You might recall that I wrote a post a few years back entitled “Don’t study economics at RMIT”, a rather tongue-in-cheek critique of Kates’ baroque views about economics, and the apparent concentration of libertarian economists at that institution.

The original post was in reaction to an op-ed by Kates in the Australian Financial Review, in which he argued that Labor government’s 2009 stimulus package was crowding out private business activity, and therefore causing inflation:

The RBA is continuing to raise rates because the government is taking up domestic savings more rapidly than we are able to generate those savings through productive activity.

In this economy at this time it is the government that is the single most important cause of rising rates. The RBA is only doing what it can to ensure the resources available for investment are properly priced.

As I argued in my original post, Kates’ ideas are highly neoclassical. Dr Kates is a well-known proponent arguing for the resurrection of Say’s Law, a largely discredited economic theory that suggests that demand and supply, by definition, are essentially always in equilibrium.

I criticised it at the time by pointing out that:

One of the implications of Say’s Law is the crowding-out theory of investment, namely, that government investment necessarily diverts the investment in productive capacity of an economy away from private firms. This is why Kates argues that “it is the government that is absorbing our national savings and raising the cost of capital.”

I further argued that there didn’t seem to be much evidence that the government was raising the cost of capital. I pointed out that the government was largely borrowing foreign money through sovereign bond issues, and that Australian firms were having no problems getting access to foreign capital via their own bond issues. So we should expect inflation and therefore interest rates to stay low.

So let’s just fast-forward and ask ourselves: has government stimulus in Australia crowded out private savings and raised the cost of capital?

No. Since Kates’ article, and since my response, Australian inflation has stayed remarkably contained, and interest rates have been lowered, not raised.

But how does Kates react to this reality? By denying it.

Here is his argument:

For me, schooled in the classics as I am, it was as obvious as a cloudless day that the stimulus could never achieve its ends. For virtually the rest of the profession it was not. Why the difference? I base my understanding on the classical theory of the cycle; they base their understanding on Keynes. That’s it. Nothing else.

Kates is so reflexively anti-Keynes that he simply can’t admit that a) stimulus can stimulate, and b) austerity can contract. This means he keeps getting things wrong. In 2010, for instance, he thought stimulus must lead to higher inflation and interest rates. Of course, it didn’t. Now, he believes that austerity is not really contractionary. Of course, it is.

It would be pretty funny, really, if it wasn’t so serious. Basic textbook IS-LM has been remarkably predictive in the current crisis. Pre-Keynesian neoclassical theory has been remarkably useless.

I tried to respond to Kates’ blog post, by the way. He binned my comment in moderation. Classy.

It’s a really neat way of thinking about the temporal aspects of culture, and completely original as far as I know (though van der Broek points out that analysis of generational cohorts goes back to Comte).

Here’s a taste of his argument:

This is the history of the arts participation of a fictitious character, Pete. At the end of 2013, he’ll be 50 years of age, which implies he was born in 1963. He is not particularly keen on visual arts or theatre, though he visits the odd exhibition and performance. He is more into rock concerts, but also attends the occasional classical music concert and art house movie.

How come his cultural repertoire is like that? Is this typical of his being 50? (Do other people at the same life-stage typically display a pattern like that?) Or, is this typical of 2013? (Does it reflect what is the cultural offer that year?) Or, is it typical of someone who grew up in the 1970s? (Does it relate to a taste pattern acquired in that era?) It’s probably the case that Pete’s cultural repertoire is affected by all three (and, of course, by many other factors too). But, which aspect of Pete’s cultural repertoire can be attributed to the fact that he is 50; which aspect relates to it being 2013, and which aspect to his having grown up in the 1970s?

van der Broek goes on to do some stats on the effects of these three frames, using US data from the NEA’s Survey of Public Participation in the Arts. This allows him to tease out the differences between, say, the formative cultural experiences of generational cohorts from, say, the effects of their life-cycle in determining their participation patterns. Overall, he finds that people are not participating in as much culture as they used to, and that the composition of artforms does change.

And what is that change? One of the main ones is that fewer people are interested in classical music. Younger generations are not replacing the cohorts of classical lovers that are slowly dying.

