21st April 2005


China has become diplomatically active.

Least threatening is the trade deal that is being worked out with Australia.  China wants a recognized trade status that will protect it from charges of "dumping".  Australia is a mineral resources nation, China is a labour resources nation.  These two are a natural fit to produce goods for the world.

Slightly more worrying is the internal talk of unfixing the US-Renminbi exchange rate in apparent compliance with the US congress's concern about the trade imbalance.  The fixed rate benefits both the US and China, as everybody but Congress and the unemployed are aware.

Most worrying is the attack on Japan.  So far this has mostly been attacks on Japanese property within China.  There seem to be four issues:
  1. Japan's stance on Taiwan.
  2. Japan's History Textbooks.
  3. Japan's PM Junichiro Koizumi's visit to Yasakuni Shrine war memorial.
  4. Disputed East China Sea Hydrocarbons mineral mining rights.
My own suspicion that the first three are a "moral smokescreen" for applying pressure to obtain title to the suspected major hydrocarbons deposit.  The suspected hydrocarbons deposit is closest to an uninhabited island group (Senkaku Islands) in the East China Sea.  According to international law, the determination of ownership is by the median line between national territory.  The Chinese have adopted the Australian approach (see Timor) and pointed out that the proposed mining rights are on "their" continental shelf, and that there is an oceanic trench separating the islands from the islands claimed by Japan.

South Korea, China and Taiwan also claim the Senkaku Islands
.  There has been recent civic unrest in South Korea concerning the issue.  It is possible that China does not strongly contest ownership of the Senkaku Islands because Taiwan would, in that instance, probably be the reasonable custodian.  It is possible that Taiwan does not promote the issue because of recent Japanese statement in support of the USA concerning Taiwan's independence.

I believe that the Chinese are bluffing from a weak hand.  The magnitude of the kitty can be estimated from the fact that they have staked as much as they have.


There are, according to mainstream economist thought, three types of economy.  These three are:
  1. Primary, e.g. resources, such as mineral, agricultural, tourist etc.
  2. Secondary, such as manufacturing (which is really just another resource, called "labour", or recently, automated technology.)
  3. Tertiary, also called services, which (supposedly) includes everything else that makes money.  I would prefer to limit "services" to those industries that facilitate the first two types of economy.
To these three I would add a fourth:
  1. Quaternary, or lifestyle exporters, whose product encompasses those mostly intangible things that people aspire to possess, including political environment, moral attitudes, information, entertainment & fashion concepts, including preventative health care and all other things that interest & motivate people once their basic needs are provided.
Australia, Canada, the countries of Asia and Europe that comprised "the old Soviet Union", South America and Africa are primarily mineral resources nations.

China, India and most of South Asia are primarily labour resource nations, although India has made a start as a services economy.

The US is nominally a services nation, although by my definition it is t "lifestyle" economy.  It still has fast fading holdovers from when it was a unionized manufacturing nation, (such as GM and FORD.)  Liberal sites (basically Democrats or in Australia, the Labour Party) are still attempting to restore that era by railing against "cheap overseas labour" taking away "our" jobs. (e.g. Working Wages Slide, While Business Lines Its Pockets by Lee Sustar in Counterpunch).  The USA will continue as the most powerful country in the world precisely because it resists those interest groups that attempt to hold onto outmoded protectionist social policies that have been known since about the time of Ricardo to enrich the wealthy at the expense of the worker.

Japan is a services resource nation, and is verging on becoming a lifestyle resources nation.

Old Europe is a bastardized mix of "labour" and "services" and "lifestyle".   Overgovernment provides a "protected" environment that allows overpriced labour to increase the social cost of luxury technology (cars, computers).  This results in stifling of the services sector, and severely inhibits the "lifestyle" sector.

Lifestyle economies


In the recent months Indonesian authorities have made two "drug busts" involving Australians.  The first was Ms Corby, who was found to have over 4Kg of marijuana in her bags when she arrived at Bali.  If she is found guilty her penalty can be as severe as the firing squad.  The other bust was a total of nine couriers and support persons of varying ethnicity allegedly carrying a few Kg of Heroin from Bali to Australia.  The penalty for possession of those quantities of Heroin is the firing squad.

