Month: July 2003

Findings from America

John Quiggin6 Comments

I’m on my annual visit to America. Although I’m literally inside the Beltway as I type this, I might as well be back in Brisbane as far as contact with the centres of power are concerned. (Actually, except at the very top, most of the powerful seem to live outside the Beltway, and commute). So I’ll just give some general impressions of how my slice of America seems on this visit:

1. Friendly. I made good friends when I lived here nearly 15 years ago and have kept them. In my experience, America is a really friendly place. Of the Australian cities I’ve lived in, only Brisbane has been friendlier (YMMV).

2. Fat. Even on the shortest of visits the prevalence of severe obesity is striking. Australia is said to be catching up on this respect, but on my unscientific sample we’ve got a long way to go.

3. Philanthropic. Visiting the Washington Mall and the National Gallery of Art, it’s striking that the building and all the paintings in it were donated. And of course admission is free, all in striking contrast with Australia. As Tim Dunlop observed to me when we had lunch (in person!), philanthropy has its limitations. It’s much better at providing ‘club goods’ enjoyed by the relatively well off than it is at transferring resources between social classes. I may post more on this some time

4. Fading flush of prosperity. The effects of the big boom are still evident but are fading. Beggars had disappeared from the streets last time I visited, but are now coming back, though still in small numbers compared to the early 90s. At the University of Maryland, where I’m visiting, spending cuts of the kind familiar to Australian academics are being imposed for the first time in years, but buildings commissioned during the boom are still going up.

Calling for volunteers

John Quiggin12 Comments

In keeping with the idea of slow blogging I mentioned a while ago, I’m going to respond to this two-week old speech by Costello, although other bloggers have already covered at length (From this large set, I’ll link, more or less randomly, to Steve Edwards).

Anyway, Costello is talking about social policy and volunteering and I just wanted to emphasise the point that the application of New Public Management/neoliberalism to the voluntary sector, exemplified by competitive tendering programs like the Jobs Network, makes volunteering utterly pointless. The only effect is to save money for the government while delivering a predefined set of services. In most cases, volunteers would be better off working overtime and sending a cheque to the Treasury.

I developed this point at length last time Costello had a progressive spell and I think the intervening period has only strengthened my case. Here’s the conclusion:

The core of the social contract was that those willing to make contributions of time and money were able, to some extent, to influence the aims and outcomes of public policy, and the way in which public services were delivered. Broadly speaking, government took responsibility for the delivery of basic services, and the efforts of the voluntary sector played a major role in determining what additional services were provided.

As far as monetary contributions to charitable causes are concerned, this is still the case. Although there are plenty of issues regarding the specific design of tax expenditures to promote charitable contributions (why, for example, a deduction rather than a rebate), the basic point that such expenditures are desirable has been accepted even by the dry economists of the Productivity Commission. Moreover it is clear enough that, if governments seek excessively tight control over the direction of subsidies for charitable contributions, the result will be to reduce the amount people are willing to give.

Unfortunately, the same logic has not been applied to voluntary contributions of time and effort. Governments have withdrawn from their role as a provider of core services and have cut back the provision of grants to voluntary groups and non-government organisations. Instead, they have instituted a regime of competitive tendering. In this system, voluntary groups are invited to bid to provide core public services at a lower cost than competitors which may be either for-profit private businesses or commercialised government businesses.

In this competitive environment, the main advantage possessed by non-profit organisation is the availability of volunteers willing to work unpaid, and of idealistic employees willing to accept less-than-market wages. By harnessing this source of unpaid or underpaid labour, governments can reduce the cost of service delivery.

In the long run, however, this is killing the goose that lays the golden egg. As competitive pressures are tightened, the original goals of voluntary organisations are subordinated to the need to meet tender specifications at the lowest possible cost. In the end, it does not really matter whether the tender is won by a voluntary organisation or a profit-oriented firm – the services delivered are those specified in the contract.

All of this is fine from the viewpoint of governments reaping cost savings, but what about the volunteers? Their unpaid labour is being used, not to provide additional services to the community, but to enable the government to provide existing (or, more often, reduced) services more cheaply. The ultimate outcome is to finance tax cuts for those who have chosen, in line with the government’s real beliefs, to maximise their own market incomes.

From the viewpoint of volunteers, this makes no sense. Even supposing they felt impelled to improve the government’s bottom line, they would be better off working overtime in regular jobs and sending the extra pay straight to the Treasury.

In practice, people are not so rational, and the tradition of voluntary effort will be eroded only gradually, but the growth of self-seeking over the past decade or so is plain for all to see. Governments of both political persuasions have promoted self-interest as the engine of progress, and leading political figures on both sides have embodied it in their personal behavior. At this point, calling for volunteers is the last refuge of a scoundrel.

