How households can create a new model of sustainable capitalism

Source: Unknown
MANIFESTO FOR A BETTER WORLD

Humans are exploiting the Earth in an unsustainable manner. The current model of capitalism is cited as the main culprit with a burgeoning chorus of scientists challenging the economic mantra of “grow or die”. They argue that perpetual growth on a finite planet will lead to environmental calamity.

In the ongoing debate on sustainability, conservationists feel hampered and business people feel vilified. Meanwhile, ecologists and economists disagree about the limits of economic growth and the ecological capacities of the Earth. There is a mounting view that preserving the planet and expanding the economy are mutually exclusive. But is this really the case?

The reality is that environmental and economic issues are interconnected. The planet is part of the economic system and the economic system, in turn, is part of the planet. In order to grow, the economy feeds on natural resources and emits waste which pollutes the air and threatens the delicate climate on which life relies.

We must reduce the use of fossil fuels by switching to clean energy such as natural gas, nuclear and renewables (solar and wind). The energy sector matters greatly in our efforts to slow climate change. Electricity generation has long been the world’s biggest source of greenhouse gas emissions. The rest comes mainly from transportation, manufacturing and agriculture.

Around the world, businesses are making changes to their production systems in order to help stop the degradation of the planet. But what role do consumers play? Businesses argue that they merely supply the products and services that consumers demand. In an age of rampant consumerism, many of us crave the latest “must haves” thereby fuelling an endless cycle of spending.

To understand our insatiable appetite for products and gadgets that are newer and better, you need only look at the hordes of people around the world who queue for days outside an Apple store for the latest iPhone. Consumerism has caused us to confuse a good life with a goods life. The more we have the more we want, creating a cycle of compulsive buying.

But many of us buy things we don’t really need and this particularly applies to clothing. Open your wardrobe and take stock of all the clothes that you have either never worn or not worn in the past 12 months. It is claimed that most people wear 20 per cent of their clothes 80 per cent of the time. Put another way, we barely wear 80 per cent of what’s in our closet.

When it comes to poor practices that contribute to climate change, the fashion industry is cited as one of the worst offenders. Never have consumers been so quick to buy pieces of clothing, but this apparel runs out of style within weeks. The fashion industry has a vested interest in selling more clothes, so it sets new trends several times a year to keep consumers buying. It’s claimed that throwaway garments contribute more to climate change than air and sea travel.

For consumers, sustainability means getting the most out of the products they buy and not throwing them away on a whim. More than 1.7 billion people worldwide now belong to the “consumer class”. These people live on diets of highly processed food, own bigger houses and cars, carry higher levels of debt and have lifestyles devoted to the accumulation of non-essential goods.

Not surprisingly, many of the environmental issues we see today can be linked to consumption. Disposable cameras, plastic garbage bags, and other cheaply made goods with built-in product obsolescence inflict a devastating toll on the Earth’s water supplies, natural resources and ecosystems. Demand for cheaply manufactured goods fuels our throw-away mentality.

A magazine article titled Climate Change Is the Symptom. Consumer Culture Is the Disease. notes that “… industries are spouting carbon because customers demand their products: travel, electronics, entertainment, food, all sorts of stuff. So, what if, instead of solely measuring emissions by economic sector, we looked at consumer demand within those sectors?”

Researchers have done just that, and the results tilt the blame away from businesses toward a different villain – ourselves. The article goes on to say:

C40 Cities, a network of 94 of the world’s biggest cities, released a report … estimating how much consumption habits drive the climate crisis. The results were staggering: In those nearly 100 cities, where a combined 700 million live, the consumption of goods and services “including food, clothing, aviation, electronics, construction and vehicles” is responsible for 10 percent of global greenhouse gases. That’s nearly double the emissions from every building in the entire world.

Billions of citizens around the world are looking to governments and businesses to do something about climate change. But the real power for change is in our hands. Our collective actions can provide the leadership necessary to combat climate change. We support governments with votes and businesses with dollars, which means that we can choose who governs and where we spend our money.

If we don’t like what a company is doing, we can stop buying their products and services and force them to change. Consumers drive markets and sustainable consumer choices can change corporate behaviour. But we all need to take a stand and, for many of us, this will require a lifestyle overhaul, particularly with regard to saying “no” to unnecessary and/or environmentally unfriendly household items.

Research reveals that having more and more possessions does not make us happier, which is why some have adopted a minimalist approach to life. There is a growing minimalist movement which advocates that we should get by with less. The basic premise of the movement is to live without excessive possessions in order to have more meaningful and thoughtful experiences.

I remain an avid fan of capitalism and believe that it is the greatest vehicle the world has ever known for creating wealth and prosperity. Even so, it is an economic system in need of repair. All of us as individual consumers working together can drive that repair by making better choices in our day-to-day lives regarding the products and services we consume.

Let’s prove that sustainable capitalism is not an oxymoron.

Before you go…

My next blog post will be the final one published for 2020 and will take the form of a Christmas parody. It will be set to the rhyme scheme of Clement Moore’s classic poem, The Night Before Christmas. It will imitate the style and form of Moore’s original lyric while addressing a different subject matter – a look back at the biggest news stories of 2020. I hope that you enjoy this twist on the famed poem.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

Why we should celebrate even in tough times

Credit: AAP, Brendan Esposito
LIFE MUST GO ON

Each year, Sydney puts on one of the world’s most spectacular New Year’s Eve fireworks displays. The iconic pyrotechnics event is watched by one billion people across the globe. Late last year, there was controversy over whether the 2020 fireworks should be held while bushfires ringed greater Sydney and raged throughout other parts of Australia.

Those who called for the fireworks to be cancelled argued that going ahead would send the wrong message. An online petition – which was supported by more than a quarter of a million people – stated that “with Australia facing drought and now catastrophic fires, decimating towns as it tears across our country, the thought of spending MILLIONS of dollars on a fireworks display when it could be used to support and rebuild our country instead is infuriating”.

