The Global Financial Crisis (GFC) is an opportunity for powerful coalitions of self-interest to be formed to ensure that wealth and power is concentrated with creative minorities that have selfish agendas but that will ultimately lead to economic ruin for all. Dr. David Paul Bennett analyses the inherent dichotomy between pursuing either the politics of higher purpose or self-interest in the context of the GFC.

Australia at the Crossroads

Politicians usually have the reputations of ‘used cars salesmen*’ – ingratiating and re-assuring to gain the sale but of no help after the purchase. A common mistake that can consequently be made of politicians is to underestimate their determination to persist to achieve their self-interested goals. This is particularly the case in Australia because rent-seeking politicians in both major parties are still trying to reconfigure the nation’s economic settings to their own advantage by laying the groundwork for the constitutional destruction of states.

(*No disrespect toward salespeople should be inferred. As Australia transitions to being a rentier state with consequently decreased employment opportunities, predominately sales commission jobs will substantially increase).

The determination of rent-seeking politicians is being manifest by their continuing attempts to still bring Julia Gillard down as prime minister. It is an open secret that rent-seeking elements in the two major parties have set December of 2012 as their deadline to depose Ms. Gillard so that a Kevin Rudd-Tanya Plibersek government can implement rent-seeking measures that a future Abbott government will not be able to without alienating its electoral base in regional and rural Australia.

The Opposition Leader’s personal attack on the prime minister in the recent October session of parliament it reflective to the extent he will go to achieve power. His comment that the ‘government should die of shame’ was reprehensible because it was similar to the radio announcer Alan Jones’ covertly recorded repugnant remark concerning the recent death of the prime minister’s father.

Abbott was mistaken if he thought that his terrible remark would unhinge Julia Gillard to therefore help clear the way for Rudd to take over again as prime minister. Nevertheless, the fact that Abbott would make such a remark demonstrates how determined he is to advance his rent-seeking agenda.

If Abbott can be so ruthless in opposition it is shuddering to contemplate what sort of government he will lead. Indeed, an Abbott regime would be the antithesis of the Menzies government. The Liberal Party founder believed in private enterprise and in fairness with regard to wealth creation and distribution in a free society. For Sir Robert Menzies it would have been an anathema for wealth to by deliberate design to be restricted to a select elite. How can people be expected to work diligently if the economic fundamentals are set to serve the benefit of a select few by deliberately disadvantaging the overwhelming majority?

Because the establishment of a rentier state involves implementing detrimental policies (such as a carbon tax) it is necessary from the perspective of rent-seeking strategists within the coalition for ALP governments to set the groundwork for a new political economy and the Labor Party’s demise. So-called ‘wheat deregulation’ is a prime example of either a coerced Gillard government or a recycled Rudd government doing the ‘dirty work’ for a future rent-seeking Abbott government. It is clear that most wheat growers in the eastern states, contrary to the assertions of the federal Environment Minister Tony Burke, desire that Wheat Exports Australia (WEA) be retained as the government agency with responsibility for arranging the export arrangements for their wheat.

If legislation abolishing the WEA is passed in the October 2012 session of the Commonwealth Parliament it thankfully will not take effect until next year. This should mean that WEA will still be able to sell the produce of eastern state wheat farmers on domestic and international markets after this year’s November harvest. This year’s anticipated bumper wheat crop should be the way to future economic prosperity as Australia’s rural sector ‘picks up the slack’ as the consequences of federal Treasurer Wayne Swan mis-managing the minerals boom.

Unfortunately, the politics of rent-seeking dictate that Australian economic processes and outcomes still be re-configured to the benefit of a narrow political elite. Australia’s would be rent-seeking elite intend that the interests of *five mining companies linked to the People’s Republic of China (PRC) dominate the mining sector and that this sector predominate within the Australian economy.

(*These five mining companies are: BHP-Billiton, Rio Tinto, Xstrata, Clive Palmer’s privately owned Mineralogy and Gina Rinehart’s privately owned Hancock Prospecting).

To help facilitate this over-dependence on the minerals sector the pro-rent-seeking elements within the ALP and the coalition parties are colluding to undermine the viability of Australian farms. This is the main reason why so-called ‘wheat deregulation’ is being inflicted upon wheat farmers in the eastern states.

Theoretically, wheat farmers in the eastern states should be able to form an owner controlled company similar to the Co-Operative Wheat Bulk Handling (CBH). This wheat farmer owned co-operative so effectively represents the interests of growers in Western Australia that wheat farmers in the *eastern states would not need WEA. However, the reality will be that wheat farmers in the eastern states will not receive the necessary support from a rent-seeking Abbott government to either establish or maintain a domestically or an internationally viable supply chain.

(*More wheat is grown in the eastern states than in Western Australia so that in net terms the volume of exported Australian wheat would decrease).

Rent Seeking and Economic Vandalism

This current undermining of wheat farmers is part of an overall pattern of sabotaging the agriculture sector that commenced following the election of the Rudd government in October 2007. This has been due to the influence of rent-seeking elements within the two major parties.

A more long-standing example of this rent-seeking public policy approach which predates the current ‘wheat deregulation’ (sic) push has been the Commonwealth’s Murray Darling Basin Authority (MDBA), which was created by the Howard government in 2007. By reducing water irrigation allocations under the MDBA’s 2010 Basin Plan not only are the economic livelihoods of farmers imperilled but also the viability of associated regional communities across the vast Murray basin region.

Another fundamental threat to the viability of the nation’s vital agricultural sector is of course the carbon tax. Higher electricity prices that the carbon tax is causing* will eventually help the mining companies lobby for coal seam mining for gas extraction as a cheaper energy source. It is therefore vital that the Gillard government not accept offers from traitorous state governments, such as Barry O’ Farrell’s in New South Wales that the right of states to grant mining permits be ceded to the Commonwealth. Such a development, despite assurances to the contrary, would initiate a process where farmers will eventually be evicted from their farms should they refuse compensation offers from the mining companies.

(*The design modelling by rent-seeking Canberra public servants is correct in that the full impact of the carbon tax will not become apparent until the second economic quarter of 2013. The recently announced closure of the Yallourn brown coal power stations in Victoria’s La Trobe Valley which supply over 20% of the state’s electricity needs will see an inevitable and steep price increases by the second economic quarter of 2013. This will help ensure an electoral wipe-out of the ALP in next year’s federal election).

The question has to be asked as to why the five mining companies are threatening Australia’s long-standing socio-economic stability which if nothing else has given the nation a stupendous advantage as an investment option. The answer broadly is that the five mining companies want to establish a de facto pentarchy within their sector which helps underpin a new national rent-seeking elite. As previously mentioned a crucial dynamic of this elite configuration will be (or possibly already is) corporate links to a mercantilist PRC.

Why Australia’s Agricultural Sector Must Now Be Safeguarded

The PRC’s enveloping domination of the mining sector is establishing the basis for this currently Leninist state’s general economic domination of the Australian economy. If too many farms go under as a ramifications of coal seam mining and denial of water under the Basin Plan then new corporate agribusinesses could take their place. As the recent acquisition of the Cabbie Cotton Station in Queensland illustrates PRC State Owned Enterprises (SOE) could gain an opaque but probably highly influential stake in new agribusinesses as traditional farms give way to them due to changed external socio-economic factors.

Manufacturing is another area where PRC economic power could become ascendant as a result of rent-seeking inspired domestic policy. The so-called ‘economic rationalist reforms’ of the Hawke-Keating era (1983 to 1996) substantially undermined Australia’s domestic manufacturing sector. However, even when there was a more extensive pre-1983 manufacturing sector, it was not the objective of then industry public policy for Australia to compete with other nations in international trade. Rather the then objective of pre-1983 industry policy was that the manufacturing sector help generate high domestic levels of employment.

In the current context employment levels will be undermined as a result of the carbon tax’s adverse impact not only on the agricultural and manufacturing sectors of the Australian economy but also on the very important services sector of the economy which adapted to the infliction of ‘economic rationalist’ policies. Australia’s still strong services sector is generating relatively high levels of casual and part-time employment but this probably will not continue to be the case due to the flow-on effects of the carbon tax in the second economic quarter of 2013.

It could be said that Australia is approaching tragedy because the distinct potential for an agricultural boom to take the place of the minerals boom is being squandered. However, this impending tragic development is not the result of bad luck but the result of a general public policy range set in which Australia’s genuine public interest is being squandered to convert the nation into a rentier state.

Questions might well be asked as to why domestic economic and political actors in Australia would sell out their nation’s interests? The answer broadly is that Australia (even before federation in 1901) as natural resource rich nation with a relatively small population was always being vulnerable to elite formation occurring on a basis of privileged access to natural resources. Such elites were fortunately not formed because the social and political costs were too high.

Australia’s Traditional Opposition to Rent-Seeking

The re-call of the New South Wales Rum Corps in 1809 and the Eureka shoot out in late 1854 were clear signals to would be elites that the concentration of economic and political power would not be tolerated by the general public. Too many people had migrated to Australia with the expectation that they would have a right to utilize the opportunities that they had not had in their home nations due to either limited economic resources and/or the impact of oligarchic regimes.

Therefore, the onset of federation in 1901 was the culmination of a process in which colonial politicians over an approximately twenty year period re-assured their respective constituents that their interests would be accommodated within a new nation. In this regard Australia was among a small number of countries where nationhood was achieved not so much as a result of independence from an external power but as a consequence of domestic accommodation.

The impact of Australia’s early national leaders such as Sir Alfred Deakin, Andrew Fisher and John Watson (who was one of the fathers of arbitration) was such that the nation’s institutional settings were conducive to protecting the genuine national good. Prime Ministers such as Billy Hughes (1915-1923) and Gough Whitlam (1972- 1975) almost destroyed the nation’s balanced socio-political traditions. The second prime ministership (1949 to 1966) of Sir Robert Gordon Menzies crucially consolidated positive traditions and helped the nation endure the infliction of the negative policies of the Whitlam, Hawke, Keating and Howard governments.

‘Economic Rationalism’: Laying the Foundations for Australian Rent-Seeking

The Hawke government (1983 to 1991) established the groundwork for rent-seeking due to its corporatist approach to governance and its forging of economic links to the PRC as this nation moved to a state socialist mercantilist political/economic model. In retrospect, it was not surprising that the Hawke government was essentially a corporatist one due to the then prime minister’s former role as president of the Australian Council of Trade Unions (ACTU) between 1969 and 1980.

Hawke had been elected ACTU president in 1969 with the support of Communist Party of Australia (CPA) heavy weight George Sealaff. That is not to say that Hawke was the quintessential left-winger who became a moderate in order to get ahead after he had obtained his leadership position in Australia’s union movement. As early as 1948 Hawke, much too his credit, had split away from the CPA dominated Labor Club to found an alternate Labor Club at the University of Western Australia. As an ACTU advocate in the late 1950s and 1960s Hawke had impressed employer representatives at industrial tribunals with his lateral presentations. Consequently many business leaders highly regarded Hawke as a moderate union leader which he was.

The flipside of Hawke as a moderate unionist who was also well regarded by the CPA led to the left of the union movement and the business community later exploiting his prime ministership to establish a corporatist orientated government in which the interests of independent actors such as craft based unions, small business and farmers were sacrificed.

Left-wing criticisms of the economic rationalism of the Hawke governments tend to give the misimpression that the left of the interests of the left-wing of the ALP were not accommodated. The onset of union amalgamation in the 1980s and 1990s under the Industrial Relations Act 1988 (the 1988 Act), gave the left-wing of the Australian union movement the Marxist inspired structure that they had long sought as craft based unions were either merged into new or existing industry unions or disappeared.

