Conroy wins, taxpayers lose

CASINO capitalism is dead; long live casino socialism. Karl Marx thought that rational economic calculation - the idea that people would carefully assess the consequences of alternative choices - was one of capitalism's great contributions to human progress. Finance Minister Lindsay Tanner doesn't agree.

Instead, Tanner says uncertainties surrounding the government's proposed national broadband network are too great for careful assessments to be made before funds are committed. Determine the odds before buying a lottery ticket? Study the form before picking a horse? Examine a balance sheet before investing? Toughen up, cupcake! The age of casino socialism is here.

Exactly how it works is a mystery. How does the Finance Minister take risky decisions? Does he go for his lucky number? Is it the vibe of the project? He does claim that no cost- benefit study was done before mobile services were launched.

What? The greedy capitalists who invested in mobile services didn't build a business case, didn't compare expected costs and revenues, didn't measure the risks they would run? Perhaps they didn't do so perfectly, capturing all the possible dynamic effects, but isn't an approximate cost- benefit analysis better than none at all? Not in casino socialism.

Mao Zedong was right: "Socialism is better than capitalism in every respect", and that applies to casinos as well. Casino capitalists, for example, have to convince punters to part with their money. Casino socialists can merely tax it away. Casino capitalists run the risk of backing the wrong horse. Not so casino socialists, who can simply hand the race to the preferred winner.

How? The small print in the government's new telecommunications bill contains this delight, among others: the power to compel Telstra to hand its traffic over to the NBN (in technical terms, to acquire and pay forthe traffic service the NBN willprovide).

True, casino capitalists sometimes excelled at avoiding disclosure. But here, too, casino socialists do better.

Consider the Finance Minister's latest discovery: cost-benefit studies depend on "the assumptions you feed in". "If you fed in my assumptions, you'd get one result. If you fed in Henry Ergas's assumptions, you'd get a very different result." True, and a well-deserved Nobel prize doubtless awaits. But in the meantime, will Tanner disclose his assumptions so they too can be tested? Forget it.

There is some good news, however. The legislation does require publication of any structural separation undertaking the government agrees with Telstra. But there's a catch: it is to be published the day after it comes into effect. Is this what Communications Minister Stephen Conroy meant when he said it would all be "transparent and clear", with no "backdoor letters or anything like that"?

Even on creative accounting, casino socialists trounce their capitalist rivals. Again, the Finance Minister takes the lead. No dour Gladstonian fiscal rectitude here. Opportunity cost? How passe. Rather, the Finance Minister explains, the NBN will barely cost a thing as "private investors will take up to 49 per cent" and "the company will borrow off its own balance sheet". But since when does the financing structure reduce the resource cost of an investment? Won't private investment in the NBN displace other, potentially more productive, uses of Australia's scarce capital? Doesn't the debt need to be repaid? And won't a higher debt ratio, with its burden of fixed payments, make the investment even more risky for equity owners, in this case the hapless taxpayers? Ah, the mysteries of casino socialist finance.

As for ambition, casino socialism truly soars. For example, Conroy, channelling Hugo Chavez in Tamworth earlier this week, committed to doing whatever it takes to get satellite broadband into rural Australia: "If we can't do a deal with operators who've got satellites in the sky, we're actually looking to do it ourselves," he said.

Here's an idea, minister: why not call the entity that operates that satellite AUSSAT, a name the commonwealth must still own? The previous AUSSAT, set up with exactly the same intentions, lost a mere $1billion at today's prices before it was put out of its misery. A billion dollars? Pocket money.

Such vision is not for the faint-hearted. Luckily, our Communications Minister isn't one to kowtow to the namby-pambies who think market forces should manage big investment decisions. He is "fed up with the market claiming it should be left to set prices when the technology revolution gets under way".

Who cares that the costs of providing telecommunications services are many times higher in remote areas than in big cities? Certainly not the minister: "Fair dinkum," he proclaims, "if you pay the same amount to use an ATM in Martin Place in Sydney as you do here (in Tamworth), we can do it for an NBN network."

Commendable candour. None of that micro-economic reform nonsense about how preventing misguided infrastructure spending is a key factor in improving our productivity performance. And gone too is that misplaced emphasis on removing inefficient cross-subsidies. Rather, according to the Communications Minister, "We are saying up-front this will be a cross-subsidy, one wholesale price de-averaged across the country."

True, that is inconsistent with everything the competition regulator has argued during the past decade. And sure, it will mean suppressing competition to the NBN to prevent cherry-picking in cities where "averaged" NBN prices will greatly exceed "averaged" costs. But never mind. We'll just create a new government monopoly. After all, one cannot make an omelette without breaking eggs. And all the better if the eggs are those of future taxpayers or the mums and dads who bought Telstra shares.

But won't the victims object? Perhaps. But, as Mao put it in launching the Great Leap Forward, the masses must be protected from the wreckers who cannot understand a program "so inspired, so militant and so daring". The proposed legislation meets the challenge.

Telstra stripped of the right to receive professionally privileged legal advice on separation issues if it does not accept divestiture? Tick. Draconian new powers to direct Telstra's conduct vested in the regulator without any specific principles to guide their use? Tick. All requirements for procedural fairness in the exercise of those powers waived? Tick. Any remaining rights of merits review repealed? Tick. At last honest people will be able to sleep at night.

So, ladies and gentlemen, step up: casino capitalism has been buried but our very own casino socialism is accepting bets. As that great Marxist ( Groucho tendency) Homer Simpson famously said, "With such an offer, how can you lose?"