In response, the Lord Mayor of Sydney, Clover Moore, argued that holding the fireworks would help unite the community and that pulling the pin “would be of little practical advantage to those who have lost so much in the bush[fires]”. She added: “We are going through really tough times now and it brings us together to celebrate a New Year with hope. It’s a really important time to be together to support each other”.

The fireworks were not scrapped but went ahead to the delight of millions of people. Those who were against the fireworks display taking place remained adamant that it was the wrong thing to do. However, a woman who lost most of her possessions to a bushfire, pleaded that “the bright distraction of fireworks” be retained. The woman was previously in favour of shutting down the fireworks.

The bushfire crisis is a stark reminder of life’s ups and downs. Throughout our lives, we all experience challenges and some – like the bushfires and the current coronavirus – are extremely difficult. But we need to make space for joy even in the midst of a disaster. Indeed, a little happiness can help our struggles as positive emotions provide relief from stress.

The fireworks which ushered in 2020 distracted millions of Australians from their troubles and gave them something to celebrate. Tough times can seem easier when we focus on something other than our immediate hardship. Life goes on and so did the fireworks which metaphorically brightened the smoky-grey haze over Sydney. But it did not quell the fire of opposition from those who disagreed.

Equally, there are those who disagree with the recent decision by the NSW Government to proceed with the upcoming New Year’s Eve fireworks during the present pandemic. Announcing the decision, NSW Premier Gladys Berejiklian said Sydney’s fireworks would go ahead “in one form or another” as they are a symbol of hope and optimism which is “important for our soul and for positive thinking about next year”.

Everyday around the world, governments make spending choices. As is the case with fireworks, not all citizens agree with government spending priorities. What constitutes effectiveness in the use of public resources is hotly debated. For example, there’s the old chestnut about how much funding should be allocated to the arts versus public welfare programs.

Many believe that the composition of public spending should be tilted in favour of the neediest in society. A bias towards policies which assist poverty reduction sits well with this cohort. These individuals argue that spending money on the arts should take a back seat to feeding the hungry, sheltering the homeless and supporting the unemployed.

The problem with this argument is that there will always be people in need and fiscal interventions cannot totally eliminate poverty, no matter how much money is thrown at it. That’s why we should provide funding to the arts because, like fireworks, they are a celebration of life. Government funding of cultural activities enables people from all walks of life to enjoy the arts, which disproves the claim that they exclusively benefit the elite.

Of course, controversy about funding is not limited to the arts but can be found across many other sectors including sport. The allocation of public funds to build new stadiums and facilities is greeted with disapproval in some quarters. Such venues are seen as a drain on the public purse and a waste of money. But how do you put a value on the social good created by sport?

We celebrate our sporting champions and delight in their success. Sporting triumphs bring us together and help us put aside petty disputes as we unite as one proud nation. Sport not only entertains but provides physical activity and that is an important point for those who say that health funding (more hospitals) should take priority over sports funding (more sporting fields). If more of us exercised and played sport, we’d be healthier and there would be less demand on the health system.

The value of the arts and sport, and many other things, can’t be measured in dollars and cents alone. However, whenever there’s an economic squeeze, funding for the arts, sport and other “non-essential” activities are the first to go. Viewed through the eyes of an economist, these budget choices involve trade-offs and opportunity costs.

A trade-off occurs when we sacrifice one thing for another such as when you have only enough money to buy a car or take an overseas holiday, but not both. Trade-offs, in turn, create opportunity costs – one of the most important concepts in economics. Whenever you make a trade-off, the thing that you do not choose is your opportunity cost. As you decided to buy the car, your overseas holiday was your opportunity cost.

Because resources are scarce and needs unlimited, governments always face opportunity costs. For example, the opportunity cost of the government spending an extra $5 billion on defence equipment might mean that $5 billion less is available to spend on education. In a perfect world, it would be great to be able to do both, but that is often not possible. But that does not mean that penny-pinching spending decisions should be made about things like fireworks.

The amount spent on fireworks and other public celebratory activities – such as Australia Day – is just a drop in the bucket compared to other areas of government expenditure. With regard to the Sydney fireworks which greeted 2020, the reported cost of staging them was $5.8m. This outlay was absolutely overshadowed by the $130m generated in tourist dollars for the NSW economy – an outstanding return on investment.

Celebrating and commemorating special events is not a waste of money which is why I am more than happy for some of the taxes that I pay to be allocated to celebrating the human spirit – even during a pandemic. Three cheers to the NSW Premier for agreeing to stage this year’s fireworks.

Let’s inject some happiness into our COVID-19 affected world.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

Why the problem with democracy is voters

Credit: memegenerator.net
POLITICAL IGNORANCE IS NOT BLISS

It never ceases to amaze me how people around the world complain about their governments. Yet citizens of democracies – via the ballot box – determine who holds political power. So, it’s largely our fault if we end up with poor political leadership.

Voters have a track record of choosing idiots, authoritarians and demagogues for elected office. These leaders invariably turn out to be incompetent and dishonest and thrive on emotion-driven discourse. They hoodwink people into supporting them by exploiting voters’ credulity and prejudices.

Politics is nothing if not a mirror of the society it serves. As a society, we crave quick fixes and instant gratification and expect politicians to solve all of society’s ills at the snap of a finger. That’s why politicians who pander to the immediate demands and desires of voters are rewarded by the electorate.

We jump quickly into the arms of political charlatans, but fail to embrace sensible and rational candidates with policies that have an eye to the future. Such long-term outcomes are rejected by “here-and-now” voters who are selfishly focussed on “what’s in it for me”.

Voting (free and fair elections) is the cornerstone of a true democracy. Yet, in many nations around the world, much of the public is disengaged from politics. Citizens are not politically informed and this is dangerous as voters do not make informed choices at the ballot box.

