Australia's Other Plague: Incestuous 'Intellectuals'

Few images better capture the out of touch and incompetent nature of Australia's self-described elites as three university academics playing word games to describe the economy as "hibernating" while the lives of millions of normal Australians are being destroyed and disfigured, some permanently.

According to reports in the Nine papers (April 1, 2020), three academics from the Australian National University developed the term "hibernation" to describe the shutting down of the Australian economy as a consequence of the social distancing measures enacted by state and Commonwealth governments.  The term is meant to capture the temporary nature of the crisis.

This is no temporary crisis.  This is a tragedy of biblical proportions.

Many of the Australians who will become unemployed over the next six months will not simply go into hibernation, to then thaw out and resume business as usual.  They will never work again.  Their wages will never recover.  Their lives will never be the same.

Precious moments will be lost and never recovered, like all of the grandparents who can't see their grandchildren.  Like all of the elderly who are trapped isolated, alone and afraid in the homes.  And like all of the Australians who have had destroyed in just days the small businesses they built up over years.

Perhaps if you work at a multi-billion-dollar taxpayer funded organization protected by government from competition or wage cuts then it is easy to practice social distancing and talk via Zoom or Skype to play clever word games which mischaracterize reality.  It is also not a surprise that the secretary of the Treasury Department, Steven Kennedy, is an alumnus of the ANU, as are many of his colleagues at Treasury and the Reserve Bank of Australia.  Such is the incestuous nature of Australia's expert class.

One wonders if any of those involved in the development of the hibernation strategy have ever looked a colleague who has a family and a mortgage in the eye and told them there are not enough customers coming through the door to keep them employed.

If universities wanted to be helpful, perhaps they could open the doors of the dormitories once filled with thousands of foreign students to those who need to be put in quarantine, rather than being put up at taxpayers' expense in five-star accommodation.  Or perhaps universities could stop the persecution of those such as Professor Peter Ridd, now the subject of an appeal against his sweeping legal victory last year, to allow for the free exchange of ideas and opinions which is so crucial in a time of uncertainty.

Or perhaps, instead of wasting taxpayer dollars on research programs which tell Australians what awful, racist, and bigoted people they are, the universities could analyse how Australia could improve its pandemic response ability.  On this last point, my research found identity politics was the single most common theme in the historical studies discipline to receive funding under the Australian Research Council's Competitive Grants Program.

Famous conservative philosopher Sir Roger Scruton argued that "intellectuals are naturally attracted by the idea of a planned society, in the belief that they will be in charge of it."  Trouble is, the intellectuals are in charge ― and only an intellectual could think that our jobs, social relations, and institutions can be temporarily put into hibernation and then brought back to life via government edict.  This is why shared sacrifice is so important.  Those developing the ideas and policies which are putting Australians out of work must themselves have skin in the game and feel some of the pain of their own decisions and advice.

One suggestion is that for every one tenth of a percentage point increase in the unemployment rate (such as from 5.5 per cent to 5.6 per cent), is accompanied by a one per cent cut to the pay of senior public servants.  And if the unemployment rate goes above seven per cent, the Secretary of the Treasury and the Governor of the Reserve Bank must lose their jobs.

Another suggestion is for all of the experts advising the government to be put in front of a rolling set of parliamentary inquiries so Australians can understand the assumptions underpinning government decisions.  It would be interesting to see if the health experts who modelled the impact of the coronavirus also modelled the social, cultural, and institutional impacts of economic depression.

Our Great Books

In his review of 100 Great Books of Liberty, edited by John Roskam and Chris Berg, with Andrew Kemp, Merv Bendle argues our book "obscures the extent to which liberty had to won [sic] in spite of the immense power wielded over the millennia by Platonic and related metaphysical systems of thought."

In his review, Bendle reproduces part of the book's blurb and spends more than 2,000 words critiquing it.

Fortunately most, if not all, of his concerns about 100 Great Books of Liberty are dealt with in the introduction.

Bendle's review is less about the book we have produced, and more about what book he would have preferred we produce.

