Pokies reform should be a straight forward policy.

Poker machines provide a substantial amount
of revenue for many Australian clubs.
(Image Source)

The petty politics that is going back and forth between Liberals, Labor and the independents over the Government's proposed pokies reform is ludicrous. The policy, which would require players to set a pre commitment for how much they are prepared to lose. The policy sounds straight forward enough; help stem the flow of problem gamblers who continue to feed coins into these machines. But the fury that has erupted in Canberra isn't because the policy is contentious or damaging, but because it is an issue that is relatively unimportant, and thus everyone can take a different position; just to be politically different.

One fact that has been long neglected in this debate, is the research conducted by Linda Hancock from Deakin University. Her research into pre-commitment has found that for problem gamblers who find themselves stuck in 'the zone' or a cycle of gambling to get out of debt, they very rarely act rationally. However if the Independents and Nick Xenophon get their way, there will be a maximum pokies bet of $1 introduced, limiting the maximum loss to be around $120 an hour (instead of over a possible $1000 at the moment). Linda Hancock's research, while mostly being ignored by politicians from either side, is damming evidence that pre-commitment legislation on pokies is needed, if just to help stem the losses for problem gamblers.

It is at this point, that the opposition become ludicrous in their stance against the pokies reform. They should be capitalising upon this and criticising the government for being too weak to truly tackle problem gambling. Instead, their discussion paper, just released, is almost a carbon copy of the government's policy, only with the change to make pre-commitment instalment on machines voluntary, and a greater emphasis on counselling and alcohol training. Though their catch cry, along with the AFL and NRL and Clubs NSW, is that local sporting and RSL clubs will go bust. Though the icing on this cake of hypocrisy is that they too acknowledge that this mandatory pre-commitment legislation will do nothing to help stop problem gamblers. Let's unpick this brilliant piece of logic

First: (The Opposition) The scheme won't work. The evidence proves so - Yet they would like to introduce the same themselves, albeit voluntarily. If we acceptance their logic that a pre-commitment scheme won't work, then neither should theirs!
Secondly: Pre-comittment lockouts on poker machines will kill off local sporting clubs and RSLs - Hold on, you said it wouldn't work, so how will they loose revenue and be forced to close?
Thirdly: They will still lose some money - Not only is that a concession that it will work, but if that's the case, then they're profiteering of the worst cases of problem gamblers. That's highly unethical!
Fourthly: But the installation of pre-commitment lockouts will also be costly and expensive - So clubs won't install them voluntarily under your proposal either, because it will still be too costly, they'll lose money, and they will have to close.
Fifthly: It'll force these problem gamblers onto the internet, where they can gamble even more: Well put limits and regulation upon that too! Pre-commitment on pokies and internet gambling restrictions are not mutually exclusive ideas. 

This storm in a tea cup debate about pokies reform is just low brow political postulating. The government is playing a very similar game, claiming that the opposition are in the pockets of the gaming industry and are prepared to hurt Australian families, especially those effected by gambling problems, for cheap political points. It's very much a case of the pot calling the kettle black. Though industries and lobby groups like the NRL, AFL, RSL and Clubs NSW are playing equally dirty, by fudging figures and disingenuously representing the consequences for them for such a proposal.

It's coming towards the end of the year and both parties are trying to create artificial distance between each other and their policies. However in doing so, they both neglect to pass what should be, a straight forward policy to assist (to a limited extent) problem gamblers. Though least of all should discussion or a proposal about comprehensive gambling policy be made. That would be all too bold.

Links
RLS jobs at stake - Queensland Times
AFL joins NRL in pokies revolt - The Sydney Morning Herald
Abbott attacked over Pokies discussion paper - Lateline transcript
Abbott talks up opposition to pokies reform - ABC
Abbott needs pokies rethink: welfare group - Sydney Morning Herald
Clubs use tricky numbers to outfox pokies reform - The Australian (and surprisingly enough, it's not behind a paywall....yet)

The Congo's poverty will not end with mining

Gold miners pass mud along a human chain in an open pit mine
North-eastern Congo. (REUTERS/Finbarr O'Reilly)

The Congo is one of the most impoverished nations in Africa, with more than 70% of its population living below the poverty line.  Yet this troubled nation sits on more than $24 trillion worth of minerals. Such mineral worth is greater than the annual economic output of both the US and entire European area combined. But accessing and distributing such wealth has not only been unsuccessful in reducing poverty within the Congo, but it has directly attributed to increased violence with militia rebel groups, slavery and social instability.

