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Monthly Archives: May 2010

Every now and again, I see an article that just makes me go wtf? Noel Pearson wants to reignite debate on the draft. He wants to implement a “fairer draft” by which he means forcing more “privileged people” to serve.

Does anyone else feel that using compulsory military service to discriminate against one group to the benefit of another is in any way a good idea? How about raising from the dead some ideas that have been long ago superceded by the notion that specialists are better suited to fighting in modern, more technology focussed wars?

His argument makes little to no sense in Australia where there are far easier jobs to get for an economically disadvantaged person than serving in the Australian armed forces. We have HECS, so anyone can go through university. We have student Centrelink payments that let you study without working.

His argument sort of makes sense in America, where manpower is important to their army. But the NYT article he quotes, by Larry Pressler (a Republican) doesn’t even ask to reinstate the draft in America. He uses the draft back in the 60s to illustrate a broader point about ‘elites’ evading their responsibilities through technicalities (hence, the Technicality Generation).

Some American soldiers are lured in because its their only hope to leave their small hometowns behind and see the world. Others are attracted by the steady money (until you die) and the GI Bill which pays your way through college (a chance many poor people would not get).

But anybody who knows anything about America knows that the most overweening characteristic of that country is their overwhelming sense of patriotism. I’ve really no idea about the realities of the demographics in the US Armed Forces, but I wonder how many are poor, black people (as they were in Vietnam) and how many are stupid, white people who have been duped by their government into believing that your country is worth dieing for in wars completely irrelevant to US national security. How many are your typical Republican meatheads who think might is right, and that unswerving obedience to a commanding officer is an admirable goal?

It sounds to me (and Pearson quotes no evidence more recent than Vietnam) that he’s just reviving without modification outdated arguments from the Vietnam War. How well do such aged and classist arguments work in the modern day? Remember when John Kerry said we were sending poor, uneducated people to die in Iraq?

It seems to me, that if you really want to stop the poverty cycle, the solution is not to forcibly conscript the rich and the privileged as reparation for injuries done to the poor and unwashed back in the 60s. The problem is as much cultural as governmental. We need to educate people. It is not economic duress that drives people to the military these days, it is lack of education rendering the stupid unable to fend off arguments that to be patriotic is to serve your country.

The times have changed. Get with it, Noel Pearson.

(PS: The most amusing  thing about this article is that he criticises the Left for playing into the hands of Milton Friedman back in the 1960s by saving the “privileged” from the draft. The really great irony is that he quotes Pressell’s “elites” argument without hesitation. The elites argument is, of course, the backbone of the modern Tea Party movement, a far more insidious beast than the liberty-loving Friedmanites).

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One of my favourite news sources is the Atlantic Magazine. Unlike most American news sources, it is completely able to look past its own biases – not just political biases (never choosing a left or right-wing approach in a particular article, but blending them into the same article), but other biases too. I would probably rate it above the Economist in terms of independence (since the Economist usually hews to a stolidly classical liberal point of view).

It’s not always the most well-written magazine. It obviously gets the basics right (it’s informative, its understandable and the grammar and spelling is all correct), but it lacks the smooth flow of the Economist, or the artiness of the New Yorker. I think, as a brand, it lacks a singular voice with which all its articles speak. Which appears to be both its weakness and its greatest strength, for there is a surprising diversity in its articles. It’s a real shame the thing’s not available in Australia, although I get their weekly emails.

This article is a fantastic example. It is the most cogent article I’ve seen on the decline of news media. It works as a lucid a business analysis, pinpointing the key factors behind the decline of the business with a clarity I have not seen before. But it goes further, explaining the future of the industry in business terms. It describes future (possible) revenue drivers and business models. It describes the entire future industry succinctly and understandably. Just as importantly, I think it describes it in a way that is understandable to lay people. I’m sure if I were a journalism student, or a IT student I would be able to see nuances from those fields in this same article.

As a piece of journalism, it works just as well. Fallows describes different points of view, and places each fact in context. He comprehensively describes trends in new and old media objectively. Atlantic articles, as I have said, tend to be a bit hit and miss with the quality of their writing. This particular article is very well written (with a brief exception where he discloses his friendship with Eric Schmidt, which breaks the flow of the article mid-way and is a bit jarring).