The dividend that the corporate sector desired from the Hawke government in an industrial relations context was reflected by the introduction of enterprise bargaining under the 1988 Act. The adoption of enterprise bargaining was correctly welcomed by most unions because a balance was initially achieved between workplace flexibility and the preservation of employee/union rights via the retention of an award conditions.

However, the overall question that has to be asked regarding the Hawke prime ministership has to be asked: to what extent were the reforms that his government introduced a reflection of his own values or his being a cipher for external forces such as left wing unions/pragmatic unions and big business?

With regard to Hawke’s genuine convictions he was a sincere believer in free trade and said that he believed that it was unrealistic that Australia cut itself off from global trade by maintaining high tariff levels. The desire for free trade was reflected by the Hawke government helping found the Cairns Group of Nations in 1986 which was established with nineteen other predominately agriculturally exporting nations to bring down tariff barriers on agricultural products.

As effective as the Hawke government may have been in promoting free trade, the domestic ill-effects of steep tariff cuts in the 1980s and 1990s was not adequately countered by sufficient job creation. There may have been merit in reducing tariffs to help lower or eliminate their possible *price impacts. However, steep tariff cuts combined, with the infliction of a high interest rate regime (partly caused by accumulating a growing massive foreign public debt) caused many small business failures and contributed growing unemployment and a sense of hopelessness within the community during this period.

(*The decrease in inflation, breaking the ‘inflation stick’, as then Treasurer Paul Keating termed it was cancelled out by the high interest rate regime).

An important reason why possible social unrest or electoral disenchantment with the ALP was avoided during the Hawke-Keating era was because of the Labor government’s Prices and Incomes Accord (the Accord) with the ACTU. The Accord was instrumental in ensuring union wage restraint during this era by delivering ‘social wage’ dividends for lower paid Australian employees such as Medicare as a trade-off.

The Labor Party also avoided electoral retribution due to public wariness with regard to the Liberals which throughout most of this period were beset by leadership division between Andrew Peacock and John Howard. The former undermined his scope for leadership effectiveness by ceding ideological leadership to Howard by endorsing his free market ‘dry’ approach to economics and industrial relations.

The problem for Peacock (who served as federal leader of the Liberal Party between 1983 and 1985 and from 1989 to 1990) was that too many Australians did not accept that he was a conviction politician with the necessary personal strength to effectively lead the nation. Andrew Peacock’s political skills were really as a manager who could have synthesized ideas and philosophies within the then broad church of the Liberal Party to potentially facilitate effective policy outcomes. By trying to project himself as a free marketer (a ‘dry’) Peacock undermined the scope to credibly oppose the ‘economic rationalism’ of the Hawke era effectiveness or to have an alternate moderate (‘wet’) base to counteract Howard as a leadership rival.

Ironies further abounded when Paul Keating as prime minister (1991 to 1996) managed to win the ‘unwinnable’ election of March 1993 for the ALP by running a scare campaign against the super-economic rationalist Dr. John Hewson, the then federal Liberal Party leader. The 1993 ALP election victory was ironic because Keating was philosophically sincere as an ‘economic rationalist’. Even though Keating denounced Dr. Hewson as ‘Captain Zero’ for his advocacy of outright abolishing tariffs his re-elected government actually committed to ‘free trade’.

The great tragedy of Paul Keating was that in having brought of the amazing coup of deposing Hawke in late 1991 and winning the March 1993 election he abysmally failed to move his government in a genuine social democratic policy direction. Keating’s re-elected government, which probably would not have won the 1993 election without union support, even passed legislation that introduced a non-union bargaining stream of enterprise bargaining.

Having devoted so much energy in undertaking essentially neo-liberal reform as Treasurer under Hawke between 1983 and 1991, Keating had probably ‘run out of puff’ as prime minister with regard to adopting a new policy direction which might have secured Labor renewal. Instead Keating as prime minister inflicted politically correct policies between 1993 and 1996, such as in your face *republicanism as high levels of underemployment consolidated.

(*The only benefit of Keating’s republican obsession as prime minister was that it left such a sour after taste with so many people that it was a factor in many voters opposing Australia becoming a republic in the November 1999 referendum).

For all the failings of the Hawke-Keating era their governments avoided the pitfalls of the Whitlam era by having a very successful wages-incomes policy help keep inflation low while maintaining relatively cordial relations with the business community. These two ALP governments were also distinct from Whitlam’s in that they scrupulously avoided illicitly borrowing money or trying to de facto nationalize the nation’s natural resources to secure economic statist control over the economy. Although Hawke and Keating were both anti-state centralists they commendably avoided trying to undermine the economic and constitutional position of states.

John Howard’s Neo-Whitlamism

Strangely enough it was the Howard government which was Whitlamist in its determination to destroy Australian states. Even today Howard would not deny that he favours that Whitlam’s so-called regional plan be adopted in which states are replaced by regions. Where the Howard government was essentially a continuation of the Hawke-Keating era was with regard to pursuing so-called ‘economic rationalist’ policies. This was despite the Howard’s implicit repudiation of them in the March 1996 election in which the coalition was returned to power in a landslide.

Howard’s government might have been a one term wonder had it not been for still bitter memories of the ALP’s ‘economic rationalist’ policies and Keating’s political correctness giving rise to Pauline Hanson’s populist One Nation Party. This extremist party’s vote prevented enough voters returning to Labor that Howard won the October 1998 federal election despite the coalition winning less of the popular vote than the ALP. An important reason why the so many voters turned against the coalition in the this election was that Howard’s declaration that he would introduce a Goods and Services Tax (GST) if re-elected, despite his previous solemn pledge that such a tax would never be introduced by a government he led.

Nevertheless, due to the impact of the 1999 GST in substantially increasing the Commonwealth’s revenue base and its non-inflationary impact, this tax ultimately became the salvation of the Howard-Costello government. This government’s single minded determination to pay off Australia’s massive foreign debt and effective prudential reforms helped make the Australian economy one of the best performing in the world by 2004.

In marked contrast to the Hawke-Keating era the benefits of higher living standards were generally passed onto the Australian people with regard to the achievement of virtually full employment* and substantially lower interest rates. The paying off of the public foreign debt and the GST bonanza also helped Australia reap the benefit of the China minerals booms because there was a more diversified and broader revenue base.

(*’Full employment’ in the context of the Howard era referred to the achievement of substantially reduced unemployment as opposed to full time work. Even today Australia’s work force is bedevilled by high rates of casual and part-time employment).

There were still however black marks against the Howard-Costello government. The industrial relations agenda of this government was essentially a de-unionising one which was manifested by its passage of the Workplace Relations Act 1996 (the 1996 Act) and the Work Choices Act 2006 (No Choices). This legislation effectively abolished award safety minimums and placed unreasonable restrictions on what unions and/or employee representatives could bargain for.

The other reprehensible aspect of the Howard government (which the prime minister was more culpable for than the government’s Treasurer Peter Costello) was its dogmatic determination to abolish Australian states. In one of the greatest instances of poetic justice in Australian political history this policy objective of Howard’s rebounded on him in the October 2007 federal election. This rebound was facilitated by rent-seeking elements within the coalition parties sabotaging Howard’s re-election so that a cipher Rudd government would introduce ‘regionalization’ (sic) on their behalf.

The Struggle for Neo-Whitlamism in the Post-Howard Era

The question arises as to why rent-seeking elements within the coalition parties did not allow Howard to win the 2007 federal election so that he could implement ‘regionalization’ (sic). The answer is that ‘regionalization’ (sic) was only part of their agenda. Coalition rent-seekers also want to see: the adoption of dud super-profits taxation for the mining sector to establish a mining pentarchy, the general ascendancy of the mining sector over the Australian economy and the establishment of Sovereign Wealth Funds (SWFs) as the major drivers of economic activity.

Because it was untenable for a coalition government to implement the above cited rent-seeking policies it was better for an ALP cipher government to do the dirty work. To help ensure that there would not be a credible opponent of these reprehensible policies rent-seeking elements within the Liberal Party tried to con Peter Costello to take the prime ministership from Howard just before the 2007 federal election which they knew the ALP would win to due to their internal sabotage.

Nevertheless, Mr. Costello’s refusal to become Opposition Leader following the 2007 federal election denied the Liberals of the capacity to effectively oppose the Rudd government’s transition to a rentier state. Indeed, the deposition of Malcolm Turnbull in late 2009 was due to his courageous refusal to sell out Australian states. As a result of Abbott becoming the new Liberal leader a rent-seeking agenda has been strongly advanced.

Though the scope for rent-seeking has been set back since Julia Gillard became prime minister in June 2010 the policy settings are still in place due to her minority government’s very reluctant adoption of a carbon tax in November 2011. Even though Prime Minister has courageously brought valuable time for Australia by setting back the scope for implementing rent-seeking the consequent gaps will be addressed by a determined Abbott/Sinodinos* government.

(*New South Wales Senator Arthur Sinodinos was the political mastermind who served as John Howard’s chief of staff between 1997 and 2006. He is now Abbott’s parliamentary secretary and as such, will in conclusion with rent-seeking elements within the ALP, ensure that the coalition wins the next federal election in a landslide).

The current policies that the Gillard government (or a recycled Rudd government) still have to implement for the future Abbott-Sinodinos government are: wheat ‘deregulation’ (sic), the establishment of a press censorship regime as a consequence of the Finkelstein inquiry, implementation of the brazenly destructive Basin Plan for the Murray Darling Basin and refraining from adopting any reform of foreign investment review laws so that PRC SOEs can move in on Australia’s agricultural sector.

If there is to be a recycled Rudd cipher government then it could be expected that the originally intended Resources Super Profits Tax (RSPT) will be adopted. A possible transfer of the prerogative of states to grant mining concessions for coal seam gas exploration could also happen under a recycled Rudd government so that mining companies will have carte blanche over agricultural properties.

Why ‘Regionalization’ (sic) Means Rent-Seeking

Because Prime Minister Gillard has impeded too much of the Abbott/Sinodinos rent-seeking agenda the major undertaking of a future coalition government will be to ‘regionalize’ (sic) Australia. Paradoxically, it will be up to Liberal National Party (LNP) Queensland state MPs and coalition MPs in New South Wales to protect their states from dismemberment by the respective Newman and O’Farrell governments selling out their states in collusion with an Abbott/Sinodinos federal government.

A question that must be asked is why state leaders in the New South Wales and Queensland ALP did not do more to save their parties from near political obliteration? Indeed, the question has to now be asked why it is that there are elements within the federal ALP that are apparently determined to allow Abbott to win the next federal election in a landslide election?

The broad answer to the above question is that there is a widespread belief within the ALP that the federal minister for Employment and Workplace Relations Bill Shorten will lead secure Labor interests in a rentier Australia as the go-between big business and industry unions. From the perspective of rent-seekers within the ALP it is imperative that the recent wipe outs in the New South Wales and Queensland state elections be counter-balanced by Labor establishing an ascendancy in Shorten’s home state of Victoria.

For the above reason it would not be that surprising if the Victorian coalition government of Ted Baillieu were too soon fall or at least lose the 2014 state election. The collusive relationship between rent-seeking elements within the Victorian ALP and Liberals is reflected by political alliances between party factions in the current City of Melbourne local government elections. Since local government was restored to Melbourne in 2001 the Victorian capital has essentially being ruled by a coalition between the Kroger faction of the Liberal Party and the pragmatic Labor Unity faction.

The Kroger Liberal –Labor Unity coalition has been consolidated by a swag of tickets running in the City of Melbourne council elections with tightly cross-preferencing tickets making it virtually impossible for outside political forces to electorally break in. The dynamics of the City of Melbourne elections are interesting because they can denote factional re-alignments within the Victorian Liberals and the state branch of the ALP by respective inter-factional alliances been formed.

