One could be forgiven for thinking Australia was in bad shape. Reading the opinion pages of almost any daily paper will fill one with a sense that our economy is amongst the worst in the world, with an overburdening debt that is dangerous and irresponsible. The economic reality is that there have been only two quarters of GDP decline since 2007 (in 2009 and 2011), and our economy has grown 13% since the beginning of 2007. Few other economies can match that performance. Government debt is about 13% of GDP, compared to other major economies – including the US and the UK – with debt around 90% of GDP (and higher). We haven’t had a recession in over 20 years, yet the prevailing sentiment is that we have been through hard times. Perhaps we have had it too good.
Without wanting to walk into the trap of a previous treasurer who spoke of “the recession we had to have,” there is a psychological aspect of this which is worth contemplating. We have benefited as a nation from a long period of growth and prosperity, in recent years largely on the back of huge mineral exports. There will be a generation of workers who have never known a recession during their lifetime (despite the fact that in 2007 unemployment rose from 4% to 5.7%). There is an implicit presumption that things will always get better. A recession tends to remind us that there are times when we need to temper our expectations: we pull in our collective belts and realise that though there are some things that me might want, we could really do without them.
Recessions tend to bring correctives, and provide the atmosphere in which they can be justified. Instead we expect that our government will continue to extend entitlements to us which we arguably neither can afford as a nation, nor need. Can we afford to subsidise taxpayers through negative gearing to the extent of $13 billion? Or private health insurance at nearly $6 billion? Living with an attitude that things will only continue to get better compromises any attempt to justify removing such subsidies (which are enjoyed mostly by the more wealthy members of society).
A complacency born of continued good economic times has allowed governments to appear to be generous with handouts rather than tackle important infrastructure requirements which compromise our ability to maintain a healthy economy into the future. And when adjustments are suggested to improve overall outcomes, the inevitable outcry is focussed on those who will lose money as a result (witness the school funding debate), reflecting the assumption that we can always afford more.
And yet we also complain about the budget being in deficit… one of the side-effects of this continued generosity flowing to us.
While one would never wish a recession upon a nation, it does serve as a welcome corrective to our national psyche, helping us to realise that we can’t continue to have it all. One thing is for certain, we don’t seem to have political leaders with the gumption to step forward and challenge that assumption.
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Tuesday, May 28, 2013
Friday, April 12, 2013
Thatcher(ism)
The death of Margaret Thatcher this week has been the catalyst for a wide range of emotional responses, from the unseemly rejoicing, through the thoughtful critic all the way to the hagiographers. There is no doubt that Thatcher left a lasting imprint upon Britain, and arguably upon the world, with her devout commitment to laissez-faire economics and strong (some say unbending) leadership for Britain out of some dark days.
From an Australian perspective, her contribution can be evaluated from a distance, both real and figurative. The emergence of Thatcher came two years after Australia had already embarked upon a swing to the right politically. Under Malcolm Fraser’s leadership, the commitment to right-wing ideology was the strongest it had been in Australia until that time. But we need to remember the context in which it took place.
The 1970s brought the first of the world oil shocks, pushing up prices, and causing a rethink about the direction of the economic reliance upon oil. The first real period of post-war stagflation caught almost all incumbent governments on the hop, as economic policies had to adapt to a hitherto unexperienced phenomenon. Keynesian economics, which, along with the development of global economic agreements, had largely served the west well for four decades, was ill-equipped to respond. Rising unemployment required economic (budgetary) stimulus, which drove inflation higher, and budgets deeper into deficit (a budget surplus was almost unknown at this time!) The austere policies of the Fraser government and the divisive capital vs labour approach was ultimately rejected by the Australian people in favour of the more cooperative approach offered by Bob Hawke’s Labour Party. While Thatcher continued to lead Britain down this pathway, Australia was already moving past it, albeit adopting a similar approach to deregulation which Thatcher and Reagan championed. This unrequited trust in the free market arguably ploughed the field which enabled the failure of the Bank of England in the first instance, and the GFC of 2007 in the second.
Thatcher’s contribution came alongside the rise of monetarism as an approach to economics. The shift in Britain’s fortunes can only be partly attributed to its wisdom and insights. The demonization of Keynesian economics was ultimately costly – even to this day in Britain and the US, where interest rates became the only accepted response to the GFC. Still mired in recession with high unemployment, monetarist economics has an empty kit bag.
