Saturday, July 20, 2002



The second law of thermodynamics is one those scientific principles that seems to have assumed a fame beyond the world of scientific investigation. Although not as instantly recognisable and with the A-list cache of, say, E=MC squared, it is nonetheless well known enough to pop up regularly in conversations at football matches, over dinner and even at the more prententious Hollywood fundraisers. Spielberg is currently working on a film with Tom Cruise based upon the second law, in which Tom runs and then stops. Working title is understood to be Schindler's Limp.

Now, under-funded, publicly financed, freeloading (by defintion) scientists at the ANU in Canberra with no financial incentive driving them on have discovered that the second law does not hold in microscopic systems. I don't know what's more remarkable: that one the basic laws of physics has to be rethought, or that the rethinking was achieved by people working for something other than the profit motive and who still wear collars from the 70s. Surely the advent of world communism can't be far behind:

The demonstration, by chemical physicists in Australia, could place a fundamental limit on miniaturisation, because it suggests that the micro-scale devices envisaged by nanotechnologists will not behave like simple scaled-down versions of their larger counterparts - they could sometimes run backwards.

The second law states that a closed system will remain the same or become more disordered over time, i.e. its entropy will always increase. It is the reason a cup of tea loses heat to its surroundings, rather than being heated by the air around it.

"In a typical room, for example, the air molecules are most likely to be distributed evenly, which is the overall result of their individual random motion", says theoretical physicist Andrew Davies of Glasgow University. "But because of this randomness there is always a probability that suddenly all the air will bunch up in one corner." Thankfully this probability is so small it never happens on human timescales.

Of course, I blame Enron and the collapse of WorldCom. "If such paragons of the free market world can actually misallocate resources, it was just a matter of time, or a time of matter, before the very laws of physics fell apart," one of the ANU scientists was not quoted as saying.


I'm sure there is a message in this for bloggers. Recent research from Israel suggests that people respond better to an email addressed exclusively to them rather than one where they see a whole lot of other names in the To box. To test the hypothesis, researchers sent 240 people emails asking for some help; some they emailed individually, some as part of a group. They asked the question, does the Technicon have a biology faculty:

Each person received it either with just their own address in the "To" box, or with four others. The team divided the replies into various categories. "Helpful" responses said simply that yes, the Technion does have a biology faculty. "Very helpful" responses included extra information, such as useful phone numbers.

But "unhelpful responses" included the brusque "Find the Web page and look yourself!" Some just tried chatting "her" up with some very personal questions.

While half the recipients failed to respond to the email if they saw four others were on the address list, this figure fell to 36 per cent for single recipients. And almost a third of the single recipients sent back very helpful responses, compared to just 16 per cent of the multiple recipients .

I must admit, it gels with my own experience, and also brings to mind those awful family letters some people send around, telling everyone and no-one in particular what they've been doing for the last year. Always so thrilled to get one. And direct mailers (in which I have a background) have known this for years: the personal letter gets a better response than the unaddresed junk mail. Perfectly obvious I guess, but like so many things, apparently in need of rediscovery in the virtual world.

Friday, July 19, 2002



I guess you couldn't help but think that Scott Wickstein's thoughts on the state of the world are sincere and well-meant. But Scott, IMHO, if you're gonna write the other side off as flakes you need to tighten up your own attack. John Quiggin puts Scott gently right about the idea of natural monopolies, and I might just as gently suggest that he not jump to conclusions about a person's voting habits or even political affiliations, as when he says: Tim Dunlop seems to be typical of the sort. This feeling is widespread among the ALP voting types, and even some older Liberal party types. The idea is that the government can meddle in our affairs, for the purest of motives, to make things "better" for "ordinary people".

Instead of generalising about what you "think" I might think, try critiquing something I've written. I'll do my best to respond.

And instead of demanding those you presume disagree with you come up fool-proof plans to reform society, try rising to your own challenge: "I guess the real challenge to those that want a "mixed" economy (that is, a greater government role in our lives and the economy) is to come up with a creditable way of protecting the vulnerable in society, without encasing a choking layer of privilege that will result in stagnation." It poses an interesting question. What's your answer?

I'm also always intrigued with the fairly common practice of equating more freedom with less government, as if "government" were this separate thing that flew around in the sky and occasionally came down, harpie-like, to pester us. Thi is especially intriguing when people sing the praises of "democracy", yer basic working definition of which is "government by the people".

Australia, of course, was built on a strong and unembarrassed reliance on government, whether it was in the form of building infrastructure or through an agency such as the CSIRO which just about single-handedly invented Australia. This "we hate government" thing, or what we might call the "necessary evil theory of government" (NETOG) is something we have imbibed from my current country of residence, the good old USofA, just as much as we have absorbed McDonalds or Disney. To swallow it whole, as many do in the wake of the global neo-liberal dominance, is to subsume our own unique history under a model that is an American fantasy.

Funny thing is, the people most willing to do this are the very ones, like the PM, who would see themselves as great patriots. This was one of the most sick-making things about his recent speech to Congress and its most arse-licking aspect, (though Mark Latham, ever the battering ram, was too unsubtle to even come close to articulating it.)

But the PM and his ilk are on a cleft stick with this one. On the one hand great patriots whose populism plays well; on the other, neo-liberal apologists who can't abide the fact that are a perfectly good country was built, not on the crest of rugged individual achievement, but upon an egalitarianism that believed in redistribution and a strong role for government. Thus this constant attempt to insert the American frontiersman (a myth anyway) into Australian history and experience, as per example:

Our pioneer past, so similar to your own, has produced a spirit that can overcome adversity and pursue great dreams. We’ve pursued a society of opportunity, fairness and hope, leaving – as you did – the divisions and prejudices of the Old World far behind.

I always find it particularly amusing to hear the likes of Howard prattling on about this stuff - constant odes to the triumph of individual endeavour from a man who went to government schools his whole life, went to a publicly funded university on a publicly funded scholarship, who has been on the public payroll since the mid-70s, including having his trips to America and Europe paid for, where he asserts the importance of getting the state off our backs, and who will retire on a whopping great publicly-funded superannuation payout, and who owes his whole adult, professional life to the goodwill and offices of that 'community' of ratbags, the Liberal Party, itself the love-child of another community group, the IPA, who recruited Menzies to run it, which in turn is part of a ruling clique that rejoices in the name 'Coalition', the other part of which, the Nationals, spends every rhetorical moment it gets either arguing for subsidies or assistance of some sort, or worshipping at the altar of the 'great community spirit' of rural Australians and organisations like the CWA. Yes, we are all individuals!

This Daniel Boone, disneyfication of our history should get "proud Australians" up arms, not lining up to endorse it. But as I say, the populist neo-liberal is on a cleft stick.

Once we accept the NETOG principle we are playing the zero-sum game of any government action being seen as a net loss of freedom for we "individuals". It's a crock. Without a society to operate in--which means some form of "government"--there is no matrix within which the much-lauded individual can take shape. Yes, individual flourishing is the centre of the moral universe, but to think it somehow happens outside society (remember, there is no such thing as that) is to be blind to your own daily existence.

To frame everything in these neo-Lockean, NETOG terms is to blithely accept the self-serving social Darwinism of those who benefit from the dog-eat-dog world of market survival of the fittest.

This knee-jerk americanisation of all debates as us-against-them NETOGism is to pit us all against each other and fail to see that government, properly understood, is our democratic right and that it provides, not a loss of freedom but an enhancement of it.

The road to surfdom is not a journey you can take alone.

And so the rant ended.


Is there anyone in the world more happily and unexpectedly on the road to surfdom--taxpayer-funded retirement? another term?--than our core-promise-keeping PM?

SMH fossil Alan Ramsey quotes some interesting figures costing the PMs recent visit to Europe:

In Rome, the Herald's Michelle Grattan enlightened readers by disclosing that the "diplomatic rate" cost of John and Janette Howard's "royal suite" at the Regis Grand, complete with butler, was $9600 a night, or almost $40,000 for their four-night stay, thank you. Her story irked the Australian Embassy so much so that it did some estimates on what the embassy (ie, taxpayers) was paying in associated costs for the travelling media for the three days/four nights of the Rome visit.

Hotel media "working centre", €10,000; "light lunch" for travelling media, €1300; media program printing, €350; installation of five phones, €700; estimated call charges, €1000; media PABX calls, €3000; photocopier and fax machine hire, €3000; stationery, beverages, €700; media bus hire €6000; hotel press conference room, €10,000. Estimated total: about €36,000. In real money - around $70,000. All for the travelling press. And taxpayers paid!

