A solution to the foreign sale of Australian farms

The emotional and political debate about the sale of Australian agricultural assets, particularly to Chinese interests,   needs a more objective perspective. 

Two types of assets

Cubbie Station - a political football

What is an asset like Cubbie Station?  It's actually two assets. One is the land and resources under the land. The second is the right to produce food or crops from farming. 

This isn't just a technical point, it's critical to the security of Australia and to the debate. 

Separate the assets

A lot of the debate quite rightly surrounds the ownership of large tracts of Australia by foreign owners, especially foreign governments.

There is also acknowledgment that Australia lacks the capital and commitment to farm our arable resources to their full capacity. So, we need to work with foreigners to make productive use of the land.

So, we can lease the asset, rather than sell it. 

The UK model

For centuries, the UK property model has sold long term leaseholds over residential property.  If you "buy" a flat you are most likely buying a 90 year lease, not the freehold. 

We should adopt this model for significant Australian agricultural landholdings. Sell a 100 year lease. It provides food security for the Chinese buyer, but does not relinquish the ultimate ownership of the Australian land. 

Selling long term leases of Australian agricultural properties is a win-win for all. 

Let me know what you think. 

Mark S 

Finally, even News Ltd concedes drug laws need to change

When a popular commentator such as Eddie McGuire calls for change to drug laws in a News Ltd tabloid like the Sunday Herald Sun, you know that public opinion is shifting.

McGuire's article:"Time for national debate on evil drug trade" is a major shift for a News Ltd paper.

Yes, it is time for Australia to seriously look at decriminalising drugs

As readers of this blog will know, I've consistently advocated decriminalisation and regulation of drugs.  The first article on this topic "It's time for a national debate on drug laws - decriminalise and regulate" said many of the same things as McGuire.

I'll repeat it again. Let's regulate, tax and manage.

The more recent article "Challenge the narcotics convention" discussed a very practical issue that our lawmakers will need to face to move down this path.

Who will take the lead?

So, now that we have the conservative tabloid contemplating change, will we see anyone from the Liberals supporting these calls? Given the Baillieu government's tough on crime stance, it still looks like the Victorian government is calling the shots from the old fashioned anti-drugs, anti-crime playbook.  Maybe, a kingmaker like McGuire can influence from the inside.  Working for James Packer as he does, he certainly has the connections, and I'd encourage him to have those quiet conversations that are so necessary to make political change happen.

On the Labor side, the social conservatives who still make up so many of the supporters are reluctant to head down this path either.  With Prime Minister Gillard under fire from multiple directions, it's highly unlikely she would be willing to take this issue on right now.

And the Greens have also been reluctant.  While their constituents are most likely to support a different drugs policy, the leadership hasn't wanted to be seen as a bunch of hippie pot smokers.  Again, from a pragmatic perspective, it's understandable, but with recent disappointing poll results for the Greens, I hope they can be encouraged to take more courageous action on socially progressive issues like drugs.  Especially now they can see that drug legalisation is becoming more of a mainstream view.

We will benefit by changing our approach

As Eddie points out, if we choose to spend money on "rehabilitation, advertising and teaching", society will end up millions (or up to $5 billion) in front of where we are now.  Thank you Eddie for bringing this thinking to the Sunday Herald Sun readers.  We need them on board to make these changes happen.

Let's keep discussing drug law reform sensibly.  We will get there.  We will benefit once we do.

Let me know what you think.

Mark S

Genetically modified. Innovative. Productive.

With the focus on Australian productivity, and the decline in manufacturing, we will soon be seeing stories about the innovation of Australian industry.  Today's announcement by the Queensland University of Technology developing genetically modified, iron-rich bananas for the Indian market is a great example.

We should praise scientific innovation - including GM

There has been a lot of criticism of GM food over recent years, but little focus on the benefits.  One of the world's great problems is food security.  As the world's population grows, we need to find methods to increase the amount of nutritious food grown on our limited amount of arable land.

GM is a fantastic example of scientific innovation.  If GM can add iron to bananas, that's something for Australians to be proud of.  Sure, there are many criticisms of GM - some valid, some less so - but the road from innovation to success is never a straight one.

Manufacturing productivity not old style factories

As Australia rapidly moves away from old manufacturing to new, value-added manufacturing, we should encourage scientific advances in agriculture.  The more that we shine a positive light on high-tech research and development efforts leading to high-tech manufacturing, the less we will be concerned about the loss of old-style factory jobs.

Libertarians support the free market

Philosophically, I'm also in support of less controls rather than more over new innovation.  If we want to be productive, and creative, we should release the chains on new ideas.  Whether it is the production of GM crops, or the creation of edgy art and movies, let's embrace new ideas - even if they subsequently fail.

