"How economic modelling is used to circumvent democracy..."

hennypenny · Mar 30, 2015

http://www.themonthly.com.au/issue/2015/april/1427806800/richard-denniss/spreadsheets-power

Spreadsheets of power
How economic modelling is used to circumvent democracy and shut down debate

By Richard Denniss

Most people think it is hard to put a dollar value on a human life, but they're wrong. It's easy. Economists do it all the time.

Most people think that all human lives are equally valuable. And most think economic modelling is boring, irrelevant to their busy lives, and unrelated to how our democracy is functioning. They're wrong about those, too.

About ten years ago, a lawyer rang to ask if I would do some (economic) modelling. "It depends," I said. "What's the job?"

"We want you to put a dollar value on the life of a dead mother," said the lawyer. "We are suing a doctor for medical negligence, and the insurance company wants to value her life at zero because she wasn't working. She had no future earning potential. Can you estimate the value of the housework she would have performed?"

I still feel sad when I think about it: for the family, for myself, and for a society in which asking such a question is not only acceptable but also necessary. The dilemma for the widower and the lawyer, and for me, was that if someone didn't put a dollar value on the love and care that a mother gives her children, the father would wind up with even less money to care for the kids he would be bringing up by himself.

Of course, economists have no real way to value love and affection, so I valued ironing, laundry and child care instead. I got my hands on data about how mothers with three kids use their time. I found data on the price of buying individual household services like ironing, and the price of live-in maids and nannies. I forecast the age at which the kids would leave home. My forecast was based on a meaningless average of kids who do go to uni and kids who don't. My spreadsheets were huge, complex, scrupulously referenced and entirely meaningless. Like all good forecasters I estimated the "value" of her life to the cent, and as happens in all good negotiations, the lawyers ultimately settled for a nice round number. The only good thing about the number was that it was bigger than zero.

The topsy-turvy "morality" of economics is built in to models that politicians, lawyers, economists and lobby groups use to persuade the public, in all parts of public life: models that say, for instance, that we can't afford a price on carbon; that life-saving medicine for some people is "too expensive"; or that the loss of an entire species is justifiable if woodchip prices remain above $100 per tonne.

Everyone who uses economic models to excuse the inexcusable wants you to believe that the models are boring. The last thing they want you to do is to pay attention.

Many economists have calculated that it will be cheaper for the world to endure climate change than to prevent it. The models they use to draw this bizarre conclusion are built on thousands of assumptions about everything from the value of human life to the willingness of consumers to buy smaller cars if petrol becomes more expensive. If any one of those assumptions is wrong, the answer will be wrong. If hundreds of the assumptions are out, the answer becomes meaningless. (Some economists then argue that if hundreds of the assumptions are wrong then the errors might cancel each other out. Seriously.)

Imagine you were asked to model the costs of dangerous climate change. Imagine you were in possession of the likely number of people who will die as a result of storms, floods and droughts. Imagine you knew what countries they would die in, and how many years into the future. Would you value all of their lives equally? Would you assume that a Bangladeshi and an American life were "worth" the same? Would you think that the death of a child in 20 years' time was worth as much as the death of a child in 50 years' time?

In our democracy, these ethical questions are usually answered by economists, to two decimal places.

Most economic modellers do not assume that all human lives are equal. Bjorn Lomborg, for example, one of the world's most famous climate sceptics, uses modelling that assumes the lives of people in developing countries are worth a lot less than the lives of Australians or Americans. While the US Declaration of Independence may declare that all men are created equal, most economic models assume that all men (and women) are worth a figure based on the GDP per capita of their country.

Late last year, Bjorn Lomborg asked to meet me, and I wondered whether talking to him would be good fun or a waste of time. It was neither: it was scary and illuminating. After 15 years as the smiling face of climate inactivists, Lomborg had raised his sights. His new mission was to ensure that governments also deliver inaction on global poverty alleviation, public health and gender inequality.

When we met, Lomborg proceeded to explain how his team of economists at the Copenhagen Consensus Center had decided that a number of the United Nations' Millennium Development Goals weren't worth pursuing. His tool of choice for defending such a position? Economic modelling.