Translate that cost for three days/four nights to the 10 days the Howards spent in the five European capitals they visited? Not less than $150,000 minimum. Maybe next time Jones can ask his little mate why the press don't pay for themselves.

My sources tell the PMs visit to Washington (I did but see him passing by) chalked up considerably more than that. (Incidentally, rugged individualist John and the cheese-and-kisses had two floors at the five-star Willard. They weren't alone, of course: the personal doctor to the PM was also close by.)

Still, between well-butled room service in the heart of DC, he did manage to get across to Congress and tell a joint sitting how much we all needed to evoke our pioneering entrepreneurial spirit and break the shackles of the dead hand of government. He also told them, in what has become a bit of a recurring theme, that the family is the best welfare system ever invented (so that's what a family is?) to which I can only say that he must have had a very generous family if they had managed to outdo the largesse bestowed upon him and his family by we the taxpayers.

And some people think John Lennon was hypocrite for writing Imagine.


Okay, so Florida Governor and presidential brother Jeb Bush's daughter, Noelle, does three days for violating a court order to do with her drug addiction.

The largely unreported fact that goes with this is that there is a law that says the family of imprisoned drug felons who live in public housing are to be evicted, along with the offender him/herself. Actually, it's even tougher than that, and it has unanimous Supreme Court approval.

Under a 1988 law (passed by a Democratic Congress, signed by President Reagan, and strengthened by President Clinton, who ordered its stepped-up enforcement), public-housing tenants may be evicted from their apartments if any member of their household or any guest is caught using illegal drugs "on or near the premises," whether or not the tenant had any knowledge or control of the drug use. A unanimous Supreme Court recently upheld this harsh "one-strike" law in a case that dramatized its abuses. Decided on March 26, HUD v. Rucker allowed the eviction of a 63-year-old great-grandmother whose disabled daughter was caught with cocaine some three blocks from the projects, as well as the eviction of a 75-year-old partially paralyzed man whose caregiver was found with cocaine in his apartment.

Of course, being the Gov of Florida, and therefore the resident of public-provided housing, Jeb should be getting an eviction notice pretty soon, shouldn't he?


Max Zawicky gave this good summary of Alan Greenspan's most recent testimony. Extracting from Max:

In his testimony yesterday, Greenspan follows standard practice and says the "fundamentals" are in place for a recovery. The fundamentals in question are inventory (it's been 'worked off,' which means new production will be needed), inflation (none in sight), and productivity growth. This seems to satisfy everybody. It shouldn't.

And then this bit of Max got quoted in the Washington Post:

The premise that we're on the road to recovery is the classic macroeconomic policy cop-out. It says we don't need to do anything but sit back. If you're securely employed, this is good news. You can ride it out. Except if you're securely employed, you're not riding out anything. It's the poor slob who hasn't worked in eight months who is riding it out. It's the nearly three million people missing from the job rolls since the 1990s who are riding it out. Congress is said to have passed an expansion of unemployment benefits, but it turns out that right now in only two states can workers qualify for such benefits.

Well some of it got quoted.

Essentailly, Greenspan's message was steady as she goes, and I just love the way we've--in the Administrations rhetoric--gone from boom to recovery, with no mention of the bust in between. (Or am I wrong? Are there lots of quotes around from Bush, Greenspan et al acknowledging that the economy hasn't been too good of late?) Of course, touts will argue this is just sensisble policy as you don't want to affect investor confidence etc with bad news, but they're the same one's who'll give you lectures about the rational genius of market allocation.

Then there's this nice piece from Nathan Newman which, relatedly, argues that the kerfuffle over Bush's shady deals with Harken are unimportant, and gives the left a good serve for concentrating on this rather more difficult and pertinent matters:

Concentrating on the "gotcha" personal politics distracts from the real policy issues. Yes, fighting on policy is less spectactular and the media ignores it more, but that's why it needs hard organizing in the streets and workplace to win. The politics of personal destruction wins short-term points but I think it often loses long-term ideological ground-- and for the reason that it discredits all involved. I think Newt Gingrich was one of the most awesome (and scary) grassroots political organizers of the last generation, but the anti-Clinton crusade derailed his whole ideological message (and cost him a speakership eventually in the collateral fallout).

Finally, there's this nice meaty piece from Financial Sense Online. Provides all the recent data on the US economy and comes to rather a different conclusion to Mr Greenspan:

So, What Does It All Mean? From my perspective, the economic state of our Union looks unhealthy and terminally ill. All of the excesses of the 90’s, which resulted in a mania in financial assets and a debt-induced spending binge on behalf of consumers, have left the economy with a huge hangover. It is hard to conceive that the consumer, who is already burdened by debt, could be expected to go even deeper in debt in order to sustain a lifestyle. Growing job layoffs and collapsing equity markets should be giving consumers reason for pause. If policy makers and strategists see a booming economy and a surging equity market, it would be hard to find the catalyst outside of war. Companies are reluctant to spend and expand capital investments. They are in the process of reliquifying their balance sheet. This points to further contractions ahead. Consumers are tapped out. Marginal borrowers are already going into default or delinquency on loans. It is just a matter of time before more households find themselves in greater financial dire straits.

Let's hope they're wrong.


OpenDemocracy offers this small attempt to summarise some of the recent goings on Wall Street and in the White House (look carefully, you can tell the difference).
For example:

Even dismissing the fact that Thomas White, Bush’s Secretary of the Army, was at the centre of the Enron controversy, generating $500 million in phony profits and personally selling $12 million of stock just before the company went bust, the charge sheet is long. Vice President Dick Cheney is first. As CEO at Halliburton until 2000 he oversaw some highly creative accounting of the Enron mould, massive losses magically becoming massive profits. Capitalising heavily during the Presidential campaign on the “great success story” of Halliburton under his leadership, Cheney then sold his shares on taking public office, making a whopping $18.5 million profit. Sixty days later the company announced its massive problems – shares dropped by 11% in the first day - which included being under a grand jury investigation for over-billing the government, and the revelation that the company was facing liability for a completely underestimated string of asbestos claims. The Securities and Exchange Commission (SEC) is currently investigating Halliburton. As yet, they have not interviewed Cheney.

But don't worry: this is the genius of the system at work.......


Somewhat predicatably, the other Tim of blogging, Tim Blair, gives me a serve, dismissing me as "another refugee from desolate, insanity-riddled Margostan". Given that he praised this piece from the praiseworthy Australian historian John Hirst, he might have at least read the latest piece I put up at Margostan before jumping to conclusions. I mean, I don't expect to him agree with the central point, but it is hardly the predictable lefty commentary that otherTim seems to have presumed.

He might also like to read the regular slaggings I get from lefties for daring to suggest things like most Australians aren't racist.

Still, otherTim has found his niche and is doing it all very nicely. For those who like their conservative rightwing commentary with less Blair and more flair, try former Qld Liberal Party deputy president Graham Young's OnLineOpinion. Apart from anything else, given the amount of time, effort and money Graham (whom I've never met) puts into it, it is living proof that even righties will do things for reasons other than the profit motive. And maybe you could sign up for their discussion list too.

There are some bad Republicans but there are no good Democrats

This will no doubt become a famous quote for Ann Coulter. Don Arthur has been following her idiotic rantings, but she showed up the other night on The Daily Show (does Australian cable TV get this?) and was nicely taken apart by host, Jon Stewart, and booed and hissed by the studio audience. And gee, didn't she take it well. Not that she stormed off or anything, but she looked about as comfortable as a blogger with a book (all that reading and no links!). Still the book will sell and that is all the justification most on the right need for anything.


John Quiggin, was looking for something nice to say about George Bush and came up the fact that he doesn't seem to be racist. Maybe. There was the recent highly under-reported story of his trip to Brazil where he asked the President, "do you have blacks too?" But this might be more ignorance than racism. And then there was the fact that his brother Jeb illegally cleared a whole of lot black voters off the Florida electoral rolls. Again, not his actual doing, but then again...(See Greg Palast's site on this, or better still, his book.)

Then there was this little slip-of-the-tongue:

Speaking to reporters about the deteriorating regional conflict on Monday, 7 January, President Bush said,

I don't believe the situation is defused yet, but I do believe there is a way to do so, and we are working hard to convince both the Indians and the Pakis there's a way to deal with their problems without going to war.

And he sure did kill a lot of black people when he was Gov of Texas.

And he did support the flying of the Confederate flag in Southern States, and did address Bob Jones University in Greenville, a place not exactly known for its down-home welcome to people of colour. This article thinks it all adds to "passive racism".

All circumstantial, I guess.