The incumbent Melbourne Lord Mayor Robert Doyle was (or perhaps still is) a factional ally of Kroger but now has the endorsement of former Victorian premier Jeff Kennett (1992 to 1999) even though they were once bitter factional enemies within the Victorian Liberals. The national political significance of the Melbourne City elections is that they help determine political alliances within the Victorian elite for a future Australian rentier state.

A major problem for Victoria since the Kennett government’s election in 1992 has been having *metro-centric state governments. Perhaps it is unfair to condemn Kennett for local government amalgamations because they were a legacy he inherited in 1992 from the previous woeful ALP state governments of Premier John Cain (1982-1990) and Joan Kirner (1990-1992). Nevertheless, the Kennett government still undermined the quality of local government democracy as reflected by the amalgamation of the venerable South Melbourne Council into the amalgamated City of Port Phillip.

(*Metro-centric in the Victorian political context means having a state government which concentrates political and economic power in Melbourne, the Victorian capital).

South Melbourne was one of the oldest and most *effective local councils in Australia but was amalgamated into the City of Port Phillip which took in the previous Port Melbourne and St. Kilda councils. As a petty slight to the residents of South Melbourne because of their council’s previous role in supporting Albert Park residents oppose the Melbourne Racing Grand Prix Premier Kennett effectively denied the South Melbourne Town Hall to its residents by giving this building to the Melbourne Conservatory of Music for a nominal fee.

(*The City of South Melbourne led Australia by introducing the first meals on wheels service for its elderly residents).

While South Melbourne residents may have gained the benefit of free music concerts it was still wrong to deny them access to a city hall which was arguably one of the best in Australia. This effective denial of the South Melbourne Town Hall undermined the capacity of local residents to maintain a sense of their specific community identity within the City of Port Phillip.

Indeed, City of Port Phillip local politics have particular relevance within Victorian state politics because this council established a political base for a sub-section of the Socialist Left (SL) of the Victorian ALP. A consequence of this development was the Victorian ALP deliberately losing (albeit by a narrow margin) the 2010 state election so that the parliamentary leadership of state Labor went to a new generation associated with that SL sub-faction.

Due to the Baillieu’s narrow parliamentary majority and widespread public dissatisfaction with his government there is a distinct possibility that the ALP will form a government in Victoria. A political ramification of this development would be that ALP interests would be accommodated as an Abbott government ‘regionalizes’ Australia. This should particularly be the case because the ALP have been consigned to the political wilderness in New South Wales and Queensland for the foreseeable future. Furthermore, the Labor state governments in South Australia and *Tasmania will probably be voted out in their next state elections.

(*In Tasmania the ALP deserve to lose office for having gone into coalition with the Greens. Furthermore, more scrutiny of the Giddings government’s decision to allow the PRC state controlled China Investment Corporation to potentially gain de facto control of twenty dairies in north-western Tasmania.

Australia is now in a position to sell agricultural produce at high prices due to increased international demand. In such a context it is very important that effective foreign investment review processes be in place. Australia is now at the point where international demand for agricultural goods can ensure economic viability in the context of the Global Financial Crisis (GFC). Alas, it seems that at the juncture where vigilance is needed to safeguard the nation’s agricultural interests will be the point at which they will be betrayed in pursuit of a rent-seeking agenda).

The Kroger Liberals will probably not be put out by the formation of an ALP Daniel Andrews led Victorian government because this will be crucial to ensuring that the ‘regionalization’ (sic) process is undertaken. The priority for the Kroger Liberals therefore is that their political interests be accommodated within the City of Melbourne where they are in an effective coalition with Labor Unity.

The current corporatist/factional arrangements between the Kroger Liberals (and perhaps now the Kennett Liberals) and Labor Unity at the Melbourne City Council is a crucial prerequisite in facilitating ‘regionalization’ (sic). Bill Shorten is supported by an extensive business network which has a vested interest in Labor being accommodated by ‘regionalization’ (sic).

Why Inter-Party Collusion is the Antithesis of Australian Democracy

Due to the importance of ‘regionalization’ (sic) in reconfiguring Australian politics it would not be surprising if a Rudd return (which now seems improbable) precipitates the fall of the Baillieu government in Victoria. Such development shows the extent to which Westminster parliamentary democracy at federal and state levels have been undermined in Australia as a result of rent-seeking agendas. An integral principle of the Westminster system is that there being a genuine opposition so that there is a viable democratic alternative that they people can have to their government.

The Australian Commonwealth and states having effective and genuine Westminster systems has been conducive to there being accountable governments which has prevented the major parties from colluding with each other to divide the spoils between them at the public’s expence. This has been a very important constraint in the Australian political context since the 1850s when the Australian *colonies gained parliamentary self-government.

(*Western Australia gained responsible parliamentary government in 1890).

The current situation in Australia is one where rent-seeking elements within the two major parties can arrange the distribution of economic resources to their mutual self-interested benefit. It will be easier for rent-seeking elements within the ALP to sabotage their party’s re-election in 2013 by having Kevin Rudd as prime minister in 2013 instead of Julia Gillard.

However, when it is all said and done, the Gillard government will not be able to win re-election due to the impact of the carbon tax. Because the terrible impact of the carbon tax will be felt until the second economic quarter of 2013 it is imperative from the perspective of the rent-seeking Abbott Liberals that the Gillard government not abolish the carbon tax by immediately moving to a genuine cap and trade, non-inflationary emissions trading scheme. Abbott could therefore have deliberately made the ‘mistake’ in parliament of mis-citing the impact of the carbon tax on a pensioner’s power bill to provide the ALP with a false sense of security so that the Gillard government will retain the carbon tax into 2013.

No nation can be effectively be led by a political leader who re-engineers the country’s economic system to the benefit of self-seeking political elite. The federal Opposition Leader however is unique as a political leader in that he is changing the nation before he has actually come to power. In this regard it is quite wrong to categorize Abbott as relentlessly reactive negative politician because his political impact since becoming Liberal leader in late 2009 has been proactive in terms of changing the nation’s socio-economic and political settings.

Abbott could not be as powerful a politician as he currently is if it was not for the support from rent-seeking elements within the ALP. It was noteworthy that the ABC’s Four Corners programme that aired just prior to the 2009 Liberal leadership change from Malcolm Turnbull to Abbott had Stephen Newnham and Rick Brown of CPI Strategic on it. These two political operatives on this Four Corners programme cited polling which indicated public opposition to an Emissions Trading Scheme (ETS).

With the benefit of hindsight this Four Corners programme was aired to help provide momentum to precipitate a Liberal Party leadership change on the basis of supposed widespread opposition to the ETS model which Malcolm Turnbull had negotiated in good faith with the government and with the prior approval of his partyroom. Having Newnham and Brown on the Four Corners programme was noteworthy because they are respectively linked to the Labor Unity faction in Victoria and the coalition.

Stephen Newnham is a former state secretary of the Victorian ALP who in the 2004 federal election supported an amazing preference stream going to the Family First candidate Steve Fielding to help him win a Victorian Senate seat despite his party’s paltry primary vote. Rick Brown is a former employee of B.A Santamaria’s, the late president of the National Civic Council (NCC). As a Santamaria supporter Brown had sided with the then NCC president in purging his organisation’s union wing in 1982. After the 1982 Santamaria Purge of the NCC, Brown subsequently headed The Council for the National Interest (CNI).

The CNI was an NCC supported organisation which was concerned with defence and foreign policy issues. In the 1990s and 2000s CNI held dinners which were often attended by state and federal coalition MPs. These functions naturally often served as networking opportunities for politicians and businesspeople.

Following Santamaria’s death in February 1998 Rick Brown left the NCC to become a political adviser to the independent Victorian parliamentarian Russel Savage who represented the regional electorate of Mildura in north-western Victoria. Savage and two other independent MPs from regional Victoria secured the balance of power following the October 1999 state election. These three independents gave their support to the ALP which ensured the end of the seven tumultuous years of coalition rule under Jeff Kennett.

An important reason why Kennett lost the 1999 state election was because of widespread dissatisfaction with his government in regional Victoria. The Kennett government continuing the previous ALP state government’s local government amalgamation policy but left its mark by steeply cutting back on services to regional Victoria. These two policy directions caused widespread disillusionment in regional Victoria which was traditionally politically conservative.
Even though Premier Kennett was warned that the ALP were pursuing a strategy to harness discontent against his government in regional Victoria to win the 1999 state election it was too late for him to stave off political defeat. Although most Victorians were stunned by Kennett’s political demise (this surprise did not necessarily mean that most Victorians were upset to see him depart as premier) political insiders were not surprised. The strategic links between Victoria’s Labor Unity faction and the Kroger Liberals were what mattered with regard to engineering political change in Victoria.

The major achievements of the succeeding Victorian state government of Steve Bracks (1999 to 2007) was a reinstatement of the powers of the Auditor-General and ending a stridently anti-union/employee approach to industrial relations that had characterised the Kennett era. Furthermore, the Bracks government studiously avoided squandering the state finances as had occurred under the ALP in Victoria between 1982 and 1992 during the time of the Cain and Kirner governments. The major problem with the Bracks and *Brumby governments was that their inherent caution causing a stultification in public policy that adversely affected business in Victoria.

(*John Brumby, served as Treasurer in the Bracks government and became premier in 2007 after Bracks voluntarily stepped down).

Due to the collusion between the Kroger Liberals and the Labor Unity faction it was perhaps not surprising that in 2001 that the elected City of Melbourne Council was sacked and new elections were held to form a succeeding council. A major justification of the Bracks government for sacking the Melbourne City Council was to prevent political in-fighting by having Lord Mayors directly elected. The quality of local government democracy was further undermined by the abolition of wards for the Melbourne City Council which had been relatively cheaper to run for and more responsive to specific local area needs.

The new method of direct election to the Melbourne City Council since 2001 has effectively been more expensive to run for and given factional heavy weights within the two major parties a greater capacity to collude with regard to preferencing. Even though John So did not come first in the popular vote for mayor in the 2001 Melbourne City Council election the preferencing stream that he belonged to ensured his election victory.

The major impact of de facto Kroger Liberal-Labor Unity rule in Melbourne since 2001 has been the continuing metro-centric focus of successive ALP and Liberal state governments. The national ramifications of factional alignments at Melbourne’s city hall will be that Labor interests will be accommodated to ensure the onset of ‘regionalization’ (sic) under a future Abbott/Sinodinos federal government.

How and Why A Cap and Trade ETS Can Stop Rent-Seeking

The only effective and practical way to now stop the transition to ‘regionalization’ (sic) and rent-seeking is to replace the carbon tax with a cap and trade ETS similar to the CPRS that Malcolm Turnbull had negotiated with the Rudd government in late 2009. Let the December 2012 deadline that rent-seekers within the two major parties have given to replace *Julia Gillard as prime minister with Kevin Rudd be the time frame by which a CPRS replaces the destructive carbon tax.

(*If Julia Gillard is prime minister by the end of 2012 this would make it more difficult for an Abbott/Sinodinos government to establish a rentier state because Rudd would not have returned as prime minister. Nevertheless, an election defeat for Julia Gillard will be unavoidable in 2013 due to the ill-effects of a carbon tax then being apparent).

A move to immediately replace the carbon tax with a cap and trade ETS will encounter strident opposition from the rent-seekers within the major parties and the hypocritical Greens. There is also the major problem of coalition parliamentarians forgoing an inevitable landslide election victory in 2013 by supporting the abolition of the carbon tax before the next federal election. However, the political turmoil that has engulfed Australia since Malcolm Turnbull’s deposition as Opposition Leader in late 2009 (which that Four Corners programme was crucial in facilitating) will be relatively mild compared to the social disruption that a rent-seeking Abbott/Sinodinos government will inflict on Australia.

