Today’s Australian Financial Review, datelined Washington (Bloomberg, AFP) contains a remarkable claim by Israeli Prime Minister Binyamin Netanyahu:
... Israeli Prime Minister Benjamin Netanyahu met President Barack Obama in Washington late on Tuesday after insisting on Israel’s right to pursue housing projects in Jerusalem. The US opposes these as detrimental to peace efforts.
“This was never raised as a point of contention between us and the US” in 42 years of building in Jewish neighbourhoods of the Israeli capital, Mr Netanyahu told US House Speaker Nancy Pelosi.
For starters, the current controversy is not about what any single country outside Israel recognises as “the Israeli capital”, it is about the intensification of ultra-orthodox Jewish settlement in East Jerusalem, which was annexed by the Israelis after the 1967 War, contrary to international law, and in which the Palestinians expect to establish the capital of an independent Palestinian state.
If this really has never been a bone of contention between the United States and Israel in the 42 years of the illegal annexation of East Jerusalem, then that would say a lot about the supine nature of US dealings with Israel over the period. But I am inclined to doubt it. Whatever caused Bill Clinton to observe after his 1996 meeting with Netanyahu that “he thinks he is the superpower and we are here to do whatever he requires”, and as ardent an Israel supporter as Clinton’s Middle East Adviser Dennis Ross to observe that Netanyahu’s performance was “nearly insufferable”, it is hard to imagine that no terse words were exchanged, or that building in Jerusalem never came up.
I rather think that the claim tells us more about Mr Netanyahu. I am no more inclined to believe that the US has never raised building in East Jerusalem at any stage of the last 42 years than I am inclined to believe that Mr Netanyahu was taken by surprise, as he claims, by the announcement at the start of Vice President Joseph Biden’s visit to Israel that Israel would build another 1600 homes in East Jerusalem.
Israeli Prime Minister Binyamin Netanyahu has told the annual conference of the American Israel Public Affairs Committee in Washington:
The connection between the Jewish people and the Land of Israel cannot be denied. The connection between the Jewish people and Jerusalem cannot be denied.
The Jewish people were building Jerusalem 3,000 years ago and the Jewish people are building Jerusalem today.
Well, that settles it. No-one else has done a tap, apparently, no-one else has any meaningful connection with the place. Wonder how that golden domed mosque got there?
In this weekend’s edition of The Weekend Australian Financial Review, 20-21 March 2010, there is an opinion piece on the debt crisis by Simon Johnson (a professor at MIT’s Sloan School of Management and former chief economist of the International Monetary Fund) and Peter Boone (Chairman of Effective Intervention at the London School of Economics) which resonates strongly with the piece contributed by Professor Ross Buckley on Friday 12 February (see Negative resilience in the global financial system).
In his piece Professor Buckley identified feedback loops in the international finance system that reward international commercial banks and the elites within nations, at the expense of the common people in those countries. The principal mechanism for this is the pressure which is placed on the governments of highly indebted countries to assume the obligations of local banks to foreign lenders, so that the foreign lenders are repaid in full, and the locals wear most of the cost of the repayment – essentially a massive socialisation of private sector debt.
Writing in a similar vein, Johnson and Boone contrast favourably the recent actions of the Kazakhstan Government with the behaviour within the Euro zone.
In relation to Kazakhstan:
For most of the last decade, Kazakhstan gorged on profligate lending, courtesy of global banks – just like much of southern Europe. The foreign borrowing of Kazakh banks amounted to about 50 per cent of gross domestic product, with many of these funds used for construction projects. As the money rolled in, wages rose, real estate prices reached near-Parisian levels, and people fooled themselves into thinking that Kazakhstan had become Asia’s latest tiger.
The party came to a crashing halt last year, when two sharp-elbowed global investment banks accelerated loan repayments – hoping to get their money back. The Kazakh government, which had been scrambling to support its overextended private banks with capital injections and nationalisations, gave up and decided to pull the plug. The banks defaulted on their loans, and creditors took large “haircuts”(reductions in principal value).
But – and here’s the point – with its debts written off, the banking system is now recapitalised and able to support economic growth.