Still, he has not played the "race card" in the way that, say, John Howard or Pat Buchanan have, and maybe that is something to be grateful for and maybe that's all Quiggin was getting at.

And I'm sure not for throwing the term "racist" around willy-nilly, as the left are wont to do.

Gareth Parker thinks my blog entries are too long. Fair enough, I guess. Still, I'm not quite sure where it says that all blogs have to follow the same pattern.

One of the things I like about the web etc is the possibility of it moving beyond the usual sort of soundbite inanity that the mainstream media has come to feed us as a staple. It'd be a shame if online writing just replicated THAT model.

Besides, I don't quite see the difference between, say, thirty one-para blog entires in a day (especially where they'll link to another thirty or forty articles) and one thirty-para entry in a day: both can be time consuming to prepare and to read.

And both can be good and both are allowable, surely? Ultimately, it's the sort of subjective argument that probably isn't worth pursuing--how long is a piece of blog?

And I can't tell you how many emails I've had that say that it's nice to get something beyond the quick comment-and-link. How many? No seriously, I can't tell you.

Anyway, I like to use this space--not always--as somewhere to think things through in a bit more detail AS WELL AS somewhere to drop the odd quick link-and-comment. I hope Gareth hangs in there and can find some value in a different approach.

Thursday, July 18, 2002


Very pleased to see John Quiggin with a blog up and running. A profilic and readable economics writer, I've ripped him off mercilessly for years. Not really. But I have found his clear explanations and thorough approach a real help. More people should read his stuff. So once you've checked out his blog of new releases, go to his back-catalogue here. There is a wealth of high-quality info that will educate and shatter a few orthodoxies. I also like the fact that he's out there in public sphere, a great example of how the Barry Jones line about "our academics are foresaking their role as intellectuals" is nothing more than his own ignorance. Barry once wrote a list of academics whom he considered to be "public intellectuals" and concluded there were no more than 25 of them. Well, he left off John Quiggin for a start which blows a hole in his "argument" from the get go. Anyway, click the links and see what I mean.


Just remembered this book that collects "the most important writings" of Stiglitz. It's a useful addition to the points I was making earlier. Blurb says:

No one has challenged the policies of the international financial community as profoundly as has Joseph Stiglitz, the former chief economist of the World Bank. with an unimpeachable reputation as a scholar, Stiglitz stunned financial policy makers with a series of stinging criticisms in recent years that were all the more effective because they were on target. In more than two dozen controversial speeches made around the world, Stiglitz undid the conventional wisdom that dominated policy-making at the World Bank, the International Monetary Fund and the U.S. Treasury Department.

Now, in one volume, Cambridge University professor Ha-Joon Chang has gathered the most important of Stiglitz's speeches and provides an invaluable introduction to Stiglitz's thoughts. This is the most coherent vision of Stiglitz's thinking to be found anywhere.

The book, which includes nineof Stiglitz's most revealing speeches, reflects his central themes. These include the failure of shock therapy and transition economics, the limits of capital market liberalization, the myopia of the Washington consensus, the role of knowledge in markets, the process of developing market institutions, and the primacy of openness and worker participation.

It's edited by Ha-Joon Chang of Cambridge University, of whom more soon.


Some too kind words from Margo over at Web Diary, but I should correct the record a little. The article she published was a joint effort by Rob Schaap and me and while I really think the whole is greater than the sum of the parts (how's that for a non-neo-liberal concept?), people should note that most of the heavy lifting was done by Rob, and he provided the backbone material for the piece.

It was good of Margo, too, to mention this blog and I've alredy had a heap of hits thanks to the plug. Feel free to write. On that note, I should also apologise for the use of the word "synergy". I don't know what came over me. Still, I'm keen to link and be linked with the vague left of bloggerland and to get some "synergy" happening. As I said to Margo, blogs seem to be dominated by the right (and blokes, or is that just my imagination?) and they are using them extremely intelligently as a way of building up networks of discussion and support. It's a good thing, but the left, I think, needs a bit more of a presence. So I was pleased to see Jack Robertson take up the offer and put in a few kinds words. And Rob's is up and running and that promises to be a powerhouse once time permits him to get at it a bit more. Maybe we can all start to be a bit of a resource for each other, providing good material for those interested in our take on the arguments of the day.

Still, I don't want it to become a preach-to-the-coverted left ghetto (there are enough of those on the left already) so let's keep our eyes open for thoughtful stuff from all along the political gamut. One site that fits this bill is Graham Young's OnLineOpinions, a great portal for a range of Australian writing. Check it out.

Anyway, here's the piece Rob and I did: comments always welcome.




by Rob Schaap and Tim Dunlop

We have an unprovable and unpopular theory arguing that when John Howard announced in the lead up to the 2001 Federal election that ‘we will decide who comes here and the circumstances in which they come’ that people responded less out of any actual racist antipathy to 'dangerous foreigners' than out of a sense of relief that someone had at last said something that put the country first.

After nearly thirty years of being told that due to the 'forces of globalisation' we had to privatise government services, sell off public assets, deregulate banking and every other industry, reduce worker entitlements in order to remain 'competitive', integrate ourselves into international institutions like the WTO which by their nature undermine our own control over economic and social policy--in other words, having lived through a generation of neo-liberal reforms that were constantly presented to people as not only desirable¾ despite the obvious pain they caused--but also as 'inevitable' and for which they was 'no alternative', people were hanging out for someone to say, hey, what happens in our country matters and what's more, I'm going to act as if it did.

Howard's famous catch-cry fitted the bill nicely.

Of course, it is unfortunate that it did in fact tap into some of the nastier elements of racism present in Australia (elements present in any country you care to name), but to read it entirely as some sort of racist backlash and a harking back to 'White Australia' is a pathetic oversimplification. In fact it is a case of presuming the existence of the very thing you are seeking to explain.

More importantly, it lets the rabid 'globalisation' touts off the hook way too lightly, and stops us looking at the underlying causes of discontent. And that’s what we’d like to do here.

We can present only limited evidence for this of course, though we think that once you start to give it some thought, there is some logical force to it.

Anyway, what made us think of all this again was an e-mail Tim got from his sister-in-law, which should be vaguely encouraging for all those, like Hilary McPhee, who are in serious hand-wringing mode about the ‘state of the country’. The e-mail included this passing comment:

’I went to Circus Oz last night, at the Town Hall. It was as it always is. The interesting thing is that, at the end, one of the performers invited the audience to put money in a bucket for refugee support groups. A cheer went up and - honestly – the people holding buckets were mobbed. Instead of rushing out the door, the audience headed straight for the collectors - they pushed and shoved to put their money in a bucket. I've never seen anything like it. Remarkable.’

The tone of surprise in her voice is really interesting but completely understandable, fed as we are on the belief that ‘ordinary Australians’ are irredeemably racist and that election 2001 was White Australia regnant. We voted for Howard so we must be racist, right? What this anecdote suggests is that the usual image is more complex than we are led to believe and perhaps offers some support for our little hypothesis.

We can put it into a bit more context by analysing it from economic point of view.

The economic is, always and everywhere, dependent on the non- or extra-economic sphere. Liberals and conservatives are coming to recognise this, as evinced by their recent idyllic invocations of 'civil society' (a host of 'third wayers', 'communitarians' and 'social capital' types come to mind). Since the outrage of September 11 2001, some are even mentioning The State again!

The trouble is, says British sociologist, Bob Jessop, the old Market/Civil Society/State trinity is being rather painfully reconfigured just now.

We citizens have watched our state apparatus 'deregulate', 'liberalise' and privatise us out of our sense of democratic relevance, of national identity, and of our understanding of our place in both present and future (see Manuel Castells' trilogy fr’instance). An ideology focused on supply side economic policy has dominated our media for nearly thirty years, and has driven the state for nearly twenty. It has simply displaced a sense of democracy as 'of, by and for' the people. In fact, under Margaret Thatcher’s famous dictate, there was no ‘the people’; there was no such thing as society.

In addition, we're mad at the state because we didn't so much watch it succumb to some irresistible external force as deliberately and methodically give away what looked like our birthright (Karl Polanyi, EP Thompson and Alex Callinicos argue/d thus). It didn't matter what we thought about it and it didn't matter who we put into government. We were told it was inevitable and to hang on.

Thus the huge disillusion throughout the western democracies with the political process, culminating not just in the fall off of actual voters in Britain and America, for example, (who can barely get 50% of those eligible to vote), but also in Australia where, as voting is compulsory, dissatisfaction has been expressed through the rise of alternative parties and independents. It is also reflected in the rise of populist right wing parties who at least purport to take ‘the people’ seriously.