Always be careful what you put in writing. Lawrence Summers is the president emeritus of Harvard University and was previously the chief economist at the World Bank. At the World Bank in 1991, he put his name to a notorious memo about the relative value of human life in rich and poor countries. Ironically, it begins with the words "just between you and me".

The Summers memo spells out why it would be "welfare enhancing" (read: "good for humanity") for all toxic waste to be dumped in poor countries:

The measurement of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.

Read: "Since toxic waste will inevitably make someone sick, we might as well make poor people sick, as doing so will minimise the amount of 'foregone earnings'."

The memo continues:

I've always thought that under-populated countries in Africa are vastly UNDER-polluted The concern over [a pollutant] that causes a one in a million change in the odds of prostate cancer is obviously going to be much higher in a country where people survive to get prostate cancer than in a country where under 5 mortality is 200 per thousand.

Read: "If it takes years for some pollutants to make us sick, why not dump pollution in countries where people don't live long enough to get sick from the pollution?"

Why wouldn't you?

Summers claims that the memo was meant to be sarcastic and ironic, but, as anyone who has studied economics can assure you, the logic (if not the morality) is unquestionable. If you assume that humanity's primary goal is to maximise world income, then killing poor people instead of rich people makes perfect sense.

You probably didn't know economists had an assumption about humanity's primary goal, did you? No wonder developing countries think that the developed countries don't really care about their suffering as much as our inconvenience. We don't.

Assumptions such as those made by Summers sit at the heart of the economic models that are regularly used to oppose carbon taxes, support free trade agreements and prevent the introduction of environmental regulations or more generous welfare safety nets.

Much of the power of economists is based on the public's (understandable) lack of desire to read reports written in algebra. That's why we like to use algebra.

While some cultures respect the elderly, economic models generally don't. On the contrary, models such as those at the heart of Joe Hockey's recent Intergenerational Report (IGR) are often used to create a sense of anxiety in the broader community about the "burden" that older citizens place on the "productive" members of the community.

Economic models are at their most powerful when only the powerful are aware of what they contain: thousands of assumptions that range from the immoral and implausible to the well-meaning but estimated. However they are made, the conclusions of a model are only as reliable as its assumptions. Garbage in, garbage out.

Back in 2003, the US public got a peek behind the modeller's curtain, and it didn't like what it saw.

The US Environmental Protection Agency (EPA) has generally valued all American lives equally when conducting so-called costbenefit analyses of policy change. Generally. While pensioners are used to getting a discount on many things, American pensioners were surprised to discover that the EPA had experimented with discounting the value of their lives.

Given that air pollution generally kills the old and the sick, the consequences of devaluing the lives of the old was highly significant. By assuming that the old and the sick weren't worth as much as an average American, it was harder to show that the benefits of tougher air-pollution regulations to the population were greater than the cost of tougher regulations to the car companies. Put simply, the EPA's "pensioner discount" assumption could have saved air polluters a lot of money.

Not surprisingly, once the public realised that economists were devaluing their grandmothers' lives, they got interested. Congress even passed a bill banning federal government funding for research that discounted the value of retirees' lives.

In Australia, a human life is valued by the Department of Finance at $150,000 per year. That said, individual departments, consultants and lobbyists are free to use their own assumptions. Of course, citizens are also free to pore over the thick reports written by the modellers, looking for such assumptions, but few do. You might argue that it is the public, or its representatives in parliament, who should weigh up such "life and death" matters. But while the US Congress has expressed its dismay, the Australian parliament has never considered the issue.

Machiavelli told us that it is better to be feared than loved, because while love is transitory, fear is ongoing.

Politicians have always used fear to achieve their objectives. The "yellow peril", "reds under the bed" and the "War on Terror" are all obvious examples, but have you ever thought about the objectives of the Intergenerational Report?

The government has used the IGR, the National Commission of Audit, the budget, the pre-election economic and fiscal outlook, and the mid-year economic and fiscal outlook to scare the public into accepting that we can never afford to tackle climate change or spend more on health, no matter how rich we become.

Most people, lefties in particular, have little time for economics. Modellers like it like that. Their findings and forecasts crowd out public debate because they, and those who pay them, have the power to limit the options we are allowed to consider.

Most people want to live long and healthy lives. They want their friends and family to do likewise, and they think that population ageing is a good thing for them and their parents. The IGR and its ilk, on the other hand, train us to believe that other people's ageing is a burden.

