"the first people to cop the blame for an economic downturn are foreigners"

Despite job fears, we must keep migration door open | theage.com.au

THE United Nations High Commissioner for Refugees, Antonio Guterres, was right when he noted last week that the first people to cop the blame for an economic downturn are foreigners. In the UK, the ‘‘British jobs for British workers’’movement
is getting more popular and more shrill.

So, until recently, it was good to see that Kevin Rudd’s Government was intent on maintaining—and even increasing—the high migration intake it had inherited. But Immigration Minister Chris Evans announced on Monday that the Government was planning to reduce the number of skilled workers it lets into the country every year.

ACTU boss Sharan Burrow pretty much gave the game away when she claimed in response that migration had to be restricted to ‘‘protect jobs’’ because of the financial crisis. The union movement has never met an immigration cut it didn’t like.

The idea that one more immigrant equals one fewer job for Australians sounds vaguely plausible. But modern labour markets are far more complicated than that. A national economy isn’t just a fixed number of jobs waiting to be divvied up between all the available workers—it is a constantly changing mixture of opportunities to work, produce and profit.

Let’s be honest: if there were a real risk that immigrants were going to rip potential employment away from red-blooded Australians looking for work, those Australians would be doing those jobs already.

Critics of immigration conveniently forget that immigrants do more than just work—they buy houses and consume products too.Hell, they even pay taxes. Adding more people into the economic mix is a recipe for long term growth— this is as true when the economy is slowing down as it is when the economy is booming. After all, there are a lot of things to do in an economy, even during a recession. The whole country doesn’t immediately seize up because a department store reports that their mid-January sales figures are down 17 per cent on last year’s.

So if we respond to the economic crisis by dramatically shrinking our migration intake,we could easily end up in the bizarre situation of having both widespread unemployment and widespread job vacancies. Sound unlikely?

Perhaps, but we haven’t seen those laid-off Macquarie Bank alumni hopping on V/Line to pick pistachios in Swan Hill yet.

Sure, there are now a lot of people actively seeking work since the global financial crisis really hit six months ago. But there have been unemployed people since before then, and those jobs in the fruit picking industry have long been unfilled.

Only when the finance industry’s brightest sparks begin seeking agricultural employment should we start denying farmers the
labour force they need—and denying eager migrant workers the opportunity to earn. Ever since the First Fleet landed, Australia’s most pressing economic problem has been our population size. Our labour force has always been small, our consumer base small, and the size of our national market small.

Compounding this has been the fear of an inexorably ageing workforce. But the credit crunch has presented long-term opponents of immigration with an opportunity to flog their favourite dead horse. Even more erroneous is the belief held by many opponents of immigration that we should limit the entry into Australia of certain non-Western religions because our
cultures are incompatible.

The history of migration has surely taught us that individual liberty and equality are quite appealing when seen up close—
every migrant group has integrated into Australian society within a generation or two. What we ask from immigrants
to Australia is that they obey the nation’s laws, just like those whose families came over two centuries ago. And we have a shiny, expensive police force to make sure we all do.

Anyway,we have a moral necessity to maintain a high immigration intake.

Much more than foreign aid, charity, Live Aid wristbands, and even the bulk-purchase of fair trade coffee, the most effective way we can help somebody living in the third world to crawl out of poverty is allowing them to move to the first world.

On the one hand, the ACTU’s Union Aid Abroad claims solidarity with overseas workers, but on the other hand the union insists that poor workers in other countries be restrained from doing the one thing that could most comprehensively help them—moving here. Certainly, the economic crisis is hard.

But blaming foreigners and cutting immigration isn’t going to get us out of it any quicker.

Chris Berg is a research fellow with the Institute of Public Affairs and editor of the IPA Review.

No end to gloom until the US fixes its banks

No end to gloom until the US fixes its banks

by Ross Gittins

If you want a handle on developments in the economy this year you need to understand there are two main kinds of recession. The one we're entering is a third kind.

Your classic post-World War II recession is a wage-inflation recession. The economy booms and unemployment falls below the "non-accelerating-inflation rate of unemployment".

In a situation of labour shortages, wages rise excessively thus feeding a wage-price spiral. The authorities become alarmed by the growing inflation pressure and start applying the brakes - raising taxes or, more likely, raising interest rates to discourage borrowing and spending.

Almost inevitably, however, the brakes are accidentally applied too heavily and we get a hard landing, with a large rise in unemployment that takes years to get back down.

This pattern describes the Menzies government's credit-squeeze recession of the early 1960s, the Whitlam government's "short, sharp shock" credit squeeze of the mid-1970s and the Fraser government's early 1980s recession.

The second type of recession is an asset-boom recession. You start with a boom in a market for assets such as shares, residential property or commercial property.