We have watched the state abandon us as citizens. Jessop talks about

- the State being ‘denationalised’ with state power moving 'upwards, downwards, and sideways as state managers on different territorial scales try to enhance their respective operational autonomies and strategic capacities'
- our political system 'destatised' with the shift from 'government' to 'governance' - from a state apparatus we saw as responsive to ideological contests transformed into a bunch of technocratic managers, and
- the usurping of the citizen as the subject and object of policy by some amorphous and bemusing plethora of transnational entities like the WTO, NATO and even the UN.
These tendencies are as apparent in the policy prescriptions of the third way left as they are in the new right, and both converge on a core of economic liberalism.

We're not even allowed to take our own reservations seriously, because everything is economics now, and most of us don't have doctorates in that. We saw this sort of attitude expressed recently on these pages by Aaron Oakley. There is always going be someone out there gunning for anybody who dares to speak on economic matters without what ‘they’ consider to be the requisite economic training.

The anti-democratic nature of such a position should be obvious, and it all serves to hobble the entire idea of democracy as participatory self-rule. Under such circumstances, expertise becomes not the helpful specialisation of knowledge in the service of the common good, but a weapon used to stifle dissent and popular participation in social debates. Experts, who in fact disagree amongst themselves, present themselves not as important contributors to national debate but as the last word to whom we should all defer.

Given that ultimately what they are dealing with are social outcomes, things we are all meant to have a say in, it is hardly surprising that the lay public gets its nose out of joint and is willing to dismiss all expertise as the self-interested ravings of a plugged-in elite.

It is less predictable, though nonetheless apparent, that this provides a perfect opportunity for the right sort of populist politician to then cast all opposition as the ravings of a selfish elite and to usurp any influence they might have had by a crude appeal to the innate goodness and common sense of ordinary people. Again, in Australia, the Johnny-on-the-spot in this regard has been our clever Prime Minister who has built up a considerable rhetorical arsenal built on the phoney distinctions between the ‘battlers’ and the ‘elites’ or ‘ordinary Australians’ and the ‘progressives’.

This in turn licenses the disenfranchised ‘elites’, the ‘progressives’ to disown the majority of their fellow citizens as ignorant rednecks, which of course also includes the charge of racism. So when the events around immigration emerged at the time of the 2001 election, it not only provided an opportunity for a populist like Howard (who was smart enough and desperate enough to seize it) but it provided confirmation of the low opinion the progressives held of ‘ordinary Australians’ and encouraged them to ignore all the other forces that were crystallised in the call of ‘we will decide who comes here and the circumstances in which they come’.

So we're talking about an Australian populace (and the same forces are apparent in the UK and France and Austria and Netherlands and even the USA) in great need of being assured that their state is still there, that it still matters, that its ruling class (the true elites) recognise its existence and importance, and that it can still wield some clout on behalf of its ordinary citizens. Oh, and we're shit-scared for our jobs, shit-scared of worldviews that further threaten the stability of our sense of self-in-world, and generally shit-scared of a world that suddenly looks like The Great Unknown, with weird foreigners flying planes into tall buildings.

It is this shit-scaredness that is held in contempt by most of those who endlessly endorse the ‘new world order’ of ‘lifetime education’, endless personal mobility, and the phoney freedoms of a wired world of self-employed contractors. Dare to challenge this mantra and you are likely to vilified as a backward-looking weakling who just can’t cut it in the online world. That this contempt is as likely to come from the left as the right is a matter of some regret and another cause of the irrelevance of voices from the left. (Who outside the world of the middle-class intelligentsia is even remotely inspired, let alone comforted, by the onset on anything called ‘The Third Way’? Surely not the ‘aspirationals’ at whom it is aimed?)

Too much ‘progressive’ commentary has overlooked the economic angle and highlighted the race angle. This plays right into the conservative's hands, something the self-righteous left fails to grasp. Yes, Australia’s history does warrant a black armband, but, no, things aren’t as bad as they might seem to the fervent anti-racism types among us.

Robert Mannewrote the other day that we’re still the same nation Hancock wrote about in the 1930s – that we’re still a huddle of nervous, fiercely xenophobic whites stuck on an island fortress, both physically and psychically (our apologies to indigenous Australians, but that’s the picture as it was drawn).

But doesn’t this ignore the little matter of the transformative half-century that has elapsed since the war? First of all, the white non-English-speaking foreigners by the hundreds of thousands.

Then--and we think this is something too easily forgotten--came the South East Asians. In the 1970s, under a conservative liberal prime-minister, ‘Australia resettled more refugees per head of population than any country on earth,’ as Scott Burchell reminds us.

The Australia that did this thing was a much more culturally homogenous entity than it is now – and logic would suggest we would have been a less tolerant, more scared bunch, too (we’d been warring in SE Asia for nearly a decade). Not only that, but the people coming to our shores were of the very ethnic groups against whom we’d traditionally set ourselves.

Yet, as Burchell says, ‘Australia earned a well deserved reputation during the Fraser years for resettling a very large number of Indo-Chinese refugees.’

As the likes of Don Watson and Hilary McPhee wring their hands at Australia's 'move to the right' and the lost 'moment' of multicultural tolerance, we should remember that very few from the left ever gave Australians credit for the way they got on with it during the seventies and eighties.

In other words, having never conceded any progress in these matters when in fact we were living through it, they now, in hindsight, seek to claim that recent past as some sort of 'golden age' from which we have strayed. So having never acknowledged it at the time, they now back-construct that period in order to use it as a weapon with which to hit Australians over the head and so continue with the usual game of superior disdain for yer 'average Australian'. Neat trick.

We might add that a newly formed party, dedicated to the emancipation of the refugees, is hardly made up of typical lefties (John Singleton and John Newcombe are two salient members). All those famous old heads are heads of the seventies, the product of a time when many on the mainstream right of Australian politics were as willing to try multiculturalism as anyone on the left.

Why? Because one big difference (and we suspect it to be the decisive difference) is that we were not as globalised then as we are now. We are suggesting, then, that nationalist xenophobia is precisely a function of that which purports to bring us all together.

There has been, quite appropriately in our view, a lot of talk about Australia’s obligations under Article 31 of UN Convention on the Status of Refugees. The trouble with the UN Convention is that it was drafted in 1951, and half a century is a long time in political economy.

Core economies needed labourers in 1951, and while this economic fact may not have written Article 31, it certainly encouraged it. Western polities were competing with the Communist Bloc for the hearts and souls of the non-aligned in 1951, too.

There is no polar distinction in the Convention between ‘economic’ migrants and ‘political refugees’ and in Article 31 there is the express understanding that refugees are often obliged to employ technically illegal means and criminal agents if they’re to escape at all.

And it is precisely upon the fulcrum of criminality that the whole argument now turns. The adjective ‘illegal’ is crammed in everywhere. ‘Trafficking’ is a big problem in Europe (to be trafficked is to be exploited and without the decisive burden of guilt) but here the problem is deemed overwhelmingly one of ‘smuggling’ (and the smuggled party IS a guilty party). We are encouraged by the government to forget the simple truth that refugees can’t escape without transport, without paying people, and without circumventing barriers. Minister Ruddock loves the term ‘queue-jumpers’, for instance. He doesn’t say where an Afghan peasant or Iraqi villager might find this queue – he just besmirches them for doing what a refugee needs to do. It’s like he never saw Schindler’s List….

We see this messing about with language a lot.

Julian Burnside speaks of the elision of the distinctions that so obviously pertain between three distinct elements of Australian policy: ‘border control’, immigration policy, & treatment of refugees:

‘All require quite different thinking, and all require separate solutions, and yet somehow our political masters have managed to run these problems together and use the ugliest bits from each.’

And, together in all their ugliness, they are reduced to but one notion: ‘border control’.

Australians heard it again and again from their prime-minister during the election campaign:

"We will determine who comes into our country and in what circumstances."

But consider: if a State is trying to garner brownie points, it’s a good idea to spend its (well, our) money at home rather than abroad. Again, that ‘smuggling’ notion comes in handy – if ‘smuggling’ is the designated problem, then ‘border control’ is the appropriate strategy, and that means precisely that The State spends the money here, where we get to see it spent.

We DO matter! We ARE a nation and we ARE a State again! For do we not see The State investing in us, The Nation, again?

So the State seems directly to have addressed our fear and indignation – it has secured our jobs (for so long have we been lectured by the neo-liberals that the notion of a Keynesian multiplier is all but dead), kept scary world views away, and made us feel like our place in the order of things has been, at least in part, restored.

