03 November, 2017

Political Perspective

Workers can unite but not with same urgency as in Marx’s time
Gerard Henderson
The Australian, 28 October 2017
New Zealand Prime Minister Jacinda Ardern believes that capitalism has failed the nation. So does her deputy, New Zealand First leader Winston Peters. A similar complaint is made in Britain by Labour leader Jeremy Corbyn, who heads the opposition. The capitalism-has-failed refrain is stated increasingly by socialists in Western societies. Meanwhile, millions of non-Westerners want to live in OECD countries to experience a higher standard of living.
The term capitalism, popularised by the German philosopher Karl Marx (1818-83), was used initially in a pejorative sense. In his massive book Das Kapital and elsewhere, Marx saw capitalism as having emerged out of the exploitation of the peasantry and small artisans in the later Middle Ages.
As Allen Wood explains the phenomenon in The Oxford Companion to Philosophy, Marx argued that this exploitation led to “a separation between the bourgeoisie or capitalist class, who privately own the means of production, and the proletariat or working class”. The latter was also called the lumpenproletariat.
According to Marx, devoid of owning the means of production, the proletariat can sell only labour to the capitalists. But this leads to inequality since the owners of the means of production have an unfair advantage when negotiating the wages and conditions of the proletariat.
Marx and his Marxist followers, including members of communist parties in the democracies or leaders of communist dictatorships where they existed, invariably evoked capitalism as a term of abuse. So, today, Ardern and Corbyn.
There are some political conservatives who are prepared to embrace the term, including Daniel Hannan, the former Conservative member of the European Parliament and Institute for Free Trade president. But it is a mistake for the likes of Hannan to embrace the terminology of their opponents.
Both Corbyn and Ardern have backgrounds in socialist movements. So it is understandable why they rail against capitalism. Yet neither Britain nor New Zealand present as capitalist societies in the sense that Marx used the term.
At the end of World War II, both nations embraced “cradle-to-grave” socialism. This led to stagnating economies. So in the early 1980s Britain undertook economic reforms to wind back the welfare state. New Zealand followed soon after. The politicians most identified with the reform process were the Conservative Margaret Thatcher in Britain and Labour’s Roger Douglas in New Zealand.
If Ben Chifley’s Labor government had survived into the 1950s, Australia would have gone down the welfare state road. But Robert Menzies’ Coalition won the December 1949 election. One of Menzies’ great contributions to Australia’s economic development is that he did not implement the nationalisation of industry or cradle-to-grave welfare. He took a middle road between Britain and the US with respect to the extent of the social safety net and regulation.
This meant that when economic reform was needed in Australia in the 80s and 90s, the impact was not as severe as in Britain or New Zealand. Consequently, Labor’s Bob Hawke and Paul Keating, along with the Coalition’s John Howard and Peter Costello, were able to bring about reform without the reaction that occurred in response to the implementation of the policies of Thatcher and Douglas.
In the original sense of the term, neither Britain nor New Zealand is a capitalist nation. Likewise Australia. All three nations provide free health services and free school education along with a welfare safety net for the unemployed and the aged, plus a minimum wage and reasonable conditions of work. Also, a large number of lower-income earners own property. This is not the enslavement of the working class (the sellers of labour) to a dominant bourgeoisie (the owners of the means of production) that Marx envisaged.
After the election, in an interview on TV3’s The Nation, Ardern was asked whether capitalism has failed low-income New Zealanders. The new Prime Minister replied: “If you have hundreds of thousands of children living in homes without enough to survive, that’s a blatant failure. What else could you describe it as?”
Well, such a situation could be a total failure of the state. But this is unlikely in a nation that has a social safety net.
Ardern’s approach suggests that she regards the state as totally responsible for all the ills of society, as if parents and guardians do not also have responsibilities to care for the very young.
In Britain, Corbyn is adopting a similar stance. He told a wildly enthusiastic audience at Labour’s annual conference in Brighton last month that a “modern socialism” entailing nationalisation of industries, dramatically increased government regulation and growing trade union influence was the future of Britain. According to Corbyn, Labour is “the mainstream now”.
And so it may be, for a while at least, in both Britain and New Zealand — and, perhaps, Australia.
There is the born-again socialism of Corbyn and Ardern and their supporters. There is also the right-wing regulatory nationalism of Peters’s New Zealand First and Pauline Hanson’s One Nation Party.
The economies of Australia, Britain and New Zealand are among the strongest in the OECD and have relatively high economic growth and relatively low unemployment. However, flat wages growth and rising property values have put pressure on middle and low-income groups — especially among young voters. Even so, the Conservatives in Britain and the National Party in New Zealand won more votes than their left-of-centre opponents at recent elections.
And then there is social media, which gives an insight into the lives of the rich and famous that was not known to earlier generations. The rich have always been with us — and they are not confined to democratic societies. However, the increasing tendency of the well-off to laud their wealth is leading to an understandable resentment among the less well-off.
Generally, in the West, the poor are not getting poorer. But this could become the case — as occurred in postwar Britain as increased taxation and rising spending and borrowing gradually suppressed living standards across nearly all areas of society. In the West we’ve seen socialism — and it does not work.