By contrast, in Ireland, where the banking system’s external borrowing reached roughly 100 per cent of GDP (twice the level of Kazakhstan):
Instead of making the creditors of private banks take haircuts, the Irish government chose to transfer the entire debt burden onto taxpayers. The government is running budget deficits of 10 per cent of GDP, despite having cut public sector wages, and now plans further cuts to service failed banks’ debt.
For Greece, with its government debt approaching 150 per cent of GDP, the outlook is much worse:
If Greece is to start paying just the interest on its debt – rather than rolling it into new loans – by 2011 the government would need to run a primary budget surplus (that is, excluding interest payments) of nearly 10 per cent of GDP. This would require another 14 per cent of GDP in spending cuts and revenue measures, ranking it among the largest fiscal adjustments yet attempted.
Johnson and Boone argue that, in Greece’s poisonous political climate the level of adjustment required is a sure route to dangerous levels of civil strife and violence; Greece simply cannot afford to repay its debt at interest rates that reflect the inherent risk.
The alternative they propose is for Greece to manage an orderly default:
Reckless lending to the Greek state was based on European creditors’ terrible decision making. Default teaches creditors – and their governments – a lesson, just as it does the debtors: mistakes cost money, and the mistakes are your own.
...
A default would be painful, but so would any other solution.
...
A default would ... appropriately place part of the costs of Greece’s borrowing spree on creditors...
Ultimately, by teaching creditors a necessary lesson, a default within the euro zone might actually be a key step towards creating a healthier European – and global – financial system.
Many will disagree no doubt, and there is an argument that there is nothing wrong (in the Greek case) with the taxpayer being asked to foot the bill for the recklessness of the governments they elected – by contrast with the Irish case, and the Indonesian case cited by Ross Buckley, where the punters are picking up the bill for the recklessness of the private banks. The fact is, however, that Greek society simply cannot deal with this matter on its own. If Greece does default, it will be the Germans and the French who take the biggest haircuts. This will be an interesting space to watch.
There is an article, Thales contracts in Combet’s sights, by John Kerin in the 15 March 2010 edition of The Australian Financial Review, which can only be described as an ill-informed beatup.
After informing us that:
Defence Materiel Minister Greg Combet has ordered a review of all “poor value for money” long-term Defence contracts with industry as part of a $20 billion drive to cut wasteful spending.
Kerin goes on to tell us that:
Government sources have told The Australian Financial Review that the Defence Materiel Organisation has had the Thales arrangements in its sights since at least 2006, suggesting the contracts were drawn up in the “bad old days” when the plants were transferred from government to private ownership (ADI) and before regular performance-base contracting.
Having been directly involved as Secretary to the Department of Defence in the closing stages of the privatisation of Australian Defence Industries (ADI) I can attest that the form of the contract had nothing to do with the bad old days before Dr Gumley took up the reins at the Defence Materiel Organisation, and everything to do with the Howard Government’s objectives in privatising ADI, namely, to maximise the proceeds of the sale.
By way of background, Australian Defence Industries was the corporate vehicle into which the Hawke Government had gathered up all of the assorted manufacturing and service-providing activities that had been directly owned by the Department of Defence. Until its privatisation it was a government corporation with its own CEO and Board, but a wholly owned entity of the Department of Defence. Its assets included the Captain Cook Graving Dock at Garden Island, the contract to build six modern minehunters, the ammunition factory at Benalla and the propellant plant at Mulwala, the so-called Long-Term Ammunition Agreement with Defence, and an assortment of smaller plants and businesses.
In one of the first conversations I had with then Defence Minister Ian McLachlan on taking up duty in February 1998, he told me that the Department of Finance (Office of Asset Sales) was complaining that Defence was dragging the chain on completing the provision of the due diligence data required for the privatisation. He told me that I was to have the process completed in four weeks. I told him that I would look into it and get back to him.
On looking into the matter I quickly ascertained that the jewel in ADI’s crown was the Long Term Ammunition Agreement, under which ADI had a contract to provide Defence with certain ammunition natures for a twenty-year period from the date that the munitions factory at Benalla commenced operations in 1995. It was that agreement that put the value into the factories at Mulwala and Benalla. I read the 250-odd pages of the agreement from cover to cover, and came upon the clause that said in effect that Defence could give its wholly owned entity one-month’s notice to terminate the Long Term Ammunition Agreement, would meet all the costs of winding up the relevant operations of ADI, but would not be liable for any other costs.