It's good to see positive stories about Australian science and innovation.  Let's keep focusing on the good, not the bad.

Let me know what you think

Mark S

Challenge the Narcotics convention

Richard Branson is in favor of drug law reform

I don't much like tattoos and men wearing their undies above their jeans. Other people dislike grunge, heavy metal and the Kardashians. All of these offences against taste are personal choices, with no impact on others. There have been suggestions that each should be banned or restricted, but such claims are regarded as frivolous.

There are many personal choices with no impact on others that are restricted or prohibited

Although those examples of behavior are allowed, almost every society restricts some behavior that is a personal choice. In every case, it is argued that allowing the behavior is harmful to society. Generally, it's a false claim. Blasphemy, homosexuality and topless bathing are all examples that have been banned in Australia and are still banned in some parts of the world.

Alcohol, gambling and drugs are other examples. Each has positive and negative consequences for the user, and yes, when misused, they have negative consequences for society. Yet drugs are prohibited while gambling and alcohol are not.

Prohibition does not work

Prohibition of alcohol failed terribly in the 1920s
Prohibition of gambling in Australia failed
Prohibition of drugs has failed

Like many countries, Australia is a signatory to the UN Single Convention on Narcotic Drugs (1961) which covers drugs with morphine-like, cocaine-like, and cannabis-like effects.  As a result, we are bound to abide by its restrictive principles.  Perhaps the Convention was appropriate 50 years ago.  It is no longer the right approach.

Australia should cease being a signatory to the Single Convention

A new approach to drugs is required in the 21st century.  For Australia to have the flexibility to pursue such an approach, we can longer be bound by the Single Convention. We have shown that by legalising gambling, and regulating it; by legalising alcohol and regulating it; by legalising tobacco and regulating it - that our society benefits.

We should take the same approach to drugs with morphine-like, cocaine-like, and cannabis-like effects, as well as other psychotropic drugs.

I would like to see a new approach to drug management globally.  The place to start is to dismantle the existing structures as they are causing more harm than good.

Let me know what you think

Mark S

Talk to the consumer in their language

Some public officials have a bad habit of following old fashioned traditions rather than considering what they are trying to achieve.  We deserve the best.

There's no place to hide behind legalese

The best public campaigns focus on achieving an objective,  the worst are bureaucratic and legalistic.  Take this sign, from my neighbourhood. With wording like this it's no wonder it's been covered with graffiti!

Projectiles thrown at trams may cause serious injury or death to occupants.  Offenders will be prosecuted.

Real campaigns must talk in the language of those we are trying to influence

Two of the most successful public campaigns in Australian history have been the Grim Reaper campaign of the 1980s, and the Victorian TAC (Transport Accident Commission) campaigns since 1989.  In particular, the phrase: "If you drink, then drive, you're a bloody idiot" has become a part of the Australian vernacular.

These campaigns were highly controversial at the time, as they were graphic, dramatic, and unlike anything before.  Yet, they both worked - Australia successfully dodged the AIDS bullet, and dramatically reduced the road toll.  An important part of their success was the way that their language was direct - not at all inhibited by legalese.

More recently, a series of ads to educate young men about alcohol fuelled violence have used the device of "championship moves".  Again, these ads use language and visuals that are consistent with the way young men act and speak. Likewise, the Save-a-Mate program talks to young people about drugs in a way that is realistic.

Stop with the bureaucracy and legal threats

Thankfully, most public officials are less bureaucratic than my local signage.  This New York example of a campaign against train surfing is direct, and doesn't mention one word of prosecution. In reality, the people that public service announcements are trying to talk to don't take much notice of legal sanctions.  But, like the Grim Reaper, TAC and drugs campaigns,  disincentives are those that affect them personally, like death, or social embarrassment.

We have no reason to use complex, legal language in communicating with our audience.  Let's be honest, and direct.  Everyone will benefit.

Let me know what you think.

It's time for a national debate on drug laws - decriminalise and regulate

According to 2009 calculations, the war on drugs in Australia costs $4.7bn. That's slightly more than the entire compensation package for the carbon tax. The debates about drug laws have been topical for decades, and it's time we looked closely at them again. The current system isn't working, and it's illogical.

If we want to minimise harm, shouldn't we prohibit the most harmful drugs? Probably not.

The argument for prohibition centres on the harm caused by drugs.  If this really was the reason, then the drugs that are prohibited should be the ones that are the most harmful.  Unfortunately, this isn't what happens.  A paper published in the Lancet in 2007 by Professor David Nutt from the University of Bristol showed that the drugs that are most harmful are not the ones that are prohibited.