The government burns $300 million a year on processing and housing refugees, and a few hundred million more on interception and interdiction. And our aid budget to the countries whence these refugees come amounts to all of $14.4 million. The State is doing National stuff in and for the Nation again. And a measure of comfort is temporarily restored.

Howard's genius at the outset of the latest nonsense was not in obeying the pollsters, but in grasping the moment before the numbers were there to be reported - sensing all of the above and giving it the focus through which it could cathartically express itself to his advantage. The irony is almost too delicious: the person who has more than any other advocated the very economic policies that created the sense of loss in the first place--and who even stood up in the US Congress the other day and waxed hysterical about the primacy of the individual--is now the prime beneficiary of this new-found desire to protect the collectivity, the state itself.

Howard had a lot of bad luck in the past (the Joh-for-Canberra saga comes to mind, and that racist nonsense on immigration policy back in '88 hadn't worked for him), but he'd never lost his eye for the main chance. Having contributed to an enduring social malaise (as neo-liberal technocrats must), he saw the salving potential in the near coincidence of 9-11 and Tampa before anyone else did (and let’s give Reith some credit too: he was very quick to connect the dots for us).

In the wake of this, we could all feel looked after again, feel a nation again, feel potently relevant again: and Howard gets another three years, all at the expense of a few thousand nobodies who can't get near a phone, never mind a polling booth.

Kim Beazley, so intent on making himself and his party a ‘small target’, literally missed the boat. So spooked were they that rather than offer a viable alternative, they meekly fell in line with a hideous policy prescription, a decision that continues to haunt them.

Our 'racism' wouldn't last a minute if we were confronted with what we're doing and the real people to whom we're doing it, but if our betters spend enough of our dollars on keeping our eyes and ears away from our actions and victims, that's entirely manageable.

So the Howard Government has an express policy (confirmed in Senate Committee) of preventing the ‘humanisation’ of those locked away in the desert or banished to the client satellite statelets of the ‘Pacific Solution’.

The infamous footage from the Curtin Detention Camp, of people in obvious despair and in various stages of mental breakdown, is part of a gradual but inevitable humanisation. You see, we don’t think the situation is such that a decisive proportion of Australians can’t be turned.

Sure, at the moment ours is the ignorance in which racism grows. And, sure, by the definition of racism held by The International Council on Human Rights Policy (IHCRP), our State apparatus is being racist (for it is most definitely "nullifying or impairing the recognition, enjoyment, or exercise, on equal footing, of human rights and fundamental freedoms in the political, economic, social, cultural, or any other field of public life," on the basis of "national or ethnic origin").

But we do not think this obscenity need be read as a definitive symptom of an unchanging political culture, nor a particularly reliable indicator of how we might behave in the future.

As intimated before, we do not think Howard won the election on ‘border protection’ alone. Labor enjoys neither the moral nor logical clout to carry that argument. They did not afford the electorate an alternative on this issue and, of course, no opposition can convincingly match a party in government that is prepared to embark on a budget-busting $23-billion-pork-orgy.

So whatever the suspicions of some, the re-election of a Howard government has little to tell us about any enduringly profound xenophobia.

A change in government might changes things--remember Paul Keating’s parting words at the national Press Club: ‘when the government changes, the country changes’--and the gradual and inevitable promulgation of more gut-wrenching footage and shock-horror disclosures of what our betters have been getting up to would help. Whether these alone would be decisive, we daren't say. But if such developments were accompanied by an expansion (and, yes, complication) of the globalisation discussions to include a democratically entrenched recognition of, and central role for, the citizen - such that subjects feel less like betrayed and impotent objects - well, then an Australia once again secure in its capacity democratically to affect and manage inevitably changing circumstances (for let's not forget the times have always been achanging, and Australia ever with them) would show an altogether different face.

Like helpless bods clinging to a leaky wreck somewhere between Indonesia and Australia, we were willing to grasp any straw floating past, as drowning people are wont to do. We deserve condemnation for the form that straw took, but those who jump to hasty conclusions about ingrained racism need to at least recognise that many ‘ordinary Australians’ did feel they were drowning in a sea of uncertainty set swelling by a neo-liberal juggernaut over which they felt they had no control. Any account that doesn’t at least factor this into the equation is incomplete.

Wednesday, July 17, 2002



(Fair dinkum, I'm getting good at these sub-editorial headlines!)

Alan Wood is at it again, recommending "market forces" be used to fix the health system.

Let's start with the basics: markets, by their nature, create winners and losers. Anyone care to argue? Therefore, opening up the health "market" to competition in the manner that Wood suggests is an invitation to create winners and losers. In such circumstances, winners and losers are decided by one thing only - the ability to pay. That is to say, sick poor people will not be able to compete in the market and therefore will not get better. Consider this false reasoning from the article:

The fundamental problem with the system is no mystery. Melbourne University economist John Freebairn set it out succinctly in a speech at the release of the proceedings of a Productivity Commission/Melbourne Institute round table on health policy at the end of June. Medicine, he said, is a really weird market.

Why? Because governments set both the quantity and the price, behaviour characteristic of the old Soviet command system rather than a market economy. Political pressures ensure that they always set the prices too low, which means they then have to control the quantity of health services or their budgets would explode.

Of course, the first requisite of taking away public services is for the intellectual apologists for the neo-liberal orthodoxy to tar them with the brush of Soviet communism, so it is good to see Wood following Right Wing Propaganda 101.

But back to the point - health is not a "weird market": it is a public good, which puts it well within the realm of the extra economic and therefore beyond the rationalisations of market theory. Well, it should. A public good (which they probably don't teach in Economics 101 anymore) is defined thusly:

Public goods have three characteristics. The first is that they yield non-rivalrous consumption: one person's use of them does not deprive others from using them. The second is that they are non-excludable - if one person consumes them it is impossible to restrict others from consuming them: public television is non-excludable; although, if devices are made for scrambling television pictures, except to those who own picture decoding cards, television becomes an excludable service. Thirdly, public goods are often non-rejectable - individuals cannot abstain from their consumption even if they want to. National defence is a public good of this sort, although television is not. Non-excludability and non-rejectability mean that no market can exist and provision must be made by government, financed by taxation.

The relevant bit here might be that last sentence. And even if we concede its probably not quite as simple as this, given that many of the various suppliers and providers within the system are there to make money, we are nonetheless left with the fact that, in a civilised country, the provision of health care should be outside the usual market paradigm, provided as a public good. Even most ultra-rights will concede this point in the matter of defence; why not in the case of health?

In brief, the only way to turn a buck in a "health market" is to avoid sick people or limit the services you give them. Thus market logic conflicts viciously with the logic of civilisation, where somebody's right to medical care is not predicated on their ability to pay. But it is precisely this point that Woods (and others) prefer to avoid.

So it is just bogus to couch the argument in terms of prices being "set too low". As pricing has been taken out of the system of market allocation and controlled--at least theoretically--by government policy, the terminology and logic of markets that he is using is simply inappropriate.

He then writes:

In fact, most health services are pretty close to free to most Australians because of subsidies on drugs, low or non-existent co-payments when they see a doctor and low costs when they go to hospital.

One would have thought this was something to be proud of, not upset about. Oh God, our health care is free! Anyone can get it, regardless of income! Quelle horreur!!

And I would like him to justify this:

With few price signals, the incentive is to consume enormous amounts of healthcare.

Says who? Once again, he is applying market logic to a situation that is clearly outside of market parameters. People don't decide to get chemotherapy just because its cheap. Health services do not enter into people's marginal purchasing decisions. It's not, the new DVD player or the radical splenectomy. And where such as abuse is more likely to occur is precisely in those areas where healthcare is dominated by the very market mechanisms that Woods is suggesting are good for us. For instance, patented, over-the-counter pain killers, such as asprin and paracetemol. Companies selling such drugs are in the business of creating demand and selling product over and above what is probably necessary. More telling--and he should come to America to see this at work--companies in the drug-flogging business are constantly trying to create markets for their drugs. Here it is common to see ads saying things like: "Do you get anxious, upset, nervous, with an urge just to get away? Then perhaps your suffering from depression. Product X can help...."

If this claim is not true (that people over-use health care because it is cheap) then the entire argument rests on a false premise.

But let's continue.

If there is anywhere that needs the discipline of price controls it is the area of proprietorial drugs: by the simple expedient of patent protection, drug companies are able to sell products under monopoly conditions, preventing the entry into the market of much cheaper generics. Why do we ever hear the likes of Alan Wood complaining about this? Why don't they argue for an end to drug patents if they believe in competition so much? (There's a nice piece here on this and related matters.)

