Andrew Leigh

18 May 2011  - Topic: foreign aid

Michael Rowland: The debate for foreign aid has increased significantly over the past year due to a big rise in national disasters and global political unrest.

Beverley O’Connor: By 2015 Australia’s foreign aid budget is expected to double to $8 billion. Some experts believe Australia needs to take a very targeted when it comes to aid spending. Dr Andrew Leigh will be talking about this topic a little later on. He’s the Federal Member for Fraser in the ACT, and he joins us now from Canberra. Many thanks for your time this morning. First of all, let’s start with the size of the budget doubling by 2015 – do you think that is too much for a country like Australia?

Andrew Leigh: Well Beverley, it is important to remember where we start off. Australia, compared to other developed countries is in the bottom third of donors and by the time we get to 2015-2016 we’ll be giving 50c out of every $100 that Australia earns and that will put us at the rich country average. So no, I think that is an appropriate scaling up that recognises the good Australia can do in the region and the benefits that being generous brings back to us, in terms of a more secure region and in terms of more trade in the future, which is good for our businesses.

Beverley O’Connor: So when you’re talking about that, you’re talking about aid with the idea of getting something back in return. If that is the approach, where critically do you think the aid should be targeted?

Andrew Leigh: Beverley, I’m giving a speech at the Lowy Institute today, and I’ll be arguing that Australia’s foreign aid has been extraordinarily effective and that one of the things we should do in the future as we scale up is to think about what Australia’s comparative advantage is, what we do better than other countries. I’ll be arguing that there are three of those areas where we should focus on. One is on natural resources – we’re a developed country with a lot of natural resources, so that’s a natural area to think about how we can help developing countries. The second is dry land farming and the third is dealing with fragile states. We’ve had a bit of experience with East Timor and the Solomon Islands and fragile states, so I think that’s something Australia does pretty well as well.

Beverley O’Connor: Can we take up that last point first though, we’ve seen Kevin Rudd just last week – the Foreign Minister – cutting back funding programs to some parts of the Pacific, because even though you may argue that they are fragile states, there is often abuse of the aid.

Andrew Leigh: Look we’ve got to absolutely make sure that our aid dollars are always being well spent. Fraud in the AusAID program is extraordinarily low, a small fraction of 1%, so I don’t think we need to be concerned that Australian aid dollars are being misspent, but we should always be vigilant about it. But in general, we have had some pretty good successes there. Our East Timor intervention and Solomon Islands stabilisation mission haven’t produced perfect states but we’ve done a lot of good in that area and that’s a real challenge, particularly in Africa now. If you look at places like Sudan and Congo, the world really needs expertise on how to stabilise countries. It’s that social policy being delivered with a rifle in one hand, which requires a mix of military, policing and aid assistance. We’re doing some of that work in Uruzgan Province in Afghanistan and the more we do, the better we get at that balancing act of maintaining security while providing basic services to the local population.

Beverley O’Connor: In terms of the other points you make, in terms of the expertise we have, are you thinking that more of our actual expertise and funding people to go over and assist, for example in countries that are developing resources, or in terms of as you were talking about that dry farming. Are you looking more at expertise being funded by Australia so that we can keep track of that money or just simply providing the funds for them to then do it themselves?

Andrew Leigh: That’s a good question, Beverley, and it’s a balancing act in foreign aid, the extent to which you want to send your people over training people in developing countries. Australia actually does a lot of training through our scholarships program, bringing people from developing countries to Australia to learn skills, and some of that is indeed in natural resource management and dry land farming. So I think it’s important to build that capacity and important to recognise that management, particularly of natural resources, is a really difficult balancing act. It turns out there’s this thing called the ‘resource curse’ in developing countries, that a country’s more likely to experience slow growth and violence if it finds natural resources. We need to turn that around – turn a ‘resource curse’ into a ‘resource blessing’, because the developing world has huge amounts of natural assets. There’s $3.5 trillion of sub-soil assets in Africa, most likely. We need to encourage developing countries to make the most of their natural resources as Australia has done.

Beverley O’Connor: How open are these other countries to us coming in, sort of the ‘Big Brother’, to show the way?