Asset prices go sky-high because the boom is being fed by borrowing. You end up with a bubble - prices that are far higher than is sensible, matched by ever-growing levels of debt owed by households or businesses.

The authorities worry that asset-price inflation will start translating into ordinary, goods-and-services price inflation, so they jack up interest rates.

After a long delay it works. Asset prices stop rising and start falling and the asset boom turns to bust. Eventually a lot of people find themselves with debts that are greater than the value of their assets, or with interest payments on the debt that are too high to manage.

They then embark on a period of "deleveraging" - cutting their spending so they can use any spare income to pay down their debts. If worst comes to worst, they have to sell their asset at a loss just to get their debt down.

When businesses deleverage they cut costs and lay off staff. When households deleverage they just cut their consumption spending.

The trouble with this is that economies are circular: your spending is my income. So when one firm or household cuts its spending, other firms or households end up having to do the same. The negative process feeds on itself and a lot of businesses go bust and workers lose their jobs.

The more that happens, of course, the harder it is to find money to pay off your debts. But the recession keeps going until enough firms or people have ground down their debt to the point where they feel able to resume normal activities.

A good example of this second, balance-sheet (assets versus liabilities) type of recession was our last one, in the early 1990s. Then, it was mainly businesses that had borrowed far more than they should have.

Worse, our Big Four banks found themselves with huge bad debts, having lent far too heavily on projects that were now under water. One or two of them got wobbly.

That recession was long and painful - with unemployment reaching almost 11 per cent - as we waited while the banks and their corporate customers got their balance sheets back in order.

If you see few similarities between our present position and the first type of recession, you're right. Despite the resources boom and the economy travelling close to full employment, wage growth hasn't been excessive - just as it wasn't in the recession of the early '90s.

But if you do see similarities between now and that last recession, right again. The main difference is that whereas last time it was big business and the banks that had balance sheet problems, this time it's households, which borrow far too much as part of our residential property-price bubble.

Our banks aren't in a lot of bother this time and, despite high-profile exceptions, in general our corporate sector isn't highly geared.

Let me get to the point. It would be a mistake to categorise the recession we're entering as just another type II recession. Why? Because so much of our present difficulties stem from overseas, from the global financial crisis. That's what's radically different this time.

In all our past recessions a coinciding world recession has added to our home-grown problems. This time, our economists and politicians wouldn't be nearly as worried as they are were it not for the terrible prospects for the global economy - weakest growth in 60 years - and the US economy in particular.

And the problem with this is on the financial side of the economy. Banks are like the heart of the economy; the many parts of the economic body need a steady flow of blood (credit) if they're to continue functioning normally. If the blood flow stops, they begin to wither and die.

The subprime mortgage debacle that began in August 2007 and the unravelling it precipitated was like the economic body suffering from angina (blocked arteries). Some financial markets stopped functioning properly and business-sustaining credit stopped flowing to parts of the body (non-bank lenders for housing, for instance).

The crisis that arose from the failure of Lehman Brothers in mid-September last year was like a global heart attack. For a while the heart stopped beating, credit stopped flowing and we went perilously close to a global financial collapse that would have wreaked untold destruction on economies around the world.

Fortunately, governments swung into action, guaranteeing their banks' deposits and inter-bank borrowings and propping up any bank that was wobbling.

Point is: that doesn't happen in every recession. In fact, we haven't seen anything so life-threatening since the Depression of the 1930s. That's what's so different this time.

Trouble is, the US banks - the American economy's financial heart - still aren't functioning at even half their normal capacity. They're close to bankruptcy, obsessed by the problems with their own balance sheets, and refusing to do normal business with sound business borrowers.

The obvious answer, as demonstrated by the Swedes in the '90s - temporary nationalisation of most big banks - is one the Americans' hang-ups prevent them from adopting. But the longer they delay, the worse things get.

Punchline: as everyone from the International Monetary Fund to the US Federal Reserve chairman, Ben Bernanke, has warned, until the Americans fix their blocked banking system, no amount of fiscal stimulus or interest-rate cuts will make any difference.

Our economy will remain in trouble until they do.

Ross Gittins is the Herald's Economics Editor.

Eyes on Clinton for Middle East strategy

Eyes on Clinton for Middle East strategy | smh.com.au

THE US Secretary of State, Hillary Clinton, arrives in Egypt today in her first foray into Middle East diplomacy, attending a high-level conference on humanitarian assistance to Gaza and making the rounds of Israeli and Palestinian officials.

Mrs Clinton's visit comes at a time when voices on both the right and left say the Middle East peace process needs a dramatically new approach.

