Category: Policy

News From George Soros’ Berlin Conference – Economists Discover Human Beings!

by Lynn Parramore
 
Could economists be leaving behind their mechanistic paradise for the messy, unpredictable human world?

  
Economists are peculiar creatures. Last week a large posse of them descended on Berlin for the third annual conference of the Institute for New Economic Thinking (INET), a think-tank co-founded by investor and philanthropist George Soros in 2009 in the wake of the global financial crisis.

As I roamed through the various sessions and gatherings, pointy-headed folk squinted at me and rattled off facts and figures that gave them the sort of thrill I get from seeing spring flowers in bloom. The field of economics is known for attracting Asperger’s-spectrum wonks better at formulating financial models than the flow of human interaction. But if the Berlin forum is any indication, the field is now fitfully reorienting itself: it wants to understand those fascinating and often irrational beings known as “people.”

Tellingly, the title of the conference was inspired by Milton. Not Milton Friedman, but John Milton: “Paradigm Lost: Rethinking Economics and Politics.” Intriguingly, the brochure opened with a passage from Book XII of Paradise Lost describing Adam and Eve’s expulsion from Eden — the moment when they look back wistfully on their former paradise, but then, teary-eyed, forge ahead, knowing that “the world was all before them.”

Early on in the program, economist Rob Johnson, INET’s executive director, pointed out that the old economic paradigm, so beautiful in its mathematical modeling, was destructively narrow and dogmatic. Its journals were like so many temples — if you didn’t follow the prescribed religion, you were out on your ear. The new economics would have to be broad, interdisciplinary and open to disagreement. And it would no longer be having a conversation solely with itself. Johnson announced his conviction that the new economics must be firmly grounded in the humanities.

Wow. At a time when undergraduates increasingly choose business majors and obtaining an English or history degree is widely considered a cultural affront, that was exciting news. Such a refocusing could certainly help economists become better able to describe reality, and just as importantly, consider the needs of human beings in their prescriptions.

Back in the late ’90s, when I was studying for a doctorate in English at NYU, my friend at the Wharton School of Business used to tell me about his lessons in rational behavior, perfect information and the pure motivation of self-interest. When I noted that a single exposure to Shakespeare or a page out of Freud’s oeuvre could relieve him of such fantasies, he got defensive and complained that all we did in the English department was sit around and read fiction. “Well,” I shot back, “That’s what you seem to be doing. Only you don’t call it that.”

I worried a lot that he and his colleagues, ignorant of human psychology and alarmingly shallow in their understanding of traditional Western values and ethics, would leave business school and go on to run large companies. 

I had reason to fear: They went on to help blow up the global economy.

In the humanities, we had our postmodern excesses, but they didn’t tend to wreak havoc on the word’s most vulnerable people. But free-market economics, in the words of INET panelist Paul Davidson, was a “weapon of math destruction.”

In his address to the conference, George Soros made it clear that economic obtuseness had helped produce the euro crisis, and that the failure was more profound then generally realized. Economics, he noted, had tried hard to imitate Newtonian physics and set itself on establishing timeless laws for reality. But, Soros insisted, it’s really a social science, and it was high time practitioners stopped pretending otherwise. (I would urge scientists to realize the same thing, but that’s a matter for another piece.) The famous financier emphasized that economic activity is based on the behavior of human beings who act on imperfect information and are driven by a wide variety of motives. They think. They are, by turns, rational, silly and euphoric. They have a will of their own. And they are definitely not inanimate objects whose movements can be neatly summed up in an equation.

If you consider economics this way, then you have to realize that markets, as Soros pointed out, are just as likely to produce horrifically damaging bubbles as they are to create equilibrium. So you’d better damn well understand that when you’re thinking about regulation and political frameworks like the eurozone. If the Europeans can’t wake up to this, Soros warned, they can pretty much kiss Europe goodbye.

I was struck by the idea that just as religious elites had once created an elaborate system based on “Divine Will” to justify their power and oppression, the obstinate free-market economists had created their own supernatural entities, referred to as “The Market” and “The Invisible Hand” in order to pretend that their policies were inevitable and natural. Was a Reformation now in the works?