Andrew Leigh: I think there’s a lot of openness to think about how to work effectively with natural resources. One of the things I think is being increasingly discussed is how to best sell off the mining licenses. It’s really important to sell of the mining licenses in a transparent way so taxpayers can follow the funds that flow from mining companies through the governments. It’s also important to sell them through auctions, to make sure taxpayers get the best deal from mining leases. It’s really important for voters and governments to know what’s under the soil, to do some basic geological surveys first. These may sound a bit technical but they’re absolutely critical to making sure that people in developing countries get that flow of resources that benefits everyone. Mining employees relatively few people, so people in developing countries will really only benefit from sub-soil assets if governments manage them well.

Beverley O’Connor: Andrew Leigh, thank you very much for joining us this morning.

Andrew Leigh: Pleasure, Beverley.

ENDS

I spoke last night at a community forum in Charnwood on economic growth.

The Pro-Growth Progressive: How Economic Reform Can Make Us Happier

Andrew Leigh
Federal Member for Fraser

Ginninderra Labor Club, Charnwood
18 May 2011

I acknowledge the traditional owners of this lands on which we meet.

The Origins of Growth

As Australians, we’re used to economic growth.[1] It’s the benchmark by which governments are often judged. Yet it is easy to forget how unusual growth is in human history.

Go back a few centuries to the Victorian era and the average person was no better of off than the average caveman.[2] There were a lucky few who enjoyed tea in china cups, but the true living standards of 1800 were better captured by Charles Dickens than Jane Austen.

Indeed, economic historian Greg Clark makes the point that on some measures, the vast mass of the world’s population were worse off in 1800 than their ancestors of 100,000BC. Victorians were shorter – reflecting their poor diet and exposure to disease in childhood.

In 1800, as life expectancy was around 30-35 years, pretty much what it was on the savannah. And citizens of 1800 probably worked longer hours than cavemen. From the Stone Age to the Renaissance, most people ate around 2000 calories a day, compared to the 3000 calories a day that we consume. In fact, most of us would find it difficult to get by on 2000 calories a day, because our bodies are significantly bigger than those of our ancestors.

There’s something slightly shocking about the thought that our ancestors – just seven generations ago – experienced stone-age living conditions. For them, it was normal to go to bed hungry. Everyone knew someone who had lost a baby in childbirth – sometimes with the loss of the mother too. Illness was normal and uncontrollable.

There was simplicity in a world without economic growth. An artisan would engrave his prices on the stone wall of his workshop, knowing that his son would be charging the same. Life for most was, as Thomas Hobbes famously put it, ‘nasty, brutish and short’.

Then – beginning in a little island off the coast of Europe – something changed. With the industrial revolution, people began to experience rising living standards. Average income tripled from 70 cents per person per day in 1800 to $2.30 by 1900. In the twentieth century, average incomes rose tenfold to $22 per person per day.[3]

That transformation had immediate effects on people’s health. A person born in 1900 could expect to live to 40. By 2000, babies born in a developed nation could expect to live until their 70s.

People didn’t just live longer – we lived healthier. A survey of elderly veterans in the US found that in 1910, nearly all were suffering from digestive disorders. By the end of the twentieth century, just one-fifth suffered from digestive disorders.

Underpinning economic growth has been a massive rise in productivity. Workers today create more value in an hour than their predecessors did. A century ago, it took 1700 hours of work to buy a year’s food supply for a family. Working a typical week, that’s 10 months’ labour. Today, a family’s food supply takes a month and a half of work.

That’s true of other products too. Since the late-nineteenth century, the number of working hours to buy various products has dropped dramatically. It used to take 260 hours of work to buy a bicycle – now it takes 7 hours. It used to take 2 hours of work to buy a dozen oranges – now it takes 6 minutes. Not surprisingly, that’s meant an increase in the number of leisure hours: from 2 hours a day in the late-nineteenth century to 6 hours a day now.

The Easterlin Paradox

If you had to name one central fact to characterise the past two centuries, it would be income growth. It has made us healthier and allowed us to enjoy more leisure. It has lengthened our lives and allowed us to be more generous.

Yet some now argue that economic growth has gone too far. In Growth Fetish, Clive Hamilton argued that once a society has developed to the point at which the majority of people live reasonably comfortably, the pursuit of growth is pointless and should be curtailed. Internationally, books like Tim Jackson’s Prosperity Without Growth became bestsellers.

At the core of many of the anti-growth arguments was the contention that once incomes reach a certain threshold, more money doesn’t buy more happiness. The person most closely associated with this idea is Richard Easterlin, who wrote a famous article in 1974 that looked at the relationship between GDP and happiness across nine countries. Easterlin found that there was no statistically significant relationship, and concluded that across countries, money didn’t buy happiness. The relationship became known as the ‘Easterlin Paradox’. His article has since been cited nearly 2000 times, and has become one of the most famous ideas in the social sciences.

