Sustaining some faith in economists

Economics journalist Ross Gittins has come to play an important role in Australia's body politic.  Amongst readers of the Fairfax Press, and generations of  students studying economics for their Higher School Certificate (and its variations),  he almost single-handedly sustains some faith in the economics profession.  As I have blogged before,  I do not always agree with him.  In terms of heterodoxy within economics he rarely strays far from the mainstream.  But that is a particularly Australian affliction anyway.

Several Gittins columns from 2010 and 2011 made it into my cutout pile (I know, very last century as is my pocket diary).  These included 'Politicians confound classical theory that competetition leads to greater choice'  (The Age, August 30, 2010); 'People aren't donkeys so best put away the carrot and stick' (The Age, April 20, 2011) and 'Breakdown in relations is everyone's business'.  On the strength of my enthusiasm for this last article I sent Ross a copy of my book, 'Systems Practice. How to Act in a Climate-change World’.  My systems-theoretical arguments - and their practical implications - extend and strengthen the arguments made in that piece.  It is also an argument in favour of the Systemic and Adaptive Governance Research Program that I am running.

It remains to be seen if Ross sees the same connections and possibilities?

What are some of the systemic implications of a power analysis of global agriculture?

A recent work called the 'Power in Agriculture Report', commissioned for the 2011 Oxford Farming Conference, and undertaken by the Policy Research Unit at the Scottish Agricultural College, raises a number of interesting systemic insights.

As Tara Garnett of the Food Climate Research Network (FCRN) observes: 'The political power relevant to global agriculture is still concentrated in the hands of the USA, major EU countries and some other economically powerful countries within the G8 coalition' but 'in the coming decades, EU countries may have to confront increased pressure to allow greater access to their markets'.  Competition is 'likely to come from emerging economies – like China, India and Brazil..'

From within Australasia the rhetoric seems to imply that Australia and NZ have more power than this analysis reveals.  This analysis raises significant uestions about  Australia's focus on WTO/GATT arrangements and other policies led by idealogical commitments to economic theory rather than the hard work of 'real politik'.  It also raises questions about whether Australia's pursuit of free trade agreements have been helpful.  In the power index devised by the report's authors Australasia comes in at less than half that of the EU and USA and on a par with Brazil.  Perhaps surprisingly it is also less than the UK.

Power now and in the future is likely to be concentrated in the hands of TransNational Corporations (TNCs) who are moving (really, have already moved) to incorporate emerging nations into their networks of power.  Consider the following findings:

• four companies account for 75-90% of global grain trade;
• 10 companies represent over 40% of the global retail market
• seven companies control virtually all fertiliser supply
• five companies share 68% of the world's agrochemical market
• three companies control almost 50% of the proprietary seeds market

 And where are these predominantly based ? The US and EU of course!  The authors did note, however, that: 'in some cases civil society organisations and farmer groups have had a significant impact in countervailing or balancing corporate influences'.

In what is decribed as a 'potentially grim picture' one of the reports conclusions is that: ' population growth, depleting mineral reserves and the impact of climate change will all put increased pressures on natural resource availability and it is clear, as evidenced through the process of ‘land grab’, that control of natural resources will become increasingly important as they become more scarce.'

Where good ideas come from

This YouTube clip from Steven Johnson relates well to what is taught in our recent Open University course (TU812): 'Managing systemic change: inquiry, action and interaction'.  In particular, as my colleague Chris Blackmore says:

"Good stuff here….. links quite well with Donald Schon’s early work on ‘ideas in good currency’ that we include in TU812"

Cyber-systemic conference in Vienna and ASC in Asilomar in July

Note from Ranulph Glanville:

The EMCSR (European Meeting on Cybernetics and Systems Research) conference series was founded in 1972. At the last meeting in 2010, Robert Trappl, who had chaired it since its beginning, retired. The new chair, Wolfgang Hofkirchner, who directs the Bertalanffy Archive in Vienna, has just published the outline program for next spring's conference.

There are changes in how the conference will be run. For instance, round table discussions are welcome. There will be a pre and post doc colloquium. There are new symposia and symposium chairs. And the process for submission and publication is different, with extended abstracts for proposals, and papers written in final form after the conference, for publication.