Most importantly, though, van der Broek finds that arts participation (at least as measured by the NEA) is declining in the US. “All in all, the upshot is that the future of arts participation is not threatened by the cultural behaviour of recent (or future) as compared to earlier cohorts, but by a general decline in arts participation irrespective of cohort (and of age).”

In summary, a really interesting paper and one that I expect I will be returning to.

It’s been a long hiatus while I prepared and submitted my PhD, but now that’s done, I plan to resume regular posts this year. As well as my weekly column on the Australian cultural industries for Crikey, I’ll be focussing on keeping abreast of recent papers in the field, particularly in relevant academic journals like the IJCP, Cultural Trends and the rest. 

All posts here will also be cross-posted to my personal website over at beneltham.be

I’m taking a couple of months or so off this blog in order to complete my PhD thesis. I’ll be popping up from time to time with a short post or link here or there, but until I finish my thesis I won’t be blogging in earnest. I promise I’ll be back in early July some time with a bunch of new posts!

Until then, you can continue to read my arts column in Crikey every Friday and my regular twice-weekly column about Australian politics in New Matilda.

The 2011 federal budget contained some modest announcements for the arts and culture.

In the Arts portfolio, the government delivered on its 2010 election promise for $10 million over five years in new grants for artists to create work. The funding will support “up to 150 additional artistic works, presentations and fellowships over the next five years through the New Support for the Arts program.”

As well, $400,000 has been found for the federal government’s Contemporary Music Touring Program, a successful program which supports popular mid-level contemporary music acts to tour regional areas.

In broadcasting, $12.5 million has been provided for the proverbially penurious community radio sector, an increase of 25% for a critical area of broadcasting that generally receives very little government support

There was also a package for the screen industry, with a headline figure of $66 million (as we will see, it is actually less than this). Much of the extra money goes to production subsidies through the tax system in the form of lower qualifying thresholds for the Screen Production Incentive. According to Screen Australia, the changes include:

• Lowering the threshold for Producer Offset eligibility from $1 million to $500,000, for features, TV and online programs

• Replacing the Producer Offset for low-budget docos with a Producer Equity payment

• Converting the 65 episode cap to 65 commercial hours for TV

• Exempting documentaries from the 20% above-the-line cap

• A reduction in qualifying Australian production expenditure thresholds, and allowances for a broader range of expenses to be eligible for QAPE.

Some really good news is the restoration of the Australian Bureau of Statistics’ screen industry survey, which provided gold-standard data on the state of the industry and which hasn’t been performed since 2007-08 (shortly before the Rudd government slashed funding to the ABS in its first budget).

But how much new money for screen is really here? Go to Budget Paper 2 and you will find that the total extra funding is only $8 million. This is because, quoting from the budget papers, “these changes will be partly offset by $48 million in savings over four years from 2011-12 by removing the Goods and Services Tax (GST) amounts from [qualifying production expenditure] for the film tax offsets and increasing the minimum expenditure thresholds for documentaries to $500,000 in production (from the current threshold of $250,000).”

Money is also being clawed back from cultural agencies through the increased efficiency dividend. Rising to 1.5% in future years, the efficiency dividend hits smaller agencies much harder than big ones. And everything in the arts is small.

The efficiency dividend measures mean the Australia Council is being asked to save $3.3 million over the forward estimates, the Australian Film Television and Radio School will have to find $1 million, the National Film and Sound Archive $1.1 million, the National Gallery $1.4 million, the National Library $2.1 million, the National Museum $1.7, and Screen Australia $759,000. That’s more than $12 million in funding cuts for cultural agencies over the forward estimates.

If we look a little closer at the portfolio budget statements, for instance from the Australia Council, we can see the effects of the efficiency dividend in falling support for artists and cultural organisations. This year there will be “a decrease of approximately $2.5 million in forecast grants expenses compared with 2010-11.” Australia Council grants funding will be only 2% above 2010 levels in 2014-15. But CPI is forecast to run at 3% annually, meaning Australia Council support for artists and organisations will fall in real terms — by perhaps as much as 10%.

In other words, the “New Funding for the Arts” money announced in this budget will be almost completely clawed back by the effects of static funding and the increased efficiency dividend on the Australia Council.

