Disillusioned commentary on Australian financial sector, politics, business, media... with attention occasionally distracted to the world outside... and intermittent reminder that rage is a more life-conserving irrationality than despair.

Tuesday, February 08, 2005

The economics of prosperity

Charismatic Christian churches have seen their influence grow rapidly in the United States and, here in Australia, there are several that have attracted large numbers of adherents.

But what, exactly, is their attraction?

Julie Macken and Geoffrey Barker, writing in The FIN yesterday, explore:

Australians have given unprecedented amounts of money for the Asian tsunami relief effort. Unlike those killed in the Iraq and Afghan wars, the victims of the tsunami disaster are innocent, powerless and highly visible. Their narrative is not sinister, but simple: wrong place, wrong time. Increasingly, that seems to matter.

The recent federal election illustrated this shift in community values. Voters focused on themselves, their families and their mortgages. The rise of the
Family First party (Cameron Stewart's article in The Australian about the church is here) and the victory of a Liberal candidate linked to the Hillsong Church suggests many Australians now rank issues of private morality such as sexual preference, divorce and abortion as of equal or more importance than broader questions of social justice.

As one Catholic priest, who prefers not to be named, says: "Having privatised the airports and roads it's now time to privatise morality."

This push to privatise morality has strong links to what US theologians call prosperity theology. It teaches that God shows his approval by dispensing cash, success and good looks on those who obey his laws as interpreted by his preachers usually charismatic men attracting big numbers to new churches out in the suburbs.

Conversely, those who experience poverty, ill-health or violence do so because they have not followed God's laws again, as interpreted by his preachers and (at the extreme) church leaders in the mould of US-style televangelists.

This is the problem for the innocent civilians killed in the Iraq and Afghan wars. There is a sense that in some way they deserved their fate in a way no tsunami victim did. Certainly their plight and subsequent deaths did not galvanise the community as the tsunami's devastation has.
This realignment of privatised morality is more than just an exercise in theological rebranding. Economists, theologians and activists say it could have a huge impact on the nation's bottom line, reorienting the direction of public spending for a generation. By focusing on self-help rather than public support, they fear it may also accelerate a trend towards dangerous levels of narcissism.
Australian National University professor of economics Bob Gregory suspects this new God-wants-you-to-be-rich theology will be harnessed to help drive economic imperatives.

"Let's be clear about this: the federal government wants to reform welfare," he says. "The way to do that is to create the idea of the deserving and the undeserving poor.

"These new Christian churches help the government do this by creating the right social conditions and values. But they didn't start the process: the federal government has been wanting this for a long time. For the Christians it's a case of good timing." ...

Macken and Barker refer to the recent book, God Under Howard, by academic Marion Maddox, also discussed yesterday in
The Australian by Emma-Kate Symons, who wrote:

REPRESSIVE, racist, homophobic, sexist, a free market economic ideologue and downright nasty - that's the cruel and jealous God that John Howard, Machiavellian wolf in relaxed and comfortable sheep's clothing, has inflicted on Australia's collective soul.

At least that's the startling finding of Marion Maddox's inquisition into the religious-political state of the nation under our second-longest serving prime minister. God Under Howard, with its pointed subtitle, How the Religious Right has Hijacked Australian Politics, is a crusader's document worthy of a Methodist-raised religious studies academic. And woe betide any who dare question its dogma - that Howard is a rampaging heretic, re-creating the Australian political landscape in the image of the American Christian Right, and in the process destroying the fabric of Australian democracy.

The title and cover illustration leave readers in little doubt about the author's intentions to expose what she declares is "Howard's spiritual assault on Australian values". She casts herself and the mass of Australian people in a role akin to John Proctor in Arthur Miller's The Crucible, fighting nobly against the puritanical, sexually repressive witch-burning forces led by Reverend Samuel Parris. It seems weirdly out of sync with reality, proferring a theocratic dystopia of an Australia more like the Taliban's Afghanistan than the nation we inhabit.


Although unimpressed, as you'd expect from a commentator at one of Fox News's sibling organs, Symons ends her piece with the strange observation that:

[Maddox] is a different kind of evangelist, longing for a new synergy between religion and politics where "by legislating to bring out our best rather than our worst, governments can make us nicer".

No wonder Howard and his muscular Christian soldiers are winning the partisan battle for Australia's political soul.

Macken's and Barker's article then moves on to money, prosperity and God:

Louise Markus, a Hillsong employee, was elected to the House of Representatives as Liberal MP for Greenway. Markus acknowledged in her first speech that she had been "blessed to sit under the teaching and leadership" of Hillsong pastors Brian and Bobby Houston from Sydney's western suburbs.

Explaining the credo of his book You Need More Money: Discovering God's Amazing Financial Plan for your Life [a scary echo of 1960s fraudster Bernie Cornfeld's rallying cry, Do You Sincerely Want to be Rich?], Brian Houston says: "I don't believe God wants everyone to be richer. But I do believe that Christians need to think beyond themselves. Resourcing our lives enables us to look beyond our own needs. It's a matter of personal effectiveness." ...