Please note the symposia (look under programme >> symposia). Apart from symposium E, chaired by Karl Mueller and myself, there are other symposia that cover a wide range of different approaches and areas.

I invite you all to have a look at the programme and, if you find the conference interesting, exciting and/or relevant, to make arrangements to be there. Check out the web site: http://www.emcsr.net.  Vienna is lovely in mid-April.

At the same time, let me advise you of the American Society for Cybernetics' conference, 9 to 13 July, at Asilomar State Park Conference Centre, California, to be held in conjunction with the Bateson Idea Group. This promises to be a richly interesting event, and will remind us that there many sources of today's cybernetics, and many ways forward. This conference is in the week before the ISSS conference at San Jose: we are planing a special, reduced rate for those attending both. The conference web site will be launched in the new year, and will be accessible through the ASC home page, http://www.asc-cybernetics.org

Economist's critique of economists

Thanks to Roy Madron for drawing this Guardian article by Bernard Harcourt to my attention along with the following text:

"The contention from an economist, a politician, a pundit or columnist opining about what Occupy Wall Street must do to succeed is no longer a fully meaningful sentence because the authors of those sentences themselves have failed.

That seems to be a central message of the Occupy movement: the purported experts are precisely the ones who got us in this situation that so many perceive as intolerable – a condition of continuously increasing inequality where, today, "the 400 wealthiest Americans have a greater combined net worth than the bottom 150 million Americans." That, I take it, is the guiding Jacobin spirit of this new form of political disobedience, but without the Jacobin leadership. And it is precisely the leaderlessness that accentuates the new syntactic challenges: those who are trying to "steer" Occupy Wall Street in the "right direction" – whether with good or ill will – have already failed miserably and, as a result, there is no authorial grammar to their statements.

Harcourt is the author of  The Illusion of Free Markets and this review shows his position

 

Professor Bernard Harcourt has recently released a compelling book "The Illusion of Free Markets: Punishment and the Myth of Social Order." Harcourt, a professor of law and chair of the political science department at the University of Chicago, painstakingly traces the parallel historical trend of increasing punishment during eras of strong free market advocacy.

 

Harcourt's Illusion presents crucial historical evidence that when nations' focus on freeing their trading and capital markets, there is always a concomitant rise in that nation's imprisonment and incarceration rates. Of course, the rise in incarceration is always of the nation's poor and disempowered.

Harcourt's thesis perfectly situates the failed American War on Drugs. The explosive rise in mass incarceration in the United States over the past 25 years (imprisonment increase of 335% as a result of the War on Drugs) occurred when the presidential administrations of Reagan, Bush Sr., Clinton and Bush Jr. simultaneously worked tirelessly to deregulate the U.S. capital markets. Free market advocacy and deregulation have been occurring at exactly the same time that prison rates and populations have been skyrocketing. Harcourt describes how this is not just an American anomaly, but is a global historical reality.

The question that this historical reality begs is why?

 

Why during eras of powerful free market advocacy do governments' radically imprison their own citizens?

A great question that no economist seems willing to hear, let alone try to answer. "

Stiglitz on inequality US style

As always Stiglitz is systemically revealing in his concerns and writing.

Richard Wolff's systemic account of the financial meltdown

 Just watch the preview.  With thanks to Roy Madron.


"With breathtaking clarity, renowned University of Massachusetts Economics Professor Richard Wolff breaks down the root causes of today's economic crisis, showing how it was decades in the making and in fact reflects seismic failures within the structures of American-style capitalism itself. Wolff traces the source of the economic crisis to the 1970s, when wages began to stagnate and American workers were forced into a dysfunctional spiral of borrowing and debt that ultimately exploded in the mortgage meltdown. By placing the crisis within this larger historical and systemic frame, Wolff argues convincingly that the proposed government “bailouts,” stimulus packages, and calls for increased market regulation will not be enough to address the real causes of the crisis - in the end suggesting that far more fundamental change will be necessary to avoid future catastrophes. Richly illustrated with motion graphics and charts, this is a superb introduction designed to help ordinary citizens understand, and react to, the unraveling economic crisis."

First carbon capture testbed opens in Yorkshire

In the spirit of balance I felt it important to acknowledge that:

'Energy and climate change secretary Chris Huhne has opened the UK's first real-world pilot project to test whether carbon emissions can be captured from coal-fired power stations and buried underground, to fight global warming.'

