Lowy Institute
The Brexit referendum

By Dr Annmarie Elijah, Associate Director, ANU Centre for European Studies, Australian National University and Dr Ben Wellings, Deputy-director, Monash European and EU Centre, Monash University.

The full ramifications of the events of 23 June, when a majority of British voters elected to leave the European Union, will not be clear for months, and perhaps years.

In part this can be attributed to the way the referendum took place: while the particulars of the 'Remain' option (including renegotiated EU membership) were set out, the 'Leave' option did not extend to clearly defining next steps. Further, political elites in the UK and the EU did not expect a 'Leave' vote, and seemed to regard even entertaining the possibility as only encouraging the Brexiteers. On reflection this was a colossal misjudgement of public sentiment, and the latest unfortunate example of the gap between the leaders of the EU institutions, their member state governments, and the public who fail to identify with the European project.

The Australian government's position on the British referendum was that, while EU membership 'was a matter for the British people', Australia would benefit from an active UK membership of a strong EU. As it turns out, the government was whistling in the dark on both counts. A majority of UK voters clearly did not agree that the UK is best served by remaining inside the EU, shaping and reforming European integration.

The EU is diminished by the prospect of the departure of a key member state. The EU28 was already contending with sluggish economic growth, a migration crisis and a complex strategic environment; the EU27 can now look forward to battling the contagion effect of Brexit as radical groups across the continent seize the momentum to push diverse political agendas. It is a gloomy portrait.

Since the result became clear on Friday, the Australian government has appealed for calm, tried to restore confidence, and noted that the implications for Australia would not be known 'for several years'. Discerning the practical implications of Brexit for third countries such as Australia is difficult.

The first question might justifiably be about whether this is the end of the matter. If history is any guide, probably not. The British were debating 'in' and 'out' for all of the 1960s, and half the 1970s as well. The 1975 referendum on (then) European Community membership did not settle the issue, and the deep divisions inside British political parties persisted. Within a a few days of last week's vote, Westminster was petitioned for a further referendum. We can say with certainty that Britain is divided over the EU, but little else about where UK policy might go from here.

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Second, Brexit's impact on Australia is all about the terms. These will not be clear for at least two years from when the UK invokes Article 50 of the Treaty on European Union. The timing for notification is not yet clear either. The EU27 and the UK will need to negotiate the terms of British exit and the relationship to take its place: economic area membership, trade agreement, or some other model entirely. The free movement of people is likely to be a sticking point.

From Australia's point of view, the best Brexit would be one that was swift and smooth. However the EU is a complex set of institutions and an advanced single market. Agreement over the terms of Brexit could be protracted. Before negotiations with the UK even commence, the position could be hard fought among the EU27. And some member states and EU leaders are in no compassionate mood. The UK is heavily integrated into the single market and dependent upon trade with the EU. It will find itself once again on the receiving end of EU terms and conditions.

Implications for Australia are somewhere downstream of these negotiations. The discontinued UK-Australia Trade Agreement (1932–1973) cannot easily be revived into a modern, comprehensive trade agreement. Noises about the revival of the Anglosphere were made during the campaign. Nevertheless, the Australian government should not assume that Australia would be on the top of the list of the UK's prospective trade partners despite the fact that a post-EU Britain will need friends — and quickly. Even if the UK and Australia were immediately inclined to seek bilateral trade negotiations, it is not clear when the UK will be at liberty to begin genuine negotiations, or even know the parameters of its trade policy. 

Third, the vote for Brexit complicates Australia's relationship with the EU. This messy triangle is old news. Successive Australian governments were once irked by UK intentions to join the Community; the present government must now deal with the disruption of UK intentions to leave it. Most immediately the Brexit profoundly changes the backdrop to the proposed EU-Australia free trade agreement, currently under consideration in Brussels and Canberra. Prime Minister Turnbull has stated that he is 'very confident' that these negotiations will continue. The truth is this agreement could be on the backburner. Instead of negotiating collectively with Australia, the EU27 and the UK are instead negotiating with each other. Further, the EU-Australia trade agreement is less attractive from an Australian point of view: the UK still predominates in the trade statistics with the EU28, with the services and investment dimensions particularly strong. Extracting the UK from the single market alters the dynamic, and almost certainly delays the negotiations. 

This is unfortunate given that goodwill had perhaps begun to prevail in Australia-EU relations, as evidenced by the recently completed Treaty-level political agreement and the moves towards the trade agreement. 

The intricacies of the UK's extraction from the EU will begin to become apparent in the coming months. The incoming Australian government will find itself on the horns of a dilemma. Brexit will absorb time, energy and resources in Europe and the UK. Australia may find itself low down in the list of priorities. But both the UK — or what remains of it — and the EU will need new friends. The Brexiteers need alternatives to Europe and Australia will be in their sights. Maybe it will be just like old times after all.

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US presidential race 2016

The Clinton camp is taking heart from new polls that place their candidate ahead in national polls. Trump had a terrible June, we've been told. But, after the shock of last week's Brexit vote, we have all learnt to be a lot more careful about reading the public mood.

On the National Review, Rupert Darwall noted that 'at one point Cameron's pollster tweeted that virtually every intelligent person thought leaving the EU a stupid idea'. This impression was fed by polls, Darwall explained.

After the horrible murder of the Labour MP Jo Cox, 'Stronger In' became 'Kinder In'. The implication was that people concerned about immigration or just not happy being governed from Brussels were narrow-minded, xenophobic, or worse. When you try to delegitimise somebody’s vote, you don’t change his mind, only his willingness to talk about it. The effect was to understate Leave in the polls. Of the nine final polls, seven showed Remain in the lead, with Remain’s pollster showing a ten-point lead.

The Atlantic cited Henry Olsen from the Ethics and Public Policy Center, who said:

I don’t think that the Brexit means Trump is going to win. That would really be getting ahead of ourselves. But I think it means that as a political matter, you have to take working class viewpoints seriously, and you have to be open to the possibility that traditional measures of polling are underestimating the political impact of those opinions.

And that means not discounting points of view because they don't fit with yours, something the unexpected triumph of Trump in the primaries suggests was quite widespread. As Olsen went on to say:

If there’s one thing that’s pretty clear it’s that the last people to take a working-class, populist, political movement seriously are people in newsrooms, trading rooms and political corridors. They will interpret things against that result coming to pass until the evidence comes up and pokes them in the eyes.

So, be careful of polls, and of commentators. But what about Brexit itself and its impact on the US vote?  Read More

PBS NewsHour compiled this list of big differences between the US and the UK and warned against drawing too many parallels. Top of the list was diversity:

The much greater racial and ethnic diversity in the United States is a reflection of its immigration history, along with the legacy of slavery that saw millions of blacks brought forcibly from Africa. Nonwhite minorities make up 38% of the US population, compared with just 14%  in the UK.

The percentage of whites eligible to vote in US elections has dropped from 78% in 2000 to an estimated 69% this fall. Minority voters historically lean overwhelmingly Democratic in presidential elections, a trend that strongly favors Trump’s White House rival, presumptive Democratic nominee Hillary Clinton.

Some conservative commentators have also warned against reading too much into Brexit. Writing on the BDN Maine blog network, Jim Fossel, who has worked on various Republican campaigns, reminded us the US and UK are very different countries and there is no way Americans would have ever ceded as much control as the UK did to a 'faceless international organisation' like the EU.

We have entered into various free trade pacts, including NAFTA, but thankfully none are permanent organisations as powerful as the EU. The United States has, quite consistently, resisted joining international organisations that might undermine its sovereignty — such as the International Criminal Court.