Australian-Sino Economic History

The other important factor which has contributed to rent-seeking has been the impact of the PRC on Australian domestic politics. The PRC is now Australia’s most important trading partner and along with the United States is the world’s most powerful nation. Many Australians during after the Second World War took a keen and sympathetic interest in China as a nation which was the victim of Japanese militarist aggression. It was therefore a profound shock in Australia when the regime of Chiang Kia-shek fell at the end of 1949 to total defeat to the Chinese Communist Party (CCP).

Even though much of the Liberal Party was anglophile the Menzies government refused to follow Britain’s lead in recognising the PRC in early 1950. It was an article of faith too many within Australia’s new ruling Liberal Party that Chiang Kia-shek was still the legitimate ruler of China. The Liberal government (1968 to 1971) of John Gorton expressed its preparedness to trade with the PRC and to recognise the Beijing government. However neither of these policies eventuated because the Gorton government and that of his successor Billy Mc Mahon (1971 to 1972) would break diplomatic relations with the Republic of China (ROC) on Taiwan which was a prerequisite to formalizing ties with the PRC.

Although Australian diplomatic recognition of the PRC came in early 1973 following Gough Whitlam leading the ALP to election victory in late 1972, Sino-Australian relations were initially not that close. This was due to the over twenty years of estrangement that had existed between the PRC and Australia. Ironically, cordial relations between the PRC and Australia were established under the Liberal Party’s Malcolm Fraser in the 1970s and early 1980s. This was due to Prime Minister Fraser’s hostility towards both a Soviet naval presence in the Pacific and Moscow’s increasingly close alliance Vietnam which had unfortunately united in 1975 under communist rule.

Cordial Sino-Soviet relations continued on under the Hawke and Keating governments (1983 to 1996). The then Chinese Premier Zhao Ziyang visited Canberra (the Australian capital) in May 1983 and Prime Minister Hawke made a reciprocal visit to the PRC in February 1984. These visits helped clear the way for Australia to export steel to the PRC.

Australian diplomatic and economic ties were (and still are) very important to the PRC because the export of raw materials helped China industrialize as part of the market reforms of China’s Deng Xiao-ping. The market reforms of the PRC’s late paramount leader (who died in February 1997) were not however intended to establish a predominately market economy. Deng still ensured that the state had a predominant influence over the economy through SOEs and government having the right to dictate to employers the hiring of staff so as to keep unemployment down.

PRC Preventative Maintenance: Making Haste Slowly

Deng’s version of market socialism ensured that major regional economic disparities did not develop and that mass poverty did not ensue as the PRC moved away from Mao’s ‘iron rice bowl’. The hybrid socialist-capitalist approach nevertheless caused inflationary pressures which crucially contributed to the outbreak of national demonstrations in 1989, the suppression of this unrest and a temporary reversion to centralized planning.

Ironically, despite Deng’s determination to avoid regional economic discrepancies developing he made a political come back by kick starting market reform in the southern coastal provinces after touring them in February 1992. A contributing factor which made this re-launch of economic market reform viable was the impact of globalization in liberalizing international trade.

Despite the fundamental importance of globalization to the PRC’s economic growth rates it would be incorrect to assume that China is going to ever (or should ever) become a laissez faire market economy which would mean economic dislocation for such a vast nation. Consequent dislocations from the PRC having an unfettered market economy could be mass unemployment, widespread poverty and high inflation. The scope for such terrible outcomes could occur as an overall result of an absence of a co-ordinating state authority.

The PRC could adopt its version of a co-ordinated market similar but still distinct for Japan’s. The Japanese state through brilliant technocrats setting broad guidelines for companies with regard to export strategies, the instituting of effective prudential banking controls and supporting small and medium businesses as the drivers of employment growth has ensured that Japan is one of the world’s leading economic powers despite a virtual absence of raw materials.

The PRC could undertake a transition from a mercantile Leninist system of overall statist control a co-ordinated market economy by undertaking political and economic reform following the selection of a new generation of leaders at the CCP’s eighteenth Congress in November 2012. Important reforms that China’s next generation of leaders could consider over the next ten years would be the recognition of private property rights to encourage investment certainty.

Recognition of property rights would prevent the state from evicting residents from their homes at the behest of corrupt building developers with business links to the CCP. The institution of local government elections on a non-party basis through China in addition to some rural villages would an important check against potential social unrest.

Having elected nationwide local government would establish a basis for a future multi-party party system (which would hopefully become a two party system) being established after 2017. In the interim elected local government could provide a basis for public involvement in the running the state so that there could be evolutionary but still engineered political reform from above. Initially non-party elected local government would also provide a basis for transparent governance which could prevent social unrest from below by effectively safeguarding against corruption.

Another important dimension for socio-economic and political reform in the PRC would be for the state to recognise and respect genuine labour rights. Recent labour unrest at Foxconn plants in China is a possible harbinger of social unrest that could ultimately threaten national unity. Despite the influence of corrupt business interests currently within the CCP the Beijing regime is not actually beholden to a shadowy elite that would necessarily be hostile to an independent organised union movement.

Authoritarian regimes that want to transition to more democratic systems can vitally help establish the groundwork by pre-emptively fostering labour reform. The most vividly successful example of a nation that benefited from the recognition of labour rights was the Republic of Korea (South Korea).

A paradox of the South Korean the military backed regime of President Chun Doo Won (1980 to 1988) was that it allowed independent labour unions to form in 1987 as broader student led democracy protests swept the nation. The intensely anti-communist President Chun correctly feared that workers would link up with the student protesters which South Korea’s excellent intelligence services informed him had links to North Korea.

The formation of independent unions in South Korea between 1986 and 1987 that were free from North Korean linked student groups has ensured that South Korea now has enterprise based trade unions similar to Japan’s. There are of course inherent problems with regard to enterprise based unions in their being sufficiently independent from the companies. Nevertheless, the South Korean state is sufficiently independent in its role within the industrial relations system that unions now have sufficient scope to effectively represent their member’s genuine interests.

South Korean trade unionism has been discredited by the long time dominance of the military in national politics between 1961 and 1988. During this period the tame cat Federation of Korean Trade Unions (FKTU) had a virtual monopoly in representing South Korean employees. The FKTU’s legacy is such that just over 10% of Korean employees are currently unionised.

Perhaps in a future PRC context union membership might be similarly relatively low because Chinse trade unionism is presently dominated by the state controlled All China Federation of Trade Unions (ACFTU). Not only has this union confederation have an unfair legal monopoly in representing Chinese employees but it is structured according to the Marxist model of industry unionism.

The predominance of industry unions in the PRC by stifling the establishment of smaller craft based unions has consequently undermined the scope for union democracy. The ACFTU is therefore effectively a transmission belt for the CCP which has ironically led to instances of government instigated industrial action against foreign owned businesses.

A notable example of this phenomenon has been ACFTU supported strikes against the supermarket chain Aldi occurring in order to help keep this company in line with government policies. While state controlled unionism in the PRC can have its interesting paradoxes, internal contradictions can later emerge which could be adverse to China’s genuine national interest.

The major structural problem with state controlled unionism is that they do not legitimately represent their members’ interests due to a lack of independence from the state and internal democracy. Dissatisfaction with this state of affairs has been manifested by a slew of independent but illegal trade unions been formed despite extensive state oppression which is ultimately unnecessary.

If the Chinese state can instigate industrial action to maintain control over private capital then the ACFTU unions can genuinely represent their members’ interests within an impartial industrial relations system. Although the right to strike was strictly forbidden in Spain under Generalissimo Franco, state sanctioned Labour Guilds (which were officially known as Commissions) had extensive powers to ensure that employers complied with labour regulations, such as those concerned with unfair dismissal. In this context Labour Guilds were independent actors within the Francoist political system.

Spanish Labour Guilds under Franco were an example of how ‘actors’ within an authoritarian state’s industrial relations system could be independent and as such help lay the groundwork for a subsequent pluralist democracy. The granting of pre-existing labour rights in the PRC could be the basis for the establishment of a two party model in twenty to thirty years time.

Although the Spanish Socialist Workers’ Party (PSOE), one of Spain’s two major nationwide parties, is not the descendant of the Francoist Labour Guilds, a future labour based social democratic party in the PRC could be descended from an independent ACFTU affiliates. Such a party could provide a sense of unity that transcends ethnic and regional differences within a nation as vast as the PRC. A vital prerequisite for such an important political development would be for the PRC state to at least allow ACFTU members to independently elect workplace delegates.

Democratization: Preventative Maintenance Against Nations Becoming Failed States

Alternatively, ruling bureaucratic parties in one-party states by paradoxically becoming independent actors can threaten transitions to democracy. The east African nation of Somalia was a vivid example of a ruling statist party sabotaging a transition to multi-party democracy and in so doing laying the groundwork for a failed state.

Somalian President Siad Barre in a televised addressed in 1990 announced his intention to legalize opposition parties. Members of the ostensible ruling Marxist-Leninist ruling party, the Somali Revolutionary Socialist Party (SRSP) organised a rally in the capital Mogadishu in supposed opposition to the president’s avowed decision to end one-party rule.

Whether the SRPS rally was really independent is a moot point because it demonstrated how members of ruling parties in one party states can become animated if their power is threatened. Ironically, this did not happen in the Soviet Union because the Communist Party of the Soviet Union (CPSU) by 1991 had become such a bureaucratic and regimented organisation it had next to no *independent capacity to survive after it was separated from the state.

(*A Russian Communist Party (RCP) as a successor to the CPSU apparat was formed in 1992 and was initially viable due to the stalwart support of pensioners. The RCP is now a viable party because it has been co-opted into the political establishment of a rentier state).

The CPSU fulfilled a central role in a totalitarian system in proselytising, propagandising and providing a bureaucrat caste to administer a state in which there was no private property or independent labour rights. The extent to which the CPSU stifled the existence of civil society varied in the Soviet era between 1917 and 1991. Despite the central role of the CPSU in the Soviet state this party consistently lacked a capacity for independent organisation within its middle or lower ranks.

The organisations which had agency for creative political action within the Soviet state were the Committee for State Security (the KGB) and the Main Intelligence Directorate of the General Staff (*GRU). The paradox of these two agencies effectively safeguarding CPSU rule was that they were more proactive and organisationally effective than the actual ruling party. The scope for proactive leadership from the CPSU came from its ruling politburo which during the Khrushchev, Brezhnev and Gorbachev eras more often than made decisions based upon KGB and GRU intelligence reports.

(*The GRU still functions as the Russian Federation’s major domestic intelligence agency and is possibly even more effective than the FSB, the Federal Security Service, which succeeded the KGB in 1991. The overall effectiveness of the GRU and the FSB has provided the Putin regime with a formidable capacity to master a range of monumental domestic and international challenges. An important distinguishing aspect from the Soviet era is the capacity of these two agencies is that they assess situations in a more objective context).

The power of the CPSU inevitably withered due to onset of Glasnost (Openness) and Perestroika (Reconstruction) during the Gorbachev era (1985 to 1991). These two policy directions were vital in precipitating the re-emergence of an independent civil society within the member states of the Soviet Union.