Donald Trump owes his victory to the uninformed. Indeed, he is on the record as proclaiming: “I love the poorly educated”. Political ignorance accounts for a large part of Trump’s success. His followers believe virtually any lie he tells – no matter how outrageous.

When voters know little, they choose the politician with the highest emotional appeal. Trump and other populists play on this, which is why millions voted for him against their best interests. Trump appealed to the anger and discontent of middle-America, tapping into their fears about jobs, race and immigration.

Leaders like Donald Trump prove that doing or saying unintelligent things is no barrier to being elected. “We have unserious and unfit leaders,” according to a columnist for The Washington Post, “because voters are unserious and too often reject sensible, fit candidates for office”.

That voters are poorly informed and make irrational decisions is no surprise to renowned political scientists – Christopher Achen and Larry Bartels. These two academics co-authored the acclaimed book – Democracy For Realists: Why Elections Do Not Produce Responsive Government.

The authors’ core belief is that people cast their votes for no particularly good reason and that incumbents often get rewarded or punished for events beyond their control. They illustrate this point by tracing the electoral impact of a random event:  a dramatic series of shark attacks in New Jersey in 1916.

In what has become the most famous example in the book, they note that voters on the New Jersey seashore blamed President Woodrow Wilson for the shark attacks in the summer of 1916. As a result, Woodrow Wilson lost his home state in the presidential election.

The beachfront towns – which relied on tourism – were negatively impacted by the attacks. Even though Wilson was obviously not responsible for the string of shark-related fatalities, he was the incumbent, and people vote against incumbents when things are bad.

This, of course, is illogical. As Achen and Bartels declare: “Punishing the incumbents for events beyond their control makes no more sense than kicking the dog to get back at a difficult boss at work” … yet “… governments are punished willy-nilly for bad times”.

At the polling booth, election-year natural disasters (droughts, floods, etc.) and the performance of the economy in the months prior to the election, have a major impact on whether an incumbent or challenger wins an election. If things are going well – whether they’re controllable or not – they’ll reward the party in power. If not, they’ll look for someone else to lead them.

Achen and Bartels assert that most citizens are unable to evaluate sensitive information to reach an informed opinion whether times have been good or bad under the incumbent government.

Citizens are unlikely to know whether crime has gone up or down, only whether gruesome murders appear in the local news. Their judgments about the seriousness of environmental threats are virtually uncorrelated with those of experts. Even in the domain of the economy, where detailed statistical information is plentiful … voters may fixate on current conditions to the neglect of the incumbent’s full record.

The book lays waste the comforting view that citizens cast votes based on rational choice – the so-called “folk theory of democracy”. Voters don’t have anything like coherent preferences. Most people pay little attention to politics and vote irrationally and for contradictory reasons.

Also, the majority of voters are too shortsighted to choose economic policies that will produce long-term prosperity. This, in my opinion, is most evident in the irrational attitude of many citizens to government debt. The ill-informed are seduced by populist politicians who promise to balance the national budget. (See my recent post on Modern Monetary Theory).

Our harmful misunderstanding of economic policy is also evident when interest rates rise and fall. Interest rates go up when things are overheating and go down when times are tough. It is ironic, therefore, that nit-picking oppositions are critical when interest rates rise (a sign of a strong economy) and glory-seeking governments take the credit when interest rates fall (a sign of a weak economy).

Most economic truths are counter-intuitive. Yet an ignorant public cannot help but endorse intuitively appealing policies in any given instance, since it has so little information to go on. In the words of the US based think-tank, The Cato Institute:

It is little wonder, then, that incumbent politicians are able to take credit for good economic times – regardless of the success, failure, or irrelevance of their economic policies – and that presidents cursed with bad economies usually are booted from office, even if their policies have been sound.

Downright misrepresentations and blatant disregard for facts have always plagued politics, and this holds true in Australia as well. During the 2016 federal election, Australians were falsely told that the Liberal Party was going to privatise Medicare and that the Labor Party’s carbon price would lead to $100 lamb roasts.

As few expect politicians to tell the truth, we are not particularly surprised when half-truths and downright lies are exposed. It’s often said, however, that politicians lie because voters do not want to hear the truth. The truth often offends and no one wants to hear things that they find confronting. As noted in the online magazine, Psychology Today:

It is decidedly better for politicians to tell people what makes them feel comfortable. Why should politicians be the purveyors of bad news (and decrease the likelihood of getting people’s votes) when they can tell fairy tales with happy endings (which, of course, everyone wants) and come out the victor.

I believe that education is the key to a more literate electorate. We teach our kids “hard” subjects like maths and science, so there’s no reason why we can’t add politics and economics to the curriculum. The next generation of voters – unlike many of those who are about to cast a vote in the US presidential election – must be able to discern if political candidates are pulling the wool over our eyes and just marketing political and economic snake oil.

As things currently stand, Winston Churchill’s words still ring true: “The best argument against democracy is a five-minute conversation with the average voter.”

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

Who should be first in line for COVID-19 vaccines?

Credit: University of Pennsylvania – Penn Medicine News
INOCULATION QUEUES FORM

The pandemic has forced governments to answer many tough questions and the virus is currently posing another: Who should be at the front of immunisation lines when vaccines against COVID-19 become available? This vexing decision has come into sharp relief as policymakers grapple with how best to allocate doses for scarce vaccines.

Even if in the coming months some vaccines are declared safe and effective, there will not be enough for everyone who wants a shot right away. While many individuals and groups will argue that they should be at the top of the distribution list, determining who should be given priority access to limited supplies is challenging politicians and epidemiologists.