The one really big-ticket spending item in culture was of dubious policy value: the $376 million spend on helping pensioners and senior Australians to make the switch to digital TV. Opposition leader Tony Abbott has already pilloried the program as “Building the Entertainment Revolution”, while our own Bernard Keane and Glenn Dyer have pointed out “the political imperative of ensuring pensioners aren’t left without television as analog signals switch off”.

Personally, I’m sympathetic to the argument that television represents an important human service that allows older Australians to stay connected with the broader community. But the spending program should also be seen in the context of the broader budget, in which $211 million in spending is being “saved” from aged care itself. The government appears to be prioritising access to daytime television over places in aged-care facilities.

Money for art and culture is often spuriously disparaged by critics as diverting resources away from the critical services that governments provide. In reality, of course, the numbers are tiny compared to the investments annually in roads, schools and hospitals. But in this case it really does seem as though the owners of television networks are getting a subsidy at the expense of much-needed investment in aged care infrastructure.

"La Chasse au Major" by Moebius. Image: Los Angeles Times.

The name on his passport is Jean Giraud and he was born in May 1938 (just one month beforeSuperman arrived in a small rocket from another planet in the pages of “Action Comics” No. 1)  and he has long been regarded as the most important cartoonist of his country. That phrase, however, falls wildly short of capturing the essence of his career and breadth of his influence through comics, book covers, paintings and movie work.  As filmmaker Ridley Scott said last year of the Moebius influence on contemporary sci-fi film: “You see it everywhere, it runs through so much you can’t get away from it.” Perhaps, but the artist is still caught off guard by the breathless reception he gets these days.  In late November, Giraud made a relatively rare visit to the U.S. to speak at the Creative Talent Network Animation Expo and again and again he was approached by fans and younger professionals who gushed.

Read the rest.

Celeste Boursier-Mougenot "From here to ear (v. 13) 2010". Mixed media, exhibited at the Gallery of Modern Art in Brisbane. Image: Queensland Art Gallery.

Your correspondent was in Brisbane last weekend, where he was able to spend a couple of afternoons at the Gallery of Modern Art’s latest contemporary art exhibition, 21st Century: Art in the First Decade.

The gallery was filled with people from across the demographic spectrum: young hipster couples, tourists, senior Australians, and families. So many families. This is an exhibition that seems to to capture the imagination of kids, as well as those who refuse to grow up.

And who can blame them? This particular vision of art in the 21st century could be criticised for many things (some have even used that most devastating of artworld barbs: “safe”), but one thing you can’t fault is its sense of sheer, innocent joy. GOMA’s take on the art of the past decade is filled with the interactive, the relational and the funny, from Martin Creed’s room filled full of purple balloons (Work No. 965: Half the air in a given space (purple)) to Carsten Holler’s signature slippery dip Test site, and from Rikrit Tiravanija’s key relational work — a Thai meal for four — to Olafur Eliasson’s giant Lego play pen, The cubic structural evolution project.

Martin Creed, "Work No. 956" (2008), exhibited at the Gallery of Modern Art, Brisbane. Image: Queensland Art Gallery / Natasha Harth

Of these, Holler’s Test site is something of a signature work of the show, dominating the gallery hall over two levels as visitors enter the space. Crikey’s correspondent was struck by the long stretching lines of kids queuing to go on the slides.

Two of the most popular works at the show were interactive and tinged with a sophisticated play of emotions: Rivane Neuenschwander’s wall of ribbons with wishes printed on them, I wish your wish, and the indoor finch aviary of Celeste Boursier-Mougenot’s From here to ear (v.13). Neuenschwander’s work knowingly winked at the unattainability of so many of our hopes and dreams (Crikey particularly enjoyed “I wish I was a famous cricket player”), while Boursier-Mougenot’s work echoes some of the best installation work of the past two decades, such as Hirst’s 1000 Years, and takes it in a sadder, quieter and more sublime direction.

The exhibition certainly has several potential flaws. As a show substantially built up from the gallery’s own collection, it has an unashamedly Asia-Pacific focus; many of the works chosen to represent important artists such as Damien Hirst, Tracy Emin, Julian Opie and Chris Ofili are far from the best examples of their ouevre. On the other hand, this Asia-Pacific collection is the gallery’s obvious strength, and has taken on a chilling importance with the recent imprisonment of Chinese artist Ai Weiwei, whose Painted vases are a part of the show.