The fear of the "costs of ageing" now lies at the heart of the campaign to limit our generosity to others and our ambitions for our community. Of course it would be great to provide world-class health care, we are told, but haven't you heard that we are being crippled by the costs of ageing?

Joe Hockey recently said that his first (and most likely last) IGR would be so scary it would "knock voters off their chairs". Look at the debt! Look at the deficit! The sky is falling!

The same government that couldn't care less about climate change in 50 years' time has conniptions about the deficit in 50 years. They cry "Won't somebody think of the children?" with no sense of irony, proportion or consistency.

Unfortunately for Joe Hockey, his IGR is like a monster in a horror movie: the longer it is on screen, the less scary it is. In 2002, when Peter Costello first asked us to imagine how big the deficit would be in 2050, right-thinking citizens dutifully expressed concern. But, like most sequels, IGR episode IV was a pretty tired affair that generated more giggles than screams.

Australia is not only one of the richest countries in the world; Australians are among the richest people the world has ever known. While poverty certainly exists in Australia, the average Australian enjoys a material standard of living that few in the world can imagine. Still, we feel poor. Many Australians believe that retiring with less than $1 million in savings will leave them vulnerable in their retirement. That is exactly how the modelling behind the IGR is designed to make us feel: selfish, broke and vulnerable.

You would think it would be hard to make some of the richest people in the world feel poor, but with 13 years worth of dodgy modelling and powerful voices on side, it turned out to be pretty easy.

The finance industry spends a fortune telling us that you can't "retire with dignity" on less than $50,000 per year (tax free), even if you own your own home. It's certainly more scary than reminding baby boomers that they have a much higher standard of living than their kids. Just how people on the minimum wage of $38,000 manage to raise kids, pay tax, pay rent and maintain their dignity is the great unasked question of Australian politics.

According to the IGR, by 2055 our average incomes will rise by 75%, we will be living longer and healthier lives, and we will be paying a lot less tax. According to Treasury, by 2055 the average Australian will have an inflation-adjusted income of more than $100,000 per year.

All of those numbers come from the IGR, but they aren't the numbers that Joe Hockey wants you to focus on. Economic modellers aren't only expert in making dodgy assumptions; they also know how to put the numbers they want you to find up in lights, and how to bury the rest in the appendices.

My first job as an independent economic consultant was 20 years ago. I'd previously worked with other economists as part of a team but this was my first solo performance. I was a bit nervous.

After a brief phone call explaining what the client wanted, I spent days preparing for our first face-to-face meeting. When I had spent a few minutes outlining what I saw as the strengths and weaknesses of the possible methodological options, the client interrupted.

"Look, mate," he said, "all I want is something about an inch thick. I want to walk into a meeting, slam it on the fucking table, and say, 'According to my economic modelling '"

The IGR isn't an inch thick, but at 145 pages it is assumed to be thick enough to deter most people from reading it closely. (Not all the assumptions made by economists are unrealistic.)

Virtually everything you have heard about the IGR is wrong. It doesn't say we are going broke. It doesn't say we can't afford to maintain the quality of our health system. And it doesn't say that we have to cut the generosity of the age pension. That, however, is what people think it says.

The most important assumption made by Treasury is also the most surprising. The economists at Treasury have assumed that income-tax rates will be cut every year between 2020 and 2055 in order to ensure that we don't collect too much revenue.

The IGR states that if we left the tax system alone for the next 40 years, the government would be flooded with a sea of revenue.

Treasury knows this. They admit it, safe in the knowledge that few people will read the enticingly titled 'Appendix C: Methodology', where it's stated that the emphasis of the IGR "rested on pressures that demographic change was likely to impose on future government spending rather than the way these spending pressures may be financed (such as through increasing revenues or raising debt)".

Read: "The purpose of the report is to get you worried about rising costs. If the report pointed out that budget revenue was likely to rise faster than budget outlays, people wouldn't be scared."

Through careful editing, strategic summarising and a few tricks of data presentation, Treasury is putting out the message that all Australians should be worried about how future people who will be far richer than us, and pay lower taxes, will afford to pay for their health care.

Well played, Treasury. Well played.