Three years ago, a pair of economists at the University of Pennsylvania – Betsey Stevenson and Justin Wolfers – decided to revisit the Easterlin Paradox.[4] But rather than using data for just nine countries, they exploited the fact that we now have more happiness surveys. A lot more.

In 2006, Gallup surveyed people in 132 countries about their life satisfaction. The relationship between satisfaction and GDP is almost perfectly linear. There is no evidence of satiation. If anything, money seems to buy more satisfaction as you get richer. When we move from nine countries to 132 countries, the Easterlin Paradox simply doesn’t hold up.

Interestingly, money doesn’t just buy more happiness. In countries with higher levels of GDP per capita, people are more likely to say that they experienced enjoyment, and more likely to say that they were pleased at having accomplished something. People in affluent nations are less likely to have experienced physical pain, loneliness depression and boredom. Indeed, people in richer countries are more likely to tell an interviewer that they experienced love in the previous day. That’s right, Paul McCartney, money can buy you love.

Environmental Concerns

A popular belief is that economic growth and environmental damage go hand in hand. This concern comes in two forms – some people argue that we will use too many inputs, while others argue that we will produce too many outputs. Let me address each in turn.

The view that our economy will eventually use up all the stuff in the world is based on a static view about where our GDP comes from. If it were the case that all workers produced goods requiring non-renewables and if we never became any more efficient at producing those goods, then rising incomes and population would eventually use up all the world’s resources.

But it turns out that neither of these things are true. Most workers don’t produce goods from non-renewables. In fact, three-quarters of Australians work in the service sector. For detectives and doctors, barristers and baristas, the product of their jobs doesn’t weigh much (leading some to dub the phenomenon ‘the weightless world’ of work). In fact, the entire output of the United States weighs only marginally more today than it did a century ago.[5]

Productivity too, is always increasing.  Today’s cars use less fuel. Our computers use less electricity. And, thanks to recycling, our paper uses fewer trees.

Our economy is also shifting from one resource base to another, a phenomenon that economist Paul Collier characterises (not very reassuringly) as ‘running across ice floes’.[6] In the nineteenth century, the British government worried that it was going to run out of tall trees for the masts of ships. We will probably look back at arguments about ‘peak oil’ in the same way.[7]

The other environmental concern about growth is that people say it inexorably leads to more pollution. Here, the best example is urban air pollution. In the 1950s and 1960s, people became concerned that growth would inexorably choke cities like London and New York. Yet through cleaner cars, cleaner factories, and shifting industrial pollution away from the largest urban areas, we have managed to reduce urban air pollution while still enjoying economic growth. [8]

Today, our major environmental challenge is climate change. Here again, I am optimistic that we can decouple growth from carbon pollution, in the same way as we successfully did with urban air pollution (and with the CFCs that were damaging the ozone layer). I do not believe that the best way to deal with climate change is by abandoning economic growth. Indeed, I think that growth will help us address dangerous climate change, since higher incomes will provide more resources to assist with the transition.

An Imperfect Measure

One of the curious things about economic growth is that while it closely tracks many of the things that we care about – such as health, longevity and love – it is far from being a perfect measure of wellbeing. Indeed, growth in Australia’s GDP (or our GNI or GNP, if you prefer) captures some things that we would think of as bad, and fails to capture other things that most of us would regard as good.

Robert Kennedy put this best in a speech at the University of Kansas, less than three months before he was tragically shot:[9]

Our Gross National Product … counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage.  It counts special locks for our doors and the jails for the people who break them.  It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl.  It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities.  It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.  Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play.  It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.

More recently, Australian economist John Quiggin argues that there are three things wrong with GDP as a measure of a nation’s economic wellbeing: ‘it’s Gross (doesn’t net out depreciation of physical or natural capital), Domestic (doesn’t net out income paid overseas) and a Product (takes no account of labour input)’.

GDP per capita also has the problem that it’s just an average. To see this, let’s suppose that there are currently about 300 people here in the Ginninderra Labor Club. Now, let’s imagine that Australia’s richest man, Andrew ‘Twiggy’ Forrest, pops by in his fluoro vest for a drink. If we just look at averages, the average wealth per person in the Club is now $20 million – even although 300 people have the same assets they had before.