I think, however, both these angles miss the real gem of this article. The brilliant thing is that Fallows can capture a unique angle on an old topic, take these facts and turn them into a coherent viewpoint. The death of old media has been bandied about for a decade now, with the same arguments carried back and forth. “Old media’s dead”, one side will argue. “How can new media make money?”, the other side will rebutt, “Twitter is tremendously successful but is completely unable to capture that revenue”. Fallows takes the best of these arguments and makes his point of view seem sort of obvious. And yet it can’t be, because I’ve rarely heard it before in this complete form. He raises facts I’ve not heard before – the idea that most expenses in the newspaper industry are paper-related, rather than content related.

It’s a very well-written article. A few months back, I had been thinking up my own business model to start up a poltical newspaper or magazine. I hadn’t done any research, but it’s amazing how much this article adds to my understanding.

I think there is room for new Old Media to appear. As one of the Google employee notes, there is a lot of repetition when it comes to approaching news stories. Everyone has the same angle. I want to start a magazine with the independence of the Atlantic, and the comprehensive and piercing analysis of the Economist. Hiring reporters to do the footwork is difficult stuff – sending them to Baghdad etc. But hiring intelligent opinion writers who can do a big cover story each week is a lot cheaper. For example, how much would it cost to hire a journalist to spend a week reading the Henry Tax Review, interviewing tax accountants, and doing a full report? As far as I’m aware, noone has attempted to give interested lay people a good summary of the Henry Review. What about the super-profits tax? Noone has adequately explained how it actually works. Almost nowhere will you see explained the fact that it was intended to replace the existing royalty system with a new regieme. There are just so many angles to be pursued, that aren’t being pursued in Australia.

Just as importantly, if you don’t read every single news article, you start to fall behind. I’ve stopped reading the world news from the Middle East because I just don’t know what’s happening. An article might describe a bombing in Pakistan. That’s great, but I’ve no idea whether this bombing is taking place after a long peace, or not. I don’t understand the context because I stopped caring. A magazine that can provide an excellent summary as well as an excellent analysis of that summary will be brilliant. As it happens, Google has been thinking along these same lines (see Living Stories on page 5 of the Atlantic article)

I think that if you can prioritise your competitive advantage in information synthesisation and writing, a new magazine company can really excel. The trick is to distribute your product without incurring those cost inefficiencies Fallows describes, and also to market the value of your product, you can really gain a strong foothold.

There are niched magazines. The Monthly and the Quarterly stand in for the New Yorker but tend to be aimed squarely at the left intelligentsia, and in any case are published quite infrequently. The (former) Bulletin was aimed at the masses. The AFR combines its daily reporting with occasional op-ed. But noone has attempted a weekly magazine which balances the two. I want to create an Economist magazine for Australia.

I think it can be done.

Edit: By the way, here’s an equally good New Yorker article about the future of books themselves.

I haven’t made a proper, well thought out post here for a while. I probably won’t do so again for at least another few weeks, after finals are done. This shan’t be a long post, for I am incredibly tired. I haven’t slept well this last week and both yesterday and tonight have been the worst in a long time. I’ve tried all my usual tricks to get myself to sleep (including two large sips of rum) and it hasn’t worked. I had to skip class today I was so tired… attempting to make it up tomorrow will hurt if  I can’t sleep soon.

But there’s so much interesting stuff happening and that has happened. So here’s a brief summary of posts  I wanted to write.

Dawkins and Hitchins suing the Pope for international crimes against humanity. I disagree on the law, and on the politics. My long-standing belief is that international law is not law, and though crimes of universal jurisdiction should exist, they should be construed narrowly. To say that the Pope is deserving of an international crime, a la Pinochet, is effectively to say that he is a head of state. To deny him head of state immunity in the same breath is seems somewhat wrong in law. Besides, the action would almost certainly fail before the courts, despite stronger sympathies for human rights in UK courts compared to Australian courts. The thing is a stunt and will probably hurt the atheist cause by entrenching stereotypes than promoting good.

Obama nominating General Kagan to the SCOTUS. Kagan is good and competent and worthy of the court. She would not have been my pick. I would have much preferred Wood, or Sullivan. I would not oppose her nomination, if I were a Senator, but it does seem suspicious that she managed to avoid all hints of what her views on constitutional law are considering she is a most eminent constitutional academic. How do you manage to teach a constitutional law class without stating your views on any of the hot button issues? How do you write articles without causing controversy? Even the one article on executive power she wrote doesn’t truly reflect her own views, from what I’ve seen.