As they put it in Appendix B: "Projections in this report have been developed using a range of assumptions There are significant uncertainties around these assumptions. As such, this report should not be viewed as a forecast."

But we can't just keep spending and spending forever, I hear you say. Surely there are clouds on the horizon for which we should be planning.

Australia is not only one of the world's richest countries, but also one of the lowest taxed developed countries. If we wanted to have some of the world's best health, education and public transport systems, we could. If we can't afford world-class services, who can?

But Peter Costello, Joe Hockey and the modellers at Treasury have never wanted to invest in world-class services. They think we should cut taxes, which is fine: in a democracy, people should be free to argue for whatever levels of taxing and spending they want. But the strategy of using modelling to scare us about future budgets effectively removes a range of choices from our democratic menu. It's OK that Costello and other conservatives want to live in a low-tax country that discourages sick people from going to the doctor, but it's not OK to use public servants to trick the public into thinking that this is not a choice. In our democracy these debates aren't won with persuasion, they're won with dodgy modelling designed to convince Australians that we couldn't possibly afford to spend as much on health as Austria or Canada does.

The IGR doesn't show that we are broke. It shows that if we want to keep cutting taxes we will have to cut spending.

Democratic decision-making is pretty ordinary at the best of times, but it is downright awful when key choices are concealed from the public and key evidence in support of a government's preferred option is simply fabricated. Fabricating such evidence is increasingly the role of economic modellers.

A few years ago, I was contacted by representatives of the Bulga Milbrodale Progress Association. Bulga is a nice little town near a big coalmine. Its 400-odd residents were in a fight against Rio Tinto, one of the world's largest mining companies. And, like many people embroiled in a big fight with a powerful company, they realised they were really in a fight about economic modelling.

When they asked me if I was willing to look at an economic impact statement prepared on behalf of the mining company, I responded cautiously. I was keen to help, but told them I would only get involved if they were willing to directly attack the assumptions underpinning the modelling used to estimate the benefits of the mine. The environmental movement had spent decades avoiding a direct attack on the claimed economic benefits of mining, preferring instead to try to counterpose a value on the possums, frogs and trees that are inevitably harmed. I like possums, frogs and trees, but I think attempts to value them are as arbitrary as attempts to value human lives.

They agreed to tackle the miner's claims about economic benefits head-on, and they won the first ever court case to stop a mine expansion or approval in New South Wales. (They won again when Rio Tinto appealed to the Supreme Court, but lost after the state government changed the law to make it easier to approve mines.)

It's never a good look to bulldoze a tiny historic village in the name of foreign shareholders. Rio Tinto knew that it needed to distract attention away from the profits that it would make destroying the village of Bulga and towards the "benefits" that would flow to the community that was adamantly opposed to the project.

That's where the modellers came in.

Rio Tinto's economic consultants wrote a fat report nobody was supposed to read. It made the absurd claim, in its executive summary, that if the mine extension were approved it would create 44,000 jobs: a figure that is more than double the entire NSW mining industry's employment level today.

The 44,000 figure is obviously a deception. The authors had redefined a job as a "person year" (i.e. a job for one person for one year) so that they could multiply their real job-creation estimate by the number of years in the life of the mine to get a bigger number. It's a simple trick, and it only works when people are too busy to read a thick report. The thicker, the better. But that's not all they did.

You have probably heard that mining creates a lot of "indirect jobs" in construction, manufacturing and retail. You may not have heard that building hospitals and employing nurses would have exactly the same indirect benefits. Mining isn't the only industry that can create "indirect jobs", it's just the only industry that spends millions of dollars each year paying economists to estimate such "benefits", and millions more spruiking them to the media.

In most cases, economic modelling isn't used to help us understand the costs and benefits of major projects or policy changes. It is used to conceal them. Rather than outline and discuss the wide range of winners and losers, debate the pros and cons, and make transparent decisions, economic modelling allows all of the messy bits to be hidden.

In 2011, Denmark's general election saw its centre-right government tossed out of power, to be replaced by a minority centre-left coalition led by the country's first female prime minister, Helle Thorning-Schmidt.

Bjorn Lomborg's Copenhagen Consensus Center was one of the first casualties of the change of government. When it was announced that its more than $1 million in funding would be cut, Lomborg visited the new prime minister, urging her to reconsider the government's decision. "I'd love to show you how the Copenhagen Consensus is a good idea," he was reported as telling her.