The same problem occurs if economic growth goes only to the richest. In Australia, recent decades have seen an increase in inequality, but everyone’s incomes have gone up. According the OECD, the past quarter-century has seen incomes for the richest tenth grow by an average of 4.5 percent per year. For the poorest tenth of Australian households, incomes grew at 3.0 percent per year.

Australia’s experience contrasts with the United States, where incomes for the bottom tenth have barely budged in a generation. But it does highlight the importance of talking about both growth and inequality. Or perhaps we should focus more on median incomes, just as we do with median house prices. Just as median house prices are unaffected by the doubling of millionaires’ house values, so a measure of median incomes would be unaffected by the doubling of millionaires’ incomes.

Boosting Growth

By now, you’ve probably guessed my secret: I think growth is good. As Winston Churchill said of democracy, it’s not perfect – merely better than all the alternatives. The challenge now is to find the set of policies that are best for promoting economic growth.

In the long-run, the key to boosting growth is raising productivity – producing more with the same set of inputs. During the 1980s and 1990s, tariff cuts, competition policy and enterprise bargaining were among the underpinnings of productivity growth, but what is the answer to the modern productivity puzzle?

In my view, the best productivity policy we can pursue today is to improve our education system. Raising the skill level of the workforce is essential if we are to adapt to changes in the labour market.

We need to raise quantity of education – boost the average number of years of schooling that each person receives. That means encouraging young people to complete high school, undertake vocational training and go to university.

We also need raise the quality of Australian education. Reforming schools is contentious, but the evidence points clearly towards the benefits of school accountability. The MySchool 2.0 website – which includes value-added data and school financial information, it will play a significant role in driving change. Another reform that will improve educational outcomes and boost productivity is improving the salary structure of teachers. We need a salary structure that encourages the most talented young people to become teachers, and creates incentives for high-performing teachers to be recognised for their achievements.

Getting education right isn’t just good for our economy – it’s also great social policy. A first-rate education is the best antipoverty vaccine we’ve yet devised.

Education is also good for civic activism. A bit more school, some vocational education or a few years at university are all factors that help make you more likely to join organisations, volunteer at the local sports club, or donate money to a worthy cause. This is music to the ears of someone like me, who cares passionately about strengthening community life

Another crucial element to the productivity puzzle is technology. As recently as the early-1900s, American jurist Oliver Wendell Holmes quipped that if all the medicines in the world were dumped into the ocean, it would be better for humanity and worse for the fish.[10] A century on, medical advances have vanquished diseases like smallpox, polio and tuberculosis from the developed world. Our emergency departments are considerably better at saving critically injured patients. And in mental health, we are steadily doing better at diagnosing and treating mental illness as soon as it appears.

Conclusion

There’s an old joke that goes:

Q: How many conservative economists does it take to change a light bulb?
A: None. The darkness will cause the light bulb to change by itself.

The main point of this speech has been to argue that economic growth tends to benefit all Australians. But you should not mistake my belief in the benefits of growth with complacency about the need for government to help build a better Australia. Unlike the conservative economist in the joke, I do not believe that markets can solve all problems. Government has an important role to play in providing public investments and managing risks. But it should also promote pro-growth policies, since growth tends to raise wellbeing.

Economic growth makes us happier, and it need not leave us with a dirtier environment. Indeed, the example of the past shows that we can use the resources from growth to improve our natural surroundings. Sometimes the changes come in unexpected ways. In the early-twentieth century, some Londoners worried that there would soon be so many horses plying the streets that the manure would become unmanageable. With the advent of the motor car, worries about exhaust fumes quickly replaced concerns about horse manure.

Australia today is in a far better position than most developed nations. Most have high unemployment rates – some over 10 percent. Some have debt loads that exceed their annual incomes, and are heavily constrained in their policy choices by the absolute priority of paying off debt. By contrast, Australia has the ability to easily satisfy our creditors and make long-term investments.

Globally, Australia's geographic position could hardly be better. At the start of the Asian Century, our proximity to fast-growing nations such as China, Malaysia, Vietnam and Korea will prove vital not only for goods trade, but also because it will allow us to plug in to global growth in other ways as well. Thousands of foreign-born students now study in our universities, while many Australian-born students take the chance to complete all or part of their education in an Asian university.