Bio-ethicists have weighed in on the debate as the mass vaccination of almost eight billion people won’t happen overnight. It is widely believed that a phased-in approach – which must be fair and equitable – will be required. But deciding how to apportion supplies of the first batches of coronavirus vaccines – and who will follow the initial jumpstart phase and in what order – is the subject of ongoing debate.

From a health equity perspective, there will undoubtedly be disagreements over vaccine rationing, regardless of what priority ranking is introduced. Prioritisation decisions will be fraught as players (the young, the old, pregnant women, health care workers, those in front-line jobs, people of colour, individuals with pre-existing conditions, etc.) jockey to be early recipients of the drug. Some will claim that it is a matter of life and death that they receive an early jab while others will refuse immunisation all together.

Of course, for nations to distribute vaccines, they must firstly obtain supplies from vaccine manufacturers. Will manufacturers just sell their product to the highest bidders? Or will they take a global perspective and ensure that supplies are rolled out to all nations – even poorer ones? The correct course of action was outlined in a recent article by Bill Gates.

During a pandemic, vaccines and antivirals can’t simply be sold to the highest bidder. They should be available and affordable for people who are at the heart of the outbreak and in greatest need. Not only is such distribution the right thing to do, it’s also the right strategy for short-circuiting transmission and preventing future pandemics.

Though no final agreement has been reached on a single, global distribution framework for COVID-19 vaccines, two main proposals have emerged. A number of experts have argued that health care workers and high-risk populations (the over 65s) should be immunised first. In contrast, the WHO has suggested that countries receive doses proportional to their populations.

From an ethical perspective, both of these strategies are “seriously flawed” according to Professor Ezekiel J. Emanuel from the University of Pennsylvania. He states:

The idea of distributing vaccines by population appears to be an equitable strategy. But the fact is that normally, we distribute things based on how severe there is suffering in a given place, and, in this case, we argue that the primary measure of suffering ought to be the number of premature deaths that a vaccine would prevent.

Professor Emanuel led an international group of 19 health ethicists from around the world (including Australia) to develop a three-phase plan – the Fair Priority Model – for vaccine distribution. In their proposal, as noted in a news release by Penn Medicine, Emanuel and his co-authors point to three fundamental values that must be considered when distributing a COVID-19 vaccine among countries:

Benefiting people and limiting harm, prioritizing the disadvantaged, and giving equal moral concern for all individuals. The Fair Priority Model addresses these values by focusing on mitigating three types of harms caused by COVID-19: death and permanent organ damage, indirect health consequences, such as health care system strain and stress, as well as economic destruction.

Preventing deaths is seen as the most urgent of all three dimensions and is the focus of Phase 1 of the Fair Priority Model. In Phase 2, two metrics that capture overall economic improvement and the extent to which people would be spared from poverty are proposed. Finally, in Phase 3, countries with higher transmission rates are initially prioritised.

With regard to preventing deaths, the Model begins by calculating the number of years of life that will be added in a given country by the delivery of, for example, a million vaccine doses. Peru, which has experienced high COVID-19 mortality rates and the US, where the virus has killed over 200,000 people, would likely be on the priority list.

“But take New Zealand, giving them a million doses, you’re probably not going to save but one or two people literally. So, they would be low on the priority list,” said Emanuel. The group of 19 rejects the argument that its policies would reward bad management, such as in the US, which leads the world in the number of virus deaths and cases.

“You shouldn’t penalise Americans because Donald Trump can’t seem to manage this pandemic,” he reasoned.

Emanuel and his collaborators – as outlined in the Penn Medicine release – also object to the WHO’s plan, which begins with three per cent of each country’s population receiving vaccines, and continues until every country has vaccinated 20 per cent of its citizens. While that plan may be politically tenable, it “mistakenly assumes that equality requires treating differently-situated countries identically, rather than equitably responding to their different needs,” argues Emanuel.

Health care workers and others most vulnerable are traditionally first in line for a scarce vaccine. But many are calling for geography to play a greater role this time round and to give COVID-19 vaccine priority to people where the outbreak is hitting hardest. Still, the fear remains that many nations will prioritise their own populations first. The resultant uneven scramble may see countries with the greatest need for vaccines being unable to put in place an early and critical ring of protection around their borders.

Another idea that has been floated is to give priority to “super-spreaders”. A trio of US academics believes that after taking care of essential workers, “vaccinations should be given to the biggest transmitters of the virus – mostly the young – and only then to the most vulnerable”.

One of the lessons from past pandemics is that vaccinating likely asymptomatic spreaders early can avert multiple infections with others. The academic trio note that very few of the COVID-19 super-spreaders are elderly. Rather, it is younger people who have a much greater propensity to resume social lives at school and in other venues.

While the strategy of vaccinating the young to protect the old is counterintuitive, there is ample evidence to suggest that this is the right approach. According to UK researchers, immunising those around the elderly may help protect them. It is also instructive to note that a vaccine against COVID-19 may not be as effective in older people who are most at risk of suffering complications and dying from the disease.

Clearly, there is an urgent need for international co-ordination on COVID-19 vaccines to ensure that effective treatments are widely available and appropriately distributed. With many nations likely to adopt a nationalistic approach, there is a high risk that the most vulnerable will not get the life-saving interventions that they need.

Deciding who gets first dibs will be a challenging and contentious task. Most nations are expected to adopt a tiered approach to vaccine distribution. Regardless of the allocation plan adopted, it needs to be transparent and perceived as fair by a majority of the general public.

Of course, fairness – like beauty – is in the eye of the beholder.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

Why we need a new approach to mental health care

Credit: World Federation for Mental Health
CLASSIC STUDY LEAVES SCAR ON PSYCHIATRY

In 1973, Stanford University professor and psychiatrist, David Rosenhan, arranged for eight mentally healthy people (three women and five men, including himself) to present themselves at mental institutions and declare that they were hearing strange voices. All were certified mad even though their auditory hallucinations were feigned. The eight fake patients were checked in to different psychiatric hospitals and seven were diagnosed as paranoid schizophrenics.

