justify a widespread, concerted international effort to criticise, demonise and undermine Israel? Aren't there other countries more deserving of criticism than Israel? Why is there an all-out effort to attack Israel, on the basis of territorial disputes and counter-terrorism efforts, when there are so many other wrongs in the world? Why do we have organisations like this one, why are there proposed labour union-sponsored academic boycotts in the UK, and why is our own Australian electorate of Marrickville proposing a total boycott of all Israeli products, when there are so many others more worthy of criticism? The answer is, very plainly, that it's discrimination and racism. People hate Israel. There, I said it - people hate Israel. Do the same organisations, unions and local councils suggest that we boycott China for oppressing Tibetans? No. Do they boycott Australia, the UK and the US for the wars against Iraq and Afghanistan (which I know they disagree with)? No. Do they boycott Iran for persecuting the minority Bahai faith, or Saudi Arabia for executing homosexuals and stoning so-called 'adulterers' (i.e. rape victims)? No. When criticism is due, give it, but keep it in proportion and keep it fair. The international movement against Israel is not founded on fact and objectivity - it is founded on hatred and discrimination. I don't agree with everything Israel says and does, but the same applies to every other country on Earth. Singling out a single country, and repeatedly attacking them for policies we disagree with, while ignoring the huge injustices in so many other countries is discrimination, plain and simple.

In a region of the Earth ruled by tyrants, dictators and Islamist fundamentalists, Israel is the only modern, Western-style, progressive, parliamentary democracy. Israel is a multicultural society, with a huge Muslim minority (about 20%) , and even takes a world-leading social stance by recognising same-sex marriage. Do they get credit for this? No. Instead her critics choose to focus all their efforts on degrading her and insinuating that she is a racist apartheid country, while ignoring her strengths, and completely forgetting the injustices in so many other countries including their own.

If Israel is deserved of a boycott for her attempts to protect herself against terrorism, then so is Australia for its participation in the Iraq and Afghanistan wars. If Israel is criticised as an 'apartheid country', then we should look at our own - Israel has far larger ethnic minority groups than Australia does, all of whom have full democratic rights.

Israel is more like our own country than any other in that region of the World. Yet, there is an enormous international movement, led by the radical left and the 'intellectual elite', to demonise that country. Before you make a concerted effort to alienate Israel, take a long, hard look at your own country.

If you gave me a choice to live in any country in the Middle Eastern region, I know where I'd prefer to live, without a shadow of a doubt - and it wouldn't be the country where they amputate my hands for opposing the rulers or stone to death my wife for being raped.

Marijuana law reform

An issue which I feel very strongly about, but which for some reason I've never blogged about before is the legalisation of marijuana. While I don't advocate marijuana use, in my mind there is no moral justification for the criminalisation of marijuana for numerous reasons:

1. Marijuana has been systematically shown to be less physically harmful and less addictive than both alcohol and tobacco, both of which are legal. The following plot comes from Wikipedia (see article for reference), which shows affinity for dependence and the physical harm of many common drugs. Notice that marijuana is less harmful than both alcohol and tobacco on both axes.

2. If people want to harm themselves, this is a personal choice and individuals need to decide for themselves whether they are willing to accept the risks. This is exactly our policy on alcohol and tobacco, so why not for marijuana? Tobacco, which is consistently rated as more harmful than marijuana, including numerous fatal illnesses, is tolerated on exactly this basis - it's a personal choice and people need to make the decision for themselves.

3. Marijuana use does not cause violent crime and anti-social behaviour in the way that alcohol, heroin and crystal meth do and therefore there is no moral justification for treating marijuana users in the same way as violent criminals by throwing them into jail.

4. The effects of jail are far more heinous than marijuana use. When you throw someone into jail you destroy their lives - their career, financially, their family, and you leave them with a criminal record, ensuring that they will never have a decent job again. This is far worse than the effects of even heavy marijuana use.

5. It's totalitarian for a government to trot into people's living rooms and tell them what they can and can't do in the privacy of their own homes. This is on par with the anti-sodomy laws of countries like Singapore.

6. Studies have consistently found that legalisation of marijuana does not result in a noticeable increase in marijuana use. Most notably, a recent study in Portugal found that decriminalisation of marijuana did not lead to an increase in marijuana use. Additionally, Holland, which has the most liberal marijuana laws in the world, has lower teen marijuana usage rates than Australia, the UK and the US, all of which have relatively tough marijuana laws.

7. In recorded medical history there has never been a single recorded case of marijuana overdose. Experts believe that to overdose on marijuana would require smoking several kilograms of marijuana, which is impossible. Furthermore, marijuana does not cause physical dependence - heavy alcohol use does.