Great fundamentals place the onus on us to do something special. With the right policies and effective leadership, we can lay the foundations for continued productivity growth, ensuring that future generations enjoy steady improvements in living standards. We can make schools and hospitals work even better, providing the building blocks of a happy and healthy life. We can improve trust in politics, engaging with voters about the tradeoffs that are at the heart of decision-making. We can continue to close the gaps between Indigenous and non-Indigenous Australians, applying hard-headed analysis to find out what works, and what does not. Through trade, aid and diplomacy, we can help improve the lives of many in our region. Ours is an optimistic future – and I am confident that economic growth will be part of Australia’s continued success.

---

[1] The first half of my title is shamelessly stolen from Gene Sperling, The Pro-Growth Progressive: An Economic Strategy for Shared Prosperity, Simon & Schuster, New York, 2006.

[2] Gregory Clark, A Farewell to Alms: A Brief Economic History of the World, Princeton University Press, Princeton, 2007

[3] Arnold Kling and Nick Schultz, From Poverty to Prosperity: Intangible Assets, Hidden Liabilities, and the Lasting Triumph Over Scarcity, Encounter Books, New York, 2009, p.26

[4] Betsey Stevenson and Justin Wolfers (2008) “Economic Growth and Happiness: Reassessing the Easterlin Paradox”, Brookings Papers on Economic Activity. See also work by Angus Deaton and Alan Krueger, which reaches the same conclusion.

[5] Arnold Kling and Nick Schultz, From Poverty to Prosperity: Intangible Assets, Hidden Liabilities, and the Lasting Triumph Over Scarcity, Encounter Books, New York, 2009

[6] Paul Collier, The Plundered Planet: Why We Must – and How We Can – Manage Nature for Global Prosperity, Oxford University Press, Oxford, 2010, p.98. Our ethical obligation with natural resources, Collier argues, is to bequeath future generations assets of equal value to the natural resources we use. We are not obliged to preserve the world as a museum, but we are ‘custodians of their value’. In the mid-nineteenth century, a generation of prospectors who mined Victoria’s gold and left us with Melbourne’s wide streets and magnificent buildings. We look upon them more fondly than if they had sold the gold and left our generation nothing in return.

[7] On peak oil, see Michael Lynch, ‘Peak Oil Is a Waste of Energy’, New York Times, 24 August 2009.

[8] Economists refer to this tendency of environmental outcomes to worsen and then improve as the ‘environmental Kuznets curve’.

[9] Remarks of Robert F. Kennedy at the University of Kansas, March 18, 1968

[10] Quoted in Robert Guest, The Shackled Continent: Power, Corruption, and African Lives, Smithsonian Books, Washington, 2004, p.200

I spoke at the Lowy Institute today, suggesting a few ideas for improving Australia's aid program.

Fragile States and Agile Aid: Some Ideas for the Future of Australia’s Development Assistance Program

Andrew Leigh
Federal Member for Fraser

Lowy Institute

18 May 2011

I acknowledge the traditional Indigenous owners of the lands on which we meet today.

Aid Works

Dai Manju lived in a small village in central China. Because her parents were ill and couldn’t afford the cost of sending her to school, she dropped out. When journalist Nicholas Kristof visited in 1990, she was hanging around the school hoping to pick up bits of knowledge.[1]

After publishing a front page article about Dai in the New York Times, Kristof was chuffed to receive a donation of $10,000 from a reader. He promptly sent it on the school, which spent it on improving facilities, and provided Dai with a scholarship to stay in education so long as she passed exams. After a good amount of the money had been sent, Kristof phoned the donor to thank him for the generous gift. It was only then he realised that the man had in fact only sent $100, and the slip of a bank teller’s fingers had multiplied it one-hundredfold. Informed of their error, the bank agreed to provide the difference as a donation.

After graduating as an accountant, Dai now runs her own business employing many others, and is able to send money back to improve the lives of her parents. Because many of the other girls in her class also received ‘bank error in your favour’ scholarships, the village now has a road.

Spent wisely, foreign aid can transform lives for the better. This year, Australia’s foreign aid program will build 2000 schools in Indonesia, fund a Women’s Crisis Centre in Fiji, prevent 8000 cases of blindness in East Asia, and provide clean water to 1.2 million people in Southern Africa. World Vision CEO Tim Costello claims that this year’s aid budget will save 200,000 lives.

Yet too often, aid debates become removed from the people that they are intended to help. When aid advocates ask the public for donations, they typically ask for help to solve an immediate and practical problem – feeding a child, building a well, providing schoolbooks. To the best of my knowledge, no aid campaigner ever knocked on a door and said to the resident: ‘we’d like you to consider increasing your aid contribution to 0.5 percent of your income in 2015-16, with the ambition of going to 0.7 percent in the future’.