Time and distance

John Quiggin19 Comments

The frontpage of Monday’s SMH has a link to a multimedia piece, entitled “Journey to the Centre of the Universe”. I couldn’t make the link work, but the teaser text says everything I needed to know anyway. I reproduce it without comment

Take a spectacular 3D tour to the centre of our solar system. Normally it would take you 50 million light years, but we can get you there in three minutes.Ê

Monday Message Board

John Quiggin10 Comments

I’m not sure if it’s time for Monday Message Board, as it’s still Sunday in Maryland. But I guess blogging has its own time, and this is an Australian blog. So open up with your comments on any topic (civilised discussion and no coarse language, please).

Internationalism and intervention

John Quiggin17 Comments

Jason Soon links to this Telegraph report in which Blair and other centre-left leaders give an in-principle endorsement to internationalist military intervention, saying

Where a population is suffering serious harm, as a result of internal war, insurgency, repression or state failure, and the state in question is unwilling or unable to halt or avert it, the principle of non-intervention yields to the international responsibility to protect

Jason gives his own qualified support and says

I’d be interested to see how the usual suspects will react to it

. Like Jason, I have no love for national sovereignty arguments, and would welcome the emergence of the kind of international order that would permit intervention in cases of state failure or to overthrow repressive regimes. The danger is, of course, that without a clear framework of international law, the principle of intervention could be used to justify wars of revenge, conquest and so on.

Unfortunately, by his acquiescence in the Iraq war, Blair has discredited himself as an advocate of this kind of policy, and greatly eroded potential support for such a policy.

To get Blair on board, the US Administration went through UN processes in the expectation that they would produce an ultimatum that Saddam Hussein would defy. When, instead, Saddam acquiesced, Blair and Bush embarked on a campaign of lies and spin that included vigorous abuse of the UN Security Council. Even now, when it is clear that, on all the factual issues, the UNSC majority was right and Bush and Blair were wrong, there has been nothing resembling an admission of error.

In retrospect, there were two options available to Blair and consistent with his stated principles. One would have been to focus the attention on human rights issues from the start, and seek an international consensus for the overthrow of Saddam on the basis that he was an evil dictator. The problem here is that this would have required Saddam to be charged in the International Criminal Court, and the Americans would not allow this. The alternative would have been, having gone with the weapons inspections process, to stick with it to the end and accept the half a loaf of ensuring that Saddam’s weapons had been destroyed.

Until Blair recognises that the US determination to run the world without interfence is a greater obstacle to internationalist intervention than is residual support for national sovereignty, he’ll continue to flounder on issues of this kind.

A cascade down the Murray

John Quiggin4 Comments

The cascade mode of debate in which an initial post attracted comments, followed by responses, to which further responses were then attached, all indented with quotes, made the old USENet nearly unreadable. Blogs have generally avoided this style. The most notable exception, Fisking, seems to have gone out of style with the winding down of polemics about war and terrorism.

But, in a more civilised form, a question and answer cascade might be helpful. so I’m going to try it in response to Gary Sauer-Thompson’s response to my Murray post. I’ve put Gary’s contributions to the discussion in italics, a device not available in USENet days.

Gary says

John says:

I thought of the following as a back-of-the-envelope exercise in cost estimation. Suppose the government bought back 1500GL of water at $40/ML/year, this would be an annual payment of $60 million, which could be financed from a capital sum of $1 billion at 6 per cent interest. I’d guess that increasing natural flows would solve about half the problem, which would imply a total cost of the order of $2 billion. This is incredibly crude, but I’d think the order of magnitude $1 billion – $10 billion is about right, and that we are likely to end up spending something around the low end of this range.”

I have some queries.

First, this seems to imply that governments enter the water market each year and buy the 1500 gigalitres required for enviromental flows. Why that option? Why not reduce the cap by 10-12%. Why not buy back water licences permanently? Why not take farm land out of production–pay the farmers to leave?

I’m not proposing this as the optimal policy, just one that allows for easy cost estimation. Reducing the cap would have much the same effects, but costs would be borne by farmers rather than the community as a whole. One of the aims of my research project is to look at policies that give both a relatively low-cost (efficient) solution and an equitable sharing of costs and benefits.

Secondly, we have $1 billion for environmental flows and $1billion for the other half of the problem. What is the other half of the problem? Land restoration? Reducing water consumption? Shifting to sustainable agriculture?

Some combination of land restoration and more sustainable agriculture. Again, at this stage I’m just trying to estimate costs, not laying out concrete proposals

Thirdly, how do we go from $2 billion to $10 billion? Is this an insurance for the rapid rise in the cost of water due to increasing shortage?

This just reflects the imprecision of the exercise. I prefer to represent this imprecision in order of magnitude (log scale) terms, rather than as an additive error range.

Fourthly I appreciate its back of envelope calculations but John does talk in terms of “fixing” the Murray. It is not clear what ‘fixing’ means in this context. It is often suggested that the “fixing” problem is about the demand of the domestic consumers, who are unwilling to pay a higher price for their vegetables.