Dengism: Pragmatism Secures Chinese National Unity

Deng Xiao-ping at the time of the Sino-Soviet Split in 1961 astutely observed that the Soviet model of socialism was too rigid that its application in a Chinese context would lead to domestic ruin for the CCP. The PRC’s future paramount leader did however not realize at this time that the People’s Liberation Army (PLA) adherence to Maoist military doctrines gave the Soviets a distinct military advantage. Nevertheless, Mao’s transitionary successor Hua Guofeng appreciated Deng’s analysis that the structural weaknesses within the Soviet system would precipitate its eventual collapse. Hua presciently predicted the collapse of the Soviet empire in a speech at a banquet held in his honour in Roumania in August 1978.

Mao himself had failed to re-impose a centralist Stalinist model of socialism in the 1960s. The PRC leader ironically unleashed the anarchy of the Cultural Revolution in 1966 as a cynical and practical means of purging the CCP which had become too domestically pragmatic as a result of the Sino-Soviet Split. The impact of the Cultural Revolution on the CCP by 1969 was that it had disintegrated organisationally to effectively be an appendage of the PLA.

The CCP might have been restructured as a Stalinist type of party had Mao not fallen out with the Defence Minister Marshal Lin Biao in 1971. This caused the CCP Chairman to support the initiative of Premier Chou En-lai to seek a rapprochement with the United States in 1972. Furthermore, the PLA itself as a result of Maoist ideological doctrine that the army must always be subordinate to the party refused to assume a direct role in ruling China. This resulted in the paradox of the army being loyal to a party which practically did not exist. This reticence on the part of the military might have derived from its determination to avoid the dangerous pitfall of warlordism.

With the support of the PLA Deng established his undisputed political leadership supremacy in late 1978. Integral to Deng’s ascendancy was his success in re-establishing a viable CCP to actually administer if not rule China. This political accomplishment was consolidated in 1982 by Deng effectively promulgating a new national and party constitution which by introducing strict two five year term limits for party and national leaders all but guaranteed that the PRC would never again be inflicted by personalized rule.

The scope for the PRC to eventually advance beyond one party rule was almost aborted by the Tiananmen Square Massacre of June 1989. This unrest had occurred due to economic reform going awry as a result of the internal contradictions of market reform been undertaken within an a Leninist political system.

The potentially contradiction of market economics existing within a Leninist political system was overcome by Deng extending the power of the CCP’s Central Organization Department (COD) to it becoming an octopus type operation. The COD’s (no pun intended) role was expanded from maintaining internal discipline and guarding against infiltration of the CCP to being the agency which extended the power and influence into an array of privately owned businesses and SOEs.

Due to the formidable effectiveness of the COD the PRC has retained a predominately statist economy despite the extensive existence of private capital. Talented technocrats have also provide the COD with an adept planning capacity which is possibly even more formidable that of Japan’s previous Ministry of International Trade and Industry (MITI).

The market socialist model that Deng bequeathed has effectively operated to date but a transition to a co-ordinated market economy similar to Japan’s should not be ruled out. The high growth rates that have been achieved are predicated upon the PRC gaining access to raw materials through foreign trade. Unfortunately, a fine line may be crossed in the future where PRC military power and external political muscle is used to attempt to coerce resources from other nations.

The above win-lose approach in PRC foreign and trading policy might ultimately lead to ‘lose-lose’ outcomes. The GFC phenomenon is such that international conflict and a division of the world into artificial power blocs is no longer viable. The PRC eventually triumphed over the Soviet Union because the PLA supported pragmatic CCP leadership which internally strengthened the PRC while the Red Army remained wedded to the CPSU until it had become an apparatus as opposed to a vanguard party.

Furthermore, a PLA which is focused on supporting an aggressive foreign and trade policy will also be more inclined toward supporting a moronic and corrupt party leadership similar to the Yugoslav/Serbian precedent of the 1990s. The PRC as the world’s most populous nation is a super power in its own right. Therefore the PLA’s traditional focus on maintaining national unity by refraining from directly ruling the nation is the secret to the PRC being a super-power in its own right.

Chinese history since ancient times as the Middle Kingdom has illustrated the wisdom of the military deliberately subordinating to civil authority to maintain national cohesion. Ruling dynasties went into decline as the importance of scholars was downgraded and military men consequently came to the fore to crush revolts and/or fight wars. Often the emergence of a powerful general heralded his founding a new dynasty. The fact that China (with reference to both the PRC and the ROC) is now a republic is due to the success of the traitor General Yuan Shi-kia succeeding in bringing down the Ching dynasty in 1912 but ignominiously failing to establish his own imperial dynasty in 1916.

Why A Professional Military Should Uphold Honesty in Government to Guarantee Chinese National Unity

Due to the PLA’s staunch commitment to maintaining civilian rule under the auspices of the CCP Chinese national unity is not imperilled. However, the military should be aware that the nature of one-party rule is such that rigidity in public policy and the scope for corruption are inherent dangers because of the absence of public accountability mechanisms.

Nevertheless, the PRC remained viable when the CCP all but disintegrated during the Cultural Revolution (1966 to 1976) because the PLA remained a cohesive force due to its concern regarding possible Soviet aggression. The contemporary threats to Chinese national unity by contrast are less tangibly apparent. The opaque long term threats to Chinese national unity are: corruption, labour unrest, ethnic separatism and the structural weaknesses inherent in administering a vast centrally controlled economy.

The major assets that the PRC has in countering the above cited challenges are an extensive and talented civil service/ bureaucracy and a professionally orientated armed forces. Consequently the PLA can continue to ensure Chinese national unity by supporting the selection at the CCP’s eighteenth party Congress in November 2012 of honest and brilliant national leaders.

A possible innovation that the PLA and the CCP’s senior leadership could consider adopting to promote honest and effective governance would be the establishment of an Examination Yuan similar to what Sun-Yet sen had conceptualized and which Chiang Kia-shek had nominally established. The Examination Yuan was supposed to be a branch of the state empowered to act independently against corruption by government officials regardless of their seniority.

A contemporary equivalent of a national Examination Yuan headed by a prestigious and scrupulously honest retired general or marshal would be a powerful force to safeguard against corruption while upholding the prestige of the state. The existence of the equivalent of examination yuans at provincial and local government levels would also contribute to combating the potential political cancer of corruption. An important reason why the Soviet system failed was that the absence of anti-corruption state agencies helped create a corrupt nomenklatura which eventually caused a fatal disconnect between the ruling party elite and the wider public.

The National People’s Congress: Power Without Democracy?

The question therefore arises as to who the equivalent of examination yuans will be accountable to in a political system without popular sovereignty? A national examination yuan type agency could be responsible to the National People’s Congress (NPC). The NPC is the PRC’s prestigious but still essentially powerless national legislature which has existed since 1954, with the exception of the aberration of the Cultural Revolution.

In contrast to the Soviet Union’s legislature, the Supreme Soviet, which was directly elected in sham one-party elections up until March 1989, the NPC is composed of 3000 indirectly ‘elected’ delegates. NPC delegates are chosen by provincial people’s assemblies which in turn are selected by local municipal assembles. Although the members of municipal assemblies are composed of directly elected candidates, who often ran as independents, they are all still vetted by the CPP who invariably select for candidates that are in turn chosen to become provincial legislature delegates.

The ramification of such indirect democracy is that the contemporary NPC lacks the capacity to meaningfully contribute to the maintenance of Chinese national unity. This state of affairs contrasts to the NPC’s institutional predecessor, the People’s Political Consultative Conference (PPCC).

The PPCC that was formed in September 1949 was a promising political institution which was composed of representatives from a broad cross-section of society who were dissatisfied with Chinese Nationalist Party (KMT) rule under Chiang Kia-shek. Appreciating the communist popular front strategy of harnessing widespread discontent Mao gained substantial, if not majority, support amongst the middle class during the Chinese Civil War between 1946 and 1949.

Accordingly representatives from non-communist parties such as the China Democratic League and the KMT Revolutionary Circle joined the PPCC to fulfil an important, if subordinate role, in the PRC under the leadership of the CCP. The important role that this section of society expected to have was reflected by one of the four smaller stars on the PRC’s new flag representing the so-called ‘patriotic bourgeoisie’.

Indeed, during the first five years of the PRC (1949 to 1954) the PPCC practically facilitated the CCP aligned parties actually participating in governing the state.

However, with the influx of Soviet trained CCP cadres the PPCC was replaced by the NPC in 1954 as the nation’s legislature. This development heralded that political power would hence be concentrated with the CCP as a ruling Marxist-Leninist vanguard party. The once naïve hope that the CCP would really share power, which for a period of time had actually being a reality, became a distant memory and a testament of what could have been.

The *PPCC 1949 to 1954 precedent shows how the NPC can be reformed to help govern the PRC effectively as the domestic and international complexities of China being an economic superpower render the ‘power-over’ approach by the Standing Committee of the Politburo and the COD ultimately unviable in the long run. It would therefore not go amiss for the CCP to now engineer the ‘election’ of top quality NPC and provincial assembly delegates to establish the groundwork for future lateral reform/

(*The PPCC still exists as a forum for Chinese citizens and representatives of non-Han communities who accept the PRC’s legitimacy but want to operate outside the auspices of the CCP. The ‘Last Emperor’ (sic) Pu Yi’s membership of the PPCC between 1962 and 1966 was a message from the central government to the Manchu minority that lived along the Sino-Soviet border that their allegiance should be to the PRC).

The selection of high quality legislative delegates by the CCP (at an initial stage) could provide the basis for specialized committees to be formed so that pressing national issues could be addressed by a combination of specialized knowledge and/or grass roots experience. Instead of the NPC, or the equivalent of provincial legislatures, merely rubber stamping by acclamation government and bureaucratic decisions from on high at yearly sessions, social action between legislative sessions could be integrated at both national and provincial levels.

Social action is the combination of analysing problems to overcome them at a practical level. Specialized NPC sub-committees could be formed to facilitate social action to overcome a wide range of national issues during the five year term of the national legislature. Consequently, there would be a need for employing NPC support staff to vitally assist in the operation of such committees. Legal guarantees would also have to be in place to ensure that citizens who appeared before NPC specialized committees or made submissions would be able to freely express their opinions on the relevant issues of concern.

Furthermore, processes would hopefully be developed by which NPC committee findings meaningfully contributed to the formulation of public policy. The merit or otherwise of the NPC’s role in really contributing to the governing of the PRC could be assessed in terms of the public policy that is subsequently implemented.

An important issue that the NPC, and/or a specialized sub-committee, might address would be that of corporate governance. This is of particular concern to the PRC because its particular model of socialism is one where the state through SWFs has a capacity to determine the business direction of major companies. A positive ramification of this state capacity to regulate labour practices has been the avoidance of mass unemployment. An alternate negative flip side is that state central direction over corporate business is the undermining of the operation of supply and demand has prevented the scope for there to be self-correcting market mechanisms.

The resulting potential danger for a mis-direction of resources has been overcome to date by the PRC pursuing a successful mercantilist international trade policy which has facilitated a reliable supply of raw materials for planning purposes. However, foreign trade should inherently be mutually advantageous so that international tension, which at its worst can entail *armed conflict, is avoided. In this context Japan offers a model where the PRC can balance the need for a strong central authority to maintain social and economic stability with the flexibility needed to avoid domestic and international discord.

(*Any armed conflict between major economic powers such as the PRC and Japan in the context of the GFC will be catastrophic for the world economy).

A Co-ordinated Economy?: Economic Power Without Coercion

Major Japanese corporations have successfully co-ordinated with the state to make astute investments which have invaluably underpinned Japan’s international trading position. A secret of this success has been the striking of a balance between the Japanese state respecting the autonomy of corporations while broadly aligning their strategic objectives to the nation’s economic viability and prosperity. How this amazing balance is achieved is probably intertwined with Japanese government agencies supplying intelligence and assessments as to how corporations can best align their interests as far as possible with those of the host nation.