The Budget and the super profits tax. The super profits tax is pure evil. It’s not a tax on super profits – its a tax on ordinary profits.

Look at the calculation:

super-profits tax= 40% x (profits – expenses – 3-6% govt bond rate)

company tax = 30% x (profits – most expenses)

Claiming that getting a return higher than the “long term government bond rate” is a “super-profit” shows wilful ignorance of the most basi concepts in financial economics. The government bond rate is treated as the risk-free rate of return – in other words, the very lowest acceptable profit if you have absolutely no risk. But mining projects aresome of the riskier real investments one can make (real, in the sense of non-financial).

The super-profits tax is tantamount to whacking a 70% companies tax on the mining companies. Try and tell me that won’t stop investment dead in its tracks in Australia. Yes, of course, existing mines will stay open. But why bother expanding those mines if almost all your profits will be taken away. With the risk of mine collapses, of deposits being smaller than expected, of strikes, of unexpected price decreases, of dealing with all the regulation it’s not at all worth it for mining companies to invest new money into Australia, as opposed to say Canada or Brazil.

That said, I would normally have liked the idea of a resources tax. Too many countries whose economies have centred around exploitation of finite resources have collapsed after those resources have disappeared or become valueless. Those which have survived and prospered are those who managed to capture the benefits and redirected them to creating a new economy to replace the resource driven economy. Norway is oft mentioned. Additionally, the resource tax will act as a nice slowing mechanism for the resources sector. It will help alleviate the two tier economy problem.

But there is no guarantee this money will be used for building a new economy. It will go into general revenue, where it will no doubt be frittered away on porkbarrelling or subsidies or both. Or it will be spent on hospitals or roadsigns or the like. That is necessary infrastructure… it is productive in that we get more utility from it than the money we put in. But it does not increase productivity in the economy. We need to invest in roads and the like which will increase productivity. The money should have been put into a general infrastructure fund.

And there is a difference between slowing down the two track economy and halting it in its tracks. It will slow it in the short run, but stop it in the long run. We all know the mining boom will not last forever. We need to exploit resources whilst we can – and there is absolutely no incentive to survey for new deposits of iron ore whilst this “super” profits tax is here.

I hate admin law. I threw this assignment away last Friday so I wouldn’t have to deal with it until after my Property exam. Now its back. And it won’t go away until after Monday.

So in lieu of actually writing my assignment, here’s a short, punchy and irritable post about the European debt crisis.

Why did anyone let Greece into the Eurozone? It’s been perpetually on the verge of default every two years or so since the dawn of modern finance. It had, during the boom years of 2001, a national debt level equal to 100% of GDP. That means… it would have taken an entire year’s economic output to repay all of its debt. Every single dime bought and sold in the economy for a year.

The reason is because people get confused between economic policy and foreign policy. Yes, I know both of them use big words, and any predictions made in either field are inevitably wrong. That doesn’t mean they’re the same thing.

People wanted to bring in Greece, Portugal and Turkey into the Eurozone to improve the economic conditions of those people. (In the case of Turkey, they also did it for purely social reasons – if it were tied to the European continent permanently, it was less likely to move towrd radical Islam). Those are valiant aims. But not when you risk the economic prosperity of every single other country in the Eurozone.

This was always going to be an inevitable outcome. Economic regions without an integrated economy should not have a single currency because there is only one interest rate for that currency. If the central bank raises that interest rate, it slows down the economy of that entire country – regardless of whether the economy is overheating or not. Australia faces this problem – with the resource-intense Western Australia and Queensland economies overheating whilst the service-dominated Sydney, Brisbane and Melbourne economies slowed during  the GFC (especially Sydney, where the financial sector is primarily located). Less well known is the fact the US economy faced similar difficulties, with California, NY and Florida racing ahead whilst other parts of the US did not (lol, Michigan) during the last economic boom in the 2000s. Such tensions are only overcome with a strong, central government which can liaise with a single central bank to manage the problem. That is not the case with the European Union. Every economic policy-maker should have been tempted to stop the idiocy of spreading the Euro so far. They did not.

I know that synonyms can be a difficult concept to grasp. But economic policy is not a synonym for foreign policy.