100 Great Books of Liberty is not a narrow compendium, seeking to measure the works of the past by the tight ideological standards of the present.  As the subtitle -- "The essential guide to the greatest idea of Western Civilisation" -- makes clear, our purpose is different.

We seek to demonstrate the supreme achievement of Western Civilisation is the idea of liberty -- the idea that individuals should be free to pursue their own goals, constrained only by the equally-applied rule of law.

While the desire for freedom from repression is a universal constant, found in every civilisation and in every historical period, only within the West has it developed into a systematic program.

Bendle characterises the modern coherence of this program as an illustration of the "fundamental unity of liberal thought" -- he argues our book fails to demonstrate this unity -- but to describe it as Bendle does is entirely ahistorical.

It is not possible to fully grasp liberty and liberalism without having some appreciation of how the debates over, say, the Glorious, or French, or American Revolutions, or over natural rights, or empiricism, or the Renaissance played out.  Liberty-seeking thinkers have fallen on both sides of each of those issues.  Their contributions should not be casually dismissed.

Take the French Revolution.  Bendle argues that the inclusion of both Edmund Burke's Reflections on the Revolution in France and Thomas Paine's Rights of Man undermines the project, "as if they were [both] champions of liberty."

But both illuminate the quest for, and ideals, of liberty in important ways -- conservative and revolutionary liberalism are two major strands of thought about the struggle for freedom.  A liberalism that cannot accommodate both is a weak liberalism.  Should change be radical or evolutionary?  The history of Western Civilisation is a chronicle of attempts to answer that question.

Modern liberals are the heirs of both Burke and Paine.

This is why we cast a wide net for one hundred books which illuminate the struggle for liberty.  We include the obvious -- Smith, Hume, Hayek, de Tocqueville, Friedman, Rothbard, and Mises.  We include works that focus on certain elements of liberalism -- Perez Zagorin's How the Idea of Religious Toleration Came to the West, Matt Ridley's The Origin of Virtue, and Tyler Cowen's In Praise of Commercial Culture.  We include character studies, such as Robert Caro's magnificent multi-volume study of Lyndon Baines Johnson.  No work better explores the drive for political power than Caro's as-yet-incomplete biography.

We include works which explore particular historical periods where liberty developed.  And unusually for a collection such as this, we look at the development of Australian liberalism.

We include the ultimate statement of totalitarianism, Plato's The Republic, and Karl Popper's devastating rebuttal.

That should be the first clue that we're not just trying to draw up an arid list of "approved" books.  We're trying to explore every facet of liberty and Western Civilisation in an accessible and engaging way.

So what about the book Bendle would have preferred?

He would like Hobbes' Leviathan to have been included -- which is fair enough -- but would prefer Burke's Reflections on the Revolution in France to be excluded for deviationism.

Burke opposed the French Revolution because he feared it would not further the cause of French liberty.  Hobbes defended a state with almost limitless power.  Yet it is Burke who Bendle would like to kick out of liberty's canon.

Likewise with Jacob Burckhardt, who, in his later years, expressed a distinctly nineteenth century conservative's pessimism about individualism, democracy, and technological progress.  But as Charles Richardson makes clear in his contribution, those views did not stop his Civilisation of the Renaissance in Italy from identifying the Renaissance as critical for the development of many of the liberal ideals he personally opposed.  If a student is to grasp the cultural origins of individualism, they're going to have to read Burckhardt, even if he was a bit of a pessimist.

Ayn Rand was crazy -- nobody is disputing that -- but her books remain one of the most powerful ways to get young people interested in individualism and liberty.

Following Bendle, we could easily pick faults in almost every book and author in the canon.

He rightly recommends John Locke's Second Treatise of Government, but Locke's labour theory of value is not totally sound.  No one would exclude Friedrich Hayek from the liberal canon, but that doesn't mean they have to accept the model constitution he proposes in Law, Legislation and Liberty.