The ‘win-win’ approach of Japanese corporations and the state broadly correlates with a ‘power-with’ approach as opposed to ‘power-over’ approach which is conducive to a ‘win-lose’ approach. This latter approach in the context of international trade is potentially dangerous because it undermines the scope for flexibility and to have fall back contingencies should emergencies arise.

A scenario could develop that if the PRC pursued a ‘power-over/win-lose’ approach toward trade with an Australian rentier state led by an Abbott-Sinodinos government that a crisis could ensue which would rebound on a still mercantilist China. The long-standing reason why Australia has been such an excellent and reliable trade partner with regard to exporting raw and primary materials has been the nation’s socio-economic stability.

If an Abbott-Sinodinos rent-seeking government helped engineer a situation where PRC SOEs backed corporate farms dominated the agricultural sector then the social stability that has traditionally made Australia such an attractive investment option would be jeopardized. Therefore it would not hurt if the PRC was amenable toward reforming its corporate governance so that Chinese corporations had more autonomy. This would expand the scope for PRC corporations to be more inclined toward entering into ‘win-win/power –with’ scenarios in regard to investment and trading opportunities with primary product exporting nations such as Australia.

The ‘win-win’/’power-with’ approach is more conducive to a variation of the gestalt philosophy to management as espoused by the American political scientist Mary Parker Follett (1868-1933). She advocated the law of the situation concept as the basis upon which executive authority is derived from accurately assessing a situation.

As a natural resource poor nation Japanese corporations have more often than not applied a law of the situation approach. This has crucially helped Tokyo bureaucrats concerned with the nation’s overall trading and financial situation to make lateral qualitative assessments as opposed to quantitative ones which more often than not negate the need to make contingencies or to have a fall back. Presently, because the political economy of the PRC is orientated toward a ‘power-over’ in trade relations, unforseen domestic crises in nations such as Australia could ultimately adversely rebound on mainland China.

In contrast to the *PRC’s power-over Leninist mercantilist model Japan’s post-1945 political economy is crucially more conducive to effectively trading with other countries on a flexible basis and to superbly utilize foreign investment opportunities on ‘win-win’ basis. An important reason why these two inter-related outcomes were achieved was because many skilled bureaucrats between the 1950s and 1990s amicably left the civil service to join factions of the dominant Liberal Democratic Party (LDP) which represented specific policy interests.

(A PRC Gold Standard?)

(*Nevertheless, a major comparative advantage of the PRC’s current socio-economic and political system has is the capacity to formulate and crucially implement long-term contingency plans to head off potential disasters. A manifestation of such a comparative advantage is the PRC’s policy on gold. The Beijing government is encouraging the domestic mining of gold and its citizens and Chinese communities abroad to purchase this precious commodity.

This PRC emphasis on gold acquisition is being undertaken as a contingency in case that the value of shares on stock markets around the world disintegrate in the event of the EU and the United States failing to put their ‘economic houses’ in order. The development of a Chinese contemporary equivalent of a ‘gold standard’ is an ‘insurance policy’ against the American dollar losing its status as the world’s de facto reserve currency.

The above cited scenario is a very frightening and immediate prospect because under a possible Romney presidency the American federal government for political reasons would and could not expeditiously tax the top bracket of income earners. As a result revenue could not be raised in time to start to substantially pay down the United States’ colossal public foreign debt and budget deficit. Such a time lag ultimately threatens the credit worthiness of American Treasury bonds and therefore the American dollar. Although stock markets around the world are currently rallying this may actually be the calm before the storm should Governor Romney win the presidency in November).

‘Power-With’: A Dominant Ruling Party Democracy?

This is not to say that the LDP consequently became a technocratic top heavy political party. For instance former bureaucrats from the agricultural ministry who joined the LDP entered the specific party faction which represented the interests of farmers. Consequently, there was a synthesis between the technical skill of the former bureaucrats with those party faction members who had specialized knowledge and experiences in the agricultural sector.

It was therefore acceptable for specific LDP factions to have open and direct links to the relevant government departments and to business corporations which covered their socio-economic concerns. There was consequently a close connection between LDP factions and business corporations which led to corruption scandals (such as the Lockheed bribery scandal of the 1970s). Nevertheless, the political economic model that developed for post-war Japan was still brilliantly successful because there was a focus on achieving the practical results of high employment and financial credit worthiness.

It is not impossible for the PRC to achieve its own synthesis between party, business and civil society to ensure a wide ranging nexus between economic prosperity, domestic social stability, harmonious international relations and above all, guaranteed national unity. A revamping to the NPC could crucially help the CCP achieve such interrelated outcomes to establish the basis for further political reform over the next fifteen to twenty years after 2012.

Going Over The American Fiscal Cliff ?:Why Time is of The Essence

A major challenge with regard to the PRC achieving the above cited future outcomes is the prospect of the United States falling over the fiscal cliff in 2013. This is a distinct possibility if Mitt Romney wins the American presidency this November year. It is difficult to envisage how the PRC and other nations will be able to avoid international catastrophe due to the inter-connectedness of the global economy.

The economic crisis that simultaneously confronts the United States and the world is the fact that America has a cumulative sovereign public foreign debt of over 16 trillion US dollars!!! If the American dollar loses its status as the world’s de facto reserve currency then there could be an international economic collapse. The paradox of the GFC is that due to the economic and fiscal anxiety that exists the American dollar has become more important as international investors and overseas governments, particularly the PRC and Japan, buy US Treasury bonds.

A major danger is that should another major American financial institution (such as occurred with Lehman Brothers) collapse with the United States government lacking sufficient capital to redeem the situation then a financial contagion could ensue in which the American dollar and Treasury bonds lose their value. Such a scenario will probably not happen in the next six months to a year but as time elapses in which the United State’s foreign debt and budget deficit (which is already over one trillion dollars!) is not paid down then the chances of economic catastrophe consequently increase.

The Romney-Ryan strategic approach of deeply cutting spending and taxes will just take too long to either effectively reduce the budget deficit and America’s foreign debt that the United States will have no effective fall back should another major domestic financial institution collapse. Then there is the pending threat of the eurozone crisis! Within twelve to eighteen months Europe will need a United States that is approximating financial solvency as its fall back. In the interim the EU could help its own cause and the global economy by economically powerful member states such as Germany vitally helping to guarantee eurobonds to cover the debts of European financial institutions and of near insolvent sovereign governments.

Due to time critical urgency the only practical way for the United States government to pay off debts is to raise taxes on the wealthy who can afford to pay them and would ultimately benefit! It is as simple and as complex as that! The United States has such an incredible private sector that this nation can actually expeditiously pay off or substantially reduce its public foreign debt and budget deficit. All that is required is the political will to do so.

Governor Mitt Romney cannot raise taxes to quickly fiscally rescue the United States and the world from an economic catastrophe because he is too beholden to political interests who are adamantly opposed to any substantial tax increases. There may have been a time when those powerful and rich Americans with middle class backing could get away with not increasing taxes by keeping entitlement spending down. Indeed, such a policy mix could be (as it was the case in the 1980s under President Reagan) conducive to economic prosperity by tax cuts actually crucially helping stimulate high economic growth rates as a result of higher levels of disposable income.

The profound uncertainty of the GFC means that American consumers and financial institutions lack sufficient confidence to stimulate sufficient economic growth by either spending or borrowing. A Romney-Ryan administration would undoubtedly cut entitlement spending which besides being socially unjust, would further deflate an already generally sluggish economy.

The Romney-Ryan ticket is citing the success of the 1981-1982 Reagan tax cuts as the model by which the United States enjoyed a spectacular economic recovery commencing in 1983. However, economic times and economic circumstances are different between now and the Reagan administration that an overview of this earlier period in American history is warranted to establish why transferability is not assured.

It is true that under the Reagan administration (1981 to 1989) social services were cut but not as extensively as some ideological monetarists desired. This was due to resistance from the Democrat Congress and because of President Reagan’s concern for less well of Americans, which American liberals such as then Speaker Thomas ‘Tip’ O’Neill refused to ever acknowledge. Furthermore, spending cuts under the Reagan administration did not have as adverse an impact as might have been expected due to the counter-effect of there being a re-invigorated employment generating employment sector.

Consequently, doom and gloom commentary by many academics and media around the world during the respective Reagan and George Herbert Bush presidencies that the United States was in irreversible decline due to its high foreign debt and budget deficit was found to be *unfounded.

(*To try consolidate the perspective that the Reagan administration was a colossal failure the British satirical magazine Punch in early 1989 had a front cover cartoon entitled Dropping the Ronnie. This cover portrayed an outgoing President Reagan walking down the ships stairs of a ship representing the United States with George H Bush looking on as the new incoming president.

The 1989 cartoon was a take on Punch’s most famous cartoon Dropping the Pilot. This 1890 sketch had a recently dismissed Chancellor Otto von Bismarck disembarking from a ship representing Germany with an inappropriately smug Kaiser Wilhelm II looking on. The earlier 1890 Punch cartoon was prophetic because it presciently conveyed that Wilhelm II would be unable to steer the massive ship which represented the German empire).

The American version by contrast had the equivalent scene set underwater to communicate that the United States had already sunk under the failed leadership of Ronald Reagan. This cartoon was indicative of how the western media and academia in the late 1980s gleefully trumpeted that that the United States was a failed super-power whose national leadership was woeful in comparison to that of a Mikhail Gorbachev led Soviet Union. It was therefore ironic that by the end of 1989 the Soviet bloc had effectively disintegrated and the United States maintained its super-power status).

The overriding difference between the contemporary United States and the Reagan era was that there was not a profound international credit crisis with an array of industrialized nations burdened with sovereign debt and a precarious international banking system. Thankfully the United States still has an innovative and productive private sector which had the economic crisis being largely confined to America there probably now would have been a full economic recovery.

The provision of bail out funds/loans by the Obama administration to substantial components of the American economy, such as the auto industry in Detroit, staved off an economic collapse the ramification of which could have been possibly worse than the Great Depression of the 1930s. Such interventions by the Obama administration were successful in themselves not only in avoiding catastrophe but also in invigorating an inherently strong American private sector. This strength was reflected by the relative speed with which American car corporations have repaid government *loans.

(*An important reason why the United States is on the ‘right track’ with regard to corporations promptly repaying government loans is because of the effective regulatory environment which the 2010 Frank-Dodd Act has crucially helped establish. Dangerously Governor Romney is committed himself to repeal this legislation on the specious basis that this would help establish new and smaller banks to promote economic growth.

The interconnection between capital credit expansion and employment is valid. However a repeal of the Dodd-Frank Act will remove the necessary regulatory controls that addressed the gaps which helped cause the 2008 GFC. The transparency mechanisms and prudential regulations of the Dodd-Frank Act not only offer a practical means of avoiding a repeat of the factors that originally caused the GFC but a realistic prospect of new pro-small business banks been formed.

By contrast a repeal of the Dodd-Frank Act under a Romney administration creates the frightening scope to allow the big banks to throw off regulatory oversight which in the contemporary context of the GFC could be fatal to the world economy).

The important role that the Obama administration has also fulfilled in rescuing many mortgagees from default has also been vital in preventing a wider economic collapse. The Obama administration’s stimulus packages (in contrast to those in Australia which were deliberately introduced to in-debt the nation to establish the basis for a rentier state) also helped generate domestic economic activity which has contributed to five million jobs been created since 2009.

Due to the context of the GFC, particularly the eurozone crisis, international growth has been stagnant which has helped stifle domestic international growth in the United States. This is an important reason why the United States’ official unemployment rate is over 8% with accompanying high levels of underemployment.