Rosenhan’s subsequent landmark paper, On Being Sane in Insane Places, created a media sensation and a crisis in psychiatry. There was astonishment at the ease with which mental health practitioners had been duped by a made-up symptom. Psychiatrists, it seemed, unlike suspicious fellow patients, could not tell a phoney from a lunatic. Not one of Rosenhan’s “pseudopatients” was unmasked by hospital staff.

The Rosenhan experiment is considered an important and influential criticism of psychiatry. That eight perfectly sane subjects could fool doctors into believing that they were insane called into question the validity of psychiatric diagnosis. There was a “uniform failure to recognize sanity” in any of the pseudopatients, Rosenhan concluded, and not one of them was ever found out by the medical staff despite behaving normally while in hospital.

“It is clear that we cannot distinguish the sane from the insane in psychiatric hospitals,” Rosenhan famously wrote at the outset of his report’s conclusion. He went on to say that the diagnosis of mental health patients was flawed because the classification system used at that time was not valid.

A disturbing aspect of the experiment was the claim by pseudopatients, as reported by one writer, that the staff was dehumanising and often brutal.

Conversations with staff were limited by their frequent absence. When the staff did have time to talk, they were often curt and dismissive. Orderlies would often be both physically and verbally abusive when other workers were absent. The pseudopatients reported they often felt invisible, as the staff would act like they weren’t even there.

There was a second part of Rosenhan’s study which also delivered a minor bombshell. A hospital – which had heard about Rosenhan’s initial test and claimed that similar errors would not occur there – was falsely informed that one or more imposters would attempt to be admitted as psychiatric patients. Staff at the hospital subsequently determined that 41 out of 193 patients were not genuine patients. In reality, Rosenhan had not sent a single imposter to the hospital.

While Rosenhan’s main experiment illustrated a failure to detect sanity, the secondary study demonstrated a failure to detect insanity. He starkly concluded that “one thing is certain: any diagnostic process that lends itself too readily to massive errors of this sort cannot be a very reliable one”.

One of Rosenhan’s key findings was that psychiatric labels tend to stick. Consequently, everything a patient does is interpreted in accordance with the diagnostic label applied. This is why the original diagnosis of schizophrenia biased the staff’s interpretation of patient behaviours. For example, pacing a corridor out of boredom was interpreted as “anxiety” by hospital staff.

Not surprisingly, Rosenhan’s unsettling findings were disputed by other psychiatrists who claimed that his study was flawed. However, the main message he sought to convey was the relative ease with which a person can be misdiagnosed as mentally ill and the significant difficulty in erasing that diagnosis. He argued that psychiatric labels tend to have a longevity that physical medical labels do not.

We have all experienced the extraordinary power of language to motivate and inspire. But words can also stigmatise and – at its core – Rosenhan’s study was about demonstrating the biasing power of psychiatric labels. I have seen this destructive power first-hand.

A member of my broader family suffers from poor mental health and her condition has been assigned numerous diagnostic labels throughout her life. Each of her labels has served as a cue that activates stigma and stereotypes and sometimes results in her being kept at arm’s length. Just as no one diagnosed with dementia wears it as a badge of honour, those diagnosed with a mental disorder equally know that they will likely suffer negative evaluations by others – a case of judging a book by its cover.

Moreover, a psychiatric label can become a self-fulling prophesy as patients act out the label. I have seen this first-hand with my above-mentioned family member who blames her “depression”, “bi-polar”, “melancholy”, or whatever other label is current at the time, for her actions during a depressive episode. “I can’t help my behaviour!” she will exclaim, “as people with my condition do these things”.

A final thing that I have witnessed with mental health patients is the apparent compulsory need for medications to be prescribed by the treating physician. In the Rosenhan experiment, the pseudopatients were administered more than 2,000 pills, including antipsychotics and antidepressants – which they largely discarded. Yet again, I have direct experience of the negative impact of pills on patients. Mental health drugs are powerful and often have side effects.

Many years ago, I provided a listening ear to a friend who was feeling down. During our chat, he revealed that he had been to see a psychiatrist for a heart-to-heart but that the doctor was more interested in pumping him with pills. As my friend rejected the prescribed medicine, the specialist said he could not see him again.

At end of the day, all my friend wanted and needed was a supportive shoulder to cry on and some genuine kindness. As portrayed by Robyn Williams in the movie, Patch Adams, a little kindness goes a long way when someone is under the weather. Following a traditional medical school education, Hunter “Patch” Adams rebelled against the pill-pushing model of medicine and pioneered a more humane approach based on laughter, love and caring as primary forms of medical treatment.

His style of care and disdain for the prevailing methods put him at odds with the norms of the established medical profession. Yet, his approach has merit. I think that every mental health specialist should watch the movie, Patch Adams, which provides a life lesson for psychiatrists. The movie’s underlying message may be a bitter pill for some doctors to swallow. However, when it comes to mental health, life should imitate art, particularly as the mental health effects of the coronavirus crisis have driven a marked rise in anxiety and depression in Australians.

Never again should pseudopatients be allowed to fly over the cuckoo’s nest!

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

Why Australia should provide free and universal childcare

Source: Free clipart
MAKE TEMPORARY ASSISTANCE PERMANENT

During the height of the coronavirus pandemic in April, Australian Prime Minister, Scott Morrison, announced that families could access free childcare. This temporary crisis measure was designed to protect livelihoods. “This virus is going to take enough from Australians without putting Australian parents in that position of having to choose between the economic wellbeing of their family or the care and support and education of their children,” Mr Morrison said.

The PM essentially nationalised the childcare system making it an “essential service”, but the relief package only covered the period to 12 July. Many believe that the emergency arrangements should have been made permanent. I join the chorus of voices calling for continued government funding of childcare and believe that it should be considered an essential service, both in good and bad times. Parents rely on dependable childcare so that they can work.