Don’t get me wrong: the quantum of aid is important. I recognise that Australia’s aid contribution as a share of national income still places us in the bottom third of donor countries. Scaling up our aid to half a cent in the dollar will put us at the developed-country average.[2] This is eminently sensible given that 18 of our 20 nearest neighbours are developing nations, and we sell over $90 billion worth of goods to developing countries each year. Few developed nations have as much self-interest in running a good aid program as Australia. But we should never forget that the purpose of foreign aid is to alleviate disadvantage. More aid creates the potential for reducing poverty – but it will not happen automatically.

Although the input-wallahs would occasionally have us believe otherwise, the most interesting debates in foreign aid are not about the quantum of assistance.[3] So today, I want to suggest a few ideas about how to increase the effectiveness of the Australian aid program. This is particularly important in the context of the scaling up of Australia’s aid program. Over the next four years, the Australian aid budget will almost double in nominal terms. This represents a unique opportunity to ensure that our aid is spent in a way that does as much good as possible.

For an economist like me, that means identifying Australia’s comparative advantages in foreign aid, and rigorously evaluating our aid programs. Let me deal with each in turn.

Read more

I spoke in parliament last week about some great things happening in Indigenous education.

Adjournment Speech - Indigenous Affairs
12 May 2011

Where kangaroos graze on an oval overlooking the Pacific Ocean lies the most picturesque school in my electorate. Founded in 1914, Jervis Bay Primary School serves children of Defence Force personnel serving at HMAS Creswell as well as children from the Wreck Bay community. Although it has the lowest ICSEA score of any school in my electorate, a like-schools comparison makes Jervis Bay Primary one of the top-performing schools in the ACT system.

Last week I visited the school and I was struck by the sense of community among the students and staff. With only 84 students, 63 per cent of whom are Indigenous, the school is quite small and everyone knows everyone else. As I walked through the K-2 room with two women who were active in the P&C, one of the boys said, 'What are you doing here, Mum?' My visit coincided with a meeting with Principal Bob Pastor, who had coordinated a Learning 4 Life meeting with representatives from Vincentia High School, the University of Wollongong, Noah's Ark, Booderee National Park, local preschools and childcare centres. The Learning 4 Life group promotes the value of education to Indigenous parents and students, with involvement right through the education spectrum from early childhood learning right up to TAFE and university.

Education's place in helping overcome inequality and disadvantage was also reinforced when I visited Cape York last year and earlier this year. Travelling with the House Economics Committee our task was, in part, to consider Indigenous economic development, so I used the chance to ask some of the witnesses about local schools. Phyllis Yunkaporta, a witness appearing before the committee, told me:

'The education system, as I knew it before, has been of low standard. The curriculum in the past, as it is in all cape Aboriginal communities, has been of very low standard. By the time our children go out to mainstream schools they are hardly there—a child in grade 8 still has the understanding of a child in grade 1. Speaking for Aurukun, I was one of the persons who were invited to the States last October; I went to New York and Los Angeles visiting African-American schools. What we have brought back to Aurukun is a new kind of teaching method and we are having that implemented in the school. Of course it took time. At the beginning it pretty much had been, in my words, chaos before that. Since having this new program come in, if you come to the classrooms in Aurukun the kids are fully focused. This new method of teaching has got them going. The teacher is full-on with the tasks given and you cannot believe it when you enter those classrooms—it is as if some of those kids are play-acting. They are not; they are just full-on, focused. I guess in time we have to have expectations for our children to be educated in a way where they have to balance both worlds—the Western world and the traditional way. Of course we want them to hang onto the traditional way because that is where they are going to be identifying themselves for the future. And with them having to venture out into mainstream, we want them to compete. It is a competitive world out there. We want our black little kids to start taking on the world. That is the aim of all this.'

Ms Yunkaporta was talking about Noel Pearson's Cape York Aboriginal Australian Academy, championed by the Minister for Families, Housing, Communities and Indigenous Affairs, Jenny Macklin. The program offered by the academy has four components focusing on Class, Club, Culture and Community.

Noel Pearson recently wrote that the Class program immerses students in numeracy and literacy using the Direct Instructions, DI, programs. Students need to achieve a mastery of 90 per cent at their level before they can move on. Tests are done every five to 10 lessons and both the students' and teachers' performances are carefully monitored.