8. Marijuana has many proven medical applications, including in the treatment of eating disorders, depression, mania, bipolar disorder, anxiety and panic disorders, loss of appetite associated with chemotherapy or HIV medication, and pain relief. Before the invention of aspirin (which causes thousands of deaths worldwide each year) in the 19th century, marijuana was a popular and effective form of pain relief.

9. Education, rather than criminalisation, is the correct approach to discouraging marijuana use. This is what we do with alcohol and tobacco - every cigarette packet contains a health warning, and there are countless media ads highlighting the dangers of alcohol and tobacco use. In the last decades the percentage of Australians who smoke has been drastically reduced. It's not because of criminalisation, but because of our investment into educational and awareness campaigns.

10. Legalisation of marijuana could potentially contribute billions of dollars to the budget if it were taxed in the way that alcohol and tobacco are. If this money were invested into education, rehabilitation and health, the benefits would be enormous.

11. By removing marijuana from the black market and bringing it above ground, organised crime groups would lose a major source of their revenue, reducing criminal activity.

12. We have spent billions of dollars wasting law enforcement and judicial effort on enforcing petty cannabis laws. Instead of wasting billions of dollars, why not gain billions in tax revenue.

In summary, I believe that criminalisation of marijuana is excessive, counterproductive and downright immoral. It is wrong to treat people as criminals for doing something in the privacy of their own homes which hurts no one other than themselves - marijuana use is a victimless crime. The Australian government should immediately reconsider its approach to marijuana in light of well established scientific and medical facts. The social, economic and individual benefits would be substantial.

Public transport?

I never figured out why so many of my economically conservative friends are opposed to investing in public transport. After all, we subsidise private transport in the form of roads, bridges, highways and public parking. Public transport takes load off this infrastructure, which means we need to invest less into it. This could make heavy investment into public transport revenue positive. Why upgrade a city road to half a dozen lanes to reduce congestion, when the allocation of a single bus lane is cheaper? Some question the compatibility of this view with my generally pro-market, Libertarian-leaning views. However, these views are completely consistent. Libertarians believe in reducing tax-payer burden and public transport is one of the few areas where tax-payer spending can reduce the overall tax burden.

Why I am opposed to an Australian Bill of Rights

There has been a lot of discussion in the Australian media recently about the introduction of an Australian Bill of Rights. Such a bill would, presumably, enshrine into the Constitution freedoms such as freedom of speech, freedom of religion, freedom of association, and other freedoms reminiscent of what appears in bills such as the United States' Bill of Rights. While the aforementioned freedoms are certainly essential in a modern democracy, enshrining them into the Constitution brings with it serious problems.

Under Australian law, the High Court is the sole entity with the right to interpret the Constitution. In other words, whatever is the interpretation of the Constitution by the High Court, is the final word. This represents a significant shift in the balance of power. Take for example the freedom of speech. While this is clearly a fundamental right in any credible democracy, it may have limits. For example, should religious extremists be able to use 'freedom of speech' as an excuse for using their influence to incite followers to conduct extremist actions such as hate crimes or terrorist offenses. While it is debatable whether freedom of speech should allow such actions, the point is that it must remain debatable. In other words, the public should be free to debate this issue, form a consensus, and pressure the elected representatives to pass motions based on this consensus. On the other hand, with a constitutionally enshrined freedom of speech, it becomes no longer a debatable issue which can be influenced by elected representatives or the public, but instead becomes an issue which is decided upon by unelected judges, who are accountable to no one, and whose rulings become the uncontested rule of law.

A good example of the pitfalls of constitutional bills of rights is the 2nd amendment in the United States' Bill of Rights - 'The right to keep and bear arms'. 'Arms' is a rather generic term and can be used to refer to anything from pocket knives to fully automatic assault rifles. Gun laws are a very important political and social issue. However, under the US Bill of Rights the interpretation of this amendment is left solely in the hands of the justices. In other words, debate on this issue in the House or Senate is effectively stifled since neither have the right to influence this - only the Supreme Court does. As a result, it is presently acceptable for individuals to posses fully automatic military assault rifles, and neither the House nor the Senate can do anything about it. In a sensible democracy, issues as important as this need to be debated, and ultimately decided by elected representatives, not by unaccountable justices whose views cannot be overruled by the democratic process.

By far the most striking example of the undeserved shift of power away from elected representatives and into the judiciary, is the Roe vs. Wade decision by the US Supreme Court in 1973. In this ruling the Supreme Court ruled that a woman's right to abortion is protected via the right to privacy of the Fourteenth Amendment. This has become one of the most cited and debated rulings in US history. Abortion is an extremely important, contentious and dividing issue in Western societies, and it needs to be debated and acted upon accordingly. However, as was evident in this case, justices sometimes feel the need to take an activist position and interpret the constitution in ways it was never intended to be. Whether you are for or against abortion is not the issue. The point is that abortion is an extremely important topic that needs to be publicly debated and ultimately decided upon by the Parliament, not by the activist judiciary.