Of course the penalties for drugs in some south Asian countries are somewhat extreme by Australian or European or even US standards.  Australia and (most of?) Europe do not have the death penalty on the books for any crime whatsoever.  In California marijuana has reportedly been legalized for chronic pain.  In Australia's capital Canberra small quantities of marijuana can be grown for home use.  In Amsterdam marijuana and hashish are legally purchasable from various coffee shops, the price in 2004 was Euros 6.00/gr.

In raising children, I have always been uncertain as to what tone to adopt as I meet the various moral dilemmas with which every parent is confronted.  For instance the catholics teach that contraception is wrong, even when it's purpose is prophylactic.  My own view differs, but not with such certainty that I would teach it as a moral law to my children.  Other things about which I have no certainty are abortion and drugs.  In consequence, in raising children, my approach was to exercise as little authority as was possible commensurate with mutual survival.  For instance I insisted that they not to step onto a road without an adult.  However I did not insist on fixed bed-times, and controlled their diet mainly by not providing many sugar based foods.  I believe that people should be encouraged from as early an age as possible to make their own decisions, and learn the consequences.

Illegal drugs are something that I would rather were not illegal.  Sure, the misuse of opiates is dangerous, but so too is alcohol, smoking, starvation, obesity, too little exercise, too much aspirin, the list seems endless.  I just do not think that our legislators should have interfered.  In fact I believe that our legislators interfere far too much in our lives.

However whether the law is justified does not excuse those who break laws regarding the supply of opiates.  Having made those drugs illegal, a considerable amount of further evil is generated by the high cost of supply.

For instance the opium derivative codeine (in tablet form, combined with Aspirin or Phenacetin) is available without prescription from just about any pharmacy in Australia at a cost of around AU$15.00/gr.   Therefore Heroin and other opium based drugs could be commercially produced at similar cost.  From newspapers it appears that the street value of 100% pure Heroin in Australia would be about AU$1,000/gr.  (i.e. $300/gr for 70% cut)

Those who have become addicted to Heroin presumably pay the rapidly escalating cost of use from their wages.  As the cost rises, they will eventually need to commit felonies to pay for further supplies.  On the other hand, if drugs were not illegal, then an addicted user could continue to obtain sufficient drugs from the local pharmacy without committing felonies, and would presumably eventually either kill themselves (which is a low probability when the quality of supply is assured) or cure themselves, or just continue and manage it's use.

However, as things stand, those who venture to supply those goods must accept the penalties.  It would be desirable if Indonesia reduced it's penalties.

I find it curious, when the Indonesian penalties are so high, that Heroin should be available so cheaply.  Apparently Heroin is also cheap in Singapore and Malaysia and Thailand.  I understand that the death penalty applies to possession of large quantities of drugs in those countries.

Such high penalties are an open invitation to police corruption.  I understand that the "godfather" of the nine Australians offered a bribe of AU$1,000,000, which was refused.  One cannot help but wonder whether the bribe might not have been accepted had the Australian police not been involved.


Ziggy Switskowski is due to finish at Telstra soon.  He is apparently proud of the fact that Telstra has about 8,000,000 mobile phone customers.  During his tenure he has lost no opportunity to compete strongly with any operator who entered telephony, and also attempted (apparently without adequate research) to enter into partnership with shady characters.  During all this time he followed standard "good" business practice (as recommended by MBA courses he attended, no doubt) of not cutting his own throat by upgrading or expanding the cheaper and more efficient copper (PSTN) network.  In the meantime he has been milking  the PSTN by increasing margins and cutting maintenance.  The impact of VOIP in the next few years will be much more severe because of his lax approach to copper.

My suggestion in these pages of some years past was to give the copper to local government, and let councils manage the PSTN on behalf of ratepayers.  (After all, the owners of telephones have historically paid a pretty steep "installation charge" so they should, in theory, own the copper, shouldn't they?)   The councils could then ask for "PSTN operation bids", somewhat like garbage collection.  Hopefully the rest of Telstra could be given to the existing 49% of public shareholders.  Of course Johnny Howard would miss out on the several (20? 30?) billion dollars he had anticipated, but then it wasn't his anyhow, and besides, it is becoming increasingly evident that he will be able to sell the other half of Telstra anyhow, (except for less than T1 & T2) the way the market is moving.  (and that would be EXTREMELY bad PR for the mums & dads.)  The Country Party (sorry, the "National Party") will get the blame if Telstra doesn't get sold.