The following chart shows 20 substances ranked by harm, as assessed by a nine category matrix of harm and expert assessment. I have added the two orange bars to divide the drugs into three equal categories.

As you can see from their findings, the banned drugs cover the most harmful such as heroin and cocaine to the least harmful such as ecstasy.  It also shows that our most popular legal drug, alcohol, is in the most harmful category - even worse than tobacco.

So, if we want to ban the most harmful drugs, we should ban alcohol.  Of course, that was tried in the 1920s and led to catastrophic crime in the US.  It was a trial that failed.

What's the next alternative? Should everything be legal? Maybe.

There are many proponents of the legalisation approach, including many countries.   Robbie Swan's article in the Canberra Times this week explained that the results have been overwhelmingly positive.

Calls for legalisation have come from a range of respected sources such as doctors.  GP, Wendell Rosevear was quoted at the Australia 2020 summit saying "I want to give drug addicts choices and I want to legalise all drugs in Australia."

There is a better alternative - regulate and tax.

In between these options of prohibition/enforcement and legalisation, there is another option.  We can regulate, tax and manage.

Those who are in favor of small government oppose regulation on principle.  I'm not one of those.  Well regulated industries are commonplace in Australia, and they generally work well.  Our pharmaceutical industry is carefully regulated.  Why shouldn't the recreational drug industry be the same.

I won't try to suggest the best methods of regulating drugs - but I support Robbie Swan's perspective in the Canberra Times article:

Over the past few decades the use of all recreational drugs has been on the increase except one tobacco. Cigarette smoking is the only recreational drug use that is in decline and that is because governments have control over the product including its packaging, point of sale, price and, most importantly, public health and education campaigns.

Let's start this debate.  Let's make it sensible, and logical.  Rather than prohibiting a randomly chosen set of substances, let's regulate all recreational drugs for the benefit of all.

Let me know what you think

Mark S


Correction: The article originally stated that "The most notable of these is Portugal, which legalised personal possession of drugs in 2001." Portugal decriminalised drugs, they did not legalise them.

Shocking live cattle abuse in Indonesia deserves tight regulation but not the banning of an industry

In last week's blog "You don't ban a whole industry because of a few bad eggs", I explained the importance of self-regulation by companies.  That article focused on self-regulation in the porn industry, to ensure that workers are not exploited.  

Mistreatment of cattle at Indonesian slaughterhouses

Tonight's episode of Four Corners uncovered torture of live Australian cattle in Indonesian abattoirs, essentially exploitation and harm of the defenceless workers.  The revelation only came to light as a result of an investigation by Animals Australia, and then by Four Corners.  The  images are shocking. 


Self regulation means setting real standards and sticking to them


Ideally, the Australian cattle industry would be self regulating, to ensure the humane slaughter of the live cattle being sent to Indonesia.  The industry, under the control of Meat and Livestock Australia (MLA) and Livecorp, has standards that are expected to be observed by the slaughterhouses, and it even inspects these slaughterhouses and conducts training.  Some of the facilities conduct themselves in a way that satisfies those standards.  Unfortunately, as shown on Four Corners, many of them fall horribly, inhumanely, short of acceptable.


What is clear is that the cattle industry is not enforcing its standards adequately.  Nobody in the Australian industry wants cattle harmed.  Yet they continue to allow it.  The self regulation of the industry is tepid.  A strict enforcement of standards could easily be implemented by developing a tight set of regulations, including mandatory stunning of cattle before they are killed.


In fact, only 10% of Indonesian abattoirs currently stun the cattle.  Despite significant efforts by people such as Greg Pankhurst, whose company, Juang Jaya Feedlot, has installed many stunning devices, most Australian beef is still being killed without stunning.  Pankhurst says that "You could probably say 90 per cent of our animals could be stunned within 18 months to two years".


Despite Pankhurst being one of the leaders in animal welfare within the cattle industry, a self regulating industry would impose a zero tolerance policy.  What he is suggesting is that with 10% compliance now, 90% compliance in 2 years will be OK.  Surely, that is not what self regulation means.


Sometimes industries need a very large nudge


Today, LiveCorp has announced that it is suspending exports to three facilities.  It is taking a stand against maltreatment of cattle.


To get to this step has taken a strong nudge through this major campaign from Animals Australia and of course, a very public 45 minutes on national TV, with extensive press coverage in Australia, Indonesia and around the world.


This reinforces the need to encourage individuals and groups to speak up against the breach of standards.  Animals Australia should be congratulated on bringing this atrocity to our attention.


The government may regulate, but we must resist banning the industry.