The fundamental problem that the Obama administration has not yet effectively addressed is that of the United State’s foreign debt and the budget deficit. These two issues have to be urgently addressed by raising taxes on wealthy Americans and judiciously cutting spending without deflating demand. To date the Obama administration has preserved America’s overall economic viability by adroit spending to both stave off financial collapse and to maintain viable domestic levels of demand. Unfortunately, but perhaps out of political necessity, such spending has mainly being derived from borrowing.

Domestic and foreign borrowing by the American government has been viable due to the financial wizardry of Treasury Secretary Timothy Geithner. However, when a nation borrows more than it bring in, then something has to eventually give. The two important ‘ifs’ with regard to a possible second Obama administration will be whether it will successfully re-configure the tax system in expeditious collaboration with the new Congress and if co-ordinated action with the EU will be undertaken to overcome the eurozone debt crisis.

The GFC Fiscal Cliff?: Why Time is of the Essence for the World Economy

The raising of taxes to pay down sufficient public foreign debt and the deficit is a must if there is to be a successful second Obama administration. In France the government of Francois Hollande is raising taxes to rein in-debt and to spend money to stimulate employment growth. It is notable that such a policy approach is being undertaken in contemporary France because this nation was previously convulsed by nearly two hundred years of political turmoil commencing with the budget crises of the 1760s and ending in 1969 with Charles De Gaulle’s *resignation.

(*The April 1969 De Gaulle resignation paradoxically consolidated a stable democracy by showing that the Fifth Republic could survive the departure of its illustrious founder).

The Hollande government is also establishing itself as effective by distinguishing itself from the Merkel government in Germany which still has within it a strong orientation within it toward a ‘power-over’ approach in overcoming the eurozone debt crisis. There have even been suggestions from Germany that the EU appoint a ‘Tsar’ or super-commissioner with the power to enforce austerity measures in the so-called *PIGS nations. However, an overview of modern German history indicates the perils of a trying to impose socio-economic systems on other nations.

(*These nations are Portugal, Ireland, Italy, Greece and Spain).

Modern Germany has a history of devising marvellously efficient domestic economic systems that are both productive and orientated towards achieving positive social outcomes such as high employment. The drawback has often been that there have been times when German governments and bureaucrats have made assumptions that their systems and mind-sets can be applied to other countries. The contemporary GFC is a prime example of this paradigm as it is virtually impossible for a service based nation such as Greece to regain financial viability via the imposition of onerous austerity measures.

An argument could be made that if the so-called PIGS nations were so fiscally irresponsible that they do not deserved to be bailed out with out at least undertaking substantial austerities to receive funds from EU industrial power houses such as Germany. Such a perspective could be countered by point that German and French governments in the 1980s and 1990s should not have over-centralized the EU by virtually imposing a single currency on member nations with distinctly different economic systems.

Even where there was economic/industrial commonality between EU nations such as France and Italy (with regard to the industrialized north) to possibly justify a single currency the foregoing of institutional separation undermined the scope for maintaining sufficient economic flexibility.

The paradox of the contemporary eurozone crisis is that even though structural inadequacies within the EU have significantly contributed to the dangerous situation this international organisation can still save Europe and the world from a possible economic collapse. A comprehensive, co-ordinated and considered policy of EU nations issuing the equivalent of EU Treasury bonds to cover existing government and private bank debts of member nations must be devised and implemented by the end of 2012 at the latest.

The technical focus of the EU, with hopeful input from the world’s leading economic powers such as Japan, the PRC and the United States, will be on how the equivalent of EU Treasury bonds can be devised, funded and directed to specific financial institutions to which money is owed. Due to incredible technological advances money transfers and monitoring of financial transactions are feasible to expeditiously lower debt levels for EU nations to move away from a threateningly contagious financial abyss.

France and Great Britain are providing leadership and a degree of consequent hope to Europe and the world with regard to overcoming both the GFC and the eurozone debt crisis. The Cameron and Hollande governments are both doing what a second Obama administration (should the president hopefully win re-election) will undertake, which is to co-ordinate the raising of taxes and the cutting of expenditures to reduce, if not eliminate, dangerously high sovereign debt levels and budget deficits. These two inter-related policy objectives are being interspersed with careful consideration by the British and French governments to ensure that expenditure reductions do not contribute to further unemployment or precipitate social unrest.

Why America’s Foreign Debt Cannot Be Paid Off By Budget Cuts Alone

It may seem unfair to condemn a possible *Romney administration as ill-suited to work effectively with EU nations to help overcome the world’s international financial crisis given the former Massachusetts governor’s public commitment to paying off America’s foreign debt and budget deficit. Criticism of the Romney-Ryan ticket may also initially seem unfair because the United State’s foreign debt and budget deficit have both substantially increased under the Obama administration.

(*Governor Romney’s inelegant comments when in London concerning the then host city’s conduct of the Olympics raised concerns among political establishments across the EU as to whether a President Romney would ‘get’ , i.e. understand Europe, at a very important juncture in history when effective international co-operation to avoid an international economic meltdown is a must).

However, the refusal of a Republican majority House of Representatives since its election in 2010 to countenance tax increases on the rich to find revenue to reduce the nation’s foreign debt and budget deficit indicate fiscal disaster for the United States and the world should Mitt Romney win the American presidency this November. That is not to say that Governor Romney is not a very intelligent person and that he does not have a very effective campaign team.

Indeed, the problem is that the former Massachusetts governor has a very talented and ruthless campaign team who have determined on a course that will lead to ultimate disaster by adopting a monetarist economic policy when such an approach is unviable. The formidableness of the Romney campaign team is derived from their having a pre-determined policy which has endowed them with a clear sense of strategic purpose and direction.

This predetermined nature of the Romney campaign is reflected by the support that Governor Romney has had from his party’s establishment in regard to his second White House bid. The former Massachusetts governor should not have been the 2012 front runner for the GOP’s presidential nomination. This position normally goes to the runner-up for the party’s nomination in the previous presidential race. Due to former Arkansan governor, Mike Huckabee accepting a position with Rupert Murdoch’s American based Fox News cable network Romney entered the 2012 GOP race as the front runner after coming in 2008.

As the default GOP front runner there was ample scope for the former Speaker of the House of Representatives, Newt Gingrich, to win the 2012 presidential nomination. Speaker Gingrich could have redeemed his political career in 2012 that had previously unfortunately ended in political defeat by his own party effectively removing him as House Speaker in early 1999. This occurred due to his then unpopularity for having previously contributed to making tough policy decisions as House Speaker between 1995 and 1999.

Due to the United States in 2012 been in a very similar position to what was in the 1995, the former Speaker had a promising prospect of winning by invoking his previous accomplishments. There was also a swag of committed Republican activists who supported the former Speaker that he could have prevailed against Mitt Romney who at the beginning of 2012 seemed to be the quintessential uninspiring front runner that was ready to be knocked off his perch.

A Gingrich GOP presidential nomination was however effectively denied as a result of the dogged maverick candidacy of former Pennsylvania Senator Rick Santorum. The former senator’s presidential campaign lost its momentum as its raison detre as Romney consolidated his position as the Republican Party’s front runner.

There were almost inevitably questions by media and political commentators as to whether the Republican Party’s base would carry after Romney after he clinched his party’s presidential nomination. This was due to his reputation as a ‘flop-flopper’. Such a concern was unfounded because Governor Romney has undertaken an effective presidential 2012 campaign by polarizing the American electorate by appealing to the middle class by running on a platform which specifically excludes increasing taxes on the top bracket of high income earners.

The lower taxes theme had previously been crucial in the so-called ‘Tea Party’ movement providing the momentum for the Republican Party to win the 2010 congressional elections. Because the Tea Party did not mature into an autonomous political movement that genuinely represented the interests of lower middle class Americans (the political demographic which were once known as the ‘Reagan Republicans’) its supporters have galvanized behind Romney based on his anti-tax message.

Due to the stalwart support of the Tea Party (which is currently disappearing into the ether due to the expiration of its political utility for the GOP establishment) for Mitt Romney any concerns about him being ‘too moderate’ have essentially evaporated. The inherently more committed electoral base that the Republican Party has had since Richard Nixon’s (RN) 1972 re-election are now giving Romney the momentum to win the 2012 presidential election. The former Governor’s momentum is such that even Ron Paul’s delegates who were effectively shut out of the 2012 GOP Convention are now being politically accommodated within the Romney campaign.

For all the Romney campaign’s success in uniting and galvanizing the Republican Party’s electoral base, the undecided voters have still to be clinched. This is still a work in progress and the trends are now favouring the former Massachusetts governor. His strong showing in the first presidential debate, combined with President Obama’s comparatively lack lustre performance, has possibly given the former the advantage. Usually a foreign policy *debate, which is what the third presidential is concerned with, would not determine victory in a presidential election.

(*With regard to American foreign policy fiscal restraints constrain the United States from either committing troops or undertaking sustained military assistance. As result it is vital that the United States assist allies and people in oppressed nations who are fighting against tyranny. Syria is of course the stand out example of where America’s allies and an oppressed people should receive military aid via weapons supply and/or air intervention in an extreme emergency. Due to the threat of an adverse re-action by either Russia or the PRC the international community has refrained from directly assisting the Free Syrian Army such as air support.

Be that as it may the Free Syrian Army will probably prevail due to their popular support and the covert supply of weapons from Turkey and Saudi Arabia. Even if republican Iran committed more of their Revolutionary Guards to Syria this would eventually create a quagmire which combined with economic sanctions could bring the Tehran regime down.

There is still however the prospect that the situation in Syria could unfortunately lead to a war of republican Iran against Turkey and Saudi Arabia. Were this to occur the United States would hopefully provide air support to its allies. With regard to the internal situation in Syria a point will possibly be reached where the despatch of either a UN or an Arab League force will be needed.

Such a force could be required in the Baathist regime’s death throes to protect the nation’s Alawite and Christian communities who ultimately cannot be blamed for the actions of their political masters. The presence of a multi-national force in Syria composed of troops with a strategic stake in facilitating stability in the region could also help endow a provisional Syrian government with the authority it will need to keep the country together and to hold democratic elections).

Why It Is Not Intelligent to Politicise National Security Intelligence Data

However, because the president and his challenger were on a par in the second presidential debate that the pubic perception of who wins the third presidential debate could well determine the presidential election. The Romney campaign is using the ‘Libya issue’ concerning the killing of the American ambassador and three diplomatic personnel at the American consulate in Benghazi to portray the Obama administration are weak and deceitful. If such misperceptions gain credence then Romney will probably win the election by successfully undermining sufficient public trust in the president.

An overview of what happened in Libya with regard to the death of Ambassador Chris Stevens and three associates, Sean Smith, Glen Doherty and Tyrone Woods, is provided to try to hopefully help prevent the Romney campaign from succeeding in politicising this terrible event.

The first very important point that needs to be made is that presidential candidates should never make events in which there is sensitive intelligence into a political issue. John Fitzgerald Kennedy in his 1960 foreign policy presidential debate against Vice-President Richard Nixon (RN) attacked the Eisenhower administration by alleging that it was not adequately helping Cuban exiles to free their homeland.

This accusation by the *Democratic presidential candidate was devious because he knew that RN could respond to this untruth without compromising national security by publicly revealing that Cuban émigrés were being covertly assisted. As a result Kennedy made RN look weak on defence and foreign policy which were suppose to be his areas of advantageous strength.

(*As it later transpired the Kennedy administration betrayed Brigade 2506 of Cuban exiles by denying them air cover in the so-called Bay of Pigs invasion of April 1961. Had the United States provided air cover to the freedom fighter of Brigade 2506 they could have established a beach head in the swamp area and units in the Cuban army probably would have been emboldened to defect to bring Fidel Castro down. The tyrant was then, and since, very unpopular due to widespread disillusionment with him for having deceived his country by previously concealing that he had been a communist since his time as a university student in the 1940s).