While there may be an element of truth in saying that:

The result is nobody has any idea whether we are consuming too much or too little healthcare, and the system isn't even equitable. "When you've got all this non-price rationing, where do doctors like to locate?" Freebairn asks. "Well, in nice salubrious suburbs where they can charge a bit more above the medical benefits rate, where they can live nicely. So what we observe is that claims on Medicare are nearly twice as high in the higher socioeconomic suburbs as in the poorer suburbs."

there is actually no guarantee that a "market" in health care would produce a better result. Surely the problem will be exacerbated under a market system? If price is the sole determinant of who gets health care, then doctors will only provide services to those who can pay. By definition. There will also be a tendency of drug companies to service peripheral rather than core medical problems for the same reason: thus Viagara will be preferenced over say, treatments for Hep B. Besides, the whole argument is being ridiculously over-simplified.

It is clear that good health is not simply a matter of better medical procedures. Most of the improvements in health in developed countries have come from improvements in such things as nutrition, sanitation, less awful physical labour, better housing, and better practice in the area of childbirth. Vaccines and antibiotics have also contributed greatly, but the efficacy of the former has, and still, depends on their widespread use through the public supply of them. In fact, all this means that a health market will misallocate resources because it simply does not value--and cannot take into account--such non-medical contributors. So when Woods argues that:
"What is more, we don't even try to answer the question of whether we are getting the best return for each extra dollar we spend on healthcare compared with an alternative use, such as education," we are again left with the fact that a market allocation of health dollars will leave us no better off, and probably substantially worse. Who wold seriously like to argue that the $120 billion + spent on prescription drugs each year in the US is an example of good resource allocation?

I don't know, these guys get an idea in their head--market allocation good--and they just apply it willy-nilly, without thinking about it at all, apparently. Thus, he just keeps saying it over and over, perhaps thinking that repetition substitutes for proof:

The issue here is not one of cost cutting. If we as a community want to spend more on healthcare we should be free to do so – provided we have a system that allows us, as health consumers, to see the trade-off between the costs of more healthcare and the benefits. That means transforming the system into something that much more closely resembles a market, rather than a command, economy.

The president of the National Competition Council, Graeme Samuel, asked several pertinent questions at the round table, including why the health sector had so far been able to largely avoid the effects of pro-competitive regulation. Why, he asked, isn't there competition among the providers of healthcare? Why do we distort the private healthcare insurance market? Why do we limit the number of doctors? Why do we protect chemists from competition at their customers' expense? Why don't we means test the public funding of healthcare in the same way as pensions and other social welfare payments?

Good questions all, and the answer is political cowardice and the fundamentally flawed nature of the health system.

Allan Fels from the Australian Competition and Consumer Commission is beginning to look at some of the restrictive trade practices the doctors' unions get up to, and not before time. But the system itself, with its anti-market, anti-competitive structure and bias is the root cause of its failure.

All pure assertion.

One key point he doesn't address is the relative weakness of the consumer in any sort of "health market" - they are typically not in a position to make the properly informed decisions presumed necessary for effective market participation. Even amongst market advocates this is recognised as major drawback and it is why, even in crazy free-market America, "managed competition" has been suggested. (It's a kind of a fallback position for health industries who fear that at some stage the public demand for universal health cover might become irresistible.)

The idea is two-fold - you have managed competition between health plans, competing on price and service, and you replace the individual consumer with the corporate (ie the employer) consumer, who has the resources to make rational, market decisions. (Bad luck for those who don't work for an employer big enough to offer health care, I guess - that is, the majority of the workforce.)

For this to work, however, you have to make a number of really unlikely assumptions. First, that competiting funds will choose to offer better services as a competitive maneouvre rather than, say, minimising services, not insuring high-risk patients, or paying doctors incentives to recommend their plan. Second, there is no reason to presume, as such models do, that good services will triumph over bad: the exact opposite may happen. Third, there is no guarantee--in fact, it is highly likely--that one player will assume a monopolistic position, and then bang goes your competitive advantage theory. Fourth, it presumes the corporation will act in the best interests of the employee. Isn't it just as likely that, if they are paying or subsidising the cost, they go for the cheapest, not the best? And the individual consumer is left with the same quandary, of not knowing enough to judge the efficacy of the corporations' choice of health plan.

The idea, then, of free market in health care is nothing but a sick joke. The notion that you could expect profit-maximising health entrepreneurs to make good medical decisions when it is their buck on the line is almost laughable. And ironically, any effort to address the inevitable imbalance between consumer and health-care provider would require massive government regulation, a point Woods doesn't even address.

If there was evidence to be found to support Woods' market fundamentalism, then surely it would be found in that most market-oriented health system, the one actually operating inthe US. Wanna swap ours for theirs? And the biggest single failure of that market is that at least forty-million people are uninsured. Those who are inadequately insured would add the same number again, at least. In a recent report by The American Bankruptcy Institute, 57% of respondents listed medical problems as the cause of consumer bankruptcy. As The Washington Post recently reported:

The lack of health insurance in America leads to delayed diagnoses, life-threatening complications and, ultimately, 18,000 premature deaths each year, according to a report released yesterday by the Institute of Medicine.

Do we really want to replicated this model in Australia?

This article includes the following salient points:

No country comes near U.S. spending on health -- 12.4% of GDP in 1990, up to 14% in 1992 -- but no country gets so little for its money. Canada, #2 in the Organization for Economic Cooperation and Development (OECD), spent three-quarters as much the U.S.; Britain, half as much.

Only Turkey (35%) covers a smaller share of its health spending with state funds than the U.S. (42%); the OECD (ex-U.S.) average is over 75%. But since the U.S. health bill is so huge, that 42% public share accounts for almost as big a share of GDP (5.2%) as is seen in countries with national health systems. And that's just the public sector. Private spending here takes another 7.2% of GDP, slightly below the average total health bill, public and private, for the OECD 23.

Our health problem is mainly one of ballooning costs, not increased use. The U.S. was the only country to show a big acceleration in medical inflation from 1960s-70s averages to the 1980s. Health inflation has actually lagged the general kind in Sweden, Norway, and France. Since the division of U.S. spending among doctors, hospitals, drugs, and the rest, is little different from elsewhere, it's reasonable to conclude that every sector shares equally in the excess.

Maybe 14% of GDP isn't too much to spend on health care; maybe a civilized society would spend even more. But there's no question that the $800 billion we spend now isn't being spent well. In a study of seven countries, Barbara Starfield found the U.S. dead last in basic health indicators, and also dead last in a "satisfaction-expense" ratio (meaning we get the least satisfaction for our money). We have fewer doctors per 1,000 people than the OECD average, and hospital stays are about half the average. Basic matters of public health, environment, and nutrition are ignored in favor of exotic, costly interventions. Infant mortality is a quarter again as high as it is in other G-7 countries, and life expectancy shorter.

And over 35 million people, 14% of the population, went without health insurance for all of 1991, and about twice that many were uninsured for some period during the year. Why so expensive?

Defenders of the current system say our system is expensive because it's the best in the world, and argue that reform could, in the words of Texas Rep. Dick Armey, "sacrifice quality for the sake of access to all." Armey can't tell complexity from quality. The U.S. leads the world in coronary bypass operations and angioplasties (Roto-Rootering clogged arteries), even though many of them are medically pointless. Contrast that fervent embrace of big-ticket operations with the slow U.S. adoption of treating heart attacks with clot-dissolving drugs, a low-cost technique pioneered in European national health agencies.

Right-wingers argue that excessive government involvement and insufficiently developed market mechanisms are also at fault -- even though we have the least statist system in the First World, and health inflation has worsened since competition became official policy in the 1970s. When Canada adopted its publicly financed system in 1971, it and the U.S. both spent just over 7% of GDP on health care. By 1990, the U.S. was up to 12.3%, vs. Canada's 9%.

I've probably made my point at this stage, though I'll continue to look at the issue. Here's another piece where the issue has been discussed in Australia.



Of course, Alan Greenspan wasn't just on the Hill to talk about the current "bad apples" messing up Wall Street. He was there to do his usual "don't scare the horses routine" which he fulfilled with the requisite amount of reassuring jargon. An interesting take on it over at MaxSpeak.