The article acknowledges that the project  'comes after considerable uncertainty over the viability of projects in the UK, since several other large players including SSE, BP and E.ON have recently cancelled projects due to cost factors.'

The article also makes clear that UK government policy in this area is in dissaray, and increasingly out to attack what George Osborne has termed 'green tape'!  My own feeling is that 'green tape' is an emergent property of a policy position that lacks systemic clarity, urgency and strategic resolve.

Not seeing and talking about the bigger picture - and why it matters

Miles Mander and colleagues make an excellent point in their article that argues:


'As environmentalists, we are terrible salespeople. We are not enabling people in society to make informed decisions. So people are left to make their own meaning of the role that the natural environment plays in their lives and in the lives of others based on lists of ecological components, but without a sense of the bigger picture. People end up making trade-offs between ecological curiosities, on one hand, and the services supplied by new developments, on the other. The inevitable result is that they choose the known benefits offered by development.


We environmentalists are failing to explain how ecological processes improve people’s lives and contribute to the success of businesses, governments, and communities. How can lists of ecological curiosities help the city treasurer, city engineer, or city manager make an informed decision when she must choose between providing potable water to city residents or protecting a forest?'

They go on to argue that:

'The evolving language around ecosystem services is now starting to build the bridge between scientists’, engineers’, and society’s perceptions of the environment. Ecosystem services is becoming the common currency, or language, between society, engineers, and ecological sciences. The time for all sides to learn this common language has never been more urgent or, indeed, opportune'

Carbon capture and storage - a systemic non-starter?

Carbon sequesteration has never made systemic sense to me so I am not surprised to see reports emerging such as the following:

'The future of carbon capture and storage (CCS) was called into question last week with two high profile projects being cancelled. The UK government scrapped plans for the nation's first CCS project at the Longannet power station in Fife, as it became apparent the project would require more funding than the £1 billion the government is prepared to allocate.

Meanwhile Vattenfall's application to develop a CCS project at a Danish geological structure has been denied. The country's government is waiting to evaluate the success of CCS projects in other nations before moving forward with any of its own.'

Joe Romm argues here that:

'There are simply too many unanswered questions for anyone to say today that we could rely on large-scale deployment of CCS in the 2030s as a major climate solution.'

Gale and Gusto launched with fanfare

A few weeks ago we went to the launch of the two new wind turbines commissioned by Hepburn Wind which is Australia's first community wind farm.  It was a delightful community-oriented ceremony in which 760 people gathered on Ron and Nathalie Liversedges property  to witness local 10 year old Neve Bosher of St Augustine’s School in Creswick cut a massive ribbon wrapping the girth of a 68m high wind tower. Neve was the winner of a competition run through local schools to name the turbines - hence Gale and Gusto!  These turbines are symbolic of what could become widespread throughout Australia with far-sighted governance and community engagement. 

Whilst the Australian PM has written in support of the development the policy setting is still very uncertain. Depite the policy uncertainties Hepburn Wind had made significant achievements by the time of their 4th birthday in July this year. Hepburn Wind started from humble beginnings with a simple, but powerful idea — that a community could own and operate its own wind farm for the benefit of the entire community.

The Hepburn Renewable Energy Association (now known as SHARE), with the help of many, established Hepburn Wind.  In July 2007, 23 members came together and voted to form the co-operative and vote in the first board. In just four years Hepburn Wind grew to almost 1900 members and are proud of their role in establishing the community renewable energy movement in Australia.  Their achievements include:

• built a $13.5m wind farm, the first in the country to be initiated and owned by a community 
• almost completed commissioning and already begun generating clean, safe energy for our community
• raised more than $9.6m from the community, been awarded $1.7m in state government grants and secured a $3.1 financing facility with Bendigo Bank
• joined up almost 1900 members, mostly locals
• entered into an innovative power off-take agreement with Red Energy that will enable supporters to purchase  locally generated power, while at the same time delivering significant financial benefits to the community
• applied the co-operative legal structure where members have equal voting rights (ensuring democratic control) but share returns in proportion to their investment
• developed the most generous benefit sharing program of any wind farm in the country, which will give special benefits to those living closest to the project as well as returning well in excess of $1m to the Hepburn Wind Community Fund over the next 25 years.
• set a new standard for community engagement and support for a wind farm — recognised with a recent honour, the Victorian Premier’s Sustainability Award for 2011.

