Should Australia join the EU (interview video)

part 1



and part 2....

The Globalisation of Tall Poppy Syndrome

As one of the world's smallest populations, we Australians are frequently nervous about our often fragile place in the global community. Our chronically inefficient industries produce few manufactured good worthy of export. One need only look to our pathetic domestic film industry to see that our cultural exports are effectively nil. We were once the richest country in the world, in the late nineteenth century, and we have declined in international stature and cultural significance ever since.

 

Yet, ironically, in the midst of the Global Financial Crisis, one of our greatest cultural traditions has not only take root, but risen to prominence throughout the world. What was once a uniquely Australian phenomenon is now the populist agenda of governments and citizens around the world. The tall poppy syndrome may, in fact, be our greatest cultural export.

 

Just a few years ago, hedge fund managers, investment bankers and short-sellers were the titans of Wall Street, what ever young man at Harvard and Oxford wanted to be. People like John Paulson, who made US$67 million in twenty-five minutes short selling, or Peter Theil, who turned a half-million dollars invested in Facebook into US$750 million, were among our pantheon of heroes.

 

These masters of the universe, so quickly, have become the scourge of capitalism gone wild, the scapegoat so quickly derided in Congress and Parliament. Bernie Madoff, the mastermind of a US$50 billion ponzi scheme, is now the face of a once proud profession.

 

No longer will we applaud those who worked hard to get into top universities, struggle to get MBAs and survive the cut-throat competition to rise to the top. Now, from Wall Street to the City, we want to cut them down.

 

But Australia was ahead of this trend; in fact, we invented it. Even in the heydays of a skyrocketing All Ordinaries, Australians derided their most successful bankers. In fact, outside of drinking and sports, as the adage goes, it is un-Australian be great at anything.

 

When Allan Moss retired from Macquarie Bank with a $100 million pay package, there was outrage. He didn't rape and pillage the most successful investment bank in Australian history, but there was outrage because he earned so much more than simple teachers and nurses. Editorial pages burst with letters deriding Moss' greed whilst pundits condemned him on talkback radio. It was the tall poppy syndrome at its finest.

 

The same kind of populist distain that was shown to the, in retrospect, angelic Mr Moss is now hurled throughout the world at the CEOs of AIG, Merrill Lynch and anyone who is braver enough to call himself a banker.

 

For years, Australians looked with disgust at Macquarie, and now that same attitude pervades the world.

 

Is the tall poppy syndrome the harbinger of the new economic order that will reform the world and save the world from greed?

 

Greed is now the third rail of global society, you touch it and you die. Yet, one cannot deny that self-interest created the amazing society we live in and produced the highest standard of living the world has ever seen.

 

Now, Americans and Europeans are just like us, disgusted by success and abhorring those who aspire to it.

 

Aron Ping D'Souza is the editor of the Journal Jurisprudence. 

Australia and the EU

I will be appearing on East Side FM in Sydney at 4:30 on Wednesday 29 April to discuss why Australia should join the EU.

Aron Ping D'Souza

Why housing prices can never fail.

With the share market recording its worst year on record in 2008, people are justifiably worried about their investments and keen to see stability in 2009. However, adding to the uneasiness of caused by the share market, some of Melbourne’s poshest suburbs have seen values apparently collapse in the last six months. Some fear an American-style negative equity crisis; which is not far fetched because of the high debt levels of Australian home owners.

A prominent property developer commented to me, “We’ve seen the ASX fall 40% in the last year, its impossible that one sector of the economy fall so much and property prices not reflect it. Its just a matter of time.”

Yet, this insight is founded upon a poor understanding of how the global market economy functions. The Australian Government is a bit player in the global share market; despite the Rudd government’s largest infrastructural investments, they are essentially powerless to improve the standing of the share market. The equities market is dictated by global forces and only a concerted effort by the international community can do anything to stabilise it.

In contrast, the domestic property prices, particularly housing prices, are not the product of the global market, but of government policy. The symphony of first home buyer grants, capital gains deductions, and investment property tax offsets have created the exploitation in housing prices in the last decade. The policies of successive governments created and sustained the sky-high housing prices we see today.

And it’s a one way street. Housing prices rose, and a generation of middle-aged and older Australians benefited, whilst disenfranchising younger Australians, who salaries will never be of the level to purchase quality inner-city housing. Yet, the housing boom was created under a pile of debt and if housing prices, not just in Toorak but nationally, decrease substantially – home owners would have more debt than equity in their homes. The American-style negative equity crisis would be at hand.

Housing prices in the United States are created by market forces, as the plethora of direct and indirect government incentives that exist in Australia would be inconceivable to our fat cousins. Essentially speaking, housing prices in the United States are created by market forces whilst in Australia, they are artificially inflated by government policy.

In concert with this is the fact that there are votes in property. Unlike the United States, where most investment is in the share market, Australians invest heavily in self-managed investment properties. Every second person I run into seems to have purchased, with heavily loans from the bank, a unit or townhouse that they rent out and negatively-gear to take advantage of tax benefits. We have a national obsession with real estate, as the number of ads and articles in this newspaper will testify to.

Although not literally, there are votes in real estate. If the housing market declined substantially, voters would become uneasy with the current government. MPs should take note that the highest debt to equity ratios are in margins constituencies – on the outer suburban fringe. Thus, because housing prices are artificially constructed in this country, and an emphasis is placed on property in such large and influential voting blocs, property can never fail as an investment in this country.