President Joseph Kabila, who is seeking re-election in the coming months, has had a change of heart and is now seeking to tap into the Congo's troubled mines to bring economic prosperity to all if its people. In the past, foreign firms have been wary of investing in Congolese mines because of its bad reputation for human rights abuse, but also because of the instability of the country which regularly dips into localised, violent civil war. There is a critical need for foreign investment to reinvigorate the Congolese mineral sector and ensure efficient production. Local companies don't have the expertise, technology or skills to excavate minerals on a scale that rakes in exuberant profits. Though in neighbouring nations where this foreign direct investment does occur, typically, these profits mostly go back to the foreign companies, not the country itself. However in the Congo, where localised mining in the east is increasing, it is often decentralised and unaccountable to government officials, which causes other significant problems.

The history of civil war and militia violence that has plagued many African nations, including the Congo, means that local development of industry is hampered by systemic corruption. It is estimated that 98% of the mines operating in the east of the Congo is controlled, or have strong ties to militia groups. Because of this, local militia groups tax those who work within the mines, restrict which ethnic groups the profits go to, but most often just funnel the profits into munitions and war campaigns. Sadly, due to government ineptitude and corruption, whatever control government agencies do get over these mines leads to very similar outcomes.

What is most shocking about Congolese mining though is the way in which its operations seem only to be entrenching the poverty cycle. As most Congolese citizens live below the poverty line and have an income of less than $2 a day, or live on subsistent farms and have no income at all, the existence of mines should have very little affect upon them. However, as mines pay money, the notion of working in a mine for cash can become an attractive option for at least one member of a family. Such money, if received, can be used for buying more farm equipment, or much needed medicine. Though when most mines only pay their workers between 50c and $1 a day, the likelihood of them becoming indebted to the mine for other costs incurred (such as food, shelter or 'protection') leaves them in a position of virtual slavery. And as militia groups are the ones who benefit most from the mines, their campaigns of looting and disrupting local villages drives more people off farms and into mines, creating a vicious cycle of poverty and slavery.

As violence around mines becomes worse, and the profits from these minerals fund new conflicts, the international communities (though mainly the US') response through the 2010 Dodd-Frank banking act to restrict the importation of 'conflict minerals' has only plunged more citizens into poverty. For some mining operations, output has slowed by more than 95% as the only way to export these minerals is to do so illegally; which in and of itself results in less profits going to the impoverished workers, and less no security for working standards. The intentions of such a policy is commendable, as it attempts to stop multinational corporations purchasing cheap minerals which cause conflict within a post colonial nation. Yet the ban and reduction in purchasing of these minerals is already hurting tens of thousands of Congolese citizens who have moved to a life in the mines.

Even in a perfect world, whereby local governments weren't corrupt, where there are no militias and all the profits went back to the people; a mining boom in the Congo would still hurt many citizens. When a country finds a new export that brings in unprecedented financial capital from overseas markets, it drives more people to move into that industry because it is highly profitable. The consequence of this occurring rapidly is called the "Dutch disease". Simply put, the exportation of this new wonder good drastically increases the price of the dollar. This kills off any other industries which export goods, (such as textiles in the Congo) because international buyers can no longer afford the good due to the inflated dollar. It also rapidly increases the amount of imports into that nation. Because of the high dollar, it becomes cheaper to buy goods from overseas (such as food) than at the local market, which then kills off domestic industries. Then if at any point the export market crashes, such as if there is another global recession or minerals are found cheaper elsewhere, an economy that has completely re-geared itself for one industry is left with nothing to produce for domestic consumption or export. This effectively kills the economy, and damages it for decades to come. Though if magically, because of better governance and more responsible foreign investment, the mining sector in the Congo could be revolutionised, the Dutch disease would only hit the east of the Congo were most of the mining occurs.