It was also in the late 1970s and early 1980s – and something for which we have Thatcher to thank, at least in part - that the seismic shift towards economic growth as the sole arbiter of government success gained significant traction. Economics was not just the prime determinant of a government’s success, it was the sole determinant, even further bastardised in more recent days as the ability to deliver a budget surplus. Impacts on social, personal and environmental wellbeing, along with any notion of global justice and equity was sacrificed on the altar of capitalism. Without apology. It was that unwavering commitment to a path she believed in that made her the strong leader many celebrate, and which nurtured a world many others mourn.
Margaret Thatcher’s death is something I note, and nothing more. As a women of advanced years, death is not a tragedy. She lived with the benefit of resources that only a few enjoy. Her legacy to the world is not something I cherish. She was a product of her time, with her “success” being misattributed to factors which have been replicated for decades, and for which we all continue to pay the price.
From an Australian perspective, her contribution can be evaluated from a distance, both real and figurative. The emergence of Thatcher came two years after Australia had already embarked upon a swing to the right politically. Under Malcolm Fraser’s leadership, the commitment to right-wing ideology was the strongest it had been in Australia until that time. But we need to remember the context in which it took place.
The 1970s brought the first of the world oil shocks, pushing up prices, and causing a rethink about the direction of the economic reliance upon oil. The first real period of post-war stagflation caught almost all incumbent governments on the hop, as economic policies had to adapt to a hitherto unexperienced phenomenon. Keynesian economics, which, along with the development of global economic agreements, had largely served the west well for four decades, was ill-equipped to respond. Rising unemployment required economic (budgetary) stimulus, which drove inflation higher, and budgets deeper into deficit (a budget surplus was almost unknown at this time!) The austere policies of the Fraser government and the divisive capital vs labour approach was ultimately rejected by the Australian people in favour of the more cooperative approach offered by Bob Hawke’s Labour Party. While Thatcher continued to lead Britain down this pathway, Australia was already moving past it, albeit adopting a similar approach to deregulation which Thatcher and Reagan championed. This unrequited trust in the free market arguably ploughed the field which enabled the failure of the Bank of England in the first instance, and the GFC of 2007 in the second.
Thatcher’s contribution came alongside the rise of monetarism as an approach to economics. The shift in Britain’s fortunes can only be partly attributed to its wisdom and insights. The demonization of Keynesian economics was ultimately costly – even to this day in Britain and the US, where interest rates became the only accepted response to the GFC. Still mired in recession with high unemployment, monetarist economics has an empty kit bag.
It was also in the late 1970s and early 1980s – and something for which we have Thatcher to thank, at least in part - that the seismic shift towards economic growth as the sole arbiter of government success gained significant traction. Economics was not just the prime determinant of a government’s success, it was the sole determinant, even further bastardised in more recent days as the ability to deliver a budget surplus. Impacts on social, personal and environmental wellbeing, along with any notion of global justice and equity was sacrificed on the altar of capitalism. Without apology. It was that unwavering commitment to a path she believed in that made her the strong leader many celebrate, and which nurtured a world many others mourn.
Margaret Thatcher’s death is something I note, and nothing more. As a women of advanced years, death is not a tragedy. She lived with the benefit of resources that only a few enjoy. Her legacy to the world is not something I cherish. She was a product of her time, with her “success” being misattributed to factors which have been replicated for decades, and for which we all continue to pay the price.
Monday, September 05, 2011
Why I support putting a price on carbon
Four years ago, both major political parties in Australia presented themselves to the electorate indicating that they would institute a carbon pricing scheme. Since that time there has been much more heat than light in relation to the issue. There are good reasons and benefits to introducing such a policy which is lost in the argy-bargy of political debate at the moment. These are the reasons I support a price on carbon.
Because it is the smart thing to do
Politicians wax eloquent about the years of coal supplies which are buried beneath the surface of Australian soil, but few lament the untapped sources of clean energy which are wasted every day. Solar, wind, thermal and tidal sources of power are much more plentiful and offer a sustainable way of powering our lifestyles than the use of brown-coal-fired electricity generation. Whether you believe the climate scientists or not, it is much smarter to develop renewable and sustainable forms of power generation, and to encourage a shift in our economy towards more sustainable forms of living.
