The opportunity cost of war

John Quiggin2 Comments

My piece in todays Fin (subscription required) is about the opportunity cost of the war on Iraq. An excerpt

In the absence of large-scale discoveries of weapons, attention has focused on the undoubted benefits of overthrowing an evil and oppressive dictator. This is a form of foreign aid and can usefully be compared to other aid programs. The total budget of USAID, the main US agency for development and humanitarian assistance is $8.7 billion for the coming year. That is, the money already spent on the Iraq war could have doubled USAID’s budget for the next five years.

It seems certain, however, that the war will herald a sustained increase in military expenditure of at least $US100 billion per year. A more reasonable comparison, therefore, is the ambitious proposal of the Commission on Macroeconomics and Health, led by Harvard Economist Jeffrey Sachs. The Commission aimed to achieve, for all a poor countries, a two-thirds reduction of 1990 child mortality levels, a three-fourths reduction of 1990 maternal mortality ratios and an end to the rising prevalence of major diseases, especially HIV/AIDS.

As the Commission pointed out, in addition to the humanitarian benefits of saving as many as 8 million lives per year, reductions in mortality are directly correlated with a reduced frequency of military coups and state collapse. These provide the breeding ground for terrorism and dictatorship and ultimately lead, in many cases, lead to US military intervention. The estimated cost for the Commission’s seemingly-utopian program over the next decade is estimated at between $US 50 billion and $US 100 billion per year.

War is sometimes necessary in self-defence. But when war is adopted as an instrument of policy, it is often counterproductive and almost never cost-effective.

A self-denying argument

John Quiggin3 Comments

In today’s [Thursday} Fin (subscription required) Gary Johns continues the Institute of Public Affairs campaign against the idea of corporate social responsibility. The piece spends 750 words complaining about a Greenpeace exercise solely on the grounds that non-responses to a question were coded as zero.

The more substantive claim is that corporations should focus on making profits for their shareholders, and leave the shareholders to decide whether to keep the money themselves or to allocate it to worthy causes. One obvious implication of this argument is that corporations should stop funding organisations like the IPA. However much or little good the IPA does for Australian capitalism in general, its impact on the profitability of any individual corporation is clearly trivial. Hence, giving shareholders’ money to such organisations is a breach of the directors’ fiduciary responsibilities.

Update As Scott Wickstein points out in the comments, if shareholders want to support the IPA, they should do so as individuals.

Word for Wednesday: Intellectual (definition)

John Quiggin4 Comments

Intellectual is a particularly tricky word. Partly this is because it has no generally accepted definition. To make things even more difficult, almost no-one will admit to being one or even knowing one without some sort of qualifying adjective or caveat. I’m happy to call myself a public intellectual for example, and I know a few people who would admit to being ?literary intellectuals?, but I don’t think I’ve ever met a self-confessed intellectual.

Although there are occasional positive uses like this, the term is far more often used negatively, but again, never in a straightforward way. Negative uses are almost always surrounded by scare quotes, as in ‘intellectuals’, or with some similar qualifier as in so-called intellectual or my personal favorite ?pseudo-intellectual.
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Labour Day

John Quiggin6 Comments

Today is Labour Day in Queensland, held to mark May Day. In most other Australian states, though, Labour Day commemorates the passage of legislation in the mid-19th century limiting the working day to eight hours. This was the first step in a series of legislative measures and agreements negotiated by unions that steadily reduced the number of hours standardly worked per year from about 2400 in 1950 to around 1750 in the mid-1980s.

As we all know, that trend came to an abrupt halt and went into reverse through the 1990s. Strictly speaking, standard hours have not changed, but the majority of full-time workers now work longer-than-standard hours, typically without paid overtime. Similar trends have been evident in other English-speaking countries, most notably the US.

Meanwhile working hours have continued to decline in Europe. The imposition of a maximum 35 hour week in France has attracted most attention, but few Europeans work more than 1600 hours a year.