Much of the debate over the recent exposure of corporate crime in the US and elsewhere has centred on whether we are seeing merely the evidence of a "few bad apples" or of something more systemic. It's a funny debate in many ways given that pro-markets types generally revel in the understanding of capitalism as a dog-eat-dog world of getting the upper hand in business deals and never giving a sucker an even break. Such descriptions, of course, reveal precisely that profit and exploitation are old bed-fellows. Profit is extracted from getting out more than you put in. Advocates normally don't balk at such understandings, illustrated, for instance, in the recent swathe of discussions about the redundancy of equality in the contemporary world. The argument here usually goes that policies that set out to equalise outcomes are unfair to those who are simply better at doing certain things and that they therefore deserve any success they get and bad luck for everyone else. To enforce equality, it is argued, is to stifle the enterprising spirit.

Similar arguments were used to justify the huge deregulation of the finance sector - that all that 'red tape' was just a hindrance to the 'natural' adventurousness of the hero entrepreneur.

So why are so many people now running the "few bad apples" line and shying away from their own descriptions of the competitive genius of the capitalist system?

Anyway, it kinda misses the point. The concern doesn't just go the "bad apples" who have clearly finagled the system to their own benefit.

Kenneth Lay of Enron may just be "one bad apple", but the ramifications of his cheating have impacted, not just on the thousands of employees who were dudded out of their retirement funds when Enron went bust, or just the millions of people (including lots of business of course) who paid the price of the rigged electricity markets and had to close down or go broke. It is not just the fact that taxpayers often pick up the bill, as they did to the tune of $200 billion after "a few bad apples" freed from regulatory constraint laid the Savings and Loans industry to waste.

As bad as all this is, the ramifications are much greater. There is the potentially worse fact that such behaviour of "a few bad apples" infects the whole system of government, as we are currently seeing here in the US. Key people from the President down are under suspicion and/or investigation for either their own financial dealings or for the part they played in creating an environment where "the few bad apples" could thrive.

It is precisely because the foul play of "a few bad apples" can have such hideous effects on so many people (entire countries) that we need to be very concerned about how they conduct themselves and have in place regulations that protect us from their attempts to do what all good capitalists try to do, feather their own nests. So the defence that this is just "a few bad apples" and that it is the market correcting itself just don't cut it.

Support comes from someone who probably wouldn't usually endorse my pronouncements, Alan Greenspan. In yesterday's testimony he highlighted precisely the knock-on effect that "a few bad apples" can have. He also noted another knock-on effect that only a few others have noticed, namely that the uncertainty about the reliability of various companies reporting has made lenders (the whole system's lifeblood) more cautious about to whom they lend, which, in short means interest rates have jumped:

The difficulties of judging earnings trends have been intensified by revelations of misleading accounting practices at some prominent businesses. The resulting investor skepticism about earnings reports has not only depressed the valuation of equity shares, but it also has been reportedly a factor in the rising risk spreads on corporate debt issued by the lower rung of investment-grade and below-investment grade firms, further elevating the cost of capital for these borrowers. Businesses concerned about the impact of possible adverse publicity regarding their accounting practices on their access to finance could revert to a much heavier emphasis on cash generation and accumulation. Such an emphasis could slow new capital investment initiatives.

Not only that, it could drive perfectly sound businesses to the wall, as Noam Scheiber pointed out in the latest TNR:

Now that WorldCom's collapse is headlining a second wave of corporate scandals, jittery investors and creditors are retrenching all over again. In recent weeks Adelphia, Tyco, and Xerox--among others--have all disclosed accounting irregularities, leading the Dow Jones to shed 1,400 points, or 14 percent of its value, since its mid-May rally. The wave of corporate restatements has also led to higher interest rates on corporate debt, pricing some firms out of the debt market as creditors worry that loaning them money might be a riskier proposition than they'd once thought. As a result, many commentators now share Janzen's concern that otherwise viable companies may be driven under by their creditors, causing a wave of bankruptcies and layoffs that could undermine an already fragile recovery. "[O]nce we had WorldCom and then Xerox, there's a straw that breaks the camel's back," observed University of Pennsylvania financial economist Jeremy Siegel on CNNFN last week. "[W]hen the news piles on, that's when this trust gets destroyed."

The "few bad apples" line is just a laughable rationalisation under these circumstances.

Greenspan commented as follows:

Well-functioning markets require accurate information to allocate capital and other resources, and market participants must have confidence that our predominately voluntary system of exchange is transparent and fair. Although business transactions are governed by laws and contracts, if even a modest fraction of those transactions had to be adjudicated, our courts would be swamped into immobility. Thus, our market system depends critically on trust--trust in the word of our colleagues and trust in the word of those with whom we do business. Falsification and fraud are highly destructive to free-market capitalism and, more broadly, to the underpinnings of our society.

In recent years, shareholders and potential investors would have been protected from widespread misinformation if any one of the many bulwarks safeguarding appropriate corporate evaluation had held. In too many cases, none did. Lawyers, internal and external auditors, corporate boards, Wall Street security analysts, rating agencies, and large institutional holders of stock all failed for one reason or another to detect and blow the whistle on those who breached the level of trust essential to well-functioning markets.

What we want to know, of course, is what that "one reason or another" might be. Greenspan gives a revealing answer:

Why did corporate governance checks and balances that served us reasonably well in the past break down? At root was the rapid enlargement of stock market capitalizations in the latter part of the 1990s that arguably engendered an outsized increase in opportunities for avarice. An infectious greed seemed to grip much of our business community. Our historical guardians of financial information were overwhelmed. Too many corporate executives sought ways to "harvest" some of those stock market gains. As a result, the highly desirable spread of shareholding and options among business managers perversely created incentives to artificially inflate reported earnings in order to keep stock prices high and rising. This outcome suggests that the options were poorly structured, and, consequently, they failed to properly align the long-term interests of shareholders and managers, the paradigm so essential for effective corporate governance. The incentives they created overcame the good judgment of too many corporate managers. It is not that humans have become any more greedy than in generations past. It is that the avenues to express greed had grown so enormously.

A reasonable parse on this would be, I'd suggest, that it wasn't "a few bad apples", it was (and still is) a systemic problem.

And, as has just been pointed out to me, this is precisely how the NYTimes read it too. God, I'm in such company today!


Joseph Stiglitiz has always been a risky ally for the Left to adopt. His agenda is one that, under normal circumstances, many on the Left would reject. As Rob Schaap said at a recent conference in Australia:

Erstwhile World Bank chief economist Joseph Stiglitz represents (to the ill-disguised fury of some of his old colleagues), indeed rhetorically leads and legitimates, the dissenting wing of what passes for the mainstream debate concerning ‘globalisation’. And more strength to his arm. But to my mind he gets something very wrong at the premise level:

“I think that globalization -- which is nothing more than the closer integration of the countries of the world, as a result of lowering transportation costs, communication costs, the elimination of artificial barriers -- is something that's going to be with us. As this integration occurs, as we become more interdependent, we need to have rules and regulations. So if anything, today we need international institutions more than ever. The problem is that confidence in these institutions is lower than ever. “

I suggest part of the reason for this lapse in confidence is to do with such sanguine definitions of the dynamic in whose thrall we find the world of today.

In other words, although Stiglitz, as a former--or in some senses, a current--insider is a great ally to have in the rhetorical and intellectual battle against the likes of the IMF and the World Bank and their supporters, his position is in fact a lot closer to those actual institutions than it is to those who are looking for a more complete or even radical alternative to the international architecture they represent.

In his book, Panic Rules, Robin Hahnel of American University here in DC, makes a comparison between what he calls the A-team and the B-team:

One school--the Neoliberal, Free Market "A Team"--proclaims the patient cured when its depression recedes, and proceeds to prescribe the dismantling of all restraints and regulations...The Keynesian "B Team"...specilizes in policy restraints to fetter market euphoria, and strong anti-depressant medications to pull the economy out of its doldrums.

He puts Paul Krugman, Jeffrey Sachs and Stiglitz in the B-Team, and while he finds them more conducive to the Left than the A-Team, he is ultimately hanging out for a C-Team and says:

Neither the A Team nor the B Team represents the interests of workers, peasants, and small business owners in the first or the third world--much less the interests of women, people of color, citizens of less developed economies or the environment....Therefore a C Team with a very different agenda and set of policies is needed.

Nonetheless, for those who wish to point out deficiencies with the architecture, underpinnings and intent of much international economic instrumentation, it is reasonable to seize upon Stiglitz's criticism and use them to support our case. It is simply a fact that a quote from such an insider is far less easy to dismiss than the continued criticisms of those who are tarred with the catch-all "anti-globalisation" moniker. In such arguments, Stiglitz is money in the bank, and even if he doesn't make it to Hahnel's C-Team, he is nonetheless a necessary corrective to the TINA rantings of the globalisation rah-rah brotherhood.