Because it is the just thing to do
That Australian action to reduce carbon emissions will only result in a miniscule reduction in overall carbon emissions in the world is an oft-cited mantra for doing nothing, while China’s rapid increase in carbon emissions is regarded as an indication of greater blame. It is forgotten that Australia remains per capita the worst emitter of carbon pollution in the world, and tenth on the list of overall polluters. While our own efforts at reduction have minimal impact on overall production, it is patently unfair to shift the responsibility to other nations whose equivalent rate of emission is much lower than ours. The flip side of defending our overall production levels is a tacit approval for other nations to raise their per capita emissions to levels equivalent to Australia. Such an approach is diabolical. We cannot expect the burden of this to fall on those who are not responsible for its production, and who are often less capable of meeting the subsequent costs.
Because we all pay anyway
There is already a cost attached to the levels of carbon emissions in our world whether it be in the decline in the air quality across our cities and into the country, in the impact on the fertility of our soil and its capacity to grow crops, or in the more catastrophic impacts of extreme weather events which appear with increasing regularity. It is barely a generation past when it was considered appropriate for companies to discharge their water by-products into rivers and waterways – a practice we rightly abhor in this day, but which seemed natural at the time. To continue to release carbon into the atmosphere changes the chemical structure of the environment, for which we are already paying the cost. To charge it at the source rather than the fruit seems more equitable. An ounce of prevention…
Because we need a catalyst for change
Many corporations (and consumers) only begin to change their behaviour when the impact is felt in the hip pocket or on the bottom line. The cost of carbon pollution is presently being paid by a more vulnerable and less responsible group of people than those whose actions directly affect it. Making such decision-makers account for the impact of their actions, or at least their contribution to the impact, is a sure way to begin the behavioural change which is necessary. At the moment the system works like a lottery, where those who pay just happen to be in the path of a major weather event. A price on carbon brings this cost back home to its genesis, and provides not only a catalyst for change, but an incentive for innovation.
People either don't seem to understand that the point of the system is to encourage behavioural change, or don’t want to acknowledge that a change is needed. The opportunity is before us now to take action which, even if it makes a miniscule contribution to overall carbon emissions in the world, can make a significant difference to the way in which our lives in Australia interact with the land on which we so much depend. It’s time to swallow some medicine which will only serve to make us all the better for it.
Because it is the smart thing to do
Politicians wax eloquent about the years of coal supplies which are buried beneath the surface of Australian soil, but few lament the untapped sources of clean energy which are wasted every day. Solar, wind, thermal and tidal sources of power are much more plentiful and offer a sustainable way of powering our lifestyles than the use of brown-coal-fired electricity generation. Whether you believe the climate scientists or not, it is much smarter to develop renewable and sustainable forms of power generation, and to encourage a shift in our economy towards more sustainable forms of living.
Because it is the just thing to do
That Australian action to reduce carbon emissions will only result in a miniscule reduction in overall carbon emissions in the world is an oft-cited mantra for doing nothing, while China’s rapid increase in carbon emissions is regarded as an indication of greater blame. It is forgotten that Australia remains per capita the worst emitter of carbon pollution in the world, and tenth on the list of overall polluters. While our own efforts at reduction have minimal impact on overall production, it is patently unfair to shift the responsibility to other nations whose equivalent rate of emission is much lower than ours. The flip side of defending our overall production levels is a tacit approval for other nations to raise their per capita emissions to levels equivalent to Australia. Such an approach is diabolical. We cannot expect the burden of this to fall on those who are not responsible for its production, and who are often less capable of meeting the subsequent costs.
Because we all pay anyway
There is already a cost attached to the levels of carbon emissions in our world whether it be in the decline in the air quality across our cities and into the country, in the impact on the fertility of our soil and its capacity to grow crops, or in the more catastrophic impacts of extreme weather events which appear with increasing regularity. It is barely a generation past when it was considered appropriate for companies to discharge their water by-products into rivers and waterways – a practice we rightly abhor in this day, but which seemed natural at the time. To continue to release carbon into the atmosphere changes the chemical structure of the environment, for which we are already paying the cost. To charge it at the source rather than the fruit seems more equitable. An ounce of prevention…
Because we need a catalyst for change
Many corporations (and consumers) only begin to change their behaviour when the impact is felt in the hip pocket or on the bottom line. The cost of carbon pollution is presently being paid by a more vulnerable and less responsible group of people than those whose actions directly affect it. Making such decision-makers account for the impact of their actions, or at least their contribution to the impact, is a sure way to begin the behavioural change which is necessary. At the moment the system works like a lottery, where those who pay just happen to be in the path of a major weather event. A price on carbon brings this cost back home to its genesis, and provides not only a catalyst for change, but an incentive for innovation.