Trump, of course, quickly moved to capitalise on the Brexit vote. He got it badly wrong on Scotland, which voted firmly for Remain.

 Still, many agreed it was shot in the arm for his campaign. Jonathan Easley summed up these arguments on The Hill:

Many of the issues Trump has tapped into in the US  — border security, the assimilation of immigrants, economic discontent and a roiling anger at the political establishment and status quo — animated the debate over whether Britain should remain in the EU.

But without the bureaucrats in Belgium to rage about, does Trump promise enough to appeal to sufficient numbers of those unhappy with their lot to win the election?  If there is one clear lesson from Brexit for the US, it's that we really won't know the answer to that question until the votes are counted.

Photo: Ralph Fresco/Getty News

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The Brexit referendum

'One has to face up to the fact that the other members of the EU have been slagged off fairly royally, and they're the people who you would be negotiating with.' That was the assessment two weeks ago of Lord Jonathan Hill, who on Saturday resigned as Britain's European Commissioner.

First among those other members is undoubtedly Germany, which on Saturday hosted a meeting of the EU's 'founding six' as an initial attempt at cobbling together a response to Brexit. Angela Merkel's reaction to the result on Friday also captured the sense that leadership through this latest European crisis has again defaulted to her country. Likewise, the public zeitgeist here has evolved from pre-referendum entreaties for the British people to stay — to the point of conceding the UK's winning goal in the 1966 World Cup — to grim resignation on managing the mess that they've created for the rest of Europe.  

Attitudes towards the UK's role in European integration tend to fall along party-political lines in Germany, reflected in Merkel's more conciliatory tone compared to that of her foreign minister and vice-chancellor. However there is broad consensus that 'ever closer union' promotes the interests of Europe in general and Germany in particular, making containment of damage to the EU the overarching priority. While Merkel's Administration has been maneuvering to leave London an escape hatch, it has also ruled out any bargaining around a decision to invoke Article 50, and in particular any concessions for the sake of keeping the UK in.

Monday's joint statement with France and Italy confirmed Germany's agreement with the EU's other power players on the bottom-line that 'out means out'.

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Big business is not enthused by the prospect of barriers (whether tariffs or regulations) going up around Germany's most profitable export market, and the DAX fell harder than the FTSE100 on Friday. But in industries where London's dominance crowds out German competitors, and where firms' choice to locate there is influenced by Britain's access to the single market and skilled workers from the continent, German players are already sniffing opportunity. One lobby group has arranged a hotline and travelling roadshow to promote Frankfurt as an alternative hub for financial services. Likewise, within hours of the referendum result a venture capitalist group was talking up the potential for Berlin to displace London as the centre of Europe's technology start-up scene.

Defence firms operating from London are also likely to be considering the need for a cross-Channel move to better service a growing continental arms market. Such a trend could play into the push for a 'European defence union', which was again raised by Germany's defence minister during a weekend interview about Brexit's consequences. This project was already on the agenda for this week's EU summit, with the German head of the EU Parliament's foreign affairs committee having labelled Britain an obstacle to its progress. An EU security strategy that is expected to be published this week, and a German defence white paper allegedly pushed back for a post-Brexit release, will both reportedly promote defence integration in parallel with the NATO framework.

The departure from the EU of its second largest economy will inevitably amplify the largest economy's role in Europe's engagement with the wider world. On Friday, Merkel was the only European leader other than David Cameron to receive a call from Barrack Obama to discuss the referendum's outcome. US decision makers already seem to be following the president's lead; as tweeted by one of Hillary Clinton's advisers, it is 'undeniable now that US ties to Germany will be key on EU issues.' And Brexit feeds into an emerging debate on the need for a coordinated European response to China's expanding investment footprint, and the growing antagonisms around Beijing's foreign policy. The EU just last week adopted a new strategy towards China, a key element of which is the use of trade defence instruments, long stymied by British opposition.

The warning by the EU Parliament's president that a whole continent must not be taken hostage by the UK dithering over implementing its' people's will reflected not just the EU's institutional imperative, but his home country's general sentiment. It is hard to find disagreement in Germany with the chancellor's view that the UK's decision represents a 'watershed for Europe'. And the fact that Merkel hosted the leaders of France and Italy as well as the EU president for talks ahead of Tuesday's pan-EU summit suggests that the other key actors — including Washington — are looking to Berlin for a sense of direction, particularly as at present this looks like it won't be coming from London.

Photo courtesy of Flickr user European People's Party.

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The Brexit referendum

The economic and political consequences of last week's Brexit bombshell will have far-reaching implications. One of these is that the G20 should see Brexit as a wake-up call.

Philip Stevens from the Financial Times points out that capitalism needed saving in the aftermath of the Global Financial Crisis, but in bailing out financial institutions with taxpayer money, governments transferred the stresses from the markets to politics.

The G20 was meant to be a key valve for resolving the political risk that governments took on. When the forum was established in 1999, it was intended as an informal dialogue on economic and financial policy to help achieve stable and sustainable global growth, and, in the words of former Canadian Prime Minister Paul Martin, to focus on translating the benefits of globalisation into higher incomes and better opportunities for people everywhere.

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The G20 has runs on the board on crisis management. When Lehman Brothers collapsed, G20 agreements in 2008 and 2009 were instrumental in the global response to the ensuing financial calamity. The model then proved a useful template during the Euro crisis a few years later, albeit on a smaller scale.

Barring further serious policy missteps, the G20 should ideally not need to convene in a 'crisis response' mode as a result of Brexit.

Yes, the decision is the biggest monetary shock since 2008. It has permanently lowered the growth trajectory of the UK and adversely impacts the EU. There have been significant financial market gyrations in the immediate aftermath of the decision. The uncertainty of Brexit also comes at a time when growth is persistently sluggish and the world economy is fragile. The deterioration in global financial markets could worsen and still has to potential to be the tipping point to a global recession. Conditions within Europe could still lead to an unwinding of the EU, particularly if the politics are handled poorly. 

But so far the actions of the key central banks, including the European Central Bank and Bank of England, and  the likes of the IMF, have projected the steady hand that's required. German Chancellor Angela Merkel has called for calm and composure from EU politicians, though not everyone appears to have received that memo. The Peterson Institute's Olivier Blanchard predicts that, should this continue, the fires can be largely contained to the UK and EU.

In contrast, the G20 has been relatively impotent in addressing the longer-term challenges of globalisation. As Duncan Weldon points out, globalisation is fraying. Yes, flows of people across borders continue to rise and the internet is driving ever higher flows of information, but trade and capital flows are slow, post-crisis growth remains weak, and productivity trends are alarming. What's more, the graph of growth of real income in recent decades is elephant-shaped; winners have been the global 1% and middle income people in emerging economies. Those left behind are the poorest, who remain locked out of growth, and the lower-middle class in developed economies.

 

 At a recent address, the IMF's David Lipton discussed the many for whom vulnerability and insecurity are now more salient than the gains from interconnectedness, which has brought market volatility, powerful spillovers and dislocations. Such uncertainty has fostered resentment (rightly or wrongly) of globalisation. 

The G20 should be a ballast against this kind of resentment; it should represent the coming together of policy experts and politicians to provide collective leadership on shared economic challenges. Yet its record remains sparse on the core matters of globalisation. Despite a migration crisis, G20 leadership has been absent on the flow of people across borders. Capital flows remain a controversial and technical matter plagued by competing philosophical positions. Progress in trade liberalisation has been glacial, and the issues divisive (though the G20 has at least made an important contribution to resisting outright protectionism).