"I think that probably might be right, Bjorn," she reportedly responded to the sceptical environmentalist. "But I will just get so much more mileage out of criticising you."

Costs and benefits can be calculated any number of ways, and the modeller's assumptions are crucial to the end result. Lomborg had confidently assumed that the Danish taxpayer would continue to fund his work. His costbenefit analyses had found that more effort should be put into free trade and less money spent on tackling poverty and climate change. But, as with all such efforts, garbage in, garbage out.

There is a role for economists, and economic modelling, in public debate. Its role should not be to limit the menu of democratic choices. Instead it should be to help explain the trade-offs.

Good modellers aren't afraid of explaining their assumptions. The clients who pay best, however, don't want the best modellers. They want people who can write a fat report to slam on the fucking table.
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Clawhammer · Mar 30, 2015

I'm not reading all that without a synopsis..... and a beer

mmm....shiney! · Mar 30, 2015

By Richard Denniss
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Should be a law against quoting that idiot.

mmm....shiney! · Mar 30, 2015

Clawhammer said:

I'm not reading all that without a synopsis..... and a beer
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I'll give you a synopsis but you can buy your own fkn beer.

"Take from the producers and give to the leeches."

JulieW · Mar 30, 2015

Always be careful what you put in writing. Lawrence Summers is the president emeritus of Harvard University and was previously the chief economist at the World Bank. At the World Bank in 1991, he put his name to a notorious memo about the relative value of human life in rich and poor countries. Ironically, it begins with the words "just between you and me".

The Summers memo spells out why it would be "welfare enhancing" (read: "good for humanity") for all toxic waste to be dumped in poor countries:

The measurement of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.

Read: "Since toxic waste will inevitably make someone sick, we might as well make poor people sick, as doing so will minimise the amount of 'foregone earnings'."

The memo continues:

I've always thought that under-populated countries in Africa are vastly UNDER-polluted The concern over [a pollutant] that causes a one in a million change in the odds of prostate cancer is obviously going to be much higher in a country where people survive to get prostate cancer than in a country where under 5 mortality is 200 per thousand.

Read: "If it takes years for some pollutants to make us sick, why not dump pollution in countries where people don't live long enough to get sick from the pollution?"
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Just read that bit and consider where you stand in their plans insect.

Shaddam IV · Mar 30, 2015

Clawhammer said:

I'm not reading all that without a synopsis..... and a beer
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Something about how climate modelling is used to circumvent reality.

Shaddam IV · Mar 30, 2015

JulieW said:

Always be careful what you put in writing. Lawrence Summers is the president emeritus of Harvard University and was previously the chief economist at the World Bank. At the World Bank in 1991, he put his name to a notorious memo about the relative value of human life in rich and poor countries. Ironically, it begins with the words "just between you and me".

The Summers memo spells out why it would be "welfare enhancing" (read: "good for humanity") for all toxic waste to be dumped in poor countries:

The measurement of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.

Read: "Since toxic waste will inevitably make someone sick, we might as well make poor people sick, as doing so will minimise the amount of 'foregone earnings'."

The memo continues:

I've always thought that under-populated countries in Africa are vastly UNDER-polluted The concern over [a pollutant] that causes a one in a million change in the odds of prostate cancer is obviously going to be much higher in a country where people survive to get prostate cancer than in a country where under 5 mortality is 200 per thousand.

Read: "If it takes years for some pollutants to make us sick, why not dump pollution in countries where people don't live long enough to get sick from the pollution?"
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Just read that bit and consider where you stand in their plans insect.
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I read that and consider that it is unverified hearsay. Got a link to the original document?

JulieW · Mar 30, 2015

First port of call.

There is a thing called Google which is available to all. It points to sites of interest.

http://en.wikipedia.org/wiki/Summers_memo

But don't bother. Wikipedia is notoriously edited to suit particular voices, though the authors saying that they were being 'sarcastic' might be a case if you can be bothered.

p.s you did notice that this was from the Chief Economist of the World Bank - a notably misanthropic organisation that has corrupted and degraded scores of countries in South America, Africa, Asia and Europe.