People either don't seem to understand that the point of the system is to encourage behavioural change, or don’t want to acknowledge that a change is needed. The opportunity is before us now to take action which, even if it makes a miniscule contribution to overall carbon emissions in the world, can make a significant difference to the way in which our lives in Australia interact with the land on which we so much depend. It’s time to swallow some medicine which will only serve to make us all the better for it.
Thursday, June 24, 2010
What would Jesus do about economic growth?
Article from Ross Gittins printed in Fairfax papers on the weekend. Refreshing.
Should Christians support capitalism? According to a leading English layman, despite all its material benefits, capitalism as we know it contains moral flaws with serious social consequences.
I'm in no position to preach to Christians, but I'm happy to pass on the views of Dr Michael Schluter, founder of Britain's Relationships Foundation, which will be of interest to a wider audience (and can be found here).
Schluter's beef is against the failings of capitalism that arise from corporations, which have developed as its primary engine.
His starting point is the belief that God is a relational being, whose priority is not economic growth, but right relationships between humanity and himself and between human beings. Christ's injunction to ''love God and love your neighbour'' points to the priority of relational wealth over financial wealth because love is a quality of relationships.
Corporate capitalism's first moral flaw, he says, is its exclusively materialistic vision. It rests on the pursuit of business profit and personal gain. It promotes the idolising of money, which Jesus calls ''Mammon''.
''People are regarded by companies as a resource, or as a cost in the profit and loss account, devoid of relational or environmental context. So capitalism constantly has to be restrained from destroying the social capital on which it depends for its future existence,'' he says.
This focus on capital lends itself to the idolatry of wealth at a personal level, and the idolatry of economic growth at a corporate and national level. Shareholders pursue personal wealth with little knowledge of how it is generated, and senior management with scant regard for pay structures at lower levels of the company, while customers are persuaded by advertising to pursue self-gratification in its many forms.
Corporate capitalism's second moral flaw is that it offers reward without responsibility. In the Parable of the Talents, Jesus implies that gaining money through interest on a loan is ''reaping where you haven't sown''. Lenders may accept some small risk, but they accept no responsibility for how or where the money is used.
Debt finance generally results in relational distance rather than relational ''proximity'' because the lender generally has no incentive to remain engaged with, or even in regular contact with, the borrower.
In the workings of large corporations, shareholders generally have little say in decision-making. Most investors provide share capital through a financial intermediary, such as a pension fund. Often they don't know or care in which companies they hold shares. Even the financial intermediaries generally do little to influence company policy.
Perhaps, Schluter says, instead of ''no taxation without representation'' we should adopt the slogan ''no reward without responsibility, no profit without participation''.
Corporate capitalism's third moral failing arises from the limited liability of shareholders, which allows debts to be left unpaid where the company becomes insolvent. Worse, the unpaid creditors are often employees, consumers and smaller companies supplying goods and services.
Because the downside risks of borrowing are capped, while the upside risks aren't, management has been willing to borrow huge sums relative to the company's share capital and thus expand companies at a frantic pace.
In the finance sector, incentive schemes often reward risk-taking excessively on the upside with no downside penalties, reflecting the risk position of shareholders. Consequent mega-losses have to be financed by taxpayers to limit wider economic fallout.
Schluter's fourth charge against corporate capitalism is that it disconnects people from place. In the Old Testament, the jubilee laws required all rural property to be returned free to its original family owners every 50th year.
This ensured long-term rootedness in a particular place for every extended family. A byproduct was to ensure a measure of equity in the distribution of property, which ensured a broad distribution of political power.
By contrast, capitalism regards land and property as assets without relational significance. This greater flexibility and mobility undoubtedly bring material benefits. But as extended family members move away from one another, and communities become more transient, they can no longer fulfil welfare roles.
Grandparents can no longer help look after grandchildren, and responsibility for care of older people and those with disabilities falls on the state, with the costs having to be met from tax revenues.
Schluter's final charge is that corporate capitalism provides inadequate social safeguards. It has no concept of protecting the vulnerable through constraints on the market. Deregulation limits constraints on consumer credit although the devastating consequences of debt for personal health and family relationships are well known.
Deregulation ensures labour is available for hire 24 hours a day, seven days a week, whereas biblical law protected a day a week for non-work priorities including rest, worship and family.
The adverse consequences of these flaws start with family and community breakdown. ''The greater wealth of some sections of society in capitalist nations has to be set against the greater 'relational poverty' which extends to an ever greater proportion of the population. The danger is that over time these relational problems become self-reinforcing and self-replicating,'' Schluter says.