But it is the G20's failures to address low growth and inequality that have been most jarring.

Growth since the crisis has not been strong, sustainable or balanced, and discussions on the path forward are at a frustrating stalemate. In recent years the G20 has fallen into a practice of endorsing bureaucratic plans to improve growth and jobs and implement difficult structural reform. But such plans have lacked political backing, with the general public typically unaware of what happens behind the forum's closed-door negotiations. And although there has been important progress on tax avoidance by multinationals, the G20 has failed, even at an aspirational level, to substantively address the disconnect in returns going to different segments of society. 

Larry Summers is spot on when he says that the challenge is now about responsible nationalism. G20 governments can be criticised for taking the public for granted. They have done too little to win back public trust following years of austerity. Moreover, the dense and technical G20 communiques do little to convince the public that it is people, not government balance sheets and fiscal targets, that are the priority. 

At a time when confidence in experts and public institutions across OECD countries is low, politicians and experts need to find a better way to speak to the sense of disillusion from those who have been left behind. The G20 remains a useful vehicle. But it needs to be seen to act, rather than talk. Starting points should be reexamining the role of fiscal policy, more active efforts to resist protectionist sentiment, and examining how to narrow the gap so not all gains go to the booming global elite.

Otherwise political leaders should not be surprised when citizens remain frustrated and feel the need to take matters into their own hands. Brexit has clearly demonstrated that options which are clearly self-destructive will not necessarily be avoided. 

What is needed is a positive, constructive G20 agenda, one that cuts through to actually reach people and demonstrate to them the merits of economic liberalism. We are far from that place now. It is the G20's biggest test since 2008. Can policymakers adapt?

Photo: Getty Images/VCG

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  • The Asian Infrastructure Investment Bank (AIIB) announced its first four loans on Saturday at its first annual general meeting, totalling US$509 million. Three of these initial projects are co-financed by conventional aid donors. Photos from the AGM suggest gender isn’t a high priority for the bank.
  • China’s Finance Minister argues that the AIIB will have a better understanding of the development needs of Asia than other international development banks.
  • The AIIB now has 57 members and US$100 billion in committed capital. It is looking to expand its membership base and increase its staff count from 39 now to 100 by the end of the year. The bank intends to invest $1.2 billion this year. 
  • As we enter the home stretch of the Australian election campaign, foreign aid dominated the Australian Deputy Leaders’ debate in Canberra last week. Matthew Dornan has broken down the debate for Devpolicy.
  • Despite all the heated discussion, when you look at the commitments of the major parties on aid there is a lot of homogeneity. Camilla Burkot and Stephen Howes have evaluated how each political party stacks up on foreign aid.
  • Bob McMullen, Australia’s parliamentary secretary for International Development Assistance from 2007 to 2010, has written about how Australia punches below its weight in multilateral development banks.
  • The Guardian has a piece on the difficulty of weaning rural Myanmar opium farmers away from the valuable but illicit cash crop.
  • Finally,  Brexit isn't looking good for development. The drop in the pound is causing the value of British foreign aid to fall by more than US$1.4 billion. It will also have broader development ramifications.

Photo: ChinaFotoPress via Getty Images

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The Brexit referendum

A vote to leave would represent an immediate and profound shock to our economy. That shock would push our economy into a recession and lead to an increase in unemployment of around 500,000, GDP would be 3.6% smaller, average real wages would be lower, inflation higher, sterling weaker, house prices would be hit and public borrowing would rise compared with a vote to remain.

George Osborne, Chancellor of the Exchequer, May 2016.

The longer-term consequences are predicted to be even more parlous:

If we take as a central assumption that the UK would seek a negotiated bilateral agreement, like Canada has, the costs to Britain are clear. Based on the Treasury's estimates, our GDP would be 6.2% lower, families would be £4,300 worse off and our tax receipts would face an annual £36 billion black hole. This is more than a third of the NHS budget and equivalent to 8p on the basic rate of income tax.

George Osborne, April 2016.

And yet Britain has voted to leave.

As usual in economics, 'it all depends', but there is near unanimity that this will turn out badly for Britain's economy, even in the longer run when the shockwaves have dissipated. See the chart on page 24 of the IMF's assessment. The only positive prediction is from a cock-eyed optimist who sees Britain retaining the substance of its EU relationship, supplementing this with free-trade agreements with fast-growing economies, and a productivity burst resulting from deregulation.

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The main economic issues are:

  • trade
  • investment
  • regulation
  • fiscal costs of membership
  • immigration.

On trade, the starting point is that favoured access to a large nearby market should provide a clear advantage, and about half of Britain's exports currently go to Europe. Many economists are lukewarm about so-called 'free-trade agreements' and common markets as they distort trade and Britain is currently buying some EU goods which could be obtained more cheaply from a non-EU supplier. Let's not, however, make too much of this argument. The EU is a large market and the distortions are probably small (with the notable exception of agriculture — more later). Losing preferential tariff rates doesn't matter much because tariffs are generally low, but it will be painful to lose the seamless connectivity that a common market provides with its uniform regulations and procedures.

It might seem that Britain could negotiate a deal with the EU that retains its current access (as Norway has done). The EU may well be peeved about Britain's departure, but it is still in the EU's interest to maintain a larger trading block. The UK is much less important for Europe than Europe is for the UK (its exports to the UK amount to 3% of the EU GDP, compared to Britain's 13% of GDP from exports to Europe). That said, Europe would be better off with close integration with the UK. 

While economics doesn't stand in the way of this outcome, politics probably does. Norway has to abide by all the EU rules except fishing (an outcome was critically important to its economy), including immigration. Switzerland has negotiated largely-free access to the EU, but contributes to the EU budget, abides by EU rules and is a signatory to the Schengen immigration protocols; all without a vote in Brussels. With these precedents, it seems unlikely that the EU would provide the current degree of access without insisting on many of the existing obligations (including immigration) and fiscal contributions.

The main trade advantage which the UK has at the moment is the ease-of-doing-business which harmonisation of standards and protocols brings. Whatever the deal finally reached, it won't be as good as Britain has at present.

The EU currently has 60 FTAs (and even more under negotiation), with the likelihood that Britain will be excluded from these once it leaves. Where will Britain stand in the Transatlantic Trade and Investment Partnership (TTIP) currently under negotiation? Maybe there is a glimmer of hope here. The US aim is to make this type of high-level agreement the new model for global trade. If Britain could somehow tag along with these arrangements, the result might provide good access to Europe. But the TTIP is a long way off and in any case these broad rules and high level principles are far removed from the detailed harmonisation of the EU common market. 

Potentially just as serious is the impact on foreign investment into Britain. There is not much doubt that Britain has benefited very substantially from being the first choice as an investment destination for non-EU companies looking for easy access to the EU market. Similarly, EU firms find the global orientation of Britain's legal system and language attractive in their dealings with the outside world. This applies particularly to London's financial sector which accounts for 8% of UK GDP. Under the 'passport' system, financial transactions are seamless not just for travel, but for mutual acceptance of prudential regulation. Some of this financial business will shift to Frankfurt, Paris and other European cities. No wonder London voted overwhelmingly to stay!

The popular complaints are about over-regulation, with lots of risible anecdotes about requirements on the dimensions and shape of bananas and cucumbers. But Britain has managed to remain lightly regulated overall, including (most importantly) in the labour market. Derisory anecdotes are legion, but the reality of a globalised economy is that any exporter will have to meet foreign-designated specification (at a minimum, for biosecurity, product safety and rules-of-origin) if it wants to do business overseas. This won't change much. In any case, many of the most efficiency-sapping regulations are home-made (such as urban planning and building regulation). Britain could go its own way on issues such as the environment, but again there are powerful pressures to conform (not least from the domestic public). Thus, EU regulations will probably be replaced by similar domestic rules.