The arguments for early childcare are well-known and universal. Infants and toddlers everywhere are naturally curious and observant and can take in vast amounts of information. Children learn more quickly during their early years than at any other time in their lives. From birth to age six, a child’s brain is like a sponge, continuously absorbing everything around them.

Enrolling a child in a daycare centre or preschool facility enhances this cognitive absorption process. Early education and care exposes children to numbers, letters and shapes. It also helps them develop social and emotional skills such as getting along with other children, sharing and contributing. Early learning settings assist children develop the skills they’ll use for the rest of their lives.

But childcare is not cheap and Australia does not provide free and universal daycare and preschooling and this places a financial burden on working families. Many Aussie households struggle to pay the fees, while for others it is completely out of reach. Childcare affordability and accessibility are significant issues in Australia.

In contrast, Scandinavian nations have the most family-friendly childcare policies in the world. The Swedes and the Danes enjoy heavily subsidised access to daycare facilities regardless of income. The French benefit from similar arrangements with the government providing inexpensive municipal daycare, tax breaks for families employing in-home childcare workers and free universal preschool beginning at age three.

Childcare options in Britain changed in 2017 with the introduction of free and universal early education for children three and four years of age. According to government data, 94 per cent of British parents have taken the government up on its offer of free education. The offer provides a guaranteed 15 hours a week of free childcare or preschool for 38 weeks a year.

More and more nations are discovering that early childhood education is one of the best investments a country can make to prepare children for learning and give them a chance to thrive later in life. It lays the foundation for a child’s future and has long-term impacts on health, education, job prospects and well-being.

Experts agree that supporting early childhood education is a win-win for everyone. One such expert is Nobel prize-winning economist James Heckman, from the University of Chicago. Professor Heckman argues that the best way to reduce deficits and strengthen the economy is to invest in quality early childhood development. This creates better education, health, social and economic outcomes which increase revenue and reduce the need for costly social spending.

He developed the “Heckman Equation” which is based on the notion that spending on education and training has its biggest impact early in life. The science of brain development reveals that the first few years of life play a critical role in shaping future emotional, cognitive and intellectual skills. Kids who get consistent nurturing care are more likely to succeed in school, stay clear of trouble with the law and have productive lives in the workforce.

Another academic who has weighed in on the early education debate is Edward Melhuish. He is a professor at the University of Oxford, a visiting professor at the University College London and a visiting professor at the University of Wollongong’s Early Start Research Institute. In an article Professor Melhuish wrote for The Guardian, he stated:

Those countries that are planning for long-term economic growth are investing in early childhood education and care, because the jobs of the future will be for those with the most skills, and the foundations are laid in early life. China is an example of a country that has greatly increased its investment in this area.

In the same article, Professor Melhuish noted that there is a powerful economic case for state funding:

Using taxpayer money to help parents into work is not necessarily a drain on the treasury, rather it can lead to more revenue. A UK think tank has published a report suggesting that a 5% increase in maternal employment in the UK could be worth £750m (AU$1.6bn) annually in increased tax revenue and reduced benefit spending.

Professor Melhuish believes that a high-quality early childhood education and care system should be considered as part of the infrastructure for a country’s long-term economic and social development, to be developed in much the same way as, say, roads. This view is increasingly holding sway among OECD countries. An OECD report, Starting Strong III, begins:

A growing body of research recognises that early childhood education and care (ECEC) brings a wide range of benefits, for example, better child wellbeing and learning outcomes as a foundation for lifelong learning; more equitable child outcomes and reduction of poverty; increased intergenerational social mobility; more female labour market participation; increased fertility rates; and better social and economic development for the society at large.

Professor Melhuish believes that Australia should follow the research and provide free universal childcare and I concur. Early childhood education will improve educational and whole-of-life outcomes for Australian children, as well as increased workforce participation. This provides a double dividend for the Australian government’s investment.

Still, some child-free individuals, together with parents who elect to stay-at-home, will object to their tax dollars being used on childcare for other people’s offspring. Yet these same people are seemingly comfortable with state funding of primary and high schools. This, I believe, is because childcare is viewed as “preschool babysitting” whereas it should be seen as “preschool education”.

By relabelling early childcare, the notion of public money being spent on the very young should be more palatable. State subsidies for childcare facilities are a common good and, in my opinion, are no different from the principle behind free state schools. Childcare provides a healthy return on investment, so undervaluing childcare is a false economy.

All revolutions take time and childcare is no exception. It is my hope that sooner rather than later Australia will have the political appetite for more spending on preschool care and education. The approach by Scandinavian countries to universal childcare is a source of policy inspiration and a sensible policy tool for Australia to adopt. It’s also a smart investment.

Our children deserve the best possible start in life.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

How COVID-19 exposed inequality among workers

Source: Twitter: NBC 5 Chicago
UNDERVALUED CORONAVIRUS HEROES

While nations were under lockdown during the depth of the pandemic, millions of people around the world worked remotely from home. At the same time, there was an even bigger cohort of essential workers for whom it was business-as-usual as the coronavirus swept the land.

These unlikely heroes drove the trucks which delivered our goods, stocked the supermarket shelves which provided our groceries and prepared the takeaway meals which kept us fed. Other essential workers – like farmhands, meatpackers, store cashiers and warehouse clerks – also helped keep the economy’s lights on.

When the pandemic hit, jobs previously labelled “low skill” were reclassified as “essential”. As cities enforced quarantines and shoppers squabbled over the last roll of toilet paper on the supermarket shelf, “essential” employees were out and about keeping societies functioning. Their efforts largely went unnoticed even though they were everywhere.