Club ensures that kids do not miss out on those future opportunities, providing extracurricular activities that many children in my own electorate enjoy; including the hope to one day include foreign languages and Shakespeare classes.

Culture helps children learn the local Aboriginal languages and their culture and traditions.

In-school activities are supported by the Community program. School attendance and readiness for school are carefully monitored. A food program provides meals during the day and families are helped to manage funds to cover educational expenses. It is clear that there is something in the different models used by Aurukun and Jervis Bay schools that is working well, and I commend the hard work of all those involved—the principals, the teachers, the parents, the children and the whole school community for making something really special happen in these parts of Australia.

My AFR article today is on the Natural Resource Charter.

Break the Resource Curse, Australian Financial Review, 17 May 2011

One of the most robust results in development economics is the fact that developing nations who have more natural resources are more likely to be poverty-stricken dictatorships. This ‘resource curse’ arises because mineral endowments tempt despots into fighting their way into power and filching the wealth.  It’s difficult for an autocrat to steal incomes from farming, industry or services. But diamonds are a dictator’s best friend.

The curse can be seen today in the Democratic Republic of Congo, where conflict over the country’s minerals has grown particularly fierce since the mid-1990s, with bands of thugs murdering five million people, raping half a million women, and impoverishing a nation. The vast majority of Congo’s population would be better off if their country had no natural resources.

In The Plundered Planet, Oxford economist Paul Collier points out that if we can help developing nations to make better use of their natural resources, the resulting fiscal flows could help societies to transform themselves for the better. In developed nations, oil and mineral assets generally benefit the entire population (though we’re currently working to get all Australians an even better deal though the Minerals Resource Rent Tax). But in most low-income countries, the opposite is true.

If developing countries can benefit from their minerals, the payoff could dwarf anything that aid might hope to deliver. Collier points out that in rich nations (where geologists have carefully surveyed the land), the typical square kilometre has subsoil assets worth US$114,000. In all probability, the same is true for the developing world. On those figures, Africa’s natural resources would be worth $3.5 trillion, more than 70 times the amount of foreign aid it receives each year.

To help developing nations make better use of their natural resources, a group of ex-politicians and entrepreneurs (working with academics like Collier) have proposed a Natural Resource Charter, which they hope will be adopted by governments, businesses and NGOs. The Charter aims to go beyond the ideological slanging match that has characterised natural resource use in developing nations, and offer practical ways in which governments can ensure the people get a better deal.

First, the Charter proposes that financial flows be fully transparent. Mining generates relatively few jobs, so what happens to the royalties is critical. Through the Publish What You Pay campaign and the Extractive Industry Transparency Initiative, mining companies are encouraged to release information about the payments that they make to governments. This makes it harder for corrupt officials and politicians to siphon it off into private bank accounts, and enables citizens to pressure governments into spending the money on much-needed infrastructure, such as hospitals, schools and roads.

Second, the Charter argues that extraction rights should be sold by auction. Once a handful of bidders participate, it becomes difficult for them to collude, and the final price is likely to reflect what the rights are actually worth. Collier uses the example of the UK, which was on the verge of negotiating a £2 billion deal to sell mobile phone spectrum when it was persuaded to try an auction instead. The auction raised £22.5 billion.

Third, the Charter suggests that developing country governments should maximise the amount of information about the country’s subsoil assets. If governments or aid donors conduct geological surveys and make them publicly available, then the people of that nation are more likely to get a fair share of their natural resources. Another way to increase information is to require that auction winners begin prospecting within a fixed period of time. If one miner strikes it lucky, this will raise the sale price when nearby parcels are auctioned off.

Fourth, the Charter requires that local peoples should be made better off by mining. Before lending to extraction projects, the World Bank requires ‘free, prior and informed consent’: a principle that the Charter argues should also extend to the way that national governments manage local consultations. Provocatively, it also suggests that where mining companies promise to conduct environmental reclamation, they might be kept to their word via the use of an escrow account.

Since the Eureka uprising, Australians have been debating the best way of managing our natural resources. Both sides of politics won’t always agree on the specifics, but our position as a developed nation with bountiful mineral wealth means that we have much to teach low-income countries about how to handle underground assets. With the right policies, developing nations can turn the resource curse into a resource blessing.

Andrew Leigh is the federal member for Fraser. The Charter may be found at www.naturalresourcecharter.org.