Earlier this month the Clean Energy Future package completed its passage through the Australian parliament. From the middle of next year there will be in place the beginnings of the policy framework that will usher in a lower pollution future.

As well as pricing carbon pollution, the full package mandates the establishment of the Clean Energy Finance Corporation (CEFC). The CEFC will direct $10 billion of the funds collected from the big polluters towards driving commercial investments in clean energy.

Hepburn Wind, Embark and their many supporters have worked hard to establish the community energy sector. With almost 60 groups nationwide starting their own journey of community power, it is important to ensure that the CEFC gets behind this sector.

The CEFC is currently seeking advice on the design of the $10 billion program — this is a great opportunity for systemic perspectives to be heard. Community groups, environment organisations, expert and passionate individuals need to advocate for the inclusion of community renewable energy into the mandate of the CEFC.

Hepburn Wind's key messages concern three basic requirements for supporting the community energy sector:

• recognise the value of engaging the community in the clean energy transition by specifically including community energy projects
• ensure that community projects are not ruled out due to their relatively small scale
• make provision for early stage equity investment in community projects

The community energy sector warrants specific attention in the construction of the CEFC as it will underpin community understanding of and support for both clean energy policy and the roll out of clean energy infrastructure. This seems to me to be an essential climate chnage adaptation strategy for Australia and to make systemic sense - distributed, resilient, networked community enterprises make sense in a climate change world where surpise and breakdown in the face of extremes will be more common.

Submissions must be emailed to cefc@treasury.gov.au by 5.00pm Thursday 8 December. Anyone can make a submission.

Using systems thinking to good effect

I have made postings before about how the Munro Review of child protection and social work practice drew heavily on systems thinking and advocated more systemic practice.  It is pleasing that good work is emerging in this field influenced by the report's findings and the enthusiasm of local staff in Hackney.

The 'howlers' are in the ascendency?

I began this post some months ago, but never quite finished it despite the plethora of examples that demonstrate my point.   I wrote then:  After nearly three months away from Australia I have returned to find that the 'howlers' have flourished in my absence.  Barbara Kingsolver's potent metaphor from her book The Lacuna fits all too well, unfortunately.  She says, referring literally, but not metaphorically, to a troup of Mexican monkeys:

'In the beginning were the howlers.  [Their howling] would start with just one: his forced rythmic groaning like a saw blade. That aroused the others near him, nudging them to bawl a long with his monstrous tune. Soon the maroon-throated howls would echo back from other trees...As it was in the beginning, so it is every morning of the world' (p. 3)

I find myself very unsettled, and not unlike Kingsolver's young protagonist who, subjected to the daily tirade from the howlers, wakes terified 'at every day's dawn'.

Clearly, and thankfully, I am not the only one worried.  But those who worry as I do are drowned out it would seem by the howlers.  Sean Carney illustrates my point well in his article in the Saturday Age when he says of the howler-in-chief:

"Since he became leader in December 2009, he [Tony Abbot] has reduced himself almost to a political parody - a politician who can rail and complain and harness community anger and generate fear but himself appears to stand for hardly anything, including the words from his own mouth."

Barry Jones pursues a similar line of argument to mine when he claimed during the week: 'intelligent discussion all but extinct'.  What is it about Australians?  More and more they seem to portray all the worst features of those trapped in an island state, where news of difference and reasoned debate merely trigger even more outrageous howling.  My cousin, a therapist, relates a story about a German client, a young woman here because of her relationship with an Australian lad, disturbed because she has yet to encounter anyone in her circle able to engage in civilised critical discussion. Having been in the reverse situation when young, with a German girlfriend, I can relate to her experience. I cannot imagine any Australians I know in Australia sitting in a mixed sauna discussing the latest news of the Baader-Meinhoff gang and the antics of Helmut Schmidt. But that was how it was in Munich in the 1970s.