Because intelligence data and analysis is so vital to a nation’s security interests it must never be utilized for political purposes. Because Governor Romney has done so an overview of the so-called ‘Libya issue’ is warranted.

A range of national intelligence services knew that so-called Islamist groups in the Middle East were organising demonstrations against the disgraceful anti-Islam ‘Innocence of Islam’ you-tube to coincide with the eleventh anniversary of the September 11 2001 attacks. Such demonstrations did occur across the Middle East and in the Libyan context the government acted on foreign intelligence reports to protect the American embassy in Tripoli.

Unfortunately adequate measures were not undertaken to protect the United States consulate in Benghazi due to the paradox of this city being overwhelmingly pro-American in sentiment. This was due to widespread local gratitude toward the United States for supporting the EU-North Atlantic Treaty Organization (NATO) 2011 air campaign which vitally assisted the Libyan people regain their freedom while specifically saving the people of Benghazi from being massacred.

The relatively weak position of Libya’s inadequately trained security forces in Benghazi combined with local pro-American sentiment was such that a policy of maximum restraint was adopted to counter Ansar al-Sharia (Libya’s Al-Qaeda’s affiliate) instigated demonstrations in the eastern coastal city on the September 11 anniversary. This policy might have been appropriate had not Ansar al-Sharia launched an actual commando type raid on the American consulate in Benghazi.

A range of intelligence agencies suspected a possible Ansar al-Sharia commando attacks in Libya but not specifically in Benghazi. The ultimate strategic stupidity of Libya’s Al-Qaeda affiliate’s attack on the United States Benghazi consulate was manifested by the strong re-action by local militias effectively moving against the Ansar al-Sharia terrorists. There have also been pro-American demonstrations across Libya against the killing of the four American diplomatic personnel and consequent moves on the part of democratic inclined militias to disband to consolidate the establishment of a viable democratic Libyan state.

Libya to date is the only country in the Middle East where there have been substantial counter pro-American demonstrations against the September 11 2012 rallies by so-called Islamists. Indeed, the salient point that needs to be made is that there were anti-American rallies against the anti-Islam you-tube in Muslim nations around the world. This may seem too obvious a point to be made but it requires reiteration because the Romney campaign is trying to spin that the Obama administration’s denunciation of the anti-Islam you-tube was part of a concerted effort to conceal intelligence reports concerning threats against American diplomatic staff in Libya.

The Romney campaign’s original line of attack was to condemn the Obama administration for denouncing the anti-Islam you-tube movie on the basis that in doing so the United States was pandering to terrorists. In fact it was necessary for President Obama to disassociate America from the you-tube ‘movie’ because in too many countries the actions of private citizens can be mis-construed as representing the stance of their government.

At his address to the United Nations General Assembly on the 25th of September President Obama denounced the anti-Islam you-tube ‘movie’ while making the important qualification that his administration respected freedom of speech in the United States. The president consequently asked UN delegates to understand that when attacks on his personal Christian beliefs were made he still had to respect freedom of expression and that he accordingly could not prevented American citizens from making the terrible anti-Islam you-tube ‘movie’.

The presidential address to the UN conveyed the point that the United States respects freedom of religion and that Muslims around the world should appreciate the Obama administration’s respect for Islam. This is an important point because Al-Qaeda’s strategy is to engineer anarchy in Muslim nations as a prelude to actually taking them over. Therefore, if governments in Chad, Mali, Mauritania and Niger are going to associate and accept help from the United States to prevent a break down in law and order the America government cannot be mis-represented as anti-Islamic.

Due to the Obama administration’s crucial help in 2011 in supporting the Libyan freedom fighters bring down the dictator Mummar Qaddafi by vitally contributing to the *EU-NATO air campaign Libya now has an American friendly democratically elected government. The al-Qaeda generated security threats in Libya that have arisen in the vacuum caused by Qaddafi’s fall but these are now being effectively attended to by the democratic Libyan government. Indeed, this government’s policy of disarming the nation’s militias commenced following the assassination of the four American diplomatic personnel in Benghazi.

(*There was also important contribution in the air campaign from Arab countries such as Qatar to the 2011 air campaign).

Critics of the United States’ support for the 2011 air campaign in Libya have pointed out that as a result of Qaddafi’s fall weapons have become available to Al-Qaeda affiliates in North African Maghreb nations where they are now stirring up discontent. An American-led international aid effort will probably be needed to assist the governments of Maghreb nations such as Mauritania.

Assistance could take the form of military and humanitarian aid with an overall focus on understanding domestic political dynamics to prevent the onset of Al-Qaeda induced anarchy. This does not mean that American (or other foreign) troops should be despatched to Al-Qaeda threatened nations but the United States should not retreat into neo-isolationism as the world becomes more complicated.

Ironically, neo-isolationist opposition to America’s support for the Libyan freedom fighters in 2011 has come from GOP ranks. Former Republican Party 2012 presidential aspirant Congresswoman Michele Bachman criticised the American contribution to assist the Libyan people overthrow Qaddafi. Her initial criticism was based upon the Obama administration not gaining congressional authority under the Vietnam Syndrome induced 1973 War Powers Act.

Even if Congresswoman Bachman had a constitutional point she still criticised American support for the air campaign on the basis that Qaddafi was a necessary block against a vacuum been filled by Al-Qaeda. Events since the fall of the Libyan tyrant have proved the federal legislator wrong because Libya’s democratically elected government is effectively moving against Al-Qaeda with popular support.

Nevertheless, the scope to distort facts to change election dynamics has been reflected by the Romney campaign trying to make it look as though the Obama administration has undertaken a policy of deliberate deceit regarding the assassinations of Ambassador Stevens and his three associates. The opening to misrepresent the Obama administration’s actions was provided by the United States ambassador to the UN, Dr. Susan Rice making a mistake at a press conference on the 16th of September when she said that the murders of the four American diplomatic staff was caused by hostile demonstrators attacking the US consulate in Benghazi.

This honest mistake that Ambassador Rice made was seized upon by the Romney camp to make it look as though the Obama campaign’s previous policy of denouncing the anti-Islam you-tube was part of a premeditated cover-up concerning the circumstances surrounding the killings in Benghazi. Credence for misconstruing the Obama administration’s diplomatic offensive against the anti-Islam you tube has been aided by the circumspection that the Obama administration must have with regard to publicly discussing intelligence reports and assessments.

Why Narrow-Minded Self-Interest Can Lead To Disaster

The awkwardness restraints placed on the Obama administration contrast to the ruthlessly driven momentum of the Romney campaign which is an apparent surprise, considering the former Massachusetts governor’s usually reserved personality. In actual fact, as previously analysed, the Romney presidential 2012 bid has had a sense of direction due to the support he has received from wealthy citizens who do not want to pay more taxes.

The 2008 GFC has created a context where the prospect of rasing taxes on the wealthy to help pay down the massive public foreign debt and deficit have become a distinct policy option. This fear of raising taxes on the wealthy has led to a concern that the viability and dynamism of America’ private sector will be imperilled. Such fears might be justified in another era but the contemporary context is one where speed is of essence if the American financial system is to be safeguarded by paying down the public foreign debt and the deficit.

The overriding anti-tax concerns of the powerful corporate interests which support Romney have endowed his campaign with a sense of purpose and direction which normally would not be associated with a candidate who has had the reputation of being a ‘flip flopper’. Therefore a Romney-Ryan administration can be expected to establish a regime which is essentially a coalition between wealthy Americans and the middle class based on a common hostility toward increased and/or expanded taxation.

The problem with such an inter-class alliance is that it will prevent the United States from expeditiously paying down its public foreign debt and the budget the consequences of which will be horrendous. While class analysis is inherently distasteful because it has an implicit Marxist ideological dimension is actually a valid concept in the contemporary American context. This is because the greatness and economic capacity of the United States has usually been underpinned by having a middle class which the working class and the poor could eventually join.

Unfortunately it has too often been the case in the United States that a strong middle class has effectively negated pursuing the objective of lifting millions out of Americans poverty by engineering high levels of employment generating economic growth. It is now more than a nubilous social justice concern that there be a White House administration which promotes a ‘win-win’ approach to economic progress. This is because the United States’ national economic survival is at stake as America simply cannot afford the time luxury of borrowing more money because of an inadequate tax base.

In stark contrast to the 1930s Great Depression there is currently sufficient capital to avoid an economic melt-down if resources are effectively and adeptly utilized. The major policy area that will determine whether this will occur is taxation policy. The Obama administration in its first term due to the genius of Secretary Geithner has avoided an economic castrophic and set the scene for an economic recovery should there be intelligent tax reform.

Furthermore, the president’s centrist policy approach and engaging, but still enigmatic personality have somehow helped avoid social polarization which in the context of the GFC and the awesome mobilizing capacity of social media technology could have been disastrous for the United States.

Alternatively, should Mitt Romney be elected president his major strength- the determined focus of his powerful supporters to prevent a raising of *taxes on the wealthy to relatively quickly pay down debt- will be a future Achilles Heel that will make for a disastrously failed presidency. Due to the slickness of the Romney campaign the inherent dangers of a Romney presidency might not be apparent before election day.

(*The adeptness of the Romney campaign was demonstrated following the second presidential debate when the former governor called on President Obama to stop attacking his economic plans and speak to his own. This seemingly reasonable request was a potential trap because President Obama in calling for tax reform could have signalled his intention to raise taxes.

Such a policy prescription might have the effect of galvanizing the GOP’s generally more committed voting base and potentially frightening uncommitted middle class voters into the Romney camp. However, the tax increases that President Obama advocates are for the top tax bracket of Americans and big corporations while offering tax relief for the middle class and small business which the Republican House of Representatives have inexplicably blocked).

The effectiveness of the Romney campaign was reflected by the GOP candidate’s psychologically brilliant speech in a commercial in which he acknowledged that President Obama had, supposedly similar to himself, a concern to help the poor. This apparently gracious concession with regard to the motivation of his opponent was conceded by Governor Romney to secure a ‘buy in’ that his 47% comments should be discounted.

Why Governor Romney’s 47% Comments Should Have Been The Bain of His Campaign

Even if those in Romney’s 47% do not accept his bona fides to the extent of them voting for him that commercial might have the effect of negating the urgency of voting to re-elect President Obama. Indeed Governor Romney’s 47% comments should be a wake up call to all Americans if they wish to avoid future economic cataclysm.

There are too many examples in history of people wishing that they had the benefit of hindsight. This became the case for Haitians with regard to their nation’s second free presidential election in September 1957 which resulted in a Dr. Francois Duvalier, who had a previously deserved reputation as a humanitarian, becoming president. Even though much of the Haitian electorate had dabbled in soothsaying, they really could not have known that Duvalier would be a corrupt and brutal dictator.

Mitt Romney by no stretch of the imagination is remotely comparable to the late Haitian tyrant. However, in the context of Governor Romney’s covertly recorded 47% comments and his record at Bain Capital, critically thinking independent and GOP voters will not have the right to say that there had been no forewarning that a Romney presidency would be a disaster.

In another era when the American and global economies were solvent and less interconnected a ‘win-lose’ approach to economic policy by an American president may have been viable. However, times have changed and time is now of the essence that the United States public foreign debt and deficit must be paid down to avoid a disaster. A re-election of President Obama therefore will not be the solution to America’s dangerous economic threats but rather the beginning of desperately needed solution. A Romney presidency by contrast will be the beginning of a horrendous future that is too frightening to contemplate.

Dr. David Paul Bennett is the Director of Social Action Australia Pty Ltd.