It's these people:

Economic Hitman John Perkins who used to work closely with these institutions: 'In my talks, I often find it necessary to remind audiences of a point that seems obvious to me but is misunderstood by so many: that the World Bank is not really a world bank at all; it is, rather a U. S. bank. Ditto, its closest sibling, the IMF. In fact, if one looks at the World Bank and IMF executive boards and the votes each member of the board has, one sees that the United States controls about 16 percent of the votes in the World Bank (Compared with Japan at about 7%, the second largest member, China at 4.5%, Germany with 4.00%, and the United Kingdom and France with about 3.8% each), nearly 17% of the IMF votes (Compared with Japan and Germany at about 6% and UK and France at nearly 5%), and the US holds veto power over all major decisions. Furthermore, the United States President appoints the World Bank President."

The IMF and World Bank, through their success in buying out political leaders and subsequently pillaging the economies of these corrupt or corrupted leaders under their debt governance, have rightly earned themselves a terrible reputation globally. As a result, these two organisations have attempted to rebrand themselves as reformed, baiting the brightest students into applying for job employment. However, the people in developing countries in South America, Africa and Asia will not easily be fooled again by the corrupt debt governance. In concert with the privately owned Federal Reserve Bank or 'FED', these organisations are now pushing for a One World Currency (and a paperless society), which may be the Special Drawing Rights (SDR) issued by the IMF. Very few people are aware that the IMF, without the democratic oversight of people of any country able to vote against or influence their actions, are able to issue the SDR debt governance currency, which is right now convertiable into dollars and most other currencies. There is talk in banking circiles that the IMF would like for their SDR's to have partial gold backing, and to use this gold backing to replace the USD as the world's global debt currency for trade and finance.

http://www.negotiations.com/questions/IMF-World-Bank-corruption/
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But you may be able to refute that using Google.

JulieW · Mar 30, 2015

And here's some more unsubstantiated information about the IMF and the World Bank - the place where an economist can suggest poisoning Africa because the costs work out quite well.

So I thumbed through my purloined IMF Strategy for Ecuador seeking a chapter on connecting the country's schools to the world wide web. Instead, I found a secret schedule. By 1 November this year, it says, its government is ordered to raise the price of cooking gas by 80 per cent. It must eliminate 26,000 jobs and halve real wages for the remaining workers by 50 per cent in four steps in months specified by the IMF. It must begin to transfer ownership of its biggest water system to foreign operators by July and grant BP's Arco subsidiary the right to build and own an oil pipeline over the Andes.

That's for starters. In all, the IMF's 167 loan conditions look less like an assistance plan and more like a blueprint for a financial coup d'etat.

The IMF would say it has no choice. Ecuador is broke, thanks to the implosion of its commercial banks. But how did Ecuador, an Opec member with resources to spare, end up in such a pickle?

For that, we have to turn back to 1983, when the IMF forced its government to take over the soured private debts owed by Ecuador's elite to foreign banks. For this bail-out of US and local financiers, Ecuador borrowed $1.5 billion.

To repay this loan, the IMF dictated price hikes for electricity and other necessities. And when that didn't drain off enough cash, yet another assistance plan required the state to eliminate 120,000 jobs.

Furthermore, while trying to meet the mountain of IMF obligations, Ecuador foolishly 'liberalised' its tiny financial market, cutting local banks loose from government controls and letting private debt and interest rates explode.

Who pushed Ecuador into this nutty romp with free-market banking? Hint: the initials are IMF. It made bank liberalisation a condition of another berserk assistance plan. The facts of this nasty little history come from the IMF report marked: 'Please do not cite.' Pretend I didn't.

The IMF and the World Bank have lent a sticky helping hand to scores of nations. Take Tanzania. Today, 1.4 million people there are getting ready to die. They are the 8 per cent of the nation's population who have the Aids virus. The financial 'rescuers' found a brilliant neo-liberal solution: require Tanzania to charge for hospital visits, previously free. This cut the number of patients treated in the three big public hospitals in the capital, Dar es Salaam, by 53 per cent. The financial cures must be working.

The bodies told Tanzania to charge school fees. Now the bank expresses surprise that school enrollment is down from 80 per cent to 66 per cent.