A show such as this is something of a risk for a big gallery — or at least once might have thought to have been — especially in comparison to tried and tested blockbuster exhibitions of old masters. Hence, it must be gratifying for the gallery to mount such a well-attended show, despite the devastating floods of summer. Brisbane’s Gallery Of Modern Art/Queensland Art Gallery complex is now themost popular art gallery in the country, according to recently released figures.

It’s indeed interesting that two of the most exciting recent exhibitions in contemporary art in this country have occurred at Brisbane’s GOMA and in Hobart, where the Museum of Old and New Art, or MOMA, continues to wow Australian contemporary art lovers with a collection whose breadth and vision is unmatched in the country (for a recap, have a look at Andrew Frost’s episode of Artscape for ABC-TV).

According to Queensland Art Gallery director Tony Elwood, speaking on a panel discussion as part of 21st Century’s talks program: “We are a soft target because we are innovative and because we are in Brisbane. We work twice as hard to get half the recognition because we are in Brisbane.”

Pointing to criticisms that the exhibition is something of a “fun park”,  he answers: “It’s just disappointing that … by demonstrating just how much we want to reach out to whole ranges of audiences, that we then become a target. Contemporary art is always going to be the most critiqued and the most misunderstood of all the different art histories.”

As a result, Elwood says the gallery worked particularly hard on the ancillary aspects of the exhibition: its didactic panels, itscomprehensive blog and the handsome catalogue. The catalogue is notable for a typically clever essay on the theory of contemporary art by the inimitable Rex Butler, who canvasses the Duchampian nature of the exhibition in a few stylish paragraphs, before declaring, in a wonderful double movement, that “the new motto for art in the 21st century should be ‘Please don’t touch’.”

He means that, as art “increasingly heads towards a condition of total immersion, of a psychedelic or even neurological model”, it also embodies a contradiction: “It would be something of the hand … in an age of digitality.”

Of course, you don’t need to understand the history of modern art to enjoy 21st Century — and that’s precisely the point. In its large-scale installations for children, in particular, the exhibition demonstrates just how vibrant and enjoyable a commitment to new art can be. This really is living art.

There were a couple pieces written supporting the Times’ proposal: Former CBS digital head Larry Kramer said he’d be more likely to pay for the Times than for the tablet publication The Daily, even though it’s far more expensive. The reason? The Times’ content has consistently proven to be valuable over the years. (Tech blogger John Gruber also said the Times’ content is much more valuable than The Daily’s, but wondered if it was really worth more than five times more money.) Nate Silver of Times blog FiveThirtyEight used some data to argue for the Times’ value.

The Times’ own David Carr offered the most full-throated defense of the pay plan, arguing that most of the objection to it is based on the “theology” of open networks and the free flow of information, rather than the practical concerns involved with running a news organization. Reuters’ Felix Salmon countered that the Times has its own theology — that news orgs should charge for content because they can, and that it will ensure their success. Later, though, Salmon ran a few numbers and posited that the paywall could be a success if everything breaks right.

There were more objections voiced, too: Both Mathew Ingram of GigaOM and former newspaper journalist Janet Coats both called it backward-looking, with Ingram saying it “seems fundamentally reactionary, and displays a disappointing lack of imagination.” TechDirt’s Mike Masnick ripped the idea that people might have felt guilty about getting the Times for free online.

One of the biggest complaints revolved around the Times’ pricing system itself, which French media analyst Frederic Filloux described as “expensive, utterly complicated, disconnected from the reality and designed to be bypassed.”Others, including Ken Doctor, venture capitalist Jean-Louis Gassee, and John Gruber, made similar points about the proposal’s complexity, and Michael DeGusta said the prices are just too high. Poynter’s Damon Kiesow disagreed about the plan structure, arguing that it’s well-designed as an attack on Apple’s mobile paid-content dominance.

Jerry Brito has a good explainer of the background of the case:

In mid-2005, the Author’s Guild and the American Association of Publishers filed suit to stop Google from scanning any more books. Soon the Author’s Guild’s case was certified as a class-action lawsuit, meaning that anyone who had ever published a book—millions of authors—would be part of the class represented and would be bound by the result of the case.