In last week's blog, I posed a question around what should be done when a "Manufacturer X, that sells Product A, exploits and harms their workers".  Most people would agree that the manufacturer should be prosecuted, and consumers might boycott the product.


However, banning the product completely isn't the answer.


The case of live cattle exports is an example where a particular problem certainly needs to be fixed.  There are many ways that the Australian government could regulate.  Indeed, if an industry has proved itself too slow or incapable of self regulating, then government regulation is appropriate. But, the solution is not to ban the trade.  


The government should insist that live cattle may only be exported if they are delivered to a certified slaughterhouse, which uses stunning to kill each animal.


Industries, beware! There are costs of ignoring your own standards. The Greens will get you.


I've seen so many industries pay lip service to their internal standards, believing that they can get away without walking the talk.  In every case, this deceit comes back to bite them on the arse.  Tobacco, gambling, banking, alcohol, telemarketing, cattle, porn, manufacturing ...


As an industry, you must set standards, and insist that they be adhered to. No wiggle room.  If you breach your own standards, government will impose tighter regulations on you - it will hurt the bottom line more than the ill-gotten gains you made.  If you still ignore the standards, you will be prosecuted. 


But it is only in the extreme case where the whole industry ignores an imposed set of standards for an extended period of time that the industry might be shut down.  The live cattle industry isn't at that point of no return yet, and the calls of politicians tonight to close down the trade are misguided.  The Greens are using an appalling situation as an excuse to peddle an agenda.


We must expect standards from all industries, but we must also support economic liberties. Our government should not ban any industries just on principle.

Let me know what you think


Mark S

You don't ban a whole industry because of a few bad eggs

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Why financial systems need regulation - and the economic Libertarians are wrong

In yesterday's column I explained the importance of incentives to our economic system. But humans are not like rats in a laboratory responding to simple incentives like food pellets. Rather, we are complex and we relate to incentives in a subjective way.


As a result, humans are capable of misunderstanding what will happen as a result of their behavior.  A person may think:

• "if I do A then I will get B" 

but the reality might be that 

• "As long as C or D don't happen and if I do A then I will get B"

These sorts of complexities are very common, and very difficult to understand for even the most knowledgeable person. 


In the perfect world of the theoretical economist, everyone would have perfect knowledge of the system and all of the current information. If that is not hard enough, it's also assumed that everyone will make completely rational decisions.  The economist even named this perfectly rational person "homo economicus" (the economic man). Nobody has ever met him!


So, back in the real world. There is far too much data for any person to understand. There are far too many interactions for any person to grasp. And to make matters worse, some humans cheat, corrupt, steal or are simply unskilled at their jobs.


And this is why financial systems need effective regulation - our markets just are not transparent enough. It's simply impossible. 


The free market libertarians reading this are jumping up and down right now in outrage. They want an unfettered system where the market will regulate itself. I'm sorry, but it is just a bad idea. 


To support my case, take a look at the Australian and US financial regulation systems.  In Australia, the system is regulated by the "three peaks" - ASIC, APRA and the Reserve Bank, in concert with the Treasury.  In the US, the system is regulated by a disconnected collection of state and federal bodies.  As a result, all of the Australian financial system is effectively regulated.  That includes banks, other mortgage providers, public companies, property markets, insurance companies... Whereas in the US, the regulations are looser, with many gaps.

If regulation is unimportant, and the market can self regulate, then it shouldn't matter.  But it does. Take a look at how the sub-prime housing market was able to get out of control in the US, compared with Australia. Over 14% of mortgages in the US were sub-prime at the peak in 2006, whereas Australia had around 1%.

And then, what happened next? The loans went very bad in the US, and kick started the global financial crisis. As there weren't so many of them, they didn't go nearly so bad in Australia.

Unfortunately, around the world there are many more examples of financial systems suffering due to poor regulation.  Another great example has been the failures in the Irish system, resulting in frauds, overcharging of consumers and bank bailouts by the public.


So, what's this got to do with ordinary people, incentives and the free market?

Well, "If I am confident that C or D won't happen, I will try to do A so I can get B".

But if I can't trust the system, because nobody understands the rules or plays by the rules, it will provide me with an incentive to abandon the system, and do something else, outside the legal, free market.

Effective regulations in our financial system are good for everyone. Letting the free market run wild is not.

Let me know what you think

Mark S

If you want to read some more, try these links:
ASIC: The integration of financial regulatory authorities – the Australian experience
Reserve Bank: A Comparison of the US and Australian Housing Markets, May 2008
APRA - www.apra.gov.au
US Govt Accountability Office: Financial Regulation...
Financial and Energy Exchange Group