The US President, Barack Obama, won praise by appointing a Middle East envoy on the second day of his presidency, indicating a commitment to resolving the Israeli-Palestinian conflict. The envoy, former senator George Mitchell, is now making his second tour of the region and will meet up with Mrs Clinton at the aid conference, which will be held today in the Egyptian Red Sea resort of Sharm el-Sheik.

But neither Mr Mitchell nor Mrs Clinton appears to have come up with new ideas.

Mrs Clinton's husband, former president Bill Clinton, devoted the final months of his administration to unsuccessfully trying to achieve a peace agreement.

But much has changed since 2001, and the Bush administration's last-minute stab at peace-making, the Annapolis process, also collapsed in failure.

Mrs Clinton will visit Jerusalem and Ramallah, on the West Bank, tomorrow and on Wednesday and every word she utters in the region will be closely watched for clues to the Obama Administration's approach.

Israelis will be listening for how hard she presses for Palestinian governmental reform and an end to corruption, while Palestinians are eager to hear a tougher US stance on Israeli settlement construction in Palestinian territories.

"It would be great to hear an American official say that Israeli settlements are illegal under international law," said Nadia Hijab, senior fellow at the Institute for Palestinian Studies in Washington.

Big donors are expected to pledge billions of dollars to rebuild the Gaza Strip, but only if the enclave's rulers, Hamas, agree to play no role in spending the cash. Mrs Clinton is expected to commit $US900 million ($1.4 billion).

The donors are demanding the money be handled by the Palestinian Authority, which Hamas evicted by force from the narrow coastal strip in June 2007.

The Palestinian Authority and Hamas each want to lead the rebuilding effort, but Western countries - which blacklist Hamas as a terrorist group - have said they will work only with Mahmoud Abbas, president of the authority.

Left Brain vs Right Brain

The Right Brain vs Left Brain | The Daily Telegraph

I am a left-brain person, how about you...follow this test :)

The Right Brain vs Left Brain test ... do you see the dancer turning clockwise or anti-clockwise?



If clockwise, then you use more of the right side of the brain and vice versa.

Most of us would see the dancer turning anti-clockwise though you can try to focus and change the direction; see if you can do it.


LEFT BRAIN FUNCTIONS
uses logic
detail oriented
facts rule
words and language
present and past
math and science
can comprehend
knowing
acknowledges
order/pattern perception
knows object name
reality based
forms strategies
practical
safe
 RIGHT BRAIN FUNCTIONS
uses feeling
"big picture" oriented
imagination rules
symbols and images
present and future
philosophy & religion
can "get it" (i.e. meaning)
believes
appreciates
spatial perception
knows object function
fantasy based
presents possibilities
impetuous
risk taking

Obama and Gaddafi

Can 'Fellow African' Barack Obama tempt Libya's Colonel Gaddafi in from the cold? - Telegraph

For a start, their dark glasses, smart suits and slicked-back hair made them somewhat hard to distinguish from the secret police loitering at the airport. And despite their boasts of a new official policy of "openness", some things remained clearly off-limits to prying eyes.

"Stop filming!" barked a minder, as the heavily-guarded residence of their boss, Colonel Muammar Gaddafi, loomed into view during an official drive around town. "OK you can start again," he said, as it retreated into the distance.

Welcome to Libya in 2009, where, nearly four decades after he first seized power, Col Gaddafi is yet again re-inventing himself. Having variously donned the roles of revolutionary leader, state sponsor of terrorism and saviour of Africa over the years, the man once dubbed "Mad Dog" by Ronald Reagan is now eager to don a new guise: friend and ally of US president Barack Obama, whose half-Kenyan ancestry marks him out - in the colonel's view, anyway - as a fellow African leader.

Col Gaddafi took over as the chairman of the African Union a month ago.

In theory, the colonel's good intentions are a chance for Libya to end its international isolation for good, bringing in much-needed human rights reform and foreign investment, and providing an example for other pariah states, like Syria, Iran and North Korea. And last month, as the foreign ministry issued The Sunday Telegraph with a rare press visa, officials insisted that the era of secrecy was over. "You can go where you like and report anything," a Libyan diplomat promised.

Old habits die hard, however. The foreign ministry minders were unfailingly polite and cheerful, but straying from their official itinerary proved all but impossible. And while portraits of Col Gaddafi - known simply as The Leader, or sometimes as Brother Gaddafi – are everywhere, asking questions about the Leader still produced a nervous reaction - even from seemingly loyal citizens. "He brought us freedom," said Osama Sharif, an English-speaking civil servant, who boasted that Libya had a "better form of democracy than you do in the West." But asked to translate the opinions of passers-by to see if they agreed, his confidence vanished. "Do you have permission?" he asked, before quickly disappearing. Likewise, a bank employee abruptly ended his otherwise cheerful account of life when the colonel's name came up. It was, he muttered, a "dangerous" subject for discussion. As Western diplomat based in Tripoli later put it: "There are still serious limits to freedom of speech and political activism here, and threats to the regime are dealt with severely."