The sad fact being is that we don't live in a perfect world. So there is little chance that the "Dutch disease" will reach the Congolese economy at all. Instead, the continuation of corrupt and militia driven mining will still occur, even while an international ban is in place. Though even if removed, it would cause just as much harm by increasing militias' ability to buy arms. It appears as though there is no solution to this most unfortunate circumstance. While it is depressing to end a post on such a dreary note, many economists, international institutions and trade experts advocate for varied solutions to help end poverty and instability in Africa (with varied and questionable degrees of success). What is clear though, is that mining in the Congo is not one of them.




Links:
Congo rape victims face slavery in gold and mineral mines - Guardian.co.uk
Digging for victory - The Economist
Still smuggling - The Economist
Mr Copper - The Economist

US debt ceiling woes

"I told you so" 

The US has always had a morbid fascination with its debt. Clocks had been set up around the country decades ago, showing the slow but steady increase in US public debt. With the 11th hour nigh before the US debt ceiling is reached on August 2nd, there is a strange, discomforting irony in going back and looking at the clocks that were originally passed off as a scaremongering tactic for conservative candidates. Though with Congress still not having come to a decision as to whether to raise the debt ceiling (and if so by how much), there is the ever growing possibility that the US may default.  And even if it doesn't, the US may still dip back into recession because of bad economic policies were rushed through at the last minute to avoid default.

The very idea of a debt ceiling for government makes perfect sense. It's a cap (the ceiling bit) on the amount of money the government can borrow. This in theory reduces the ability of a government to act irresponsibly and charge up the national credit card on irrelevant, pricey policies. Though in this circumstance, the US debt ceiling is acting as anything but a protection measure for the US government and economy. It has become a mere obstruction to the ability for the US government to make both timely policy, but also not to default and loose its AAA credit rating.

To take the view of the "Tea Party", Barack Obama - being as fiscally and politically irresponsible as he is -  is trying to ruin the US economy. In this situation, the debt ceiling wouldn't stop an economic disaster. As soon as the government over borrowed, either the government would have cease from acting on anything that cost or the US would loose its AAA credit rating and economic strife would ensure. The President could also ignore the ceiling and open up the possibility for impeachment, thus economically and politically disabling the economy. In no way does the US debt ceiling manage to avoid or mitigate bad political and economic decisions in relation to debt. It acts more as a guideline, a point of reference to which governments would not like to reach because of what it symbolises; bad economic management.

Though for Barack Obama, who is trying to stimulate the struggling US economy and also push through major yet costly healthcare reform, the debt ceiling acts only as a blockade to action. It prohibits the President from using his executive power to make decisive action where Congress dithers and dawdles.  Though the closer the US gets to hitting the $USD14.3 trillion ceiling, the more pressure is placed on him to take decisive action.

On the current course, if no action is taken, the US will break through the ceiling on August 2nd, requiring Congress to limit government expenditure, resulting in the US defaulting on some of its loans. The impact of this would not only likely plunge the US back into recession, but it would trigger a wave of instability over financial markets around the world. With the already unstable Eurozone, a US default would only worsen their situation. The other option is that the President ignores the ceiling (and continues spending) or priorities some payments so as to avoid default. Though this would cause a political/constitutional crisis with the President using his powers in the manner, creating even more uncertainty and instability. Hence the only real option that remains is negotiation and deal making with the Republicans. As the Republicans hold the majority in the  House of Representatives, and could realistically pass their own policy of heavy spending cuts through with a filibuster, politics in Congresses is getting very terse, tense and nasty.

It's 11th hour of Capital Hill with the 2nd August fast approaching. It is unknown whether it will be the Democrats or Republicans who become victims of circumstance by agreeing to a last minute deal in Congress. The one unknown variable in this political equation is the markets knowledge that the US economy is at its most fragile state since the 2008 GFC (Global Financial Crisis). This may be the hour for bold decision making and strong leadership; or a drawn out filibuster, political backstabbing and a solution that no one is really confident in.

Links

US House and Senate divided over debt ceiling issue - BBC news 

Q&A: Why has the US not agreed a new debt ceiling? - BBC news 

Talks resume as Senate kills off debt bill - ABC news