I went back to Mr McLachlan and said that without a renegotiation of the LTAA, to give the buyer contractual certainty, the Commonwealth would have virtually nothing to sell. Who would pay for a contract that had 17 years to run, but could be wound up without compensation at one month’s notice? He agreed, I said we would complete the matter without delay, and would have all outstanding matters dealt with in weeks, not months, and we did.
The point of this tale is to make the point that the Howard Government’s privatisation strategy for ADI was shaped by its desire to get as much money as it could for the business, as quickly as possible. It was sold by public tender, and the Transfield-Thomson CSF Joint Venture (the original purchaser) paid a price that reflected what they perceived the LTAA was worth to them. For its part, the Commonwealth capitalised that expected profit stream. If the Commonwealth had placed more stringent performance conditions or less certainty on the contract, that would have been reflected in a reduced price. The Joint Venture got what it paid for, and the Commonwealth was paid the best price it could obtain for what it chose to sell.
Over ten years on, it is entirely appropriate that Defence consider what arrangements it wants to make for the acquisition of the hundreds of ammunition types that it purchases. Everyone has always known that the LTAA was a fixed term arrangement, and that there were no understandings, explicit or implicit, about what would happen after it expired. This is the ordinary course of business and is not a reflection on either Defence or Thales, the current owner of the ammunition facilities and the LTAA.
It is interesting that the only other one of the “older poor value long term contracts” that rates a specific mention relates to the Collins-class submarines:
Another long-term contract under renegotiation is Adelaide-based submarine builder ASC’s $3 billion, 15-year maintenance contract on the troubled Collins-class submarines.
There seems to be a bit of a pattern emerging from this and other reports by Kerin. It seems that nothing that happened in the defence acquisition world prior to the advent of Dr Gumley was quite up to scratch, and similarly, ASC’s performance since he ceased to be the CEO there has been distinctly below par. I wonder where Kerin gets those impressions from?
The 15 March edition of The Age carries a letter to the editor by Andrew Farran, former senior lecturer in public law and, like me, a former Commonwealth public servant, on the issue of whether or not it is appropriate for Ministerial staff to be called before Parliamentary Committees.
Farran’s letter as published reads:
Parliamentary committees are proceeding down a dangerous path when seeking to investigate ministerial staffers. They are endangering the viability of the Westminster system of Ministerial responsibility.
When senate committees sought to involve themselves in departmental matters in the early 1970s, Canberra’s mandarins became very concerned. They were placated when assured that departmental witnesses would be required to answer factual questions only and not comment on policy.
The area that should remain sacrosanct is the ministerial office. The Westminster principle of ministerial responsibility to Parliament should prevail.
Decades ago I had responsibility for a federal ministerial office. Every day written and oral exchanges took place between myself and the minister, and with others, much of which was confidential and personal. The thought that I, and not the minister, could be brought before a parliamentary committee to account for these would have been incomprehensible.
If we lose sight of the long-standing conventions we risk undermining the system that has sustained our parliaments over centuries.
I am in complete agreement with Farran on this, subject to one important caveat: the Minister must accept in full the consequences of a convention which says, in effect, that the Minister and the Minister’s personal staff are a single political entity – the members of a Minister’s staff are an extension of the Minister’s political persona, and not players in their own right. If this principle is respected the Minister accepts full responsibility for his or her own actions and all actions of the staff.
A serious problem arises, however, when Ministers seek to depart from that principle, either claiming, as happened in the Children Overboard affair, that information had not been passed on, or excusing themselves on the basis that a staff member had acted without instruction from the Minister, or had misunderstood the Minister’s instructions.
I addressed this issue amongst others in a 2003 submission to a Senate Inquiry into Members of Parliament Staff (MOPS). The terms of reference of that inquiry, and the Committee’s Report, can be accessed from here, and the nineteen submissions received, plus supplementary information from the Department of Finance, can be accessed here.