Throughout the week, I heard economists (certainly not all, but many) talking as if human beings mattered. Chinese economist Jiahua Pan mentioned the need for an ethical foundation and ecological principles. James K. Galbraith discussed the human costs of inequality. Arjun Jayadev of the University of Massachusetts, Boston, talked about why people needed debt forgiveness. Speeches centered as often on what humans think and feel as they did on what financial models could predict. There were lectures on neuroscience and social values.

Some will say this is all just talk. You don’t get an insurrectionary adrenaline rush at an economic conference the way you do at an Occupy Wall Street protest. But such talk, particularly among those who teach tomorrow’s leaders and act as policy advisers at high levels of government, is critical to any chance of changing the paradigm. Do we want a society that is people-driven, rather than profit-driven? Then Johnson is right: economics must reacquaint itself with the humanities. Do we want an economy that serves society rather than a society that serves the economy? Then we have to keep insisting on the social nature of economics.

There’s reason to think that the effort coming from INET will be long-term and influential. During the week, the announcement came of a $25 million gift from William Janeway, senior advisor at Warburg Pincus and INET governing board member, and his wife, Weslie Janeway. Along with that donation, the governing board of INET has launched a $75 million fundraising campaign, and Soros, in response, has pledged $50 million. Conference attendees also learned of a joint project (INET@Oxford) with the Martin School at Oxford University focused on visionary interdisciplinary approaches to economics, equity and curriculum reform.

After half a century of free-market orthodoxy, the field of economics is not going to produce a new paradigm overnight. As a woman and an English major, I can be forgiven for hoping that more women and more English majors will be joining the conversation. The need for diversity is strong, and the call for a vigorous examination of values urgent. But there’s a whiff of change in the air, and you could feel its electricity in Berlin. The economists were beginning the painful and exciting process of leaving the old fantasies behind.

And the world was all before them.

Lynn Parramore is an AlterNet contributing editor. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of ‘Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture.’ Follow her on Twitter @LynnParramore.

Moving beyond political soap opera

by David Hetherington

A debate over fair distribution of Australia’s mining income gives Labor a platform to reconnect with ordinary voters on national values

Australia’s Gillard government resembles a half-written political drama, but the most creative scriptwriter would struggle to pack in the twists and turns that have marked its first 18 months in office.

Undoubtedly, there have been policy successes – a carbon price, a national broadband network and a streamlined income tax system. Yet there have also been serious misjudgements on the part of the government and the prime minister herself, which have surprised many since she was so sure-footed as education minister.

These self-inflicted wounds include a botched deal to repatriate asylum seekers to Malaysia, an ugly internal ‘stoush’ over same-sex marriage, and the reversal of proposed reforms to address chronic gambling. Excuses can be mounted for each in isolation, but together they’ve betrayed a worrying pattern.

The most recent twists have centred on a high-profile dramatis persona with former prime minister Kevin Rudd. After months of speculation and a sudden late-night resignation as foreign minister, Rudd formally challenged Gillard for the Labor leadership on 27 February. Despite his dramatic intervention, Rudd was roundly beaten, a loss that puts his ambitions on ice for the foreseeable future. Ultimately this was a contest of personalities rather than policies, with Rudd arguing his popularity with voters gave him the better chance of winning the 2013 election. Evidently, his parliamentary colleagues did not agree.

Barely hours after this challenge, another powerful player, senator Mark Arbib, announced his sudden resignation from the government. This in turn opened the door for Gillard to draft in Bob Carr, a wise elder statesman of the party, as the new foreign minister.

This process was far from smooth, and had all the elements of a play-within-a-play. Gillard, fresh from her resounding leadership victory, jumped at the suggestion of Carr’s appointment, with media reports hailing it a done deal. Then, in a sudden about-turn, the government poured water on the idea: it appeared the prime minister had been outmanoeveured by ambitious members of her team.

Three days later, against all expectations, Gillard called a press conference to unveil Carr as her new foreign minister, and in doing so, asserted her control of the government in no uncertain terms. This belated show of strength was certainly a win for the PM, but the stop-start process dulled much of the afterglow of her leadership ballot victory.

This may have proved compulsive viewing for political watchers, but it has left the ordinary voter with an impression of Labor more absorbed in its internal machinations than in running the country.

In need of a new, positive twist, the government found an unlikely hero, treasurer Wayne Swan. A credible if unflashy finance minister, Swan used a major essay to consider the challenges Australia faces in the fair distribution of its mining income. In particular, he highlighted the role of a handful of mining billionaires in resisting attempts to price carbon emissions and to tax mining super-profits.