Alexander Hamilton -- who Bendle praises -- was an advocate of "energetic" government.  Karl Popper wrote that "Marx was right in asserting that increasing misery tends to be the result of laissez-faire capitalism".  And John Stuart Mill supported industry protection.  Ludwig von Mises wrote some very un-Misean work while he was an Austrian bureaucrat.

Oh, and George Orwell was a proud socialist.

But that doesn't mean their books didn't make liberty the greatest idea of Western Civilisation.

Bendle may prefer five great books of liberty to our one hundred, but if we were to follow his advice, liberalism would be sterile and fragile.

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Softly, softly

The goal of international agreements being considered on climate change is to stabilise the world's human-caused carbon dioxide emissions.  This ambition is barely conceivable.  For the main gas, carbon dioxide, it would require emissions to be set at an average global level of about three tonnes per capita.  At present, Australia emits 16 tonnes, the United States 20 tonnes and the EU nine tonnes.  China, which is only one-third developed, is already at 4.5 tonnes, i.e., 50 per cent above the required level.

Australia, even if it closes down its entire coal industry, including the 85 per cent of electricity that is coal generated, will still not get close to any such target.  If we replace coal with gas (adding 50 per cent to the price), it would still leave excessive emissions.  Replacement by wind is not feasible, and wind energy is, in any event, three or four times the cost of that generated from coal.

The Rudd government is suggesting that a step in the right direction would be to reduce Australian emission levels by 20%.  There are only two feasible means of achieving such a target.  The first is to adopt nuclear power generation, at a cost in terms of plant that is similar to a year's national income and would still mean an electricity generation cost premium of over 70 per cent.  The second is adopt poverty as our national life style, i.e. to go backwards in terms of present living standards.

If an ETS is to be implemented globally, and it makes no sense otherwise, it would require the elimination of coal as a source of energy, at least until some cheap form of carbon dioxide capture and storage is available.  There is no prospect of that on the horizon.

Australia has got about 76 billion tonnes of coal reserves.  If we wipe out coal for power generation, then even at a value as little as $10 a tonne, it is a sacrifice of $760 billion wealth;  compounding that, we would have wealth shedding also from shale oil and gas and various other things.

An Australian ETS would not only stifle current business operations, but would also virtually eliminate new investment in power generation as well as other energy intensive processing.  Leakage of important industries overseas would inevitably follow, despite the energy intensive allowances which are in place or intended.

These issues are compounded if Australia continues with its plan to take a very high, proactive position.  If we move in advance of other countries we will lose an awful lot of industry, as well as the inherent value of the coal and all the other natural energy wealth that we have.  But introducing a carbon dioxide tax will also have deleterious direct affects on electricity producers.  Canberra's CPRS proposal leaves Australian generation businesses far more vulnerable than their counterparts in the US and Europe.  That's because only 4 per cent of total allowable emissions free to existing electricity generation businesses.  The US Waxman-Markey bill provides 35 per cent of total emissions free to generators.

As a coal based power generation economy and with coal and other fossil fuels forming one third of our exports, Australia is perhaps the world's most vulnerable economy to carbon taxes and similar restraints.  We therefore need to take particular care to shape a constructive and economically viable policy.  One of the key outcomes of the Treasury modelling offers a promising policy approach, which is its implicit estimate that the cost of doing nothing to 2020, and then catching up with the 2050 target thereafter if necessary, would cost only 0.3 per cent of GDP by 2050.

Even if this is not overstated, 0.3 per cent of GDP seems a reasonable insurance policy price to pay for keeping options open, rather than prematurely embarking on carbon dioxide taxation measures that will comprise, in the white paper's words, "the most significant structural reform of the economy since the 1980s".

By 2020, the need for emissions reduction policies will be clearer, and presumably we will have access to all the technological advances that Treasury claim will be forthcoming by that time.

Preparing for action should it be needed, but meanwhile deferring the introduction of a tax that will wreak massive economic damage, could be an ideal solution for Australia to adopt.

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Green jobs subtract value

One justification being given for the government's emissions trading bill is that it will provide tens of thousands of new "green jobs".  Our politicians, together with their colleagues across the western world, have discovered marketable new cliché.