Another consequence of capitalism's failings over the longer term is a huge growth in government spending. As the number of damaged households increases, so does the size of the bureaucracy.
Government spending on welfare has reached a level many regard as unsustainable, Schluter argues, yet without it many vulnerable people would have little or no physical or emotional support.
As state agencies take over many of the roles of family and local community, they undermine the reasons why these institutions exist and thus further lower people's loyalty and commitment to them.
Schluter's conclusion is that Christians need to search urgently for a new economic order based on biblical revelation.
Ross Gittins is the economics editor at The Sydney Morning Herald and correspondent for The Age. Original source
Should Christians support capitalism? According to a leading English layman, despite all its material benefits, capitalism as we know it contains moral flaws with serious social consequences.
I'm in no position to preach to Christians, but I'm happy to pass on the views of Dr Michael Schluter, founder of Britain's Relationships Foundation, which will be of interest to a wider audience (and can be found here).
Schluter's beef is against the failings of capitalism that arise from corporations, which have developed as its primary engine.
His starting point is the belief that God is a relational being, whose priority is not economic growth, but right relationships between humanity and himself and between human beings. Christ's injunction to ''love God and love your neighbour'' points to the priority of relational wealth over financial wealth because love is a quality of relationships.
Corporate capitalism's first moral flaw, he says, is its exclusively materialistic vision. It rests on the pursuit of business profit and personal gain. It promotes the idolising of money, which Jesus calls ''Mammon''.
''People are regarded by companies as a resource, or as a cost in the profit and loss account, devoid of relational or environmental context. So capitalism constantly has to be restrained from destroying the social capital on which it depends for its future existence,'' he says.
This focus on capital lends itself to the idolatry of wealth at a personal level, and the idolatry of economic growth at a corporate and national level. Shareholders pursue personal wealth with little knowledge of how it is generated, and senior management with scant regard for pay structures at lower levels of the company, while customers are persuaded by advertising to pursue self-gratification in its many forms.
Corporate capitalism's second moral flaw is that it offers reward without responsibility. In the Parable of the Talents, Jesus implies that gaining money through interest on a loan is ''reaping where you haven't sown''. Lenders may accept some small risk, but they accept no responsibility for how or where the money is used.
Debt finance generally results in relational distance rather than relational ''proximity'' because the lender generally has no incentive to remain engaged with, or even in regular contact with, the borrower.
In the workings of large corporations, shareholders generally have little say in decision-making. Most investors provide share capital through a financial intermediary, such as a pension fund. Often they don't know or care in which companies they hold shares. Even the financial intermediaries generally do little to influence company policy.
Perhaps, Schluter says, instead of ''no taxation without representation'' we should adopt the slogan ''no reward without responsibility, no profit without participation''.
Corporate capitalism's third moral failing arises from the limited liability of shareholders, which allows debts to be left unpaid where the company becomes insolvent. Worse, the unpaid creditors are often employees, consumers and smaller companies supplying goods and services.
Because the downside risks of borrowing are capped, while the upside risks aren't, management has been willing to borrow huge sums relative to the company's share capital and thus expand companies at a frantic pace.
In the finance sector, incentive schemes often reward risk-taking excessively on the upside with no downside penalties, reflecting the risk position of shareholders. Consequent mega-losses have to be financed by taxpayers to limit wider economic fallout.
Schluter's fourth charge against corporate capitalism is that it disconnects people from place. In the Old Testament, the jubilee laws required all rural property to be returned free to its original family owners every 50th year.
This ensured long-term rootedness in a particular place for every extended family. A byproduct was to ensure a measure of equity in the distribution of property, which ensured a broad distribution of political power.
By contrast, capitalism regards land and property as assets without relational significance. This greater flexibility and mobility undoubtedly bring material benefits. But as extended family members move away from one another, and communities become more transient, they can no longer fulfil welfare roles.
Grandparents can no longer help look after grandchildren, and responsibility for care of older people and those with disabilities falls on the state, with the costs having to be met from tax revenues.
Schluter's final charge is that corporate capitalism provides inadequate social safeguards. It has no concept of protecting the vulnerable through constraints on the market. Deregulation limits constraints on consumer credit although the devastating consequences of debt for personal health and family relationships are well known.
Deregulation ensures labour is available for hire 24 hours a day, seven days a week, whereas biblical law protected a day a week for non-work priorities including rest, worship and family.