These magnates have paid for mass media campaigns against the government. In response, Swan placed the debate in the context of the shared national values of egalitarianism and fairness. His intervention was successful in part because it was so unexpected. It surprised a lot of people who’d forgotten that Australian politicians could talk meaningfully about values as part of the wider public debate.

Labor has found it difficult to articulate its raison d’etre in recent times, struggling to explain how its policy achievements connect into a vision for the country. If Swan is able to drive a mature debate about inequality, wealth distribution and the role of media campaigns in policymaking, he will remind voters that Labor is addressing issues of real importance to Australia’s future – a worthy next chapter in Labor’s story.

A contribution to State of the Left, a monthly insight report from Policy Network’s Social Democracy Observatory

David Hetherington is executive director at Per Capita, a progressive thinktank based in Sydney

Spending on Dam Safety Upgrades Slashed By O’Farrell

State Water will slash its capital expenditure on dam safety upgrades in order to meet the O’Farrell Government’s dividend requirements, the NSW Labor Opposition has revealed.
 
The government owned State Water Corporation operates 21 dams in rural NSW, and its 2011/12 Statement of Corporate Intent reveals dam safety spending will be $120 million lower than previously budgeted over the next decade because of the O’Farrell Government’s dividend policy.
 
The drastic cuts will occur despite the report warning that many of State Water’s dams no longer comply with the NSW Dam Safety Committee’s (DSC) standards and guidelines for extreme floods and earthquakes”.*
 
The Statement of Corporate Intent has been personally signed off by Treasurer Mike Baird and Finance Minister Greg Pearce, and was tabled in the State Parliament late last month
 
“The Statement of Corporate Intent notes State Water has been forced to develop a ‘more fiscally efficient dam safety upgrade program’ in order to meet O’Farrell Government dividend requirements,” Shadow Water Minister, Luke Foley said today.**
 
“State Water has revised its 10 year business forecasts to defer Stage 2 dam safety upgrade works – designed to reduce safety risks in accordance with Dam Safety Committee requirements – across all 21 of State Water’s dams.
 
“The O’Farrell Government is budgeting for an extra $260 million in dividends from State Water over the next 10 years.
 
“This means tens of millions of dollars that State Water could and should spend on upgrading dam safety will instead be paid to the O’Farrell Government as dividend payments.”
 
State Water is subject to a Government dividend policy of 70 per cent of net profit after tax. It admits that it cannot meet that level of dividend payments and continue with the scheduled Dam Safety Program:
 
“State Water can sustain a dividend payout ratio in the range of 35 per cent to 50 per cent, but not as high as 70 per cent, if water sales are less than the 20 year average and if debt continues to increase as a result of the Stage 2 Dam Safety Upgrade Program.” ***
 
“A government that cuts back on dam safety upgrades at a time when people across NSW are battling flood waters is a government with the wrong priorities,” Mr Foley said.
 
“There can be no excuse for the O’Farrell Government putting dividend gouging ahead of dam safety in NSW.”
 
 
*Source: State Water Corporation Statement of Corporate Intent 2011-12, page 17.
**Source: State Water Corporation Statement of Corporate Intent 2011-12, page 19.
***Source: State Water Corporation Statement of Corporate Intent 2011-12, page 23

The Putty Valley is no place for the Coal Seam Gas industry

by Luke Foley

 Nine days ago I visited the Putty Valley and met with local residents.

 The Putty Valley is mid way between Windsor and Singleton, nestled between the Wollombi and Yengo national parks, and within the electoral district of Upper Hunter and the local government area of Singleton.

 It is a place of indescribable beauty. A place where heaven meets earth.

 The Putty Valley immediately brought to my mind the Clogher Valley in County Tyrone, in the north of Ireland.

 My wife was born and reared in that valley, and we were married there.

 The Putty Valley and the Clogher Valley have both been dominated by dairy farms for generations.

 In Putty Valley, most of the dairy farms have given way to grazing.

 The rugged terrain of the wilderness and mountain ranges surrounding Putty is reminiscent of County Tyrone’s Sperrin Mountains.

 The Wollemi National Park encompasses the largest wilderness area in New South Wales, and is part of the Greater Blue Mountains World Heritage Area, as is the Yengo National Park.

 The area is home to one of the world’s great biological mysteries: how did the Wollemi pine, the ‘dinosaur tree’, survive 5 million years secluded in a single canyon before being discovered?