So we shouldn't be surprised to see the Empire Strike Back against Han Solo Stiglitz.

The most famous one to date has been this Open Letter by Kenneth Rogoff. It takes the Oh-Joseph-how-could-you-be-so-unkind approach, seeking to kill Stiglitz with kindness. It even begins, Dear Joe! And the opening para is a classic of smarminess:

Like you, I came to my position in Washington from the cloisters of a tenured position at a top-ranking American University. Like you, I came because I care. Unlike you, I am humbled by the World Bank and IMF staff I meet each day. I meet people who are deeply committed to bringing growth to the developing world and to alleviating poverty. I meet superb professionals who regularly work 80-hour weeks, who endure long separations from their families. Fund staff have been shot at in Bosnia, slaved for weeks without heat in the brutal Tajikistan winter, and have contracted deadly tropical diseases in Africa. These people are bright, energetic, and imaginative. Their dedication humbles me, but in your speeches, in your book, you feel free to carelessly slander them.

While I have no doubt that within every institution there are people with these qualities and intentions, this sort of institutional patriotism is really sick-making and the first refuge of the scoundrel. From reading this, you'd think everyone working at the IMF was free to pursue their own version of economic "reform" and did so without remuneration, rather than as merely the functionaries of a too-powerful international organisation.

The first-name sliming continues in the next paragraph, and it is clear by now that the writer has no credibility left. I'd prefer an out and out attack rather than this gutless, faux-friendship approach:

Joe, you may not remember this, but in the late 1980s, I once enjoyed the privilege of being in the office next to yours for a semester. We young economists all looked up to you in awe.

Oh please: who does this guy think he's kidding? Dear Adolph, remember when we were in grade school together and you were leader of the folk dancing team? Me and the other kids were in such awe of your dancing skills. Why did you have to go and kill 6 million Jews? In other words, if this guy is even halfway serious about the level of injustice done to the IMF by Stiglitz, then his tone of voice is completely inappropriate and just serves to undermine his credibility.

We get another para and half of this shite, then, it seems, we are getting down to business:

Let me make three substantive points. First, there are many ideas and lessons in your book with which we at the Fund would generally agree, though most of it is old hat. For example, we completely agree that there is a need for a dramatic change in how we handle situations where countries go bankrupt. IMF First Deputy Managing Director Anne Krueger—who you paint as a villainess for her 1980s efforts to promote trade liberalization in World Bank policy—has forcefully advocated a far reaching IMF proposal. At our Davos [World Economic Forum] panel in February you sharply criticized the whole idea. Here, however, you now want to take credit as having been the one to strongly advance it first. Your book is long on innuendo and short on footnotes. Can you document this particular claim?

Second, you put forth a blueprint for how you believe the IMF can radically improve its advice on macroeconomic policy. Your ideas are at best highly controversial, at worst, snake oil. This leads to my third and most important point. In your role as chief economist at the World Bank, you decided to become what you see as a heroic whistleblower, speaking out against macroeconomic policies adopted during the 1990s Asian crisis that you believed to be misguided. You were 100% sure of yourself, 100% sure that your policies were absolutely the right ones. In the middle of a global wave of speculative attacks, that you yourself labeled a crisis of confidence, you fueled the panic by undermining confidence in the very institutions you were working for. Did it ever occur to you for a moment that your actions might have hurt the poor and indigent people in Asia that you care about so deeply? Do you ever lose a night's sleep thinking that just maybe, Alan Greenspan, Larry Summers, Bob Rubin, and Stan Fischer had it right—and that your impulsive actions might have deepened the downturn or delayed—even for a day—the recovery we now see in Asia?

So the first "substantive point" is that Stiglitz was right, but the IMF didn't need Jo to tell 'em. Geez: cutting. The query about whose idea it was is stupid and irrelevant. And I love that "our" possessive in the sentence: "At our Davos [World Economic Forum] panel in February..."

But at least from here on, the criticisms are more substantive, even if still laced with pathetic first-person hand-wringing and sarcasm:

Did it ever occur to you for a moment that your actions might have hurt the poor and indigent people in Asia that you care about so deeply? Do you ever lose a night's sleep thinking that just maybe, Alan Greenspan, Larry Summers, Bob Rubin, and Stan Fischer had it right—and that your impulsive actions might have deepened the downturn or delayed—even for a day—the recovery we now see in Asia?

Don't you love it when elites can even dare to unselfconsciously frame the argument in terms of their personal, individual effects on entire countries? Such framing betrays a certain quotidian acceptance of their place at the centre of the universe, doesn't it? Even as they quibble amongst themselves.

As to the claims made in these latter two "substantive points", well, my impression is that it misrepresents Stiglitz, but I'm happy to take advice on that. But you have to be very suspicious of waffle like this, which is nothing but assertion posing as argument:

Throughout your book, you betray an unrelenting belief in the pervasiveness of market failures, and a staunch conviction that governments can and will make things better. You call us "market fundamentalists." We do not believe that markets are always perfect, as you accuse. But we do believe there are many instances of government failure as well and that, on the whole, government failure is a far bigger problem than market failure in the developing world. Both World Bank President Jim Wolfensohn and IMF Managing Director Horst Köhler have frequently pointed to the fundamental importance of governance and institutions in development. Again, your alternative medicines, involving ever-more government intervention, are highly dubious in many real-world settings.

Well, market failure is pervasive, and only an ideologue would fail to concede it. In fact, "failure" is meant to be its true redeeming feature, isn't it? The way it organises resource allocation and coordinates knowledge and preferences? But the worst thing about this sort of rant is that it speaks as if market/government was an either/or proposition when it is obvious no such easy line can be drawn. Markets are constructed, not just naturally occurring entities that somehow "emerge" if only govts back-off by deregulating, privatising etc. This is the lie at the heart of the entire neo-liberal project and it is this that the likes of Stiglitz can be valuable in challenging.

Another who has gone after Stiglitz is Dr Frank Shostak. I was alerted to this by Aaron Oakley, the guy who took me to task for not agreeing with his theories of economics. (His comments are here: my response here.) What is interesting is that Oakley mentions this article in the context of an argument about the use of economics by non-economists. He is deliberately and understandably setting out to undermine Stiglitz's credibility so that Stiglitz can't be invoked by those arguing, broadly, against the neo-liberal agenda.

Anyway, the Shostak piece is more a rant against Keynes than Stiglitz and begins inauspiciously with an obvious mistake:

The newest issue of The Nation herald’s the 2001 Nobel Laureate Joseph Stiglitz as a “rebel with a cause.” That characterization is certainly a stretch for an economist, who is former senior vice president of the World Bank and who adheres to orthodox Keynesian doctrine, the dominant economic paradigm of mainstream political and economic theory for the past 50 years.

Well, tell that to Thatcher, Reagan et al. Tell it to the economics units in virtually all western universities. The only way to maintain anything like this is to define any sort of government intervention as Keynesianism and to argue for a complete "hands off" approach by government. Which is what he does, again perpetrating the fallacy that markets are "naturally occuring" and just need governments to get out of the way.

Boom-bust cycles, however, are not caused by the market economy. They are the outcome of central authorities’ interventionary monetary policies. The monetary theory of boost-bust cycles as developed by Ludwig von Mises provides an accurate explanation of the boom-bust cycle phenomenon. It is about activities that sprang up on the back of loose monetary policies of the central bank. Thus, whenever the central bank loosens its monetary stance, it sets in motion an economic boom by means of diverting real funding from wealth generators to various false activities that a free unhampered market would not facilitate.

And he has the nerve to accuse of Stiglitz of a "a strict doctrinal adherence."

The final piece (so far) of dumping on Stiglitz comes again from the IMF, in the form of a letter to the editor of the Tornto Star by Graham Hacche, Deputy Director, External Relations Department IMF. The reference to Stiglitz is passing but pointed:

Linda McQuaig writes that "a lot of commentators" are pointing to the ineffectiveness of aid in Africa, which she views as a convenient excuse for the slogan "trade, not aid" (June 30). It is unclear exactly to whom she is referring, but she cannot tar the IMF with this brush. She and Professor Stiglitz do not have a monopoly on compassion, as she seems to suggest, and it is becoming increasingly well understood that Stiglitz is an unreliable source of information on the IMF. In fact, the IMF has always been clear that both trade and aid are needed.

Love it! The casual aside, so obviously true that it needs no verification, barely needs to be mentioned.

Anyway, keep an eye out for more such references, as Stiglitz is sytematically taken apart by the people he threatens. I'll follow this one through and post any more I get and would be happy for others to be passed on.