In many ways the Murdoch press in Australia is the main megaphone for the howlers.  But how it works is not straightforward.  Some years ago when Vice Master of Wesley College at the University of Sydney I helped the students run a guest speaker program. One of the more interesting speakers was Wendy Bacon, then a well recognised and 'radical' journalist.  She was asked whether she had ever had stories censored by her employers (Murdoch, Packer, Fairfax). Her answer was revealing.  My memory of her answer was that to her knowledge she had never had a story censored or blocked by her employer.  Instead, she said, the main form of censorship was self-censorship by journalists themselves. They knew that if they wanted to keep their job, or to get another job in Australia, they had to observe certain rules.  Concentration of ownership in the press has increased since Wendy gave this talk so I imagine that self-censorship has become even more insidious.  There is good evidence for this today in an article by Wendy Bacon in The Age where she reports a revealing exchange with News Corp (Australia) CEO John Hartigan:

"I emailed Hartigan some questions. They included: Do you consider that bias by newspapers in cities where only one company owns a newspaper could ever be an issue? How do you monitor whether fair means of reporting the news are being applied across the company? What auditing or monitoring mechanisms do you apply? Are there occasions when you do take up matters of bias with editors? Do you think that it would be a good idea if the Australian Press Council became an independent body with funding from both media and other sources, including government?

I received this reply:
''Your bias against our organisation over many years and the errors and omissions in your recent New Matilda piece renders your right to answers from me completely redundant. It is deeply troubling to me and to all of our editors that someone like you has any role in teaching young journalists in Australia.''

Hartigan did not elaborate on my errors or omissions. Nor, to my knowledge, has he pointed these out to online magazine New Matilda (which has a policy of publishing corrections)."

It is a pity freedom of information legislation cannot be used to find out what was discussed at the recent meeting of  News International senior staff at Rupert Murdoch's Californian ranch.  Given the power News International has, the intentions of FoI legislation would, in this instance be better directed at News International than governments.

I agree with Martin Flanagan, whose witty piece today sums up the week of Murdoch theatre in tremendous style, when he says:

  "I hope the debate about journalism that the News of the World has triggered hits Australia like a tsunami"

Since I wrote this piece Murdoch junior has reappeared before the House of Commons Committee in the UK highlighting to us all the inadequacy of his answers.  In Australia an inquiry has been mounted and is now underway.   I fear its terms of reference are inadequate to the circumstances. Particularly telling is recent research released from Wendy Bacon's academic group which concludes:

" The first of a two-part analysis of Australian press coverage of climate change, A Sceptical Climate, has found that between February and July this year negative coverage of the carbon policy across 10 major newspapers outweighed positive coverage by 73 per cent to 27 per cent. Report author Professor Wendy Bacon said the overall result was driven by News Ltd group publications (82 per cent negative versus 18 per cent positive), compared to a more balanced result for the Fairfax press (57 per cent positive articles outweighing 43 per cent negative)."

News Corp is clearly the verdant forest for modern day howlers!

Storms over Melbourne

Release of Insight Maker

Systems Thinking World has just advised of the first general release, on Friday, October 21, 2011, of  Insight Maker -  a FREE web based drawing and simulation package.

Insight Maker was designed as a modeling and simulation environment but it also does Rich Pictures, Mind Maps, Dialogue Maps and Causal Loop Diagrams with ease.

Please refer to the overview at  this site for further insights as well as a list of the new features in the general release.

Feedback from users is welcome.

New Book from Bernard Scott

Second-order cybernetician, Bernard Scott has  had a collection of his papers published recently. Bernard is well know as a scholar of 'conversation theory' as developed by Gordon Pask.

The geoplitics of water and dams

This article provides valuable insights into the current status of the geopolitics of water, particularly the China, Laos, Burma 'triangle':

"The Mekong and Irrawaddy rivers, though unconnected and hundreds of miles apart, are both integral to life in Southeast Asia, supporting millions of people and more than 1,200 species of animals, including freshwater dolphins and-in the Mekong-giant catfish.

Now, in an energy-hungry age on the continent, the rivers share another distinction, as wellsprings of financial temptation for the struggling countries that rely on their flow, Laos and Myanmar (Burma). Both countries are grappling with decisions on whether to build massive hydropower dams on the two significant rivers. The projects could put fragile ecology and associated livelihoods at risk, but the dams could help the two countries reap billions of dollars by exporting the megawatts to China and Thailand, two neighbors with rapidly growing energy demand......."

Thinking clearly about China?