 The rural environment of the Putty Valley is today threatened by the coal seam gas industry.

 So are the surrounding national parks, notwithstanding their protected status under the National Parks and Wildlife Act.

 We know that the extraction of large volumes of water impacts on connected surface and groundwater systems.

 On 19 August 2011 Dart Energy commenced drilling a core hole to explore for coal seam gas at a property on Putty Road, in the Putty Valley area.

 The bore site is just over 500 metres from the boundary of a World Heritage listed area of international significance.

 The exploration site is 40 metres from Long Wheeney Creek which runs into Putty Creek, Wollemi Creek and the pristine and protected Colo River through the Wollemi National Park, before joining the Hawkesbury River.

 Prior to the election, the Liberal and National parties announced that they would introduce a Strategic Regional Land Use Policy to “strike the right balance between our important agricultural, mining and energy sectors, while ensuring the protection of high value conservation lands“.

 The Coalition’s election policy stated that “The NSW Liberals and Nationals believe that agricultural land and other sensitive areas exist in NSW where mining and coal seam gas extraction should not occur.”

 Today’s announcement of the Government’s Draft Upper Hunter Strategic Regional Land Use Plan provides no comfort whatsoever to the people of the Putty Valley.

 The protection of strategic agricultural lands and high conservation values is left to a process which can sideline water protection and be sidelined itself if the government deems the project to be ‘exceptional’.  

 There’s no certainty for sustainable agriculture nor threatened habitats.

 I do accept a role for gas in this state’s energy mix.

 I also believe that there should be no go areas.

 The NSW Liberals and Nationals used to believe this too – at least until polling day last year.

 I believe that the Putty Valley is a perfect example of a sensitive area that should exclude mining and extractive industries, in order to protect its significant environmental values.

 Allowing the coal seam gas industry into the Putty Valley would create a pustule of industrialisation in the heart of the Wollemi and Yengo World Heritage areas.

 The Putty Valley is no place for the gas industry.

  Luke Foley MLC is the Leader of the Opposition in the NSW Legislative Council

 

O’Farrell Bypasses Scientific Advice to Approve Coal Seam Gas Licenses

 The O’Farrell Government’s draft strategic land use policy gives Ministers the power to bypass independent scientific panels and approve Coal Seam Gas extraction licenses in secret at the cabinet table, the NSW Labor Opposition said today.

“The O’Farrell Government’s draft strategic land use policy gives politicians the power to green light Coal Seam Gas extraction licenses, regardless of how close they are to homes and prime agricultural land,” Opposition Leader, John Robertson said today.

“Cabinet may declare a project to be an exceptional circumstance project if the subject resource is of exceptional value to the state. For an exceptional circumstance project, the requirement for a gateway certificate would not apply.”

(p86, New England North West and Upper Hunter Draft Strategic Regional Land Use Plan)

“Under this new policy, Ministers would be given the power to bypass independent approval requirements if the Coal Seam Gas project had ‘exceptional value’,” Mr Robertson said.

“This strategy is not what the people of NSW were led to believe would occur prior to the election.

“This sneaky addition on page 86 flies in the face of the O’Farrell Government’s commitment to having independent panels scrutinising Coal Seam Gas license approvals.

“The O’Farrell Government is politicising the Coal Seam Gas industry approvals process and offering no protection to areas with ‘high value’ projects nearby.

“Even the Government’s own aquifer interference policy will allow Coal Seam Gas pilot or test wells to operate for years before an aquifer license would be required.

“While elements of this policy are positive, the fact restrictions would only occur in the extraction process and not the lengthy exploration period beforehand would still allow significant damage to potentially occur.

“The O’Farrell Government needs to adopt Labor’s policy to suspend all current Coal Seam Gas exploration licenses and cease issuing new extraction licenses to protect the State’s aquifers and water resources.

“Until a water-tight regulatory framework is in place based on independent scientific research and conclusive evidence, we should not be allowing Coal Seam Gas mining to proceed unabated.

“Instead of sneakily giving itself the power to approve major Coal Seam Gas projects under the cover of darkness, the O’Farrell Government needs to act now to protect our precious ground water resources.”


Connect now

Subscribe

Subscribe to LAWCRIMEPOLITICS.COM

Email address:

Search

Progressing the Social Democratic Agenda