The NBN is all about productivity improvement – ask CSIRO

For those of you who are not aware, the CSIRO has an incredibly interesting podcast called CSIROPOD. It shows off the range and depth of Australia’s leading scientific research institution. For those of you excited by the possibilities of science, like me, to solve the world’s problems, it is just a treasure-trove. Most people do not realise, though, CSIRO is not only “hard science”. It has soft science areas like economics and social research.

One area which it has tackled recently is the area of Australia’s productivity. Apparently, if you take mining and agriculture out of the mix, Australia ranks about 33 out of 36 in the OECD productivity table. This is in stark contrast to almost every other social and economic indicator where Australia usually rates in the top 3 or 4. This is a disgrace.

This interview outlines the challenge, but also the solution:

http://www.csiro.au/en/Portals/Multimedia/CSIROpod/Uploading-the-economy.aspx

What it clearly explains is that there is a solution to this predicament, but it involves Australia as a nation committing to completing the roll out of the NBN fibre to the home, which the coalition are still holding the line about dismantling. This is crazy. Malcolm Turnbull has more than enough ammunition to fire at the ALP on this area of economic policy. He should not also prevent the solution from being arrived at. It is politics in its worst form.

I still think Turnbull is the best leader for Australia at the moment, but he is dead wrong on this one.

The coming together of two visionary ideas…..

As regular readers of this blog will realise, I am a great admirer of the Federal Government’s NBN policy – one of the most visionary policies I believe from the Federal Government in recent memory and one which has the potential to greatly change the way we operate as a society for the better.

Some of you also may not realise that I am “an old Asia hand” ie someone who has lived and worked in Asia for almost a decade in my career, so I was delighted to see the Government initially commissioning their “Asia and Australia in the 21st century” White Paper, and releasing it so competently over the weekend. Having now read it thoroughly, I think the authors have done a great job, and deserve due consideration on both sides of politics, as well as in academia and the media.

Imagine my horror today, when listening to the ABC at lunchtime, when the government has allowed themselves to be marginalised by the vested interests on this issue, particularly on their commitment to Asian languages and the line from the opposition “it means nothing without extra funding”.

This is a nonsense. The extra funding comes from the NBN. Sometimes I wonder whether the Government even realises what a revolution they have started in this area.  They certainly did not explain it as they should, something they also have  a habit of doing in other areas of policy.

It started off this morning in “The Age” with one Professor Adam Chen suggesting the commitment to Asian languages “will cost billions”. This was followed up during the morning by the usual procession of vested interests with their hands out (of which as usual the Teachers Unions are the most vocal with their baseless breast beating about class sizes echoed by the Federal Opposition).

Education is the sector, along with Health, which will be most profoundly affected by the NBN. In 10 years’ time, when the NBN will be fully implemented, education will be profoundly changed.  Teaching at universities will be largely done online, when the most important things  for them will not be the size of their campus, but the quality of their teaching and the prestige of their Brand. The NBN will provide virtually unlimited capacity to teach. Rather than a university lecturer being limited to the student numbers dictated by the size of the lecture theatre, it will be restricted by the size of the demand as these services will be delivered via a limitless capacity on the internet.

As with universities, the same will apply to schools. An excellent teacher of Mandarin, rather than being restricted to a classroom, will be able to take regular classes with unlimited capacity via a very fast broadband. It will revolutionize schools, and greatly improve teaching standards to all sectors of society in all subject areas.

It is possible the Federal Labor Government would prefer to take “stick” from the Opposition, than to have to explain this fact to their constituency in the Union movement, most of whom do not appear to understand this profound change (along with most of the Press). Nevertheless, it is coming down the track, and will greatly expand the policy options for government in all sort of areas, not least Education.

In my view, it will be a revolution even more profound than the internet itself.

Overseas Graduates – yet another great chance for Australia

Everyone is aware of the devastation which the GFC and now the euro crisis (s) have brough on Europe. These are dramatically illustrated by the trends in youth unemployment across Europe, particularly since Lehmann’s collapse. In most European countries, graduates make up between 20-30% of youth unemployed. Similarly in the US. Unemployment amongst college graduates is the highest in half a century.

What does all this mean for Australia? It means yet another incredible opportunuity.

Australia, through its good fortune to be one of the strongest economies in the OECD, has an unprecendented opportunity to attract the best and the brightest graduates from countries with high education levels and high graduate unemployment rates ie countries like Spain, Portugal, France, Italy, Greece and the US. Without wishing these countries mis-fortune, the fact is they have some very smart young people bereft of opportunity and many will become “the lost generation”. Australia desperately needs skilled people to provide the energy and drive for the future. Although a properly structured program would be quite expensive, in the longer term it would pay off handsomely, and would be a sensible way to spend any future surplus to set the country up as a brain driven environment to drive innovation, creativity and wealth creation.