Libya's latest faltering overtures to the outside world are part of a long, slow diplomatic thaw that started back in 2003, when Col Gaddafi, having seen the fate of Iraq's Saddam Hussein, gave up his secret nuclear programme and handed information to the West about al-Qaeda, which likewise opposed his dictatorial regime. Having previously devoted himself to supporting armed revolutionary movements - including the IRA and the PLO - he also shifted to the more peaceful cause of African development, channelling money for aid projects for Libya's poorer neighbours. Today, billboards in Tripoli depict adoring groups of black children looking up at him gratefully.

Last year, in another major gesture of goodwill, Libya paid $1.5 billion in compensation to the families of the 270 people who died in the 1988 Lockerbie bombing, which led to the reopening of the US Embassy three months ago. It had been shut since the mid 1980s, when America bombed Tripoli and killed Col Gaddafi's adopted daughter.

"The fact that they have returned to the family of nations is good," said Dr Jim Swire, whose daughter Flora was among the British victims of the bombing. "It is good for the people of Libya, and it reduces the chance of their government ever going back to supporting terrorism."

The showpiece of last week's visit, however, was the annual "people's congresses", Col Gaddafi's own version of democracy. In hundreds of committees across the country, thousands of citizens gather to debate the future of the country, although the Leader always sets the topics and terms for debate, giving them little real power. This year they are talking about his latest big idea – a bizarre plan to virtually abolish all government ministries and instead distribute the proceeds of Libya's £24 billion oil revenues direct to its six million people.

Many congress-goers back the move, which would, in theory, simply hand thousands of dollars directly to families to pay for their own healthcare and education. At a meeting in the dusty town of Zuara, on the Tunisian border, congresswoman Aysha Muftar's only question was why it hadn't been done already.

"There are people becoming richer and richer today, but I am a simple woman and I am not getting my share of the wealth," she declared. "This project should not be delayed."

Whether the Leader will definitely implement the plan, however, nobody knows. Much as Libya has been stifled by centralised bureaucracy over the decades, removing it at a stroke would cause chaos. Many suspect that the plan is simply a way of frightening corrupt and incompetent officials, who are blamed for squandering much of the nation's oil wealth. Although literacy rates are high and there is a good health service by African standards, much of Tripoli consists of shabby, hulking apartment blocks, with potholed streets where groups of jobless young men loiter. The efficiency of Col Gaddafi's intelligence services means that public opposition to his regime has been virtually non-existent for the last few decades, but there is satellite television, on which younger Libyans see the success of other Arab capitals, such as Dubai, with its smart office blocks and skyscrapers. In private at least, they are starting to ask why they do not enjoy the same kind of wealth.

Among those who might one day be expected to provide the answer is the Leader's son Saif al-Islam Gaddafi, who was educated at the London School of Economics and has been seen as the heir-apparent among Col Gaddafi's six sons. He has carved out a reputation as an environmentalist and political moderniser, raising hopes that he could guide Libya to full normality should his father, now 66, ever retire. In recent months, however, he has disappeared from public view, raising fears that Col Gaddafi has decided to slow down on reform, or changed his mind on it altogether.

It is similarly unclear just whether the Libyan leader will remain keen on Mr Obama. One reason that Col Gaddafi's hopes are so high for the new US leader is that in the 1988 version of his famous Green Book - his answer to Chairman Mao's Little Red Book - he predicted that "Black people will prevail in the world." But when Israel attacked Hamas in January, Col Gaddafi rounded on the then President-elect for failing to intervene, declaring in typically eccentric style: "We fear that Obama will feel that, because he is black with an inferiority complex, this will make him behave worse than the whites."

The uncertainty is reciprocated by Washington. Mr Obama, for all his enthusiasm for improving relations with the Muslim world after the Bush years, is believed to be wary about cosying up too closely to the Libyan regime, given its continued poor record on human rights and torture. And with the strategic threat from nuclear programmes and terrorism now largely gone, there is also little pressing need to. "Human rights issues will always be at the forefront of our foreign policy," said a US government spokesman, asked about policy towards Libya.

On the streets of Tripoli, though, there is predictably little room for the idea of anyone - even Barack Obama - turning down an offer from the Leader. "Our religion tells us to forgive and forget," said Said Abu Saufan, 62, whose backstreet shop is lined from floor to ceiling with Col Gaddafi portraits. "We are just glad those days are over. We want to be friends with the American people."