When asked whether it was more important to attend to issues of personal morality or social justice, Houston says: "If we can build the individual with a code of morals and ethics that will strengthen their personal lives, their homes and their families, I believe this ultimately can only have a positive impact on a broader scale."

Michael Fallon, a Canberra-based Catholic priest and scriptural scholar, says such an approach is a dangerous nonsense. "The whole notion of private morality is a fiction," he says. "Morality can only exist when a person develops their personal morality in relation to the rest of the world."
He challenges the proponents of prosperity theology: "Feeling good and holy by remaining oblivious to the suffering of others is immoral. We have an obligation to be aware of suffering and to take action against it.

"For instance, there would probably be some Christians who would want to send money to help rebuild Iraq, despite the fact that they voted for a government that approved and supported the bombing of the country in the first place. That's an absurd and immoral position to be in."
A professor at the University of Melbourne's Centre for Applied Philosophy and Public Ethics, Tony Coady, agrees.

"A lot of the focus on highly personal and self-oriented issues of personal or family wellbeing can lead to the atrophy of sympathy for the wider community," he says. "For example, how people can be concerned about a debatable increase in abortion rates and ignore the fact that Australia is implicated in this disastrous war in Iraq that has ended the lives of tens of thousands of innocent people. Something has gone wrong with the moral priorities in Australia, and it has financial consequences."

Coady says he is concerned that voters consider the economy to be separate from moral evaluation.

"But given that the state of the economy has direct implications for just distribution of wealth, alleviation of poverty and disease, and financial corruption, it is fraudulent to try and separate them."

But why in the United States, and to a lesser extent in Australia, has targeting religious groups on the fringes of the mainstream become a political priority?

Harvard economists Glaeser, Ponzetto and Shapiro are on to the case.

In their
paper, "Strategic Extremism: Why Republicans and Democrats Divide on Religious Values", they argue that strong appeal by politicians to the religious, while only minimally affecting political policy outcomes, can be an election-winning strategy. They predict that the split is most likely to be effective in a society where, like the United States, around 50% of people are church-goers. Overall, far fewer Australians than this regularly attend churches, but the proportion may approach that in areas such as Sydney's Hills District "Bible belt" where the Hillsong Church has its headquarters.

Saturday, February 05, 2005

The market economy in all its glory

A strong body of opinion, especially in the United States, believes that the fundamental problem with society is government.

If government stopped doing most of the things it does, tax rates could be dramatically reduced, everyone would have much more incentive to work harder and private enterprise would step into the gap. Firms would provide the services that government now does, but they would do it efficiently because they are propelled by the profit motive, instead of inefficiently and wastefully, as government currently does.

Leading proponent of this thesis, Grover Norquist, is interviewed here on National Public Radio:

LIASSON: And Norquist is very clear about what's at stake in the tax cut debate.

Mr. NORQUIST: The central question in American politics is the size of government, is it gonna get bigger or smaller? Of the resources that you and your family put together, more of it go to the state or more of it stay with you?

LIASSON: When the tax cut is enacted, Grover Norquist says, there will be much less money available to the government, fewer resources that the state can use to bother the members of what Norquist calls the 'leave us alone' coalition. Grover Norquist's long-term goal is simple and very radical. He wants to cut the size of government in half over the next 25 years. That's a serious and reasonable goal, he says, and one he's willing to advance with as blunt a metaphor as possible.

Mr. NORQUIST: I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.

In many countries, supply of gas and electricity has either been responsibility of government, or has been heavily regulated by government. So let's see what happens when government gets out of the way, and lets private enterprise do what it does best.

From The New York Times:

February 4, 2005
Tapes Show Enron Arranged Plant Shutdown
By TIMOTHY EGAN


EVERETT, Wash., Feb. 3 - In the midst of the California energy troubles in early 2001, when power plants were under a federal order to deliver a full output of electricity, the Enron Corporation arranged to take a plant off-line on the same day that California was hit by rolling blackouts, according to audiotapes of company traders released here on Thursday.
The tapes and memorandums were made public by a small public utility north of Seattle that is fighting Enron over a power contract. They also showed that Enron, as early as 1998, was creating artificial energy shortages and running up prices in Canada in advance of California's larger experiment with deregulation.


The tapes provide new details of market manipulation during the California energy crisis that produced blackouts and billions of dollars of surcharges to homes and businesses on the West Coast in 2000 and 2001.

In one January 2001 telephone tape of an Enron trader the public utility identified as Bill Williams and a Las Vegas energy official identified only as Rich, an agreement was made to shut down a power plant providing energy to California. The shutdown was set for an afternoon of peak energy demand.

"This is going to be a word-of-mouth kind of thing," Mr. Williams says on the tape. "We want you guys to get a little creative and come up with a reason to go down." After agreeing to take the plant down, the Nevada official questioned the reason. "O.K., so we're just coming down for some maintenance, like a forced outage type of thing?" Rich asks. "And that's cool?"
"Hopefully," Mr. Williams says, before both men laugh.