On the question of whether members of Ministerial staff should be required to appear before Parliamentary Committees of Inquiry or other Parliamentary Committees, my position remains as I put it in my submission:
I would suggest that a regime along the following lines is practicable and strikes a fair balance between the confidentiality of transactions within the Minister’s Office and the accountability of Ministers and public servants to the Parliament:
- Where the activities of Ministerial staff are confined to the provision of advice to the Minister, the confidentiality of that advice should be sacrosanct to the extent that it is today. Any action taken pursuant to this advice would taken by the Minister or on the Minister’s instructions. The Minister can be held fully accountable for this. Under these circumstances there would be no requirement for the accountability processes to penetrate the internal workings of the Minister’s office, nor would this be desirable.
- Communications between Ministers’ staff and Ministers’ offices should enjoy similar levels of confidentiality under the same conditions.
- Ministerial staff should be fully accountable for all actions undertaken by them outside the confines of the internal Ministerial advisory processes, for example, all transactions they conduct with the Department, with other agencies, with private companies and with the general public.
In respect of the latter point, it seems to me an intolerable situation that, as seems to be the case at the present time, members of Ministerial staff can give oral instructions to Departmental officials that purport to be instructions from the Minister, but being oral are susceptible to claims that the Minister was not aware of them, and yet the staff member concerned cannot be reached by due Public Service or Parliamentary processes.
Similar concerns apply to the receipt of information or advice by Ministerial staff. If information or advice is provided to Ministers’ offices by Departmental staff, only one of the following two approaches is tenable:
- The information or advice having been received by the Minister’s Office, it is deemed to have been received by the Minister him/herself, there being no conceptual distinction to be drawn for this purpose between the Minister and the Minister’s staff, or
- There being a conceptual difference between the Minister and the Minister’s staff, members of the Minister’s staff are liable to being tested as to what they did with the information or advice and when.
Addressing these issues is a matter of high importance. They are the first line of defence for the Parliament and public in safeguarding our political system against the establishment of a political culture in which Ministers can operate in an environment of plausible deniability.
While the climate change deniers scoff at the poor simple souls who think that humankind might be having an influence on the climate, serious research goes on in the real world.
A letter by I. Velicogna of the Department of Earth System Science at the University of California, Irvine and the Jet Propulsion Laboratory at the California Institute of Technology, Pasadena, published in Geophysical Research Letters, 13 October 2009, demonstrates through direct observation that the rate at which the Greenland and Antarctic Ice Sheets are losing mass, through net melting of the ice, is accelerating (see abstract here).
Velicogna and his team used monthly measurements of time-variable gravity from the GRACE (Gravity Recovery and Climate Experiment) satellite gravity mission to determine the ice mass-loss for the Greenland and Antarctic Ice Sheets during the period between April 2002 and February 2009.
They found that during this time period the mass loss of the ice sheets is not constant, but is accelerating with time, which means that the ice sheets’ contribution to sea level rise is increasing with time. In Greenland, the mass loss increased from 137 billion tonnes per year in 2002–2003 to 286 billion tonnes per year in 2007–2009. In Antarctica the mass loss increased from 104 billion tonnes per year in 2002–2006 to 246 billion tonnes per year in 2006–2009.
This means that in both cases the rate of annual ice loss has more than doubled in less than seven years.
The body of the paper puts the best estimate of the net contribution of Antarctic and Greenland deglaciation over the past decade at 0.4 and 0.6 mm per year respectively.
Citation: Velicogna, I. (2009), Increasing rates of ice mass loss from the Greenland and Antarctic ice sheets revealed by GRACE, Geophys. Res. Lett., 36, L19503, doi:10.1029/2009GL040222.
Last week we saw the Prime Minister accept “full responsibility” for the shortcomings of the national insulation rollout.
On Sunday we saw him extend his acceptance of full responsibility to all of the underperformances of the Government he leads.
Today we heard the Premier of Victoria, John Brumby, accept full responsibility for the “lacklustre performance” of the Government he leads.
Don’t be fooled. These are not acts of contrition. These gambits, straight from the Peter Beattie political handbook, are a very effective form of anti-ballistic missile defence. They are a reliable shield against all incoming fire. Clearly the Prime Minister or Premier is not going to resign over the odd “mistake” or two, but they do accept full responsibility, so there is no further discussion, no need to ask who did what when, and no need for the sound of heads dropping into wicker baskets with all of the accompanying messiness. We can all "move on". All the mates can remain in place.