Is the return of longer hours a desirable market outcome or an aberration. In my view, it’s the latter. the intensification of work in the 1990s seems to be the product of a period of economic expansion combined with employer dominance. Working hours have already begun to decline in the United States.
The experience of Japan, famous for long working hours in the 1980s is instructive. The low growth of the last decade has not been accompanied, as one might expect, by strong growth in unemployment, even though productivity has continued to improve. This is because working hours have declined. As this ILO data shows, average working hours in Japan are now slightly below those in Australia and well below those of the US.

Intuition suggests that leisure is a normal good. Economic progress should entail shorter hours and less stress. Instead, for the last decade or so, we have had the opposite. Productivity gains derived from such sources are built on sand (in fact, correctly measured, they are nonexistent).

Monday Message Board

John Quiggin1 Comment

It’s a public holiday here in Queensand (Labour Day, on which I hope to post more soon). But it’s a normal workday in most of Australia which means you have no excuse for not devoting your time and your employer’s Internet connection to posting incisive comments on today’s Monday Message Board. As always, civilised discussion and no coarse language, please.

What I'm reading, and more

John Quiggin

I’ve finished the Inferno and am now beginning Dante’s ascent of Purgatory. I also made my first visit to Brisbane Forest Park, a very pleasant expanse of mixed eucalypt and subtropical rainforest, just west of my new home.

Partly because I was thinking about Dante, it struck me that Queensland seems to have more optimistic/picturesque placenames than the areas I’m used to. On today’s journey, for example, I passed Mt Glorious. By contrast, a typical bushwalk in the Snowy Mountains might begin at Dead Horse Gap, and bypass Mt Purgatory on the way to Mt Terrible. Or there’s Scabby Range, Dry Plain and Doubtful Creek, to name just a few of the spots I’ve visited.

It's gone pear-shaped, guv

John Quiggin1 Comment

Despite occasional temptations, I’ve stuck to my resolution to abandon The Bill, which, as Rob Corr pointed out, jumped the shark some time ago (I nominate the station firebombing, which wrote out six characters in one episode, but the warning signs were evident well before that). I have, however, received reports of the ultimate shark-jump, a dramatic wedding episode. I didn’t get any good recommendations for alternative TV addictions, so I’ll be curled up in front of a video, instead of watching while Debbie, covered in blood, escapes from Tom’s office, as promised in the TV guide.

Update Demonstrating yet again this blog’s intimate link with the Zeitgeist, The Age runs a story on the soaping up of The Bill. It confirms that the firebombing was the first initiative of the shark-jumping new executive producer, but then descends into the realm of the bizarre, claiming that all of this reflects viewer demands for more “realism”. This confirms the inversion of the term that first arose with the use of the term “reality TV” to describe live-in game shows.

Moral equivalence

John Quiggin

I just got my new version of iTunes which lets you connect directly to the Apple Music Store and download songs at $US0.99 a pop. Except that I got this message

The iTunes Music Store is not available in your country yet. You will be able to browse music and listen to previews (sic), but you won’t be able to purchase music unless your billing address is in the United States.

This is putting Australians on the same level as (gasp …) Windows users.

Back to 1975

John Quiggin

Nick Minchin doesn’t seem like a fool to me. So why is he the latest to push the idea of reducing the size of the Senate in the hope of securing majority control? This Fin Report (subscription required) has

Federal Finance Minister Nick Minchin has suggested reducing the size of the Senate to make it easier for the coalition to get controversial pieces of legislation through the upper house.

A smaller Senate, and even more, a return to the winner-takes-all system that prevailed for the first few decades after Federation would guarantee that a major party would control the Senate, but this is a lousy idea for a government to proposed. It’s pretty much an even-money bet that the opposition, and not the government, would be the party controlling the Senate.

Whatever complaints Minchin may have about the current Senate, it’s nothing to the situation that previaled last time we had an Opposition-controlled Senate (between 1972 and 1975). Apart from twice forcing the Whitlam government to elections by blocking or threatening to block supply, the Senate was routinely obstructionist to an extent that makes the frustrations Minchin is experiencing seem like fleabites.

Why then is Minchin pushing the idea? In general, proposals to strengthen the executive come from governments that have been in office too long, and forget they will one day be in Opposition. This proposal actually has more dangers for governments than for oppositions, but I suspect it derives from the same mindset.