The adverse consequences of these flaws start with family and community breakdown. ''The greater wealth of some sections of society in capitalist nations has to be set against the greater 'relational poverty' which extends to an ever greater proportion of the population. The danger is that over time these relational problems become self-reinforcing and self-replicating,'' Schluter says.
Another consequence of capitalism's failings over the longer term is a huge growth in government spending. As the number of damaged households increases, so does the size of the bureaucracy.
Government spending on welfare has reached a level many regard as unsustainable, Schluter argues, yet without it many vulnerable people would have little or no physical or emotional support.
As state agencies take over many of the roles of family and local community, they undermine the reasons why these institutions exist and thus further lower people's loyalty and commitment to them.
Schluter's conclusion is that Christians need to search urgently for a new economic order based on biblical revelation.
Ross Gittins is the economics editor at The Sydney Morning Herald and correspondent for The Age. Original source
Monday, November 09, 2009
In the wrong game?
Here I thought that God was interested in helping the poor, but Goldman Sachs CEO Lloyd Blankfein reckons that it is the banks who are doing God's work by helping companies raise money.
I wonder what Bible Mr Blankfein is getting that from? Maybe he's better at raising money and rewarding executives than he is at interpreting scripture...
I wonder what Bible Mr Blankfein is getting that from? Maybe he's better at raising money and rewarding executives than he is at interpreting scripture...
Friday, July 10, 2009
Pope Benedict on the Global Economy
I read with interest news stories of the latest papal encyclical - it read as a breath of fresh air into a world where profit and economic growth have been slavishly served to our detriment. Then I received this wonderful summary by email this morning, so post it here, with a link at the bottom to the full encyclical, which runs to 30000 words.
As the G8 Summit begins in
Caritas in Veritate (Charity in Truth), is rooted in a stream of papal teaching on economic justice that goes back to 1891 with the encyclical Rerum Novarum (Of New Things). It is a far-reaching look at the relationships and issues that the global economy has created, and their impact on the world’s people.
From the beginning Benedict states his basic foundation, that “charity in truth is the principle around which the Church's social doctrine turns.” It is:
a principle that takes on practical form in the criteria that govern moral action. I would like to consider two of these in particular, of special relevance to the commitment to development in an increasingly globalized society: justice and the common good.
And, he says, those principles are both in service and involvement in the political arena.
The more we strive to secure a common good corresponding to the real needs of our neighbours, the more effectively we love them. Every Christian is called to practice this charity, in a manner corresponding to his vocation and according to the degree of influence he wields in the pólis. This is the institutional path -- we might also call it the political path -- of charity, no less excellent and effective than the kind of charity which encounters the neighbour directly, outside the institutional mediation of the pólis.
He deals with profit, writing that while it is useful, once it “becomes the exclusive goal, if it is produced by improper means and without the common good as its ultimate end, it risks destroying wealth and creating poverty.” The current economic crisis, he writes,
obliges us to re-plan our journey, to set ourselves new rules and to discover new forms of commitment. ... The crisis thus becomes an opportunity for discernment, in which to shape a new vision for the future.
He discusses globalization, which has “led to a downsizing of social security systems as the price to be paid for seeking greater competitive advantage in the global market, with consequent grave danger for the rights of workers,” and cites how
budgetary policies, with cuts in social spending often made under pressure from international financial institutions, can leave citizens powerless in the face of old and new risks; such powerlessness is increased by the lack of effective protection on the part of workers' associations. Through the combination of social and economic change, trade union organizations experience greater difficulty in carrying out their task of representing the interests of workers, partly because governments, for reasons of economic utility, often limit the freedom or the negotiating capacity of labour unions.
The crisis of world hunger and lack of clean water lead to an affirmation that:
The right to food, like the right to water, has an important place within the pursuit of other rights, beginning with the fundamental right to life. It is therefore necessary to cultivate a public conscience that considers food and access to water as universal rights of all human beings, without distinction or discrimination.
He writes about the “pernicious effects of sin” in a market where there is a “speculative use of financial resources that yields to the temptation of seeking only short-term profit” that does not make “a real contribution to local society by helping to bring about a robust productive and social system, an essential factor for stable development.” Financiers, he says,
must rediscover the genuinely ethical foundation of their activity, so as not to abuse the sophisticated instruments which can serve to betray the interests of savers.
The encyclical also addresses the rise of global inequality, the threats to the environment – “we must recognize our grave duty to hand the earth on to future generations in such a condition that they too can worthily inhabit it and continue to cultivate it” – and the need for new solutions to the world’s energy needs. “The fact that some States, power groups, and companies hoard non-renewable energy resources represents a grave obstacle to development in poor countries,” Benedict writes.