The next day, Jan. 17, 2001, as the plant was taken out of service, the State of California called a power emergency, and rolling blackouts hit up to a half-million consumers, according to daily logs of the western power grid.

Officials with the Snohomish County Public Utility District in Washington State, which released the tapes, said they believed Enron officials had taken similar measures with other power plants. This tape, they said, was proof of what was going on.

At the time, power plants in the greater West Coast grid were under a federal emergency order to keep their plants running...

Economist Paul Krugman explains that, the way the California energy market was structured, this was almost inevitable:

The really striking thing, of course, is that there is excess capacity in the system - yet the price goes sky-high. And with a little realistic friction added, you could easily imagine blackouts and brownouts as part of the picture. Let me also stress that this is a non-cooperative equilibrium - it doesn't involve collusion, let alone conspiracy, among the generators. You don't have to imagine Ken Lay and Dick Cheney sitting in a room, trading sneers, and chortling over the havoc they are wreaking (which isn't to say that this might not have happened!). All it takes is individual firms, acting in their individual self-interest.

Of course this doesn't prove that private enterprise cannot satisfactorily provide services that governments otherwise provide. The California energy market today is a case in point.

On the other hand, if private enterprise is to be kept in line, it may require energetic defenders of the public interest such as New York Attorney General Eliot Spitzer, who, having done Wall Street and the insurance industry like a dinner, has now turned his attention to shopping mall rorts.

Thursday, February 03, 2005

Economically rational whale conservation

Whales are slow breeding animals. For example, the humpback whale has a gestation period of 12 months, and mature females produce calves at best every 2-3 years.

Taking various causes of mortality into account, non-harvested whale stocks increase by 3% a year. This means, given that sufficient food resources and habitat are available, whale stock will increase by 19 times over 100 years.

Ten-year government bonds offer above 4% interest in Australia, the UK and the US. Assuming that this is a typical rate (which most times it is), $1 invested today will be worth $50 in 100 years. That is, money grows two and a half times as fast (even in a secure investment) as whales do.

So is it logical to slaughter all whales, sell the meat and invest the proceeds in government bonds, to form a fund to conserve faster growing species of animal?

Kyoto, or bust

The FIN had an article yesterday, "Industry faces changing climate", discussing possible impacts of the Kyoto Protocol on Australian business:

In a fortnight, the federal government will be able to stand proud as the protector of Australia's resource-dependent industry, having stemmed the environmentalist tide by refusing to ratify the Kyoto protocol.

The fear among some businesses though, is that they well still be swamped by the reality of a global push to cut greenhouse gases.

Internationally, resources giant Rio Tinto has swung its support behind carbon trading, even as the Australian arm publicly says it neither supports nor opposes Australia ratifying the Kyoto Protocol while lobbying behind the scenes to prevent it.

The article quotes leading Australian climate scientist Graeme Pearman as saying, "In Australia [businesses] see a state government preparing a statement with regard to energy and energy futures, they see a federal government and they see and international framework an a Kyoto framework, none of which are in agreement."

But regardless of federal government position, there is growing pressure from investors, conservationists and, indeed foreign customersto take greenhouse gas abatement seriously.

I tend to the view that the Australian position is due to intellectual laziness - the unwillingness of companies, particularly those in the extractive industries, to devote serious effort to finding ways to comply. The article notes that:

According to data gathered by the Climate Group, DuPont, Alcan, British Telecom, IBM and Norske Canada have already saved more than $US5.5 billion between them by cutting carbon emissions by 60 per cent or more.

Granted, not all companies will find that cutting carbon emissions saves money, but at least for the ones where it will, why aren't they already doing it?

The Copenhagen Consensus study finds the economic case for implementing the Kyoto protocol unappealing. Kline's paper on the subject uses a figure of $94 trillion as the net present value of the implementation cost. While the experience of the five companies cited by the Climate group is not a representative sample, is it possible that sustained innovation could yield a massive reduction in that figure?

The economics of 19th century whaling

Delightful discussion on Crooked Timber.

Wednesday, February 02, 2005

The price of peace and war

Joe Siracusa claims that expenditure to date on the new US missile defence system is around $120 billion, and counting. If we could do something else instead with that money, well, what might that be?

According to the Copenhagen Consensus, just $50 billion would be sufficient to control HIV/AIDS globally ($27 billion), make major global inroads into malnutrition by supplying micronutrients to those who lack them ($12 billion); liberalise international trade (political will, not money); and control malaria globally ($13 billion). What is more these initiatives are estimated to have a pay-back of at least ten times their cost.

And the consensus has a further shopping list of worthwhile projects that could be accommodated well within the balance of the $120 billion.

It's a good thing that fanatical terrorists aiming to launch atomic missiles onto the United States are not trained economists (or at least we hope they are not). Intercontinental ballistic missile represent a hopelessly expensive and inefficient vehicle for delivering atomic warheads. An economist would recommend that this method of attack be dropped without further ado.

The most cost-effective vehicle for delivering an atomic warhead is a shipping container, or in the case of a very small atomic device, a suitcase. Department of Homeland Security's 2005 budget for US port security is $50 million.