Any government, either liberal or labour, will be forced to bailout any substantial fall in the property market, through increases to home buyer grants or in the various tax deductions, if they intent to get or stay in power. Unlike the share market, the state and Commonwealth governments have the power to control the housing market, which voters will recognise. Thus, like the American car industry, housing in Australia, is “too big to fail.”

Parliament

Apparently the Parliament of Australia is keeping tabs on my work:

http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;adv=;db=;group=;holdingType=;id=;orderBy=;page=;query=MajorSubjectId_Phrase%3A562;querytype=;rec=6;resCount=

Sad Reality

The Australian economy is on the brink of recession. The American economy has been in recession for the past twelve months. Politicians in Washington and Canberra are feverishly planning strategies to combat the looming depression. It may be easy to conflate the American experience with the Australian future, but there are distinct issues that differentiate each governments approach to solving the current credit crisis.

 

In the simplest terms, the current economic situation was caused by an over consumption of debt. After September 11^th, on the back of numerous rates cutes by the US federal reserve, millions of Americans binged on debt to build larger houses and buy bigger 4WDs. When the housing market took a slight decline, the house of cards collapsed upon itself with the domino effect of foreclosures, lower housing prices and increasing unemployment.

 

The American solution to the current recession is to ease "the log jam" in the credit markets. As US Treasury Secretary Henry Paulson so often says, "access to credit" is essential to allow the economy to grow. Yet, politicians in the Bush White House have forgotten that the current crisis was not caused by a lack of credit, but too much credit. How can a crisis created by debt truly be cured by more debt?

 

The American government is trying to restore access to debt, so that consumers and business alike will again live off their brother's back and consumer more than they earn. In George Bush's dream, if his bailouts works, consumers will again swipe their credit cards and take up large home loans. American Politicians are seeking to rebuild the house of cards, in the false hope that that a society built on debt will not collapse again.

 

The American response to the credit crisis is as logical as suggesting that the problem of domestic abuse can be stopped through more wife-beating. Fighting fire with fire will only see the world burn. Fighting debt with debt will only see individuals, families and companies selling tomorrow's bread to feed today's stomachs.

 

Contrast the American strategy of kick-starting their economy through debt with the Rudd Government's plan to bring massive infrastructure projects forward. Instead of relying upon consumers to spend more and indebted themselves, Australia is taking the logical solution and spurring job growth through productive contributions to the overall health of the nation. Through roads, bridges and public transport, we are building a fifteen billion dollar foundation to future growth. To see the returns on these investments may take decades, but growth and productivity will certainly proliferate from them.

 

Antithetically, if lowering interest rates and cheapening debt convinces American consumers to spend, they will quickly rise out of a recession. However, this will not be supported by productive growth, as in the Rudd strategy, but the charade of increasing indebtedness. Debt is the illicit drug of the modern economy: It takes individuals to great highs, consuming more than one could normally consume, but then drags one to greater lows, destroying today's future for yesterday's pleasure.

 

The foundation of the great society must, therefore, be in productive gains, slower growth and a stronger foundation, like those found in the Australian strategy. Bailouts and stimulus packages may treat today's symptoms and propel economies to higher highs. But any heroin addict will tell you, the higher the highs, the lower the lows. The American medicine of treating debt with debt will only create another bubble waiting to burst.

 

Aron Ping D'Souza is a doctoral candidate in the University of Melbourne. 

Fwd: More fame!

A few months ago, I organised a Freshers Party for the Oxford University Society in Victoria. It was very successful, in my opinion, and it warranted a mention by Lady Kenny, the Secretary of University Society, in her regular letter to alumni. 

APD

Aron,

 

I am circulated a letter from the Secretary of the University Society (Lady Kenny) once in a while. You will see that our Freshers' Farewell Party merited a mention – in particular your report!

 

Well done – and thanks again for helping to make the event a success.

 

Best wishes,

 

Elizabeth.

 

 

4.2 Freshers' send-off parties

Many branches gave farewell parties for freshers coming up to Oxford from their area, some of these branches for the first time. Our impression is that these have been fun and useful for everyone, and I'm including here a report from Aron D'Souza in Melbourne about their first freshers' party. As you'll see, they included possible Oxford applicants, as well as freshers. It seems to have been a happy mix.

Freshers Farewell

Nearly twenty alumni acted as hosts at the OUSV's Freshers Farewell. It was the first time the OUSV ran such an event and the turnout was brilliant. The event gave those going up this year a connection to Oxford and an opportunity to interact with and learn from those who have come down in recent (and not so recent) years. Additionally, students who were considering making an application were invited to learn more about Oxford and the application process. With the generous sponsorship of the Boston Consulting Group, about sixty people were present at BCG's wonderful office at 101 Collins Street.

By my count, there were eight freshers currently accepted into Oxford, most for second degrees. Additionally, there were about thirty five undergraduates and secondary school students who were in various stages of considering or preparing applications to Oxford. Some school officials attended, displaying a keen interest in encouraging some of their top students to apply to Oxford.

One alumnus commented to me, "By the end of the evening, it was apparent that the confidence of the students was clearly raised. No longer was Oxford distant and unreachable to these young people." One fresher came all the way from Sydney to attend the event and she commented, "It was a great help and awesome fun".

Hopefully, this event will become part of the regular OUSV calendar.