The international community has an urgent duty to find institutional means of regulating the exploitation of non-renewable resources, involving poor countries in the process, in order to plan together for the future.
Perhaps the most provocative and controversial suggestion is his call for a reform of the United Nations that would produce a “true world political authority” and would give “poorer nations an effective voice in shared decision-making.” Such a world body would “need to be universally recognized and to be vested with the effective power” to “ensure compliance with its decisions from all parties.” That power, he suggests, could include the ability
[t]o manage the global economy; to revive economies hit by the crisis; to avoid any deterioration of the present crisis and the greater imbalances that would result; to bring about integral and timely disarmament, food security and peace; to guarantee the protection of the environment and to regulate migration...
Near the end of the encyclical, he underlines his basic premise:
While the poor of the world continue knocking on the doors of the rich, the world of affluence runs the risk of no longer hearing those knocks, on account of a conscience that can no longer distinguish what is human.
Caritas in Veritate is well worth our careful and thoughtful study. Its richness and depth will add new insights to Catholic social teaching. The entire text is available here.
(reproduced from Sojomail 07.09.09)
Friday, March 13, 2009
Work Value
In 1965, U.S. CEOs at major companies made 24 times a worker's pay -- by 2004, CEOs earned 431 times the pay of an average worker. From 1995 to 2005, average CEO pay increased five times faster than that of average workers. While CEO pay continues to increase at rates far exceeding inflation, wages for the vast majority of American workers have failed to keep up with rising prices. In fact, real wages for the 90% of Americans who earn under $92,000 a year have actually fallen since 2001.
Friday, February 27, 2009
Are executive salaries part of our present problem?
We have been constantly reminded that one of the main reasons for high executive remuneration is the need to attract and retain world class leadership in our corporations. Consequently we have seen annual remuneration spiralling above $10m per annum in many of our largest corporations. Such packages not only mark significant reward for expertise, they create significant pressure on executives to produce results commensurate with their remuneration. To demonstrate to shareholders (and possibly to themselves) that they are worth such compensation, there is a subtle pressure to make changes in order to improve profitability, increase growth rates and shareholder returns. And quickly. It is quite feasible to recognise the pressure towards short-term thinking for quick improvement in a corporations reported fortunes. With the average rate of turnover less than five years, what benefit is there in working on developments which will have significant long-term benefits? What incentive is there to adopt short- and medium-term pain in order to set up a business for decades to come? The pressure to justify the remuneration creates an environment where it is beneficial to sacrifice long-term creative thinking for short-term creative restructure, and has perhaps encouraged increased risk-taking. It explains why so few companies are ahead of the curve when it comes to carbon emissions. Why it is easier to close an operation in Australia because costs are cheaper overseas. The bottom line in this year's report is more important than the well-being of the workers or the country in which you sell.
The pressures on business executives are immense and worthy of recognition and reward. But have we created extra (counter-productive) pressure by rewarding at the levels which have been evident in recent years? And is that part of the price we are now paying in the global economy?
The pressures on business executives are immense and worthy of recognition and reward. But have we created extra (counter-productive) pressure by rewarding at the levels which have been evident in recent years? And is that part of the price we are now paying in the global economy?
Tuesday, February 03, 2009
Economic Realities and Opportunities
In the lifetime of most people there has never been the depth of economic instability which is in evidence today. Seismic shifts in economic activity in every sector are apparent as we see the unwinding of an economic boom which has lasted nearly two decades. Governments are working furiously in the hope to prevent this turning into another depression. The Australian government is still operating under the belief that it can stop the recession and prevent the falling in house and other asset prices. When you remember that the ultimate catalyst for this economic downturn (I use the term advisedly) was the collapse of the house of cards which propped up share and house prices in the USA – ill-secured debt. A perfunctory perusal of graphs showing the shift in share prices, house prices and household wealth over the last 60 years shows that we had long abandoned any attachment to the long-term trend line. But… such trend lines cannot be ignored unless there has been a quantum shift in the economy, such as happened during the industrial revolution. Such a shift is not yet evident, although the emergence of environmentally-sensitive technologies might be the basis of one (though not yet).