The achievements of China within the paradigm they have pursued have been so impressive that it is sometimes easy to be seduced by the numbers.   In his recent thought provoking talk at the LSE, Malcolm Turnbull made the following observations about China:

• 'Population – 22 to 20 per cent
• Poverty (< $US1.25/day) – 38 to 15 per cent
• Manufacturing value added – 5 to 11 per cent
• Steel production – 12 to 39 per cent
• Foreign reserves – 3 to 22 per cent
• Resident-owned patent filings – 1 to 15 per cent
• Telephone lines – 1 to 29 per cent
• Internet users – 0 to 15 per cent
• Carbon emissions – 11 to 20 per cen'

Acknowledging the great achievements of the last 30 years, Turnbull goes on to say:


'Finally, consider the environment. Over millennia floods and famines have seen off many an Emperor – tangible evidence that he had lost the mandate of heaven. China faces some of the most severe environmental challenges in the world. Some are direct consequence of global warming; as the Himalayan glaciers melt more water becomes available when it is not wanted, in winter, and less when it is, in summer.
 
At the same time, industrial pollution of the air and water is so severe that it’s a political issue – what good is it to have a television or a car if you cannot breathe the air or drink the water?

And China’s ability to feed itself is threatened by diminishing water availability.  Agriculture on the northern plain is largely irrigated using groundwater which has been unsustainably extracted to a point where wells are running dry.  Water can be desalinated or pumped from the south for cities, but that is too expensive for farming.'

Following an excellent analysis Turnbull asks: what is to be done?   Amongst his many suggestions none question the current development trajectory, nor suggest how China, Australia (as a major suppier of environmentally damaging resources) and other resources intensive countries might address the fundamental environmental conundrum that the current trajectory delivers.

So it is hard to get one's thinking straight.  Much, for example, has been said about the BRIC countries. Yet as Ha-Joon Chang argues in this article they are unlikey to rescue the world from meltdown:

'So with Japan still reeling from its two "lost decades" (drenched in QE), the only hope seems to be the emerging economies, such as China, India, Brazil and South Africa. Yet can they save us from worldwide economic stagnation? The answer is a definite no. Even with three decades of growth and 1.3 billion people, China's economy is still just over 8.5% of the world's (as of 2009), so whatever it does pales in significance compared to what goes on in the rich world. Moreover, it faces the challenges of deflating its huge property bubble without creating a financial crisis and managing its intensifying social conflicts – it experiences thousands of riots and strikes every year. And its dependence on exports makes it vulnerable to crises in the rich world.'

What will emerge?

Insensitive heavy-handedness only increases alienation

I wonder to what extent the Mayor of Melbourne and the Premiers of Victoria and NSW did their homework to fully appreciate why there has been a wave of protest around the globe, before insensitively sending in the police to close protest camps down in Sydney and Melbourne?  A useful place to start would have been with the US situation.  Central to the US protests is  the extreme inequality that has developed in the US economy over the past 30 years.

According to todays Age, Australia now has a three speed economy.  Alienation, inequality  and disillusionment with our governance institutions prevail in several of these 'economies'.  Under such circumstances protest seems a legitimate form of social action.

Excellent systemic account of the Euro crisis

My thanks to Bruce Legay for drawing my attention to this New York Times piece entitled: It’s All Connected: An Overview of the Euro Crisis.  The question becomes how to act on such systemic understandings.  My own experience suggests interventions that move damaging positive feedback processes in to virtuous negative feedback processes - but what these might be is beyond my experience.  The latter could involve some institutional innovations within the Eurozone designed to provide more resilience in future - the current arrangements have clearly failed.  Many commentators are comparing the Greek situation with that of Argentina.  On the surface these arguments seem to make sense, although in this posting the author refutes this claim, going on to say:

"There is no clear answer to what will happen or what should happen. There is a big mess out there. Once is certain though. The similarities between Argentina and Greece point to another worrying development. The citizens won’t be able to suffer the burdens of austerity any longer more (especially when they are made to pay for the bloated public servants). When that happens the situation will be beyond saving by the IMF, the EU and the ECB."

I wonder if allowing Greece to default within an institutionalised firewall is not a good strategy, whilst maintaining transfer payments from the rest of the EU, much as has happened over the last 30 years?  One thing is clear that without transformation of Greek institutions the situation is likely to reoccur.