Altogether the Bank and IMF have 157 other helpful suggestions for Tanzania, and the Tanzanian government secretly agreed last April to adopt them all. It was sign or starve. No developing nation can borrow hard currency without IMF blessing (except China, whose output grows at 5 per cent a year thanks to it studiously following the reverse of IMF policies).

The IMF and World Bank have effectively controlled Tanzania's economy since 1985. Admittedly, when they took charge they found a socialist nation mired in poverty, disease and debt.

Their experts wasted no time in cutting trade barriers, limiting government subsidies and selling off state industries. This worked wonders. According to bank-watcher Nancy Alexander of the Washington-based Globalisation Challenge Initiative,in just 15 years Tanzania's GDP has dropped from $309 to $210 per capita, the literacy rate is falling and the rate of abject poverty has jumped to 51 per cent of the population.

Yet somehow the bank has failed to win over the hearts and minds of Tanzanians to its free-market gameplan. Last June, the bank reported in frustration: 'One legacy of socialism is that most people continue to believe the state has a fundamental role in promoting development and providing social services.'

The World Bank and the IMF were born in 1944 with simple, laudable mandates: between them to fund post-war reconstruction and development projects and lend hard currency to nations left skint by temporary balance of payments deficits.

But in 1980 they seemed to take on an alien form. In the early Eighties, Third World nations, haemorrhaging after the fivefold increases in oil prices and a similar jump in dollar interest payments, brought their begging bowls to the two bodies. But instead of debt relief, they received structural assistance plans listing an average of 114 'conditionalities' in return for capital.

The particulars varied from nation to nation, but in every case, they had to remove trade barriers, sell national assets to foreign investors, slash social spending and make labour 'flexible' (that is, crush unions).

Some say the vicious policy change resulted from the election that year of Ronald Reagan as US President, the quickening of Margaret Thatcher's powers and the beginning of the neo-liberal ascendency. (My own information is that the IMF and World Bank were taken over by a space alien named Larry. It's obvious that 'Larry' Summers, once World Bank chief economist and now US Treasury Secretary, is really a platoon of extra- terrestrials sent to turn much of the human race into a source of cheap protein. But I digress.)

So what have The Aliens accomplished with their free-market prescriptions? An article by Samuel Brittan in last week's Financial Times declared that the new world capital markets and free trade have 'brought about an unprecedented increase in world living standards'. Brittan cites the huge growth in GDP per capita, life expectancy and literacy in the less developed world from 1950 to 1995.

Now hold on a minute. Until 1980, virtually every nation in his survey was either socialist or welfare statist. They were developing on the 'Import Substitution Model', by which locally-owned industry was built through government investment and high tariffs, anathema to the neoliberals.

In those dark ages of increasing national government control and ownership (1960-1980), per capita income grew by 73 per cent in Latin America and by 34 per cent in Africa. By comparison, since 1980, Latin American growth has come to a virtual halt, growing by less than 6 per cent over 20 years - and African incomes have declined by 23 per cent.

Now let's count the corpses. From 1950 to 1980, socialist and statist welfare policies added more than a decade of life expectancy to virtually every nation on the planet. From 1980 to today, life under structural assistance has become brutish and shorter. Since 1985, the total number of illiterate people has risen and life expectancy is falling in 15 African nations. Brittan attributes this to 'bad luck, [not] the international economic system'. In the former Soviet states, where IMF and World Bank shock plans hold sway, life expectancy has plunged, adding 1.4 million a year to the death rate in Russia alone.

Admittedly, the World Bank and IMF are reforming. The dreaded structural assistance plans have been renamed 'poverty reduction strategies'. Doesn't that make you feel better?

Recently, the IMF admitted that 'in the recent decades, nearly one-fifth of the world population have regressed' - arguably 'one of the greatest economic failures of the twentieth century.' And that, Professor Giddens, is a fact.
http://nadir.org/nadir/initiativ/agp/free/imf/imfcrimes.htm
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As you may have gathered I despise these people as mass murderers and the psychopaths that will kill the planet after enslaving its remaining inhabitants.

bordsilver · Mar 30, 2015

Clawhammer said:

I'm not reading all that without a synopsis..... and a beer
Click to expand...