Congratulations to Chief Minister Katy Gallagher on becoming the Australian Capital Territory’s 6th head of government and the 3rd woman to lead our nation’s capital.



In her time as Deputy Chief Minister and Treasurer, Ms Gallagher strengthened social equality through economic growth. With the nation’s best-performing economy Ms Gallagher delivered funding for vital social and community programs, giving assistance and support to many in the ACT.

As Chief Minister, Ms Gallagher will bring an understanding of the economic and social needs of our city, driven by a spirit of optimism and a determination to make Canberra the envy of the nation’s other capitals.

Thanks to the efforts of Katy Gallagher and her deputy Andrew Barr, we enjoy a first rate school system and record investment in health care ensuring quality care for all Canberrans. 

The pride Katy and Andrew have in Canberra makes them the perfect choice for a new generation of leaders that symbolise our diverse, modern and vibrant city.

I believe Canberra is the best city in Australia. I look forward to working with Katy, Andrew and their team to grow our city and ensure equality, opportunity and services for all Canberrans. 

Andrew Leigh

Federal Member for Fraser

I gave a short speech to parliament on Thursday about the challenge of loneliness, an issue that gets less policy attention than it probably deserves.

Loneliness, 12 May 2011

A recent article in the Australian noted that one in four Australians suffer from loneliness as a serious problem. In fact, loneliness is one of the fastest-growing contemporary issues in modern Australia. Many of us here know Professor Adrian Franklin as a panel member on the ABC's Collectors program. But he is also one of the country's leading sociologists and has recently conducted extensive research on housing, loneliness and health. Loneliness is a grim reality that I know the member for Wakefield has also written about.

Between 1986 and 2006, the share of people living on their own rose from 9 per cent to 13 per cent. People who report being lonely are twice as likely to experience poor health as those who do not. As our population ages, more elderly people will be living alone. Loneliness exacerbates anxiety and depression, already the leading cause of disability in young Australians. If we are not careful, we may be caught in a classic pincer movement where  loneliness and its physical, mental and social implications will affect more and more Australians, both young and old.

So I would encourage us to continue our efforts to engage with marginalised and vulnerable members of our communities. It is something I do in my own electorate of Fraser. As I wrote in Disconnected, 'A smiley face emoticon isn't much of a substitute for a smile.'

I've written a guest post for 'Insider' (the blog at current affairs website Inside Story) on the topic of inequality.

Mind the Gap

In a new report on inequality, the OECD has tracked income changes in several developed nations including Australia. It finds that from the mid 1980s to the late 2000s, the average rate of real household income growth among developed nations was 1.7 per cent per year. But while incomes grew at an average rate of 1.4 per cent for the bottom 10 per cent of households, they grew at 2.0 per cent for the top 10 per cent.

In Australia, real household incomes grew faster than the OECD average. Average incomes grew at 3.6 per cent per year over the period. But, as in most other developed nations, these decades were a better time for the rich than the poor. For the top-earning 10 per cent of Australians, incomes grew at 4.5 per cent. For the bottom tenth, they grew at 3.0 per cent.

These results accord with my own work, co-authored with Oxford’s Tony Atkinson, while I was an economics professor at the Australian National University. Our research looked at how the income share of top income groups in Australia had changed, going right back to the 1920s. One way of looking at this is to look at the income share of the richest 1 per cent of Australians – people who in 2007 had earnings of $197,000 a year or more (see chart). In 1921 that top 1 per cent of Australians had 12 per cent of all household income. Then we saw a compression: the top earners’ income share steadily dropped until 1980, by which time that group had about 5 per cent of all national income. Then we saw a rise again, and by 2007 the top 1 per cent had 10 per cent of household income, double the share in 1980.



We see an even starker pattern if we look at the top 0.1 per cent – the richest 1/1000th of Australian adults. In 2007, members of this group were earning at least $693,000, and their income share of the Australian pie followed a similar trajectory. In 1921, they had 4 per cent of all household income. That fell by 1980 to 1 per cent, and then rose again so that, by 2007, the richest 1/1000th of all Australians again had 4 per cent of household income.

There will always be considerable debate about whether policy should try to reduce inequality, and if so, how. Yet work by the OECD reinforces the finding that the gap between rich and poor has widened in Australia over recent decades. True, the incomes of the poorest tenth of Australians have improved. But top incomes have increased faster still.

Andrew Leigh is the Federal Member for Fraser.