To illustrate the fact that a Bill of Rights is not absolute and is open to interpretation by the judiciary, consider a very good example - once again the US Bill of Rights. In the hands of the judiciary the US Bill of Rights did nothing to prevent slavery, nor did it prevent segregation, nor did it prevent the circumvention of habeus corpus during the War on Terror, despite the fact that under a literal interpretation of this Bill such acts would be outlawed.

A final objection to a Bill of Rights, is that it is not flexible - it cannot evolve with evolving social views. What is enshrined in the Constitution is essentially permanent, unless a referendum takes place, which is very rare. In other words, while the views of society may change, the views of the Parliament may change, but what is enshrined in the Constitution does not.

In summary, a constitutional Bill of Rights, by definition, shifts legislative power away from the Parliament and into the hands of the judiciary, which is not elected, not accountable, and whose rulings cannot be overturned. If a politician implements a bad policy, they can be voted out at the next election. When a judge makes a bad ruling, they cannot be. A Bill of Rights is not flexible, and therefore cannot change as social views change. This is a dangerous situation and represents a complete attack on our democratic process and principles. Australia has an impeccable history of allowing freedom of speech, freedom of religion, freedom of association and protecting the rights and views of minority groups - historically, is the US better in these regards? As such there is no convincing reason to shift power away from Parliament and into the hands of the judiciary. Shifting around the power balance, in a system that has worked so well for a hundred years, is a precarious and pointless thing to do.

In defence of capitalism

Following the recent credit crisis and collapse of several major financial institutions, many commentators have jumped to the conclusion that this proves that the case for free market capitalism is invalid and that libertarian ideals are dead. This includes comments to this effect by prominent people like Nicolas Sarkozy who said "Le laisser-faire, c'est fini" ("Free market capitalism is dead"). The view taken by Sarkozy and many other commentators is fundamentally misguided and suggests a misunderstaning of the real reason for our recent financial troubles. The real reason was not free market capitalism, but quite to the contrary, government interventionism.

Our troubles started with the sub-prime mortgage crisis, which, I think it is fair to say, was the event that triggered the remainder of the problems we have seen. The sub-prime crisis was not caused by free marketeers, but rather by two forms of interventionism. First, the US government offered backing to the two major mortgage backers, Freddie and Fannie. Second, having given them the guarantee of government backing, pressured them to expand their sub-prime lending - lending to people who in a normal (free market) situation would be ineligible for loans on the basis of their credit rating or ability to pay off their debts. Naturally, Freddie and Fannie were more than happy to comply. After all, if the government is guaranteeing your financial position, you can afford to take risks you ordinarily wouldn't take. So sub-prime lending flourished and as a result many people who were unable to pay off their loans were given loans anyway. A few years down the line, and, surprise surprise, Freddie and Fannie found themselves in a situation where they had vast amounts of bad investments on their hands.

There can be no argument that this sequence of events came about as a result of free market capitalism. Rather, it came about as a result of a misguided, interventionist policy to artificially expand home ownerships rates. This problem was compounded by an ultra-expansionary monetary policy championed by Greenspan et al., which further artificially expanded the amount of bad debt in the market.

Following the government bailout of Freddie/Fannie, their financial woes sent shockwaves of loss of confidence through the rest of the market, which triggered the remainder of the troubles we are seeing today - the collapse of banks and other financial institutions, the decline in world stock markets.

Nonetheless, despite the overwhelming evidence for the real cause of our problems, I haven't seen many politicians or media commentators call for measures that really address the problems, such as eliminating government involvement in the mortgage market, allowing for insolvent companies to go down, and a more restrained monetary policy. Instead, they're all too busy calling for the death of capitalism, while advocating bailouts and the injection of more credit.

Capitalism was never the root of today's problems. Interventionism was. And the only solution is to scale back interventionism and return to free-market principles.

I conclude with this picture...

The European solution to banking woes

Several European nations, most notably Germany, have introduced government guarantees on personal savings accounts at their banks. This approach to bailing out, bailing out the consumer, is completely different to the until-now 'conventional' approach of bailing out the institutions. There are very valid arguments both ways on this issue, so here's how I see things.