The problem is that we voters have heard this type of argument before.  The idea that government can create viable and sustainable jobs has failed every test ever posed.  Yet these kinds of promises remain remarkably popular with the electorate.  Bryan Caplan has argued that the general public suffers from four economic biases;  an anti-market bias, an anti-foreign bias, a make-work bias and a pessimism bias.  The modern environmental movement suffers from all of these biases, while green jobs appeal to two of those biases -- anti-market bias and make-work bias.

The federal Treasury "guesstimates" of the cost of the government's climate change policy was published in December 2008.  In that analysis Treasury evaluated the impact of five policy options on the Australian economy.  The modelling, however, had an important omission.  It calculated deviations from expected GDP growth and the impact on investment and the like, but it did not include a separate labour market analysis.  Given the government keeps promising green jobs, and that Australians are not interested in GDP growth per se but rather on future employment for themselves and their children, one would think a labour market analysis should be the centre piece of any evaluation.

The modelling assumes that there might be some unemployment in the short-run (up to ten years) but there is no unemployment in the long-run.  This is an assumption of the modelling technique.  The Treasury have to assume that real wages will fall ensuring that labour markets clear and there is no involuntary unemployment.  The modelling indicates that by 2020 real wages will have fallen by between 2.5 percent to 5 percent relative to a do-nothing business as usual type base case.  In other words, the government doesn't know what will happen to employment, they simply assume that it won't be a problem.

An alternative explanation is that the government has other modelling results that carry an unhappy message regarding future unemployment, but has decided not to release the results to the public.

While the government has given no credible information, or at least no public information, as to what will happen to existing employment within the economy, they clearly recognise that the electorate may have some misgivings, and so "green jobs" are conjured to fill the vacuum.  But there are problems with the claimed green jobs that are already appearing in public debate;  for example, "what is a green job?"  And how does it differ from the work-for-the-dole scheme?  More importantly, what is the cost of these green jobs?

It has quickly become apparent that green jobs will require massive government subsidies to sustain them.  They do not create additional value and so cannot become self-sustaining.  The biggest question, of course, is to what extent will green jobs crowd out existing jobs?  In short what is the opportunity cost of a green job?

Professor Gabriel Calzada Alverez of King Juan Carlos University has investigated the Spanish experience where substantial government subsidies were provided for renewable energy.  He calculates two measures of the opportunity cost of green jobs.  The first measure is the ratio of the renewable subsidy per worker to the average stock of private sector capital per worker.  This ratio measures how many private sector jobs could have been created if the government spending on renewable energy had not been taxed away from the private sector, and had rather been left in the private stock of capital.  The second measure looks at the subsidy per worker relative to the average productivity per worker.  This measure calculates the productivity lost by investing in green jobs as opposed to leaving the money in the private sector.  Both measures suggest that the opportunity cost per green job is 2.2 non-green jobs.

Alverez' point is very simple;  relative to existing jobs, green jobs are expensive.  Consequently new green jobs cannot replace old lost jobs.  Furthermore, the resources used to create new green jobs will crowd out existing jobs.

This study has been severely criticised as being "simplistic" or just simply wrong.  Part of the issue is that Professor Alverez is not a native English speaker, and has not expressed himself clearly.  The second point to consider is that he has calculated an opportunity cost;  many of his detractors simply do not understand that opportunity costs are not easily seen or observed.  It is not enough to respond his analysis that Spanish unemployment is lower now than before -- unemployment could have been lower still but for the green jobs program.

The important thing to remember is this;  climate change policies are deliberately changing the structure of the economy away from efficient production techniques to less efficient production techniques.  That means that many existing jobs will no longer add value in future.  Those jobs will be lost.

It is a leap of faith to suggest that the government can create jobs that add as much value as those that will be lost.  If they could do so, why have they not done so already?  That is the fundamental difference between the current policies being proposed and previous economic reforms.  Previous Australian governments had proposed to make the economy more efficient.  This government proposes policies that will make the economy less efficient.

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