This was implied by Tricky (Ticky, actually) Fullerton in her 4 Corners Sold Down the River. Sure those living in the cities need to change their habits in the use of water, and we need to redesign our cities to make them more sustainable. But the centre of the “fixing “problem is the unsustainable agricultural practices of farming systems (wine industry) geared to exporting their products to an overseas markets.

I’ll look more into this, but I think you’ll find that, given tradable water and a reduction in total allocations, the big reduction in water use will be in irrigated pasture for dairying, which is mostly for domestic markets. Other likely losers of water are rice (mostly domestic) and cotton (mostly export). Horticultural crops like grapes are generally high-value uses of water

.The queries are offered in the spirit of dialogue and debate.

And the responses similarly.

Thought for Thursday

John Quiggin10 Comments

My column in today’s Fin (subscription required) is about work and work intensity. The takeaway

According to the Australian Bureau of Statistics. Average working hours for full-time employees increased from 42 to 45 hours a week between 1982 and the mid-1990s, levelled out, and have declined slightly over the past two years. It is reasonable to assume that work intensity has followed a broadly similar pattern.

The productivity statistics reflect the easing-off in effort. The best single measure is multifactor productivity, which takes account of capital inputs and working hours, but not of changes in work intensity. After two decades of fairly poor performance, ABS estimates of showed a strong increase in multifactor productivity from the end of the recession in 1992 to the late 1990s, when work hours and work intensity reached their peak.

In the last few years, however, as work intensity has eased off, so has (measured) productivity growth. The figures have bounced about, but the average rate of multifactor productivity growth since 1998-99 has been below 1 per cent.

Can the Howard government claim, then, to have delivered a relaxed and comfortable Australia? Certainly it could not do so on the basis of its first term in office. The government ditched its pre-election commitments as Înon-coreâ and used the Black Hole and the Commission of Audit to justify a new round of reforms and Budget cuts. But the pace of reform has eased significantly since then.

Many commentators have criticised the slowing pace of reform, arguing that it has contributed to slower productivity growth. They may be right, but a slowing pace of reform, along with worker resistance to the erosion of leisure time, has also contributed to more Îrelaxation and comfortâ.

Word for Wednesday: managerialism (again)

John Quiggin11 Comments

Nobody agreed with my attempt two weeks ago to link neoliberalism, and particularly ‘new public management’ with the ideology of managerialism, and the supporting academic ‘discipline’ of management as embodied most notably in MBA programs (for more on the reason scare quotes are appropriate see this piece by Henry Farrell).

I agree that the two are superficially dissimilar, and that their practitioners do not have much to say to one another. I also concede that my supporting argument, resting on the proposition that the two are united in opposition to professionalism was inadequate. Still, I believe it is an empirical fact that the two are generally found together and this fact can be given a theoretical basis. So I’m going to reformulate my argument.

The central assumption of new public sector management is that, if organisations are given the right (financial) incentives, they can deliver socially desirable outcomes without reliance either on direct political control or on any assumption that the organisation is committed to some concept of public service. In practice, in the sentence above the first occurrence of ‘organisation’ should be replaced by ‘managers of organisations’ while the second refers to the members of the organisation considered collectively.

So new public sector management embodies the hypothesis that managers can ensure that organisations pursue whatever objectives are determined for them by policymakers choice of incentives. From a free-market viewpoint, the most congenial way this hypothesis could be satisfied would be for the incentives to be transmitted from top management through the levels and departments organisation. In effect, this would imply a system of piecework with the prices mirroring the incentives chosen by policymakers. But if everything could be done by piecework, there would be no need for the organisation and particularly no need for the senior managers.

So in practice, new public sector management applies direct incentives only to top management and assumes that there exist a set of generic management skills that can produce the desired outcomes even when the individual interests of the organisation’ staff are not directly tied to those outcomes. So, new public sector management depends on managerialism.

The converse link is weaker, particularly since managerialism is first and foremost a private sector doctrine. However, it’s clear that, even in the private sector, managerialism and neoliberalism reinforce each other. Managers clearly get more of the autonomy they want in a neoliberal policy setting, and neoliberal policies of Îlight-handedâ regulation are justified by the assumption that, provided the rules of the game are set correctly, unfettered managerial discretion will yield the best possible outcome.

PM Lawrence on canals and railways

John Quiggin1 Comment

Occasionally my comments thread gets a contribution that deserves a fully-fledged post of its own. I posted one from Observa some time ago. Now regular commenter PM Lawrence has presented a history of transport in the UK, which I think deserves a bit more prominence than a comments thread.

Here is where it begins

As promised – an overview of the economic history of UK transport since the canal age (much omitted, obviously, e.g. no stage coaches or aircraft).

Of course, this should also provide some insights of wider applicability. I shall take the opportunity of making a few asides about things they told me during my Monash MBA studies that weren’t true, which I had more sense than to tell them at the time.

The idea and practice of canal building reached England in the late 17th century, from Holland, which had got them in turn from northern Italy (the term “canal” actually comes from the Italian).

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