The downside

The government guarantee approach adopted by Germany et al. might skew the allocation of capital in the market in favour of more risky investment decisions. Without government backing, every person with a savings account must first make an assessment of which bank or savings institution to deposit their money with. This decision will be based on numerous factors, with the security and stability of the bank being a major consideration. This in turn creates a market mechanism whereby savings tend to be deposited in institutions which are perceived to be safer. With full government backing this mechanism is completely destroyed. We are left with a system in which savers couldn't care less about the security or stability of the bank in which they are depositing their funds because they know their savings are government backed. Presumably, this will in turn will lead to more money being deposited at dubious institutions which engage in more risky allocation of capital - malinvestment. So although the government backing approach is probably better for the consumer, which is good, it by no means bypasses the problem of moral hazard, which was my biggest criticism of the US bailout package.

The upside

The upside of this type of government intervention is that it virtually eliminates the possibility of bank runs. Ironically, a government backing of savings at banks reduces the possibility that the backing will actually be needed. When people know their money is guaranteed they have no reason to rush to the bank to withdraw their funds as soon as there is any loss of confidence. In other words, the positive feedback loop of loss of confidence is contained and not allowed to spread and engulf the entire banking sector and broader economy. So from this point of view the government backing can be seen as an investment into creating a positive market psychology that will rarely (if at all) actually require the investment of taxpayer dollars.

Conclusion

It's important to remember that a government backing of bank deposits most of the time requires no input of taxpayer dollars whatsoever. It is only when there is a serious collapse of a bank that the intervention is actually called upon. I think the real questions are 'what is the probability of a significant crash occurring that would require taxpayer dollars being spent?', 'to what extent will this kind of backing reduce the chance of a bank collapse occurring?' and 'to what extent will this kind of intervention distort the allocation of capital in the markets, leading to malinvestment?'. I don't know the answer to any of these questions, but I'd welcome comments. On the whole though I tend to be inclined against deposit guarantees - they seem to be more of a populist measure than anything else. Having said that, like many issues in economics, I don't think there is substantial data supporting either case, so it's impossible to draw a conclusion based on empirical evidence.

Monetary madness

Bear Stearns. Freddie Mac. Fannie Mae. AIG. What next? I've already had my rant on the federal bailouts of these financial giants. But there's one thing that bugs me even more than the bailouts, and it's the crazy monetary policy surrounding them. Following the collapse of these institutions, Wall Street entered a state of despondency. The solution by the Federal Reserve, and other central banks around the world, was to pump hundreds of billions of dollars more cash into the system. Unfortunately this is not something that is without precedent. Indeed, it seems that whenever the markets take a dive the immediate response of the Fed is to inject more cash. I have two objections to this. First, easy money was surely a contributing factor to the financial problems we are seeing today. Consumers, and homeowners in particular, are living beyond their means because money is easy to come by. This in turn has led to excessive debt to income ratios, which fueled the impact of the sub-prime problems. So, how is pumping more money into the system helping this problem? It's not. It's just prolonging the pain. It's akin to taking out a new loan to pay off an old one - you're not actually any better off, you've just delayed the inevitable, and allowed it to grow in the meantime. Second, when the Fed pumps more money into the financial markets, this is money that is coming from nowhere - it's just printed. This in turn devalues the dollar. Let there be no mistake, this is a direct form of taxation - an inflation tax. It is a tax paid by every person who holds dollars in order to subsidize Wall Street. This is wealth redistribution in its most perverse form - money is being taken from every citizen, including every member of the middle and lower classes, and redistributed to a large extent to the upper end of town to cover them for mistakes made during the course of their own greed.

Not only does the US government have a lot to answer for by engaging in the socialistic policy of repeatedly bailing out some of the biggest institutions in the country, but the Federal Reserve has a lot to answer for with its solution to the problem of simply printing more money. This approach in unsustainable. You simply cannot go on forever printing money to cover your losses. Eventually you devalue the currency. Indeed this is exactly what has happened. The US dollar is today worth almost half as much as a few years ago compared to many other major currencies.

If you don't believe me, ask Ron Paul... (I apologize for citing a Fox News story. It won't happen again)

As a bonus, here's a personal message from Ron Paul about the current situation

The insurance bailout

The whole debacle with the US housing market, and, in particular, the bailout of Freddie and Fannie, raises some very important questions as to what the role of government should be in supporting the economy. Proponents of the bailout argue that Freddie and Fannie are so central to the operation of the US mortgage market that their collapse would spell an economic catastrophe. However, my fear is that the alternative - a bailout - while attractive in the short term, could be far more catastrophic in the long term. Specifically, a bailout skews the risk analysis by companies, since they come to assume that if they run into trouble the government will bail them out. This in turn encourages irresponsible risk taking behaviour, which, in the long term, will lead to the same problem of over exposure to risk arising again and again. So as a rule of thumb I tend to oppose bailouts, no matter how dire the situation may appear in the short term. One of the most pivotal aspects of a market system is that market participants need to take responsibility for the risks they take. This in turn encourages responsible risk taking. Bailouts (or any other form of government backing) completely destroy this important feedback mechanism.