14 October, 2017

The New Deniers

There is now wide spread acceptance that the climate change models are way ahead of observations in the measurement of the rate of global temperature increases. In fact it is impossible to refute such a statement. Yet the alarmist, mostly Government funded, climate bodies are remarkably reluctant to acknowledge this fact. Who are the deniers now?

13 October, 2017

Extreme Greens and Poverty

I have long argued that if humans wish to contain population growth we need to do everything possible to lift standards of living in the world's poorest (and fastest growing) countries. Extreme green ideology has been a massive barrier. Here is the latest example.


Press Release 
Embargoed until 00:01 BST Friday, 13 October

New Report:

World Bank "Abandons The Poor"

London, 13 October: A new report: The Anti-Development Bank: The World Bank's Regressive Energy Policies by the London-based Global Warming Policy Foundation (GWPF) finds that the World Bank has abdicated its primary mission of tackling poverty in the developing world.

The report, written by author and former Treasury adviser Rupert Darwall, with a foreword by the distinguished economist and former World Bank research administrator, Professor Deepak Lal, comes as ministers travel to Washington, DC to attend the annual World Bank meeting.

The report finds that the bank’s energy policies are hurting development and making poor countries poorer.

By embracing high-cost, low-reliability renewables and restricting clean coal financing, the World Bank is guilty of “an inhumane and senseless attempt to try and save the planet on the backs of the world’s poor,” Darwall says.

In line with the demands made by developing countries, he argues that the World Bank should lift its 2013 ban on financing coal-fired power stations and help the world’s poorest by supporting the next generation of low-emission power stations.

He calls on the World Bank to abandon what he says is "its damaging advocacy of renewable energy for countries that can ill afford the costs and risk of flawed technologies that rich countries have yet to solve".


The Anti-Development Bank:

The World Bank's Regressive Energy Policies (PDF)



Foreword by Professor Deepak Lal

The best way for me to introduce this paper is by outlining how the World Bank (WB) turned into the Anti-Development Bank, as suggested by its title.

In the mid-to-late 1980s, I was the research administrator at the World Bank. Towards the end of my tenure, during the annual meetings between the bank and the International Monetary Fund, green activists were abseiling down the bank’s Washington headquarters protesting against its purportedly anti-green activities. This pressure seemed an emergent threat to the bank’s mission to alleviate poverty through efficient growth and so, with the support of the Vice President for Economics and Research, Anne Krueger, I responded by proposing a World Development Report on the environment, now the WB’s flagship publication.

The report was published in 1993, well after I had left the bank. The authors included two of my former colleagues at University College London, Wilfrid Beckerman and David Pearce. It was a balanced report which, as the WB’s president Lewis Preston said in his foreword, argued for

". . .a careful assessment of the costs and benefits of alternative policies, taking account of uncertainties and irreversibilities that maybe associated with ecological processes. Some would prefer a more absolute approach to protection, but for policy-makers with scarce resources seeking to raise the well-being of their citizens in an environmentally responsible manner, it is essential that tradeoffs be clarified in a rational manner and cost-effective policies designed."

This paper shows in detail how this injunction is no longer adhered to by the current WB President Dr Jim Young Kim. He has overruled the cost–benefit estimates of the superiority of coal-based over solar- and wind-based power generation produced by his own economic staff, justifying this by reference to a wish to cut global emissions of greenhouse gases. In 2013 the bank adopted anti-coal funding policies, which, as the paper shows, prioritises the green environmental agenda over its core developmental mission of poverty reduction.