Synopsis:
It is a repetition of hundreds of previous economists who have explained that economics does not make value judgements. For example, summarising the conclusion to Murray Rothbard's (1970) "Power and Market":

Economics cannot by itself establish ethical judgements. It can and should be developed in a value-free manner. Economics provides us with true laws, of the type "If A, then B, then C, etc.". Some of these are true all of the time (the law of diminishing returns, time preference, opportunity cost etc.) while others require A to be established as true before the consequents can be affirmed in practice. The economist is a technician who explains the consequences of various actions.

In essence, economics is a discipline that studies the formal implications of the fact that people use means to attain various chosen ends. The economist can analyse the consequences of the free market and of various systems of coerced and hampered exchange the myriad consequences of different political systems and different methods of government intervention. However, once the consequences have been presented, the economist retires from the scene and the morality and ethics of the individuals must now choose according to the set of value or ethical principles they hold dear.
Click to expand...

Clawhammer · Mar 30, 2015

bordsilver said:

Clawhammer said:

I'm not reading all that without a synopsis..... and a beer
Click to expand...

Synopsis:
It is a repetition of hundreds of previous economists who have explained that economics does not make value judgements. For example, summarising the conclusion to Murray Rothbard's (1970) "Power and Market":
Click to expand...

geezus...and it took 12 scrolling pages of text to tell us that?
Can't wait for the next tombe... 'teaching granny to suck eggs"

bordsilver · Mar 30, 2015

Richard Denniss said:

Australia is not only one of the world's richest countries, but also one of the lowest taxed developed countries. If we wanted to have some of the world's best health, education and public transport systems, we could. If we can't afford world-class services, who can?
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Umm, we do have some of the world's best health, education and public transport systems.

Richard Denniss said:

A few years ago, I was contacted by representatives of the Bulga Milbrodale Progress Association. Bulga is a nice little town near a big coalmine. Its 400-odd residents were in a fight against Rio Tinto, one of the world's largest mining companies. And, like many people embroiled in a big fight with a powerful company, they realised they were really in a fight about economic modelling.

When they asked me if I was willing to look at an economic impact statement prepared on behalf of the mining company, I responded cautiously. I was keen to help, but told them I would only get involved if they were willing to directly attack the assumptions underpinning the modelling used to estimate the benefits of the mine. The environmental movement had spent decades avoiding a direct attack on the claimed economic benefits of mining, preferring instead to try to counterpose a value on the possums, frogs and trees that are inevitably harmed. I like possums, frogs and trees, but I think attempts to value them are as arbitrary as attempts to value human lives.

They agreed to tackle the miner's claims about economic benefits head-on, and they won the first ever court case to stop a mine expansion or approval in New South Wales. (They won again when Rio Tinto appealed to the Supreme Court, but lost after the state government changed the law to make it easier to approve mines.)
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This is an utter lie. It was never a fight about the "economic modelling" it was a fight for people's rights under NSW law.

Richard Denniss said:

Would you value all of their lives equally?
Click to expand...

Do people value the lives of an ISIL terrorist, Adrian Bailey, Charles Manson, Ivan Milat etc the same as Tom Hanks, Bill Gates, John Lennon or their mother? What about valuing your own mother versus mine? Valuing other people's lives (and your own) can be done in a variety of ways and from the perspective of compensating victims of crime or other people's actions has a valid place in most people's ethical worldview. That a dispassionate, value-free economist can also apply the same valuation methods to other people is only logical. Whether anyone should perpetrate a crime based on such information is a question outside of the realm of economics. Trying to conflate the two completely different spheres of human action for the purpose of slandering economics is intellectually dishonest from someone who calls themselves an economist.

[Aside: Ironically, for someone who claims to care so much about the morality of things, Richard is a strong promoter of Legal positivism (where it is power alone that creates law) instead of natural law. The consequence is that morality is completely separated from the law and that a person's actions are judged as lawful or unlawful, criminal or non-criminal, depending not only on the nature of the action, but on the person's relationship to the state. It means that the dispute becomes more about the words in a statute. The question of what is right or wrong, just or unjust, is irrelevant and out of place. The only question is what has been written. It also allows different actions for different people.]

JulieW · Mar 31, 2015

I haven't noticed the world's best public transport systems. Which suburb is it in?

mmm....shiney! · Mar 31, 2015

JulieW said:

the world's best public transport systems.
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^ oxymoron

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