No Western government whose citizens have experienced this asset bubble will be able to escape its unwinding in this downturn. Long-term relationships are evidence of a deep-seated connection between the price of assets and absolute wealth. This bubble was created by profligate use of debt, which has ultimately been its undoing, and cannot be left behind until the debt has worked its way out of the system, either by repayment (unlikely in many cases) or in declared losses by corporations carrying the debt. No economic stimulus package can escape this reality.
So what are governments to do?
In the best interests of the country, the governments should invest in the next generation of infrastructure. In Australia, the targets are obvious: solar technology, public transport infrastructure, education, and communications are clearly areas of underinvestment which would benefit from government investment, which would not only provide employment in the present, but would also lay out a foundation for a more environmentally friendly and efficient future. We don’t need further tax cuts to be spent on plasma and LCD TVs. We need to move our economy away from dependence upon coal, iron ore exports and uranium to prop up (I use the term loosely) our current account. Let’s get ahead of the game. The country’s budgetary position is better placed than most to auspice such development at the moment.
The next two to three years will be difficult as the economy absorbs the realities being unwound. Now is the time to shift the paradigm. Now is the time to recognise opportunities. While companies are dealing with a shifting economy, let them factor in a serious carbon trading scheme, and let households be encouraged to invest in solar technology and water capture and recycling.
We dare not prop up industries and companies which we would be better off without in the long-term. Our task is not to maintain what is, but to facilitate what will be.
I fear, however, that our governments will squander the opportunity, to the detriment of us all.
No Western government whose citizens have experienced this asset bubble will be able to escape its unwinding in this downturn. Long-term relationships are evidence of a deep-seated connection between the price of assets and absolute wealth. This bubble was created by profligate use of debt, which has ultimately been its undoing, and cannot be left behind until the debt has worked its way out of the system, either by repayment (unlikely in many cases) or in declared losses by corporations carrying the debt. No economic stimulus package can escape this reality.
So what are governments to do?
In the best interests of the country, the governments should invest in the next generation of infrastructure. In Australia, the targets are obvious: solar technology, public transport infrastructure, education, and communications are clearly areas of underinvestment which would benefit from government investment, which would not only provide employment in the present, but would also lay out a foundation for a more environmentally friendly and efficient future. We don’t need further tax cuts to be spent on plasma and LCD TVs. We need to move our economy away from dependence upon coal, iron ore exports and uranium to prop up (I use the term loosely) our current account. Let’s get ahead of the game. The country’s budgetary position is better placed than most to auspice such development at the moment.
The next two to three years will be difficult as the economy absorbs the realities being unwound. Now is the time to shift the paradigm. Now is the time to recognise opportunities. While companies are dealing with a shifting economy, let them factor in a serious carbon trading scheme, and let households be encouraged to invest in solar technology and water capture and recycling.
We dare not prop up industries and companies which we would be better off without in the long-term. Our task is not to maintain what is, but to facilitate what will be.
I fear, however, that our governments will squander the opportunity, to the detriment of us all.
Monday, October 20, 2008
The Economic Crisis
"Is it possible for someone to please explain in simple English with simple examples how this crisis came to be?" Here at Crikey, we like to help. So we bring you without further ado, the first (and possibly last) episode of the Wall Street crisis explained. The first instalment is brought to you by fellow Crikey reader Tony Stott, and is titled, The parable of the stock market and the monkeys:
Tony Stott writes: Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each. The villagers seeing that there were many monkeys around, went out to the forest, and started catching them. The man bought thousands at $10 and as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy at $20. This renewed the efforts of the villagers and they started catching monkeys again.
Soon the supply diminished even further and people started going back to their farms. The offer increased to $25 each and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it! The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now buy on behalf of him. In the absence of the man, the assistant told the villagers.
"Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35 and when the man returns from the city, you can sell them to him for $50 each."
The villagers rounded up with all their savings and bought all the monkeys. Then they never saw the man, nor his assistant again, only monkeys everywhere!
Now you have a better understanding of how the stock market works.
Tony Stott writes: Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each. The villagers seeing that there were many monkeys around, went out to the forest, and started catching them. The man bought thousands at $10 and as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy at $20. This renewed the efforts of the villagers and they started catching monkeys again.
Soon the supply diminished even further and people started going back to their farms. The offer increased to $25 each and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it! The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now buy on behalf of him. In the absence of the man, the assistant told the villagers.
"Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35 and when the man returns from the city, you can sell them to him for $50 each."
The villagers rounded up with all their savings and bought all the monkeys. Then they never saw the man, nor his assistant again, only monkeys everywhere!
Now you have a better understanding of how the stock market works.
Subscribe to:
Posts (Atom)