How has this come to pass? The turning point came when, in the mid 1990s, with the opening up of world capital markets to most developing countries outside Africa, the bank had three choices, as noted by Anne Krueger:

• to downsize and concentrate only on the countries that are truly poor, and phase out activities in middle income countries

• continue to operate in all countries, focusing on the ‘soft issues’ of development, such as the environment, women’s rights, labour rights and the encouragement of NGOs

• to shut down.

The new President James Wolfensohn chose the second option. I argued in my Reviving the Invisible Hand for the third. The arguments of this paper provide further support for my position.

I commend this paper to all those who are sincerely concerned with alleviating poverty – particularly in Africa, since China and India no longer need World Bank money or advice – and who are not seduced by the siren voices of the eco-fundamentalists.

Deepak Lal is a British development economist of Indian origin who has held academic posts at Oxford, University College London and the University of California. He was a member of the Indian Foreign Service and a former Research Administrator at the World Bank. He is currently James S. Coleman Professor of International Development Studies at UCLA. He is a member of the GWPF’s Academic Advisory Council.

22 August, 2017

A Key Topical Issue

A rigorous study of the impact of robots in manufacturing, agriculture, and utilities across 17 countries, has found that robots did reduce the hours of lower-skilled workers—but they didn’t decrease the total hours worked by humans, and they actually boosted wages.

In other words, automation may affect the kind of work humans do, but at the moment, it’s hard to see that it’s leading to a world without work. Researcher Andrew McAfee says the central phenomenon is not net job loss. It’s the shift in the kinds of jobs that are available.”

McAfee points to both retail and transportation as areas where automation is likely to have a major impact. Yet even in those industries, the job-loss numbers are less scary than many headlines suggest.

Goldman Sachs just released a report predicting that autonomous cars could ultimately eat away 300,000 driving jobs a year. But that won’t happen, the firm argues, for another 25 years, which is more than enough time for the economy to adapt.

A recent study by the Organization for Economic Cooperation and Development, meanwhile, predicts that 9 percent of jobs across 21 different countries are under serious threat from automation. That’s a significant number, but not an apocalyptic one.

Of the 271 occupations listed on the US 1950 census only one—elevator operator—had been rendered obsolete by automation by 2010.

Corporate America, for its part, certainly doesn’t seem to believe in the jobless future. If the rewards of automation were as immense as predicted, companies would be pouring money into new technology. 

But they’re not. Investments in software and IT grew more slowly over the past decade than the previous one. Total spending on all robotics in the US was just $11.3 billion last year. That’s about a sixth of what Americans spend every year on their pets.

So if the data doesn’t show any evidence that robots are taking over, why are so many people even outside Silicon Valley convinced it’s happening? In the US, at least, it’s partly due to the coincidence of two widely observed trends.

Between 2000 and 2009, 6 million US manufacturing jobs disappeared, and wage growth across the economy stagnated. In that same period, industrial robots were becoming more widespread, the internet seemed to be transforming everything, and AI became really useful for the first time. So it seemed logical to connect these phenomena.

But something else happened in the global economy right around 2000 as well: China entered the World Trade Organization and massively ramped up production. And it was this, not automation, that really devastated American manufacturing.

A recent paper—titled, fittingly, “Robots and Jobs”—got a lot of attention for its claim that industrial automation has been responsible for the loss of up to 670,000 jobs since 1990. But just in the period between 1999 and 2011, trade with China was responsible for the loss of 2.4 million jobs: almost four times as many.

“If you want to know what happened to manufacturing after 2000, the answer is very clearly not automation, it’s China,” says Dean Baker, an economist at the Center for Economic and Policy Research. (In other words, Donald Trump isn’t entirely wrong about what’s happened to American factory jobs.)

20 August, 2017

Another Rational Optimist-Craig Rucker-19th August,2017

"Two hundred years ago the vast majority of the world's population lived in extreme poverty. Thanks to free markets, industry and, yes, important energy sources like fossil fuels and nuclear power, today only around 10% live in extreme poverty … and the situation is getting better every day."

07 August, 2017

Government Failure

My open letter to Tony Burke (below) has made me think more about what I perceive as Australia's downward spiral as a consequence of being let down by politicians of all hues, particularly Greens. I mentioned policies relating to Energy,Water, and Internet (NBN). I now think we should add NDIS (Disability).

Oh for some strong pro-active leadership.