Won't Britain be freed from the undoubted inefficiency of the Common Agricultural Policy (where domestic farm production is sheltered by the highest tariff levels, around 20%)? Much of British agriculture is subsidised (Britain gets back around half of what it puts into funding the CAP) and wouldn't survive without subsidies. It is inevitable that the CAP subsidy will be replaced by a domestic one in the short term, and even in the longer term it will be hard to wean British farmers off their subsidies.

What about the burden of supporting the EU's budget, with all its bureaucracy and costly subsidies for Europe's poorer members? The net cost of EU membership to Britain is around 0.3% of its GDP: not small change, but not all that large either.

Even free-market economists understand there are political sensitivities when it comes to labour markets. Nevertheless, they generally see economic advantage in immigration. The IMF assessment (section 25) quotes a number of studies showing the positive impact of EU immigration on the UK. A growing labour force is usually thought of as a positive for an economy (for the counter example, think of the gloom associated with Japan's declining demographics). That said, the public generally doesn't like outsiders. Looking more closely at the composition, however, only about half of Britain's recent immigrants come from the EU, and these tend to be, in economic terms, the best immigrants; educated, young, mobile, hard-working, motivated, and often bringing special skills. If there is a political imperative to cut immigration, reducing the non-EU migrants could be done without leaving the EU.

From an economic perspective, Britain obtained an attractive deal within the EU. It isn't a member of the euro-zone (it kept its own currency), so it continues to have independence in monetary policy. It is not a member of Schengen, so it keeps control over its borders. It had to accept EU immigration, but this is a plus in economic terms, especially as Britain negotiated the right to restrict social security benefits for the newcomers. Its net membership cost is below average as a share of GDP. It negotiated specific exclusion from the inevitable costs of bailing out troubled EU members like Greece. The sometimes-weirdness of regulatory burden is a source of endless amusement, but is a serious issue only for doctrinaire libertarians; an increasingly globalised economy requires more regulation at a supra-national level. Britain's natural advantages of language and law meant that it could dominate Europe's finance industry and that led to lots of high-paying jobs.

Thus from an economic viewpoint, Brexit is inexplicable. Does it make more sense in a longer timeframe? If the 'Europe' project is moving inexorably towards a huge country called 'Europe', with fully integrated budgetary policy involving large transfers to the poorer members, then the push-back is more understandable. Perhaps Britain's half-hearted integration (notably, its decision to stay outside the euro zone) was a forewarning that it wasn't a suitable candidate for the Europe project, and what happened last Thursday was inevitable at some stage.

Even if this were true as a longer-term trajectory for Britain, why not ride along for the benefits which remain to be gained for continuing membership? The economic case for remaining in the EU is so overwhelming that Brexit has to be counted as yet another case where the economic arguments never gained traction. Of course the economics may not turn out as badly as Chancellor Osborne predicted (he was, after all, a biased source). Financial markets hate uncertainty and always overreact. But what is indisputable is that the down-side risks facing the economies of both Britain and Europe have substantially increased.

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Contrasting Philippines President Benigno Aquino with President-elect Rodrigo Duterte is much easier than finding similarities. Undoubtedly, the Duterte administration will be very different from Aquino's. Duterte has brought communist party nominees into his cabinet but not the Vice President-elect, Leni Robredo. Aquino moved from the Senate to the presidential palace carrying the most powerful surname in Philippine politics. Duterte will, reluctantly, move to Manila from far-flung Davao City where he is mayor. Reflecting these differences, Philippine security policy under Duterte is also likely be very different to the present settings.

Yet, in one important aspect, their security policies could be similar in effect.

The biggest change in security policy introduced by the Aquino administration came in 2013 when it chose to take China to court over maritime rights disputes in the South China Sea, an action led by Foreign Secretary Albert del Rosario . This quickly became Aquino’s most famous policy internationally. It gained widespread public support, and was endorsed by the US and key security partners such as Japan.

It also seriously damaged the president’s personal relationship with China leading him to be castigated by Beijing and excluded from China-organised cooperative events with Southeast Asia. Many critics in the Philippines and beyond thought Aquino and del Rosario had pushed China too hard and that the rash Philippines would pay too high a cost.

What could be the biggest change to Philippine security policy under Duterte is already unfolding even before he is inaugurated. Duterte has restarted the peace process, which was largely moribund under Aquino, for the decades-old, nation-spanning communist insurgency. His peace envoys have had their first meeting in Oslo with the self-exiled founder of the Communist Party of the Philippines (and Duterte’s former teacher) Joma Sison, and the chief negotiator for the communists, Luis Jalandoni. The Duterte team is considering releasing political prisoners, a return for Sison, and a very quick negotiation of a peace deal. Negotiating to end the insurgency and the disruption and death it causes across the archipelago will likely gain public and international support.

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However, Duterte’s unprecedented offers to the communist insurgents at a time when the insurgency is not a threat to the state has triggered concerns from senators including the elder of the Senate, Juan Ponce Enrile. Former coup plotters turned elected politicians publicly spoke during the election campaign about a potential coup if Duterte goes too far and concedes too much. The Armed Forces of the Philippines has backed Duterte’s plans for restarting the peace process but many may find the release of political prisoners and other olive branches to the militant left bitter pills to swallow.

Aquino’s most significant change to Philippine security policy severely strained relations with China, the country’s largest trading partner, at a minor cost to Aquino and the Philippines. Duterte’s likely biggest change to security policy, if not handled well, could put serious strain on his relationship with elements of the army. Sison himself has warned Duterte of this risk.This should be more worrying for the Philippines than China’s opprobrium and cancelled invitations. 

Duterte’s likely biggest change to Philippine security policy is larger than Aquino’s move. It offers greater rewards, and greater risks as well.

The Lowy Institute has today released Dr Malcolm Cook's Analysis, 'Turning Back? Philippine Security Policy under Duterte'.

Photo by Lito Boras/Anadolu Agency/Getty Images

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The Brexit referendum

A few weeks ago some researchers at Lowy had a lunch. I was asked about the consequences of Brexit for Australia and the global economy. I shrugged my shoulders and said 'Meh'.

So, I was quite surprised by the market moves on Friday. Perhaps I shouldn’t have been. If I had paid attention to the changes in markets prior to the vote, I would have appreciated that this would reverse after the 'Leave' vote came in. Interestingly, by some measures, the moves did not reverse completely: the FTSE 100 was up over the week, although the large global companies in that index presumably would have been helped by the depreciation of the pound.

This was the first time I followed a major market ruction over Twitter and the accuracy of the information was surprisingly high; far better than other high-drama events I’ve followed previously on the platform.

The best market analysis I’ve seen of the event is by former IMF chief economist Olivier Blanchard, now at the Peterson Institute. He had a simple message. What we saw in markets on Friday was a combination of a fundamental shock — the Brexit itself — and an increase in uncertainty.

The referendum result probably would not have warranted such a big fall if markets had a precise picture of what exactly Brexit is. However, we don’t have that picture, and that’s caused some panic. Blanchard has this to say:

If … it looks after a week or two as if no one did anything too stupid, and the central banks appear to have things under control, I would expect risk aversion to slowly decrease, markets and currencies to largely recover, and the fires to be mostly limited to the United Kingdom, and to a lesser extent, the European Union.

That seems about right to me.

There has been some concern that the markets were going to experience some sort of 'Lehman' moment, where financial instability and bankruptcy threatened. William Cline suggested that this is unlikely and Gillian Tett declared that, actually, markets have passed the Brexit stress test so far.

Again, that all rings true.

However, there is another wrinkle here.

Some of the heaviest losses occurred in the more fragile parts of Europe. Italian and Spanish bourses took a big hit, even bigger than in the UK. Larry Summers is worried about 'populist exit contagion', where the success of the Leave campaign could have a domino effect that will lead to further European fragmentation. Wolfgang Münchau claimed that 'Brexit’s consequences will be neutral to moderately negative for the UK but devastating for the EU'.

If you are after a bad global outcome, you could find it easily enough there.

Photo by Christopher Furlong/Getty Images

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The Brexit referendum

Sometimes cliches and hyperbole are inescapable. Britain’s decision to leave the EU really is momentous; it really will reshape Europe’s political landscape; things really will never be quite the same again. The implications of this entirely avoidable decision look uniformly bad, and not just for the UK itself —  in the unlikely event that it continues to exist, of course.

It’s worth pointing out that ‘Britain’ didn’t really decide anything. In reality a bare majority, composed primarily of those outside of metropolitan, cosmopolitan London, and an increasingly independently minded Scotland, made the decision. It seems a visceral, barely coherent dislike of elites, Southerners, the City and — most of all — those dreadful bureaucrats in Brussels played a bigger part in deciding the outcome of this vote than any objective debate about the future of Britain, much less Europe.

Add immigration, deindustrialisation, alienation, loss of identity, wrenching structural change and — yes — apparent incompetence at the heart of the European project, and it’s not hard to see why so many became so disenchanted with the European project. But having vented their spleen, will Brexiteers come to rue the day? There are already signs that many are suffering an acute case of buyer’s remorse as they begin to actually realise what they have actually done.

It is not just the short and long-term damage to the economy that is  causing doubts. Even in the unlikely event the other EU members do not punish Britain for leaving by restricting access to the single market, Britain will still have to renegotiate a series of other trade deals from what Barack Obama famously warned would be ‘the back of the queue’. But the economic consequences of Brexit may prove to be the least of newly independent Britain’s worries.

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Scotland’s First Minister, Nicola Sturgeon has already indicated that she wants her country to remain in the EU; in line with the wishes of the majority of Scottish voters. Quite how this can happen without triggering the break up of Britain via a new independence referendum is unclear. At the very least, it is one more layer of unnecessary uncertainty that has been triggered by outstandingly poor and/or opportunistic political leadership across the spectrum in England in particular.

British Prime Minister David Cameron is exhibit A in this context: his monumentally misjudged decision to offer an ‘in-out’ referendum has brought about his own demise and may do the same for the UK. It is entirely possible that Labour leader Jeremy Corbyn may join David Cameron on the political scrap heap; and perhaps he should. His lacklustre, half-hearted support for the Remain cause may well have led to its ultimate defeat.

Boris Johnson may end up having to try and repair the political and economic damage he has done so much to create with his unprincipled, self-serving about turn on Europe. This is, after all, a man who claimed that it was better for Britain to remain in the EU as recently as 2015. Is it any surprise that so many are so cynical about the political process?

For all Johnson’s occasionally Churchillian rhetoric, he may not have much of a country to preside over. In the all too likely event that Scotland leaves, England will indeed be little, and of a vastly diminished global significance as a result. This matters for Europe almost as much as it does for England.

For all Britain’s failure to be a ‘good European’ citizen at times, there’s no doubt it’s added to the EU’s importance and credibility. It’s the second biggest economy and the most consequential strategic actor, after all. It’s also been a useful counterbalance to the historically unpalatable prospect of German hegemony. Angela Merkel is not alone in recognising this importance and regretting its loss.

But even this is not the greatest danger created by Britain’s ill-considered decision. If the European project begins to unravel as a consequence of Brexit, it may mark the end of the most important and ambitious political project in history. For all the EU’s undoubted problems, failures, inadequacies and hubris, it has definitively and unambiguously demonstrated that international cooperation is actually possible — even among countries that have spent centuries tearing each other apart.

So-called realists have always claimed that institutionalised cooperation across borders is unsustainable and that sovereign states ultimately cannot trust each other. Self-reliance rules. We are about to see an important empirical test of these propositions unfold before our eyes. Europe’s appalling, blood-soaked historical record and propensity for self-destructive bouts of rabid nationalism remind us of just what is at stake.

The main reason such a resurgence of nationalism seemed unthinkable was because of the pacifying impact of the EU. Successful economic integration really does change the way people think about each other, especially when it’s produced by political institutions that are designed to achieve precisely that end. Even a bloated, expensive and inefficient bureaucracy seems a small price to pay for such a historically unprecedented achievement.

That this happening when populist leaders and authoritarian politics are on the rise across the world should give us all pause for thought. Yet conservative commentators here and elsewhere offer entirely unconvincing, specious nostrums about regaining control and restoring sovereignty. Such platitudes ignore both the undoubted gains and inescapable necessity of interdependence in what is still a global environment.

Indeed, the environment is but the most important and implacable reminder that none of the defining problems of the 20th century can be addressed without more cooperation rather than less. The problems are difficult — some possibly irresolvable — but without mechanisms with which to address them, solutions are not even theoretically viable. A retreat into insularity, parochialism and nostalgia for the 19th century are plainly not the answers.

The likes of Putin, Trump and Xi may be the only beneficiaries of what will surely come to be seen as a disastrous turning point in the history of the West.

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Well, today's been a shocker. In what will be my last Weekend Catch-up for The Interpreter, the news that the UK has voted to leave the EU has been demoralising. I can't help but think that a liberal project, perhaps the most significant since the UN was established after World War Two, has been torn apart. Already calls from other nationalist forces across Europe have been strengthened. Maybe the financial shocks that are sure to resonate this weekend will dampen any further enthusiasm for further isolationism in other parts of Europe. Maybe they will have the opposite effect. Nobody really knows. This piece in the Financial Times by Philip Stevens captures much of my mood, particularly this passage:

Across advanced democracies politics has been soured by resentment against wealthy elites. Look across Europe, or across the Atlantic to Donald Trump’s Republican presidential campaign, and you see the same seething discontent about globalisation, migration and cuts in welfare. The postwar political order, dominated as it has been by parties of the centre-right and centre-left, is under unprecedented strain. Rising populism of the extreme left and right has begun to sound echoes of the 1930s.

The Interpreter has covered the lead-up to the Brexit referendum extensively this past week. I'll lead off with Shashank Joshi on the strategic consquences:  

If Britain votes to leave the EU on 23 June, it may well represent the greatest strategic shock to the continent since the breakup of the Soviet Union and consequent reunification of Germany a quarter century ago. The balance of power and influence between Britain, France and Germany – a crucial variable in European geopolitics for hundreds of years – would shift, while the European project as a whole could be gravely weakened just as its eastern and southern flanks come under unprecedented strain. Britain itself, having found the role that Dean Acheson famously proclaimed lost, would be in danger of losing it once more, eroding its value as a transatlantic bridge, and grasping for chimerical substitutes in the Middle East and Asia.

Matthew Dal Santo also wrote an excellent and perceptive piece in relation to the vote: 

The intellectual case for Brexit is essentially a 'no' in answer to those questions, making the case for Brexit not only historically, but also philosophically coherent in a British setting: the supremacy of parliament in all areas of public policy is the sine qua non of the nation's civic and political continuity. In Benn's words, not only has parliamentary democracy 'defended our basic liberties' and 'offered us the prospect of peaceful change', it has 'bound us together by creating a national framework of consent for all the laws under which we were governed.'

Christine Gallagher outlined a 'word on the street' take that seems quite on the money now: 

These figures may explain why migration and labour issues are resonating in Brexit debates. A lady I met at Manchester train station said her son is long-term unemployed despite his job hunting efforts. He's had factory work in the past and labouring jobs but he's been unemployed for 18 months and she blames EU migration. A tradie in a pub in Peckham in south London told me that most of the workers on his construction site are from eastern Europe. His view is that people coming from poorer countries get jobs because they are more motivated to change their circumstances and are willing to wake early and work hard. This is anecdotal, keep in mind, and not empirical evidence, and yet it is a reflection of local perspectives about how migration is impacting labour.  

Brett Hogan and John Roskam put forth the idea that Brexit would be good for the UK and good for Europe:

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Democracy is, at its heart, the process by which personal freedom of expression finds its voice. A nation's executive and legislative system, its courts, its police and armed services, and the laws they pass, interpret and enforce, form a framework that governs how its citizens live and interact with each other. A properly functioning nation-state and democracy must have the ability to perform these functions. Unfortunately it is clear that the citizens of the UK no longer enjoy these privileges.

In a similar vein, Richard Johnson said Remain's arguments were unconvincing and did not tackle the issue of globalisation properly: 

The Remain side seems incapable of distinguishing between internationalism and globalisation. Yet we can surely be internationalist while not succumbing to unfettered globalisation. We can support national reciprocity and co-operation without ceding democratic institutions. We can support immigration without giving up our ability to regulate it.

Moving on to the Australian election, Andrew Carr noted that Australian politicians are more willing to talk about defence and foreign policy issues:

On a range of fronts, the last few years have suggested Australia's politicians are increasingly willing to highlight their disagreements on foreign and defence policy. This was clearer under the combative Tony Abbott, but even Turnbull's more refined style can't hide growing differences in how the major parties talk about and think about issues such as terrorism, China, defence spending, climate change (as a security concern), foreign aid, and until Abbott succumbed to the political pressure, submarines. 

In a very important piece, Jenny Hayward-Jones tackled the overlooked issue of Manus in the election:

The major parties in Australia should also be canvassing other options. If the Manus 'deterrent' can no longer be a key plank of Australia's immigration policy, how much symbolic value is there in 'never' permitting refugees currently detained in Manus access to Australia or to New Zealand, while we continue to risk our bilateral relationship with Papua New Guinea? Australian voters have accepted policy backflips before and no doubt will again. Our politicians might even persuade us to do so this time if they do us the courtesy of involving us in an informed debate.

The Lowy Institute launched its annual poll this week. Alex Oliver with an overview of the most important results:

While we are divided between China and the US and many of us are anxious about China's intentions, we also appear to be quite concerned about what's going on in US politics at the moment. Nearly half (45%) of us say Australia should distance itself from the US if Donald Trump becomes president. Around half (51%) say we should remain close regardless of who is elected president; not a decisive vote of confidence and a result which suggests that the Trump factor may be having an impact on Australian support for the alliance.

North Korea launched yet another IRBM earlier this week. Morris Jones:

Ironically, this impatience has probably contributed to the failure of these test launches, much like the fairy tale of the goose that laid golden eggs. Exactly what happens next is unclear, but certain political intermediaries who have oversight of the program could face a bleak future. North Korea would presumably judge that executing or imprisoning key technical personnel would derail their missile development. Then again, politics has already grossly interfered with engineering. Nobody knows what else is happening beyond our view.

With a difficult and messy ASEAN summit that failed to reach a consensus on the South China Sea, Nick Bisley wrote on how it reflects the contest for primacy between the US and China:

The meeting also reminds us that the South China Sea dispute is testing the efficacy of the old ways of managing Asia's international order. Indeed, in many respects it shows that the old order, centred around US primacy and consensus among Asia's states about the basic rules and purpose of that order, is dying — if it is not already dead. Asia has returned to a period of contestation, not only about who owns which features in the South China Sea, but about the underlying structure and purpose of region's international order.

Rodger Shanahan with a take on a recent dissent memo within the US Department of State over the Obama Administration's Syria policy:

As an aside, I must admit that I never knew about 2 FAM 70, the US document that outlines the way US State Department or USAID personnel can express alternate views to US government policy. It beggars belief that an Australian government of either hue would ever allow such freedom of expression within a key government agency.

Jiyoung Song continues her series on the migration-security nexus in Asia:

Human trafficking in the fishing and seafood industry in Southeast Asia is another example of modern-day slavery. Fishermen are especially vulnerable to exploitation as their movements are restricted in boats at sea. Physical abuse, inadequate working and living conditions, unpaid salaries, and the lack of any avenue for complaint are widespread. Australia is connected to a degree to these exploitative practices in seafood industries as it is the fourth largest consumer of seafood from Thailand where forced labour by trafficked persons takes place.

And Marie McAuliffe wrote on migration and the regulation-expectation paradox:

The more states regulate aspects of social and economic life, the more they strengthen the perception that things can be regulated and controlled, even phenomena occurring transnationally and far beyond the direct control of national or regional regulators, like irregular migration. The pressure can then translate into more ‘innovative’ and extreme attempts at exerting greater control, such as the EU-Turkey deal, which can come at a very high price, financially, bilaterally and in humanitarian terms.

Finally, Shyam Saran wrote on India's economic reform agenda and he departure of India's central bank governor, Raghuram Rajan:

In any event, Rajan's departure is not good news at a time when the global economy seems destined to be buffeted by another bout of volatility thanks to uncertainties related to Brexit, China's economic slow-down and continuing economic stagnation in the US and Europe. In dealing with such volatility and unexpected macro-economic instability, Rajan's continuing and tested stewardship would have inspired confidence and projected an air of predictability. As we have seen, perceptions count.

Photo courtesy of Flickr user Theophilos Papadopoulos.

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The Brexit referendum

In just over 90 hours after the UK's excruciating referendum vote to leave the EU, the politically shattered British Prime Minister, David Cameron, was due to go to Brussels to attend a long-planned EU leaders summit.

Instead of celebratory champagne, he and his fellow EU confreres will be bracing themselves to face the dangerous forces unleashed by the British outcome.

The instability from Brexit was already underway as the results began trending to the official Leave result. The markets spoke first, sending the pound to a low not seen since the mid-1980s, and spreading turmoil through global bourses.

Then the victorious Leave campaigner and UKIP leader, Nigel Farrage, told the BBC: 'I hope this victory brings down this failed project and brings us to a Europe of sovereign nation states trading together. Let June the 23rd go down in our history as our independence day.' Earlier, even before the result was clear, Mr Farrage said 'the Eurosceptic genie is out of the bottle and will not be put back'.

He was quickly backed up by the extremist Dutch Freedom Party leader, Geert Wilders who tweeted, 'Hurrah for the British! Now it's our turn. Time for a Dutch referendum.' 

Other European far right forces began to rejoice over the result with the National Front in France tweeting via its Vice President, Florian Philippot: 'The freedom of the people always ends up winning. Bravo United Kingdom. Now it's our turn'.

Gerard Aruad, France's ambassador to Washington gave a hint of what might occupy the EU leaders summit in Brussels next week when he tweeted, 'Now to the other Member states to save the EU from unraveling which excludes business as usual, especially in Brussels. Reform or die.'

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Many have speculated a British exit would leave Germany little challenged as the master of the EU, but so far the reaction from Berlin has been what might be expected. Germany's Vice-Chancellor, Sigmar Gabriel tweeted: 'Damn! What a bad day for Europe."

Scotland's First Minister, Nicola Sturgeon hinted at a future break up of the UK over Brexit, saying that the EU vote 'makes it clear that the people of Scotland see their future as part of the European Union. After all, all 32 local authority areas (in Scotland) returned majorities for Remain.'

Another looming problem for the UK is that Northern Ireland also voted to Remain, if not as emphatically as Scotland. This will raise thoughts of a reunification with the Republic of Ireland. 'The British government...has forfeited any mandate to represent the interest of people in the north of Ireland in circumstances where the north is dragged out of Europe,' said Sinn Fein chairman, Declan Kearney .

The now hapless Cameron must decide when to use Article 50 of the Lisbon Treaty that allows the UK two years to negotiate its withdrawal. He said he would do so as soon as possible, but Boris Johnston and British cabinet minister, Michael Gove, who led the official Leave campaign (which excluded Nigel Farrage), say Cameron should not rush it.

At the same time, however, they say they want quick changes before the UK leaves the EU, including limiting the power of EU judges and restricting the free movement of workers.

This advice not to rush on one hand but to speed up on the other could be in breach of EU regulations. But that won't worry the Leavers.

Another Tory Leaver, former defence secretary Liam Fox, urged Cameron to stay on as prime minister to see Britain through the 'turbulence' the vote would  bring. He said:

There is clearly going to be some short-term turbulence. . . As the prime minister that gave us the referendum he is best placed to see us through. . . It would be quite wrong and against his character to say 'I lost the referendum therefore I'm going.'

Elsewhere, in the Remain camp, emotions were running high. Labour's former Europe Minister, Keith Vaz told the BBC the vote would be 'catastrophic for our country, for the rest of Europe, and for the rest of the world.'

Three weeks ago on The Interpreter  Daniel Woker wrote Europe faced three related challenges: Libya and Turkey as key migrant transfer countries; Putinism in the East; and the need to stay globally relevant in the Asian century. Woker said:

Prime Minister Cameron or a like-minded pro-European successor will feel free to work with the UK's newly affirmed European partners to start tackling real problems such as those three challenges.

Now Cameron won't.

Photo by Michael Tubi/Corbis via Getty Images

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If you are not already, it's worth following the work of Steven Levy, a long-time technology journalist that has been covering Silicon Valley and the American technology sector for over 20 years (his work and criticism of Apple are particularly noteworthy). He now writes for Medium on its Backchannel site and recently published a long-form piece on Google and its attempts to integrate 'machine learning' throughout all aspects of the company. The progress on artificial intelligence has been getting more attention recently, primarily because of comments from figures like Elon Musk and Stephen Hawking (some other great pieces on this broad area can be found here and here). But a lot of the work is taking place in massive companies like Google. Below are a few extracts from Levy's recent piece.

First, what exactly is 'machine learning'?:

The example Giannandrea cites to demonstrate machine learning power is Google Photos, a product whose definitive feature is an uncanny — maybe even disturbing — ability to locate an image of something specified by the user. Show me pictures of border collies. “When people see that for the first time they think something different is happening because the computer is not just computing a preference for you or suggesting a video for you to watch,” says Giannandrea. “It’s actually understanding what’s in the picture.” He explains that through the learning process, the computer “knows” what a border collie looks like, and it will find pictures of it when it’s a puppy, when its old, when it’s long-haired, and when it’s been shorn. A person could do that, of course. But no human could sort through a million examples and simultaneously identify ten thousand dog breeds. But a machine learning system can. If it learns one breed, it can use the same technique to identify the other 9999 using the same technique. “That’s really what’s new here,” says Giannandrea. “For those narrow domains, you’re seeing what some people call super human performance in these learned systems.”

Google seems to be championing a sort-of 'democratisation' of machine-learning skills among its engineers, as well as throughout the wider tech community:

For many years, machine learning was considered a specialty, limited to an elite few. That era is over, as recent results indicate that machine learning, powered by “neural nets” that emulate the way a biological brain operates, is the true path towards imbuing computers with the powers of humans, and in some cases, super humans. Google is committed to expanding that elite within its walls, with the hope of making it the norm...

...“The more people who think about solving problems in this way, the better we’ll be,” says a leader in the firm’s ML effort, Jeff Dean, who is to software at Google as Tom Brady is to quarterbacking in the NFL. Today, he estimates that of Google’s 25,000 engineers, only a “few thousand” are proficient in machine learning. Maybe ten percent. He’d like that to be closer to a hundred percent. “It would be great to have every engineer have at least some amount of knowledge of machine learning,” he says.

Also, it seems that machine learning responses follow human nature more closely than first thought:

When the team began testing Smart Reply, though, users noted a weird quirk: it would often suggest inappropriate romantic responses. “One of the failure modes was this really hysterical tendency for it to say, ‘I love you’ whenever it got confused,” says Corrado. “It wasn’t a software bug — it was an error in what we asked it to do.” The program had somehow learned a subtle aspect of human behavior: “If you’re cornered, saying, ‘I love you’ is a good defensive strategy.” Corrado was able to help the team tamp down the ardor.

Lastly, this takeaway likely foreshadows what will be written in terms of the history of the evolution of coding:

“It was significant to the company that we were successful in making search better with machine learning,” says Giannandrea. “That caused a lot of people to pay attention.” Pedro Domingos, the University of Washington professor who wrote The Master Algorithm, puts it a different way: “There was always this battle between the retrievers and the machine learning people,” he says. “The machine learners have finally won the battle.”

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By Jonathan Pryke, Research Fellow and Director of the Aus-PNG Network in the Lowy Institute's Melanesia Program, and Kath Taplin, Senior Development Manager for Femili PNG

Rates of gender-based violence in Papua New Guinea (and in the Pacific Islands region more broadly) are among the highest in the world. Estimates from Médecins Sans Frontières (MSF) suggest that 70% of women in PNG experience some degree of physical or sexual assault in their lifetime. The issue hit international headlines again this year with MSF delivering a major report on the crisis as it wrapped up its engagement in PNG after almost 25 years of operations. Even more hard-hitting than these statistics are the images in Vlad Sokhin's photography book Crying Meri.

However, less is heard about the important work being done in all sectors of Papua New Guinea toward addressing this pervasive issue. Solutions are desperately required throughout the Pacific Islands region, but there are new approaches warranting broader attention both within and outside of Papua New Guinea.

The Lowy Institute, in partnership with the Development Policy Centre, recently hosted events in Canberra and Sydney to hear from exceptional Papua New Guinean leaders in government, civil society and the private sector. This article attempts to summarise some of the work being done, making specific reference to the guests from our events.

Violence against women is underpinned by a complex interplay of individual, relationship, community and societal factors, not all of which are easy to pinpoint, but at its core it is an exertion of power and control that maintains women's inequality. A sustained and coordinated national response is required, and this starts with the PNG government.

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The Department for Community Development and Religion takes a lead role in this regard, and is developing the first national strategy to address gender-based violence in PNG. Anna Solomon, the Secretary of the Department, assured audience members at the events that this strategy (which will help focus and guide government) is in its final stages of development after a lengthy consultation process.

PNG's Family Protection Act and child protection laws were also discussed, as they form part of the developing legal framework necessary to start effectively addressing violence. Unfortunately, PNG's ongoing fiscal challenges raise the question of whether the resources the government will allocate to new initiatives and to bolster existing work will be sufficient. Comprehensive strategy and laws, however, are critical to demonstrate national commitment on an issue challenging national development, help concentrate domestic efforts and coordinate international assistance. The government also has the luxury of being the largest employer in PNG's formal economy, and where it can't lead with cash it can certainly lead by example (such as through implementing and enforcing stringent employment and recruitment standards). 

Momentum in the private sector is starting to build as employers grasp that there is not only a moral justification for serious action, but also an economic one. At our events we heard from Oil Search Foundation CEO Kymberley Kepore (Oil Search recently committed over US$50 million to the Foundation for the years 2016-2020) on why gender has become a cornerstone of the Foundation's work and how investing in this space is more than just corporate social responsibility for Oil Search.

We also heard from Kevin Byrne, Deputy Chair of the PNG Business Coalition for Women (BCFW), a recently established group of companies and corporate leaders, on his work to promote business and employment opportunities for women. BCFW is also actively trying to address violence in the workplace (such through developing model family and sexual violence policies being taken up by companies who want to support their employees who are suffering violence). The BCFW is an example of how the private sector is starting to coalesce and unify around this critical issue. 

Another instance of business recognising the importance of both empowering women and addressing the barriers and violence they face was the recent Aus-PNG Business Forum in Cairns. There was an address from KTF Archer Leadership Scholar Stephannie Kirriwom, an awe-inspiring Henry Kila Memorial Address from Dr Barry Kirby on the topic of addressing maternal health challenges and breakout sessions on addressing violence against women in the workplace. The leadership and resources PNG's private sector wields will be critical in developing much more concerted and integrated private sector, government and NGO responses over time. 

While leadership, raised awareness, resources and coordination are all parts of the puzzle, delivering services and support to survivors of sexual and family violence is particularly vital. With limited resources and an already stretched health budget, front line workers do a valiant job of providing treatment to adult and child survivors. However, there are insufficient examples of integrated services for survivors in PNG, which is where Femili PNG (which operates in PNG's second-largest city of Lae) comes in. Operations Manager Denga Ilave discussed how the organisation (supported by DFAT, along with Oxfam and private sector and philanthropic donations), works with provincial government, police, courts, hospitals and the private sector to provide daily assistance to adults and children affected by family and sexual violence. Femili PNG staff provide access to services for hundreds of women and children, including medical treatment, counselling, legal assistance, safe houses and (when necessary) relocation assistance, including business start-up kits and other support to assist women's economic independence. You can read more Denga and Femili PNG's work at ABC

Another area discussed at our panel events, and which repeatedly came up in conversation, is how to address these challenges in rural communities, where the majority of PNG's nearly eight million people live. This is where existing networks (critically wantok groups and churches) need to be supported, involved and utilised to help this pressure for action reach the grassroots level. 

There is some cause for optimism in seeing every sector take action, but it will take a redoubling of efforts to stitch together these pockets of momentum into a movement that can cause real change in the lives of many. And that change certainly won't happen without men's involvement. Ultimately violence against women isn't just a women's issue; it is the action of men, and gender inequality, we must address. But when looking around the room at both events, something was missing: sufficient men. In both crowds only around 20% of attendees were male.

For a country where, according to the 2016 Lowy Institute Poll, 79% of Australians feel that domestic violence is a very important issue facing Australia (more so than the economy or terrorism), this turnout was embarrassing. But it is also an important reminder that we need to intensify our efforts both at home and in our region to bring men to the table, because just as it will take all sectors working together to see change, it will also take all people. 

Photo: Getty Images/Hadi Zaher

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  • 'Have you been to Tibet bro?' This signalled the beginning of a recent slang-filled Twitter outburst from China's State Information Office. 
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  • On 4 June, the Canadian Government turned to Facebook to commemorate the 27th anniversary of Tiananmen Square.
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  • This slick new video from China urges citizens to pray for smooth sailing in the South China Sea if they want continued access to the newest fashions and electronics. Buoyed by the popularity of Weibo, it's a very smart strategy and only the latest addition in this ongoing propaganda battle:

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Raghuram Rajan, the well respected governor of the Reserve Bank of India, has decided to return to academic life at Chicago University when his three year tenure comes to an end in September this year.

In announcing this well before the due date, Rajan has pre-empted what would have been a controversial government exercise on deciding whether he should be extended for another two years, as has been the case with most of his predecessors; or whether a successor should be selected instead.

Rajan has been acknowledged as one of the most professionally qualified persons to head the central bank in recent years and his management of India's financial and banking sectors has drawn praise both at home and abroad. From being billed as part of the 'Fragile Five' in 2013, when Rajan took charge, to being one of the few bright spots in an otherwise dismal global economic landscape, India owes much to Rajan's efficient and confident stewardship. The fact that Rajan came to this assignment as a highly respected and acclaimed economist gave him a high degree of credibility in international business and financial circles.

This proved to be an important, though intangible, asset to an Indian government seeking to convince an often sceptical international audience that India was embarked on a serious and substantial reform path. Rajan's mere presence at the helm of the central bank, seemed to suggest that India could for once be a good bet for investors.

Rajan's international reputation shone brighter than his domestic image. Business leaders constantly complained about him persisting with a relatively high interest rate regime as part of his anti-inflation strategy. His insistence that public sector banks own up on their expanding non-performing assets  and clean up their balance-sheets struck at the roots of a crony culture where banks and big business together undermined an efficient market based economy.

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But what may have lost him support in the present Modi Government may have been his outspokenness on issues unrelated to economic management. His strong defence of India's plural and democratic values and his implicit criticism of some of the manifestations of sectarianism and intolerance may have angered some of the more ideologically motivated elements in the ruling party. The open and unseemly personal attacks made on Rajan by the BJP Member of Parliament, Subramaniam Swamy, seemed to suggest as much. Some critics of Rajan have suggested, perhaps with some justification, that as a central bank governor he should have maintained a low public profile and concentrated on matters relating to his own mandate, rather than venture into a contested public space.

In any event, Rajan's departure is not good news at a time when the global economy seems destined to be buffeted by another bout of volatility thanks to uncertainties related to Brexit, China's economic slow-down and continuing economic stagnation in the US and Europe. In dealing with such volatility and unexpected macro-economic instability, Rajan's continuing and tested stewardship would have inspired confidence and projected an air of predictability. As we have seen, perceptions count. 

Rajan's announcement of his imminent departure was followed almost immediately by the government announcing of a slew of economic reforms, some potentially quite significant. It is tempting to think that the latter was timed to counteract or neutralise the possible negative impact of the former, at least on international audiences. In fact, these reforms were being deliberated upon for quite some time and decision on them preceded Rajan's announcement. The latest reforms have expanded the scope of foreign direct investment in defence, civil aviation, broadcasting services, the pharmaceutical sector and processing and retail in agricultural products . They have been justified in terms of job creation and technology infusion.

However, social and labour organisations associated with the ruling party have attacked these reforms as a 'betrayal'. There is a strong and deeply ingrained suspicion of foreign investment within sections of the BJP, which espouse self-reliance instead. It remains to be seen whether intra-party dissension sidetracks the reform process. This is what happened in the last years of the previous government, despite it being headed by a prime minister with impeccable reform credentials.

Whatever the reasons why these reforms were announced at this juncture they should be welcomed. India's economy can only benefit from greater openness and market friendly policies. Rajan may be leaving soon, but India will hopefully continue with his legacy of prudent macro-economic management by appointing a professional with a reputation for credibility and competence. This will be critical to the government's aim of pressing ahead with its reform agenda, in particular in the crucial banking and financial sectors.

Photo courtesy of Flickr user International Monetary Fund.

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