Doctors, nurses and other health professionals bore the brunt of the outbreak and were the most at-risk population. They received an outpouring of gratitude from citizens and governments for their tireless patient care. Non-medical frontline workers, however, were less recognised. Nonetheless, this other layer of critical workers continued to show up on-the-job to help maintain a semblance of normality for others.

The pandemic has shone a light on the stark workplace divide between people who can work from home and those who can’t. Lower paid workers – like factory employees, security guards and supermarket staff – don’t have the option of working remotely. In contrast, highly compensated workers – like managers and other professionals – are able to shelter at home.

Alison Pennington, a senior economist at The Australia Institute’s Centre for Future Work, told ABC News that it was easy to see how the pandemic work regime could compound inequality in Australia.

We estimate people who can work from home are earning around 24 per cent more than those who can’t. They’re also more likely to have paid sick leave benefits — while essential workers who are turning out every day, are more likely to work for lower pay, but also less likely to have sick leave.

Pennington said those differences were creating greater inequality, not only in incomes, but also health outcomes as essential workers faced the higher risk of infection without the income safety net of sick leave. She stated:

… coming through this regime, what we’re going to find is that the pandemic is going to require a universal entitlement to sick leave if we’re going to be able to work through the virus and keep everyone safe.

The Centre for Future Work estimates that only around 15 per cent of Australian workers currently have the option of working remotely full-time. That figure is expected to double as companies quickly adapt to allow more of their employees to stay away from the office. By way of comparison, about a quarter of US workers can easily do their jobs from home.

COVID-19 has revealed how deeply our fates are tied together. It’s not a case of us and them – all workers are in this together. Amid stay-at-home orders, office workers ditched their daily commute while essential workers continued to drive our buses, clean our workplaces, collect our rubbish, cook our food and staff our nursing homes.

Essential workers are just that – essential. They keep communities running, so staying home isn’t an option for them. Risking their wellbeing for the greater good, their sacrifice is a moral calling for all of us. The pandemic added another layer of burden and responsibility to their jobs as they braved the frontlines against an invisible enemy. We owe them our heartfelt thanks.

Thank you to supermarket employees. Often working at minimum wages, they had to deal with epidemic levels of abuse from irate customers. Retail workers are our neighbours and fellow citizens and maybe even the children of your friends. They put themselves in harm’s way to ensure we had access to essential goods – they deserve our highest praise.

Thank you to delivery drivers. While many of us were safely hunkered down at home in isolation, we asked others to drop parcels to our front door. Fulfilling our online orders required the coordinated efforts of workers in warehouses, sorting hubs and courier companies. They provided an indispensable lifeline to the outside world. We are in their debt and salute their wonderful service.

Thank you to transit workers. Buses and trains underpin urban life and during the pandemic they performed the critical task of shuttling workers to and from their jobs. This put transit workers in daily physical contact with members of the public in the confines of a bus or train making social distancing difficult. Three cheers to these quiet achievers for keeping our cities running.

In the war against the novel coronavirus, these and myriad other essential workers were the life support for communities. Yet their work is chronically underpaid and undervalued by society. The explanation for this can be found in economics – or more precisely, the law of supply and demand.

The harsh reality is that lower paid “essential” jobs require few educational credentials. Moreover, the skills necessary to be, say, a cleaner, are easy to pick up as they are non-technical. This means that the pool of eligible workers is large, making it easy for employers to hire and fire.

Around the world, many essential workers just get by, living from pay-to-pay. Yet, during the pandemic, these “low wage workers,” according to Health Policy Watch, continued “to risk exposure to the deadly virus while celebrities and CEOs retreat(ed) to private mansions and islands for self-isolation”. This brought the gap between “have” and have nots” into stark relief.

In an opinion piece in The New York Times on 24 April 2020, Gene Sperling, a former economic adviser to Presidents Bill Clinton and Barack Obama asked: “Will our overdue recognition of the contributions of so many workers lead to only temporary applause and pats on the back, or will it move us toward a true social compact ensuring economic dignity for all?”

Drawing inspiration from legendary human rights activist, Dr Martin Luther King, Mr Sperling wrote:

Fifty-two years ago, when the Rev. Dr. Martin Luther King Jr. famously asserted the dignity of all work, he seemed to foresee this moment when it would become so clear that the labor of everyone – farmworkers, grocers, delivery drivers, caregivers, nursing assistants – was essential to all of our health and well-being.

“One day,” Dr. King told sanitation workers on strike in Memphis in 1968, “our society will come to respect the sanitation worker if it is to survive, for the person who picks up our garbage, in the final analysis, is as significant as the physician, for if he doesn’t do his job, diseases are rampant”.

In the words of Dr King: “All labor has dignity”.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

Search for COVID-19 vaccine brings nationalist element to worldwide crisis

Source: The National – Shadi Ghanim
NATIONS ENGAGE IN DANGEROUS HEALTH ARMS RACE

A global competition is underway to defeat the novel coronavirus. More than 140 vaccines are being tested, according to the World Health Organisation. Australian researches are leading several major clinical trials that might help control the spread of the disease.

But in the battle to be the first to find effective protection against COVID-19, nobody wins unless everyone wins. That’s the view of American epidemiologist and CEO of Gavi, The Vaccine Alliance, Dr Seth Berkley. In an opinion piece Dr Berkley wrote for Fortune Online, he expressed concern that the search for a vaccine has morphed into a geopolitical battle.

… regardless of which vaccines succeed, if we don’t take a more global and multilateral approach, one involving unprecedented collaboration, where countries work together with global health agencies toward COVID-19 vaccines and where the rewards are shared, then ultimately we all stand to lose. Because with infectious disease, no one is safe until everyone is safe.

Dr Berkley is not alone in flagging that a lack of international cooperation is driving nations to race against each other and not the real enemy – the virus. Writing in The New York Times, a team of senior correspondents observed:

China, Europe and the United States have all set off at a sprint to become the first to produce a vaccine. But while there is cooperation on many levels – including among companies that are ordinarily fierce competitors – hanging over the effort is the shadow of a nationalistic approach that could give the winner the chance to favor its own population and potentially gain the upper hand in dealing with the economic and geostrategic fallout from the crisis.