An Unsettling Settlement

Three years later, after extensive negotiations, the parties announced they had reached a settlement. Google would pay $125 million up front and would then be allowed to continue scanning books and making them available online. More importantly, Google would be allowed to offer not just snippets, but it would be allowed to sell entire text of books as well. The copyright holder would get about 2/3 of the revenues and Google would keep 1/3.

On its surface, the proposed settlement was a boon for all involved. Google would get to continue digitizing books, authors and publishers would get a cut of the profits, and consumers would get universal access to almost all of the world’s books. But reading between the lines, the settlement proved to be problematic.

Because it was a settlement to a class-action lawsuit, it meant that all authors who had ever published a book were bound. Google could scan any book without first asking for permission. If an author didn’t want his book to be scanned or included in Google’s database, he had to contact Google and opt-out. This would have turned copyright on its head.

As a result, many authors protested. The Author’s Guild and the publisher’s association had negotiated on behalf of millions of authors, and many felt the deal didn’t represent their wishes. Almost 7,000 authors wrote to the court asking to be removed from the lawsuit’s plaintiff class.

Saving the Orphans

Another contentious aspect of the settlement was how it treated “orphan works,” books the authors of which are unknown or can’t be found. It’s a well-known problem in copyright that members of Congress have tried to fix several times.

The problem is that if a company like Google wants to digitize a copyrighted book, and it can’t find its author to ask for permission, then its choices are 1) scan the book anyway and face heavy penalties if the author surfaces later and sues, or 2) leave the book undigitized and out of a universal library. As a result, hundreds of thousands of books are in a kind of limbo, not accessible to readers even if the author may well have been fine with digitization.

The Google Books settlement presented a solution to the problem. Because it bound all authors—-known and unknown—-Google could proceed to scan orphan works without having to worry. If an author later surfaced who didn’t want his book used, he could no longer sue Google. He could opt-out of the program and claim a check for the revenues associated with his book, but no more.

Some welcomed this solution to the problem, but others, including the Department of Justice, pointed out to the court that it would give Google a monopoly over orphan works. Because the settlement would only apply to Google, if another party like Amazon or the Internet Archive wanted to create its own digital library that included orphan works, it would not get the same protection.

And it wouldn’t be easy for other to get the same deal. Short of Congressional action, the only way a company like Amazon could get similar treatment would be to settle a class action suit of their own—a very difficult and time-consuming set of events to replicate. Additionally, because the authors and publishers who negotiated the Google deal are getting a cut of revenue, some have suggested that it would be in their interest to make sure Google remained a monopoly and would therefore not settle as easily with other parties.

What’s Next

Because class-action lawsuits can be as controversial as this one, the law requires that a court approve a settlement before it becomes binding. The court accepted over 500 briefs from various parties supporting or opposing the settlement and early last year held a hearing on the fairness of the settlement. It rejected the case yesterday.

The options available now to Google and the authors and publishers are:

1. Continue litigating the original lawsuit, which is an unlikely scenario.
2. Amend the settlement to make it opt-in, meaning that authors would have to give permission before their books are scanned.
3. Appeal the judge’s decision to a higher court.

Judge Chin seemed to invite a new settlement, saying in his opinion that “Many of the concerns raised in the objections would be ameliorated if the [settlement] were converted from an ‘opt-out’ settlement to an ‘opt-in’ settlement.”

In the New York Times, Robert Darnton, himself a librarian and a strident if highly-0informed critic of the deal, weighed in with this opinion piece:

This decision is a victory for the public good, preventing one company from monopolizing access to our common cultural heritage.

Nonetheless, we should not abandon Google’s dream of making all the books in the world available to everyone. Instead, we should build a digital public library, which would provide these digital copies free of charge to readers. Yes, many problems — legal, financial, technological, political — stand in the way. All can be solved.

The Chronicle of Higher Education carries a good interview with Pamela Samuelson:

It’s the only ruling really that the judge, I think, could have made. The settlement was so complex, and it was so far-reaching. With the Department of Justice and the governments of France and Germany stridently opposed to the settlement, it seems to me that the judge really didn’t have all that much choice. So the ultimate ruling, that the settlement is not fair, reasonable, and adequate to the class, is one that I think was inevitable.

The thing that surprised me about the opinion was that he took seriously the issues about whether the Authors Guild and some of its members had adequately represented the interests of all authors, including academic authors and foreign authors. That was very gratifying because I spent a lot of time crafting letters to the judge saying that academic authors did have different interests. Academic authors, on average, would prefer open access. Whereas the guild and its members, understandably, want to do profit maximization.

The EFF’s Corynne McSherry has this analysis:

On the policy front, the court recognized – as do we – the extraordinary potential benefits of the settlement for readers, authors and publishers. We firmly believe that the world’s books should be digitized so that the knowledge held within them can made available to people around the world. But the court also recognized that the settlement could come at the price of undermining competition in the marketplace for digital books, giving Google a de facto monopoly over orphan books (meaning, works whose owner cannot be located). The court concluded that solving the orphan works problem is properly a matter for Congress, not private commercial parties. Sadly, Congress has thus far lacked the will to do so. Perhaps yesterday’s decision will finally spur Congress to revisit this important issue and pass comprehensive orphan works legislation, that allows for mass book digitization.

That said, the court also got some things fundamentally wrong in its copyright analysis. For example, it states that “a copyright owner’s right to exclude others from using his property is fundamental and beyond dispute” and then proceeds to quote at length from the letters of numerous authors (and their descendants) who share the misguided notion that a copyright is, by definition, an exclusive right to determine how a work can be used. We respectfully disagree. Copyright law grants to authors significant powers to manage exploitation of creative works as a function of spurring the creation of more works, not as a natural or moral right. And those powers are subject to numerous important exceptions and limitations, such as the first sale and fair use doctrines. Those limits are an essential part of the copyright bargain, which seeks to encourage the growth and endurance of a vibrant culture by both rewarding authors for their creative investments and ensuring that others will have the opportunity to build on those creative achievements. Thus, as the Supreme Court has explained, such limits are “neither unfair nor unfortunate” but rather “the means by which copyright advances the progress of science and art.” If the legal issues raised in the underlying lawsuit are ever litigated on the merits, let’s hope this or any future judge keeps the traditional American copyright bargain firmly in mind.

Michael Liedtke of the Associated Press thinks this is a micvrocosm of the larger anti-turst and monopoly challenges facing Google:

This week’s ruling from U.S. Circuit Judge Denny Chin did more than complicate Google’s efforts to make digital copies of the world’s 130 million books and possibly sell them through an online book store that it opened last year. It also touched upon antitrust, copyright and privacy issues that are threatening to handcuff Google as it tries to build upon its dominance in Internet search to muscle into new markets.

“This opinion reads like a microcosm of all the big problems facing Google,” said Gary Reback, a Silicon Valley lawyer who represented a group led by Google rivals Microsoft Corp. andAmazon.com Inc. to oppose the digital book settlement.

Google can only hope that some of the points that Chin raised don’t become recurring themes as the company navigates legal hurdles in the months ahead.

The company is still trying to persuade the U.S. Justice Department to approve a $700 million purchase of airline fare tracker ITA Software nearly nine months after it was announced. Regulators are focusing its inquiry into whether ITA would give Google the technological leverage to create an unfair advantage over other online travel services. Google argues it will be able to provide more bargains and convenience for travellers if it’s cleared to own ITA’s technology.

In Europe and the state of Texas, antitrust regulators are looking into complaints about Google abusing its dominance of Internet search to unfairly promote its own services and drive up its advertising prices.

And Google is still trying fend off an appeal in another high-profile copyright case, one stemming from its 2006 acquisition of YouTube, the Internet’s leading video site. Viacom Inc. is seeking more than $1 billion in damages after charging YouTube with misusing clips from Comedy Central, MTV and other Viacom channels. A federal judge sided with Google, saying YouTube had done enough to comply with digital copyright laws in its early days.

One of my favourite comentators on Google is of course the one-and-only Siva Vaidhyanathan, who is quoted in this excellent Inside Higher Ed piece:

Siva Vaidhyanathan, a media studies professor at the University of Virginia and a notable Google gadfly, said the company overplayed its hand by essentially trying to rewrite the rules governing the copying and distribution of book content through a class-action settlement. “Google clearly flew too close to the sun on this one,” he wrote in an e-mail. “…This is not what class-action suits and settlements are supposed to do.”

Vaidhyanathan said that Google now faces the choice of either continuing to fight for its interpretation of copyright law in the courts or scaling back its plans for a digital bookstore. “If Google decides to take the modest way out, it can still ask Congress to make the needed changes to copyright law that would let Google and other companies and libraries compete to provide the best information to the most people,” the media scholar says. “Congress should have been the place to start this in the first place.”

The federal government has just finished a review of federal film financing arrangements — and given itself a rather large pat on the back. The result is an endorsement of film financing arrangements in which more and more taxpayers money is being given to Hollywood studios.

Confirming Sir Humphrey Appleby’s famous principle that you should “never commission an inquiry without knowing the outcome first”, the federal Arts Department’s 2010 Review of the Australian Independent Screen Production Sector makes a series of rosy findings about the state of the sector and the effectiveness of the government’s Australian Screen Production Incentive, a large tax refund to film producers.

More money is certainly leaving Treasury coffers: the report states that “in the three years since the introduction of the Australian Screen Production Incentive, the government has provided $412.1 million in support through the tax system, compared to $136.7 million in the three years before the package.”

But delve further into the report, and all sorts of questions start to pop up. First and foremost is the crucial question of whether those extra taxpayer dollars are really stimulating an upswing in domestic production across the board, or merely co-financing large Hollywood studio films such as Happy Feet 2 and Australia.

Arts Minister Simon Crean trumpeted the review’s findings. “The boost in government funding is a great achievement and contributing to the viability of the local film production industry,” he announced in a media release.

“Although it’s still early days, the increase in activity, particularly the production of Australian large budget films, such as Baz Luhrmann’sAustralia and George Miller’s Happy Feet 2, and the box office performance of films such as Tomorrow, When the War Beganshows the government support for the sector is having a significant impact.”

In fact, a close reading of the review suggests that the effect of the new funding arrangements is far less positive than the minister and the department claim. Much of the extra money — $169 million, in fact — has gone to foreign movie studios in the form of international production subsidies, though that’s not a fact that the review chose to highlight. But despite this, levels of foreign production in Australia have actually been falling, as the strengthening Aussie dollar and strong competition from other countries and locations have made the foreign production incentives less attractive.

More private investment has been attracted to Australian feature films, however, and more films are being made. Despite this, the domestic box office takings of Australian feature films has risen only slightly, from 3.8% between 2005-2007 to 4.4% in 2008-2010. That’s better than the subterranean levels of 2004, but still worse than the performance of Australian features in the early 2000s — let alone the 1990s.

As for television, the report found that while drama budgets had increased, total hours for Australian-produced adult television drama had remained steady. The reason? Television production is driven by local content quotas. To quote the report, “Australian television production levels remain stable over time and are closely linked to requirements under the Australian Content Standard.” In other words, the television networks are receiving more taxpayers money to produce drama that they are required to by the regulations. It’s a nice deal if you can get it.

Most of the money continues to flow to the big productions, such as Luhrmann’s upcoming Great Gatsby. These are loved by the industry, as they provide lots of employment for local casts and crew. But the review points out that a large part of the Australian screen sector is made up of small companies, many of which produce documentaries. These smaller firms have struggled to access the tax refunds, owing to high production thresholds. Features and documentaries made for less than $1 million or $250,000 respectively are ineligible for the offset, ruling out a large swathe of the independent sector.

Yet the review thinks this is a good thing, as it precludes the low-budget and arthouse features and documentaries that would be unlikely to make a return in any case. “Lowering the offset threshold for feature films to ensure access for emerging producers would to an extent alter the intent of the offset,” it says, “from one encouraging commercially focused features, to one that includes films less likely to be market and box office driven.”

The review confirms a subtle shift in Australian screen funding priorities away from backing emerging film-makers and new voices and towards big budget, Hollywood-financed productions. This may result in bigger box offices for bigger-budget Australian films — or it may not. The federal government’s last effort at supporting commercial film finance was the Film Film Corporation, a 20-year initiative that acted as a for-profit investor in feature production. The FFC lost more than a billion dollars in that time-frame, booking investment returns of negative 80%.

The new policy gets around this problem by simply giving tax refunds to big producers, regardless of how much money their film eventually makes. And it’s uncapped and open-ended: the bigger the budget of the film, the larger the taxpayer contribution.