This plays to one of the over-riding but unstated tenents of our immigration policy post While Australia i.e. although the policy is non-discriminatory from race, religions and sexuality, it definitely favours the better educated on the basis it is education which is the biggest driver of assimilation and job security. In an environment where our universities are bursting at the seams, and we can’t get enough of graduates, particularly those related to the sciences, why wouldn’t we take the best and the brightest from abroad. Much cheaper than financing additional Phd places, although that should be done as well.

A related issue to this, it was dissappointing to see that there has been a considerable tightening up on criteria for entrepreneurs from abroad immigrating here. Somewhat short sighted I would have thought.

Europe – what a mess

In retrospect, it was a big mistake to think that the Euro could work across diverse economies, without fiscal and monetary union. But that in itself was impossible because of the very diverse ideas in Europe about economic responsible economic management and fiscal discipline. Indeed, the formation of the Eurozone encouraged all the member economies that they could have German style living standards, but without the disciplined, focussed and skilled German workforce and economy, and without the economic management which has charactarized the German government, at least for the last 10 years.

Many countries, led by the French, have believed they could run economies with very generous social benefits without the hard economic management and decision making which so charactarizes successful economies. For instance, when the last president of France hesitatingly tried to instigate mild economic reforms such as raising the retirement age from 60 to 62 there were howls of protest which forced him to back down. This does not even go near economic distorting policies like the Common Agriculture Policy (CAP), exorbitant pension and social welfare provisions, industry subsidies, and unaffordable internal and external deficits. In spite of the fact that the IMF, ECB, World Bank, and Germany have been handing out enormous bail outs to many broke countries in southern Europe, nearly all of them have been unable to fully implement them because their electorates will simply not wear them.

The only way is for the market to force it on them ie leaving the euro zone and issue their sovereign currencies. How might this work? Take Greece. Greece in the current circumstances will never pay back its debts. It will be saddled with such stringent provisions that it could remain in recession for 20 years. Time for a change in direction.

If Greece, without warning, announced that henceforth the Greek currency would be in drachma, and all international debts would be written off,  then there would be short term pain, but eventually the market would kick in (probably 18 months to 2 years), and the Greek economy would begin to recover. There would undoubtedly be a 50% plus devaluation against the euro, which would make Greek exports cheaper, and imports more expensive. It would also allow the Greek central bank to recapitalise the Greek Banks by printing more Drachmas. This, though, would all end in disaster if it were not accompanied by drastic economic reforms to the social welfare system, collection of taxes and other charges, removal of distorting government subsidies of various kinds, reform of the legal system and a crackdown on the corruption which so distorts the efficient running of the Greek state.

Within five years, the Greek economy will recover, the debts will be written off, and the competitive advantages of Greece will start to kick in in a much more  growth friendly environment than before. The low growth, deficit cutting and low investment environment which ios the consequences of the European bailouts, will be delivered via a market mechanisms and will not therefore be the subject of the political vastitudes currently underway in Greece.

No-one though sees this as pain free. It is not. It will be very painful indeed, but in the medium term it will be less so than 20 years of recession, and it will give hope to a population sadly lacking in it, especially the young. It is somethingthe population and government can galvanise around, and on which it could build a prosperous future.

It is also something the other southern European governments such as Spain, Italy and Portugal would also likely copy once the benefits become apparent. The French, well they will remain French, and keep their heads buried in the sand, even though the economy distorting welfare state, government subsidies, the CAP, and unreformed labour, capital and distribution markets are worse than almost anywhere in the EU, and France’s economic performance reflects that. They should also take the economic medicine, and return to the Franc. But they won’t of course!

A Deadly Raid

Comment on Economist artcle (31 May, 2010) “A Deadly Raid”

Until both sides realise that incidents like this will continue until there is a peace deal, this situation is unavoidable. Israel continues to believe that a country with a population of 5 million can use military force to suppress 100m plus around its borders.

The only solution is to stop the settlements, withdraw to the pre 1967 borders, and make peace with the whole of the Arab world. Then have this supported by a million plus troops from UN peace keepers paid for largely by petro dollars, and allow Palestine (Gaza and the West Bank) to develop peacefully into a low cost economic haven right in the middle of the middle eastern powers.

Heaven forbid, Israel may well get on with their neighbours very well, share a common prosperity, even eventually participate in a middel eastern common market. The region could then become a force for good in the world rather than be the reason for most of the world’s conflicts between islam and the West.