Vaccine nationalism and a “my-country-first” approach to vaccine allocation also trouble Thomas J. Bollyky, Director of the Global Health Program at the Council on Foreign Relations. He warns that such behaviour creates the potential for a deadly zero-sum game which will have profound and far-reaching consequences.

Without global coordination, countries may bid against one another, driving up the price of vaccines and related materials. Supplies of proven vaccines will be limited initially even in some rich countries, but the greatest suffering will be in low and middle-income countries. Such places will be forced to watch as their wealthier counterparts deplete supplies and will have to wait months (or longer) for their replenishment. In the interim, health-care workers and billions of elderly and other high-risk inhabitants in poorer countries will go unprotected, which will extend the pandemic, increase its death toll, and imperil already fragile health-care systems and economies.

World powers are working at breakneck speed to secure vaccine stocks and score some reputational kudos. But an excess of national pride and one-upmanship are threatening to overwhelm the common good. The jockeying for position and public posturing by nations was the focus of an article in the July 7 edition of POLITICO Magazine.

In China, where a vaccine victory could turn a country that started the virus’ spread into the savior of the world, the virologist and major general leading the country’s vaccine project has been hailed as a “goddess” on social media….

In June … President Emmanuel Macron announced that (French pharma giant) Sanofi would be dramatically ramping up operations in France to put “Sanofi and France at the heart of excellence in the fight … to find a vaccine.” Invoking the “genius of Louis Pasteur,” Marcon  (sic) hailed France as “a great vaccine country.” …

Meanwhile, across the English Channel, Britain is celebrating the news that its own Oxford scientists are “sprinting fastest” to develop a vaccine, in the words of an April 27 New York Times article – though the news site Irish Central took pains to point out that the lead scientist is Irish, not English….

And then there’s Trump, who stood in the Rose Garden in May and stated definitively that “America is blessed to have the most brilliant, talented doctors and researchers anywhere in the world. And now we’re combining all of these amazing strengths for the most aggressive vaccine project in history. There’s never been a vaccine project anywhere in history like this.”

Of course, governments aren’t chasing the vaccine trophy just for prestige and scientific accolades. Beyond the hubris, it’s about getting first dibs on any breakthrough drug for the benefit of their own people. Many world leaders are driven by nationalist impulses and the demands of their anxious populations to get a jump-start on eliminating the virus and bringing their economies back to life.

While it’s still uncertain which countries will get the first inoculations, what is clear is that there will not be enough vaccine for quite some time, even with the unprecedented efforts to manufacture billions of doses. A report in The Washington Post noted:

… the nationalistic priorities of individual nations could thwart the strategic imperative to tamp down hot spots wherever they are on the planet – including poor countries that cannot afford the vaccine. The United States in particular could be left in the cold if vaccines developed here as part of a go-it-alone approach turn out to be less effective than those produced in China or Europe. The scenario public health experts fear most is a worldwide fight in which manufacturers sell only to the highest bidders, rich countries try to buy up the supplies, and nations where manufacturers are located hoard vaccines for their own citizens.

While richer nations look set to win the battle to find a COVID-19 vaccine, they will lose the war against the spread of the virus if poorer nations remain unprotected. Just immunising a few populations against a universal threat won’t be sufficient for global trade and travel to resume. Yet there remains a high risk that the most vulnerable will not get the lifesaving interventions that they need.

African nations were pushed to the back of the queue in gaining access to an antiretroviral therapy (ART) for HIV and they may well suffer the same injustice regarding COVID-19 vaccine delivery. To help prevent history from repeating itself, the United Nations has declared it a “moral imperative” that everyone has access to a “people’s vaccine”.

A press release issued by UNAIDS in May, cited an open letter signed by “140 world leaders, experts and elders”. The letter demands that all vaccines, treatments and tests be patent-free, mass produced, distributed fairly and available to all people, in all countries free of charge. The letter states:

Now is not the time to allow the interests of the wealthiest corporations and governments to be placed before the universal need to save lives, or to leave this massive and moral task to market forces. Access to vaccines and treatments as global public goods are in the interests of all humanity. We cannot afford for monopolies, crude competition and near-sighted nationalism to stand in the way.

Like climate change, pandemics are transnational issues that no country can solve alone. Both highlight the need for closer international cooperation and coordinated global action. Yet most nations have acted independently from each other during the pandemic rather than in unison. The world needs to heed the words of Pulitzer Prize-winning science writer, Laurie Garett:

“Without equity, pandemic battles will fail.”

PS. To be clear,  there is no certainty that a vaccine will be developed in the near term. The fastest vaccine ever developed was for mumps and that took four years.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

How the pandemic has undermined democracies

Authoritarian leaders composite: EPA, Getty, Reuters, AP. Top Row: Donald Trump, Jair Bolsonaro, Benjamin Netanyahu, Narendra Modi. Bottom Row: Recep Tayyip Erdoğan, Rodrigo Duterte, Xi Jinping, Vladimir Putin, Viktor Orbán.
EMERGENCY POWERS ABUSED

The novel coronavirus is the biggest news story in a lifetime. For months, it has dominated the international media and become the most talked about topic on the planet. Front-page and top-of-the-broadcast news stories have focussed on the public health and economic consequences of the outbreak.

What has slipped under the public radar, however, is the danger that COVID-19 poses to democracy. Inadequate attention has been given to the political risks associated with the virus even though ominous warning signs are everywhere. Authoritarian leaders are using the crisis to undermine democracy.

Around the world, citizens accepted previously unthinkable restrictions on their basic freedoms in order to avert countless deaths. The loss of civil liberties – