Labor powerbrokers removed then prime minister Kevin Rudd just 24 hours before he was to make a significant policy shift on the resource super profits tax, mining magnate Andrew Forrest says.

Forrest says that he had finalised a deal which was less favourable than that struck with BHP Billiton and Rio Tinto. This, of course, gives the lie to claims that Rudd had been unwilling to genuinely negotiate.

Forrest now wants the government to return to negotiating with the industry as a whole. He also says that any resolution, which must come by Friday, must be more favourable than the concessions Kevin Rudd had offered.

In yesterday’s Crikey, Bernard Keane revealed the text of a letter sent to new PM Julia Gillard from the Minerals Council of Australia. Keane characterises its gist as ‘Cave in or else’. With permission, I’ve reproduced his article beneath the fold.

The Minerals Council of Australia has welcomed Julia Gillard to the Prime Ministership with a demand that she gut the RSPT completely if there is to be any end to the mining industry’s campaign against Labor.

Minerals Council chairman Ian Smith wrote to the new Prime Minister on Friday demanding an urgent meeting with Gillard or Wayne Swan and Martin Ferguson early this week to enable a backdown on the tax.

In the letter, addressed to Prime Minister Gillard, with Deputy Leader Wayne Swan and Resources Minister Martin Ferguson cced in, Smith opens by congratulating Gillard on her Prime Ministership.

Smith then flags the mining industry’s willingness to suspend their advertising on the proposed tax as a “sign of goodwill.”

But Crikey understands from a senior mining industry source that the Minerals Council wants an offer from the Government before the end of this week, or it will resume its campaign against Labor.

Prior to being wrong-footed by Gillard’s suspension of the Government’s advertising campaign for the RSPT, the Minerals Council had been planning a mailout to 50,000 households in up to 20 marginal electorates aimed at defeating Labor candidates.

Smith tells Gillard that there are five issues that the Government must back down on:
the 40 per cent rate;
the RSPT “should not be applied retrospectively to existing projects”;
the RSPT must be “differentiated by commodity”
the tax must be “resource-based –- it should not tax infrastructure or secondary processing; and
efficiency — “changes must not compromise the principle of competitive neutrality and minimise deadweight losses to the economy. The absence of complete agreement with the States on the treatment of royalties will prevent real reform.”

Smith writes:
“…unless all these elements are addressed in a comprehensive way the minerals resources super tax will remain fundamentally flawed. It will continue to damage Australia’s reputation as a low sovereign risk destination for foreign direct investment.”

Smith also attacks the possibility of a shift to a PRRT-based model:
“Any suggestion that the Petroleum Resource Rent Tax (PRRT) model is suitable for the minerals industry reflects a fundamental misunderstanding of the differences between the petroleum industry and the minerals industry.”

The mining industry has been deeply concerned that an offer by the Government to shift to a PRRT-based model would leave it looking obstinate and unwilling to engage in genuine compromise, which would undermine its successful advertising campaign against the tax.

Last week, the Minerals Council rushed out hastily-commissioned modelling by KPMG purporting to show little improvement for the industry if a higher uplift rate was applied — even as high as 15%, from the currently-proposed 6% — and transferability and deductibility of losses was abandoned, as part of a plan to avoid being portrayed as stubborn holdouts.

Smith warns Gillard “given the global nature of our industry and the Australian economy, every day the uncertainty over the proposed minerals resources tax is allowed to continue greater damage occurs to Australia’s national economic interest.”

Contrary to Smith’s claims, however, since the announcement of the tax, metals and mining stocks have outperformed the ASX 200, while foreign competitors like Vale and Anglo-American, who RSPT critics claim stand to reap a bonanza from havoc wreaked on the Australian mining industry, are trading well below their early May prices on overseas markets.

Beyond that, it’s hard to figure out what the hell kind of game is being played here. However much Australia, and the developed nations, may “need” China, they “need” us too. And throwing citizens of Western countries into what is going to be perceived as arbitrary detention, which could theoretically go on for years is going to have rather a chilling effect on business ties. That’s in no-one’s interest, least of all the Communist Party leadership’s. So what’s really going on here?

Rio Tinto’s response, that they’re not ‘battling’ a global emissions trading scheme, is laughable. How do they honestly expect a national – let alone global – scheme to gain traction if everyone keeps undercutting it? Business commentary, from the most hackneyed pining for a fanciful, counterfactual world free of political machinations (Carbontaxalia?) to more orthodox defences of industry have questioned the EITE concessions. eg. Electricity Supply Industry Apparatchik Keith Orchison has noted that, “… firms are hardly going to play up the negatives to the investment community, particularly as the legislation is still a moving playing field. However, as the analysts all read the papers, surely they must be asking these companies about their public utterances – how one wonders does the rest of that conversation go?”

One does indeed. The cut and thrust of the complaint is that with such a thoroughly impotent carbon price now firmly on the table, companies have an obligation under s52 of the Trade Practices Act to, well, make ‘the rest of that conservation’ redundant. The key issue for the ACCC will be whether the Statements ‘were made in trade or commerce’ or bear such a character. The complaint alleges that the statements were absolutely core to these businesses. Indeed, they were instrumental in delaying the scheme, increasing compensation etc.

The accompanying opinion piece in the AFR is punchy

If the law requires honesty in how companies communicate to investors or consumers, why should we tolerate any lower standard in how companies lobby governments? Surely truth in the democratic process is as valuable as truth in the marketplace… After all, in return for the privilege of limited liability that corporations enjoy, the public is entitled to expect corporations will not seek to corrupt the process of public policy formation.

The shift from the marketplace as site of justice to the site of truth is a distinguishing mark of modernity according to some scholars, though the same could hardly be said of politics. We expect ‘non-core’ promises from our politicians. Government, according to my new preferred metaphor, is a ‘congenitally failing operation’ – a genetically impossible creature always subject to new, feverish techniques of assembly, connection and disassembly (and I’ll blog about the voluntary action workshop I attended recently when I get a chance). The persistent clashes between notions of a free person and one who’s the object of prediction and perfection through various modes of calculation are an essential dynamic to contemporary life. In this sense, political actors, like their theatrical counterparts, require massive infrastructure behind them – it’s not hard to think of the ways in which corporations and NGOs require a backstage, changerooms, crew, props etc. to manage their public image.

However, this shifting between backstage and frontstage needn’t imply some kind of relativism in the pejorative sense of not being able to distinguish any relations. As Mark has remarked, the expansion of the state under the Great Transformation was about ‘disembedding’ existing social relations until the public sector reached a critical mass – until the stage grew too big for the theatre. The neoliberal turn, to the extent that it is identifiable, was about aiding the fracturing of this space and shifting much of the work performed there to the backstage. Thus, whilst the size of government may have actually increased, our collective dreams of freedom have brought forth the multiplication of, often incommensurable, justifications for climate change action – utilitarian, industrial, ecological, etc. etc. The rise of the IPCC as a technocratic, globalizing project amongst a cacophany of others pushes against this tide, which is perhaps why consensus models have proven completely unworkable in the current reason of state.

Revitalisations of an idealised public sphere of yesteryear hardly seem like they’ll cut the mustard in this context, though it’s notable that that’s exactly what Third Way progenitor Anthony Giddens has called for as he saw the Third Way/New Labour project descend into a technocratic morass, reinstating the old divisions it was originally designed to liberate. Instead, Giddens argues, to meet the challenge climate change poses, “what is needed is not just an enabling but an “ensuring” state, a state that can actually deliver outcomes.” The increasingly empty promise of Carbon Pollution Reduction against a mythical ‘baseline’ combined with tawdry political managerialism suggests that we’ll see a lot more judicial machinations picking up the ‘ensuring’ slack.

A big factor in the decision was the size of Rio’s debt, which blew out to about $US42 billion ($65.8 billion) after the ill-timed acquisition of Canadian aluminium group Alcan last year. BHP carries only $US6 billion in debt. “It is just not the right time to be taking on the debt that is on Rio’s balance sheet,” Mr Kloppers said.

Chinese steel mills, which were concerned that a BHP-Rio combination would be able to control prices for iron ore and other raw materials, were also pleased the offer was dead.

If you’re a BHP or Rio Tinto shareholder (and if you have superannuation, you are, as am I), in the short term it’s good news for BHP shares and bad news for Rio Tinto shares, according to what’s happened on the British markets overnight. For the long-term sake of one’s super, however, we may well all be better off that the merger didn’t go ahead, regardless of the horrible shape of the financial market that were the immediate reasons for this deal to fall apart.

Why? Because most corporate merges fail; the merged company ends up being worth less than what the original parts were. No matter how well two companies would seem to fit together, the process of putting them together tends to be beyond the capabilities of most management.

Given every ambitious young suit-wearer with an MBA knows this, the question arises why there are so many corporate mergers. One explanation is that it gives CEO’s something to do; another is that there are (or, more to the point, were until a couple of months ago) large fleets of merchant bankers whose livelihood depends on convincing CEOs that mergers are a good idea.

In any case, the organizational behaviours that cause corporate mergers to fail undoubtedly operate throughout the government sector as well. But politicians seem to like reorganizing departments even more than corporate management do, and there are arguments that the costs are similar. Crikey recently had a piece about the New South Wales health system making a similar argument:

If you think the health system is a bird, a complex system with a mind of its own, it needs to be fed, nurtured, and developed. So which are you, and what signs does your favourite policymaker, minister or bureaucrat exhibit for preferring one or the other? Assuming you have a favourite, of course.

The evidence that restructuring does any good, by the way, just to confirm everyone’s actual experience, is plain and simple — it doesn’t. Studies have shown that if you keep on restructuring complex organizations like teaching hospitals they become less not more efficient and reorganizing area health boundaries (NHS Trusts in England) put people back about eighteen months.

I work in higher education, an area in which we are promised “revolution” by the Rudd government at some point. I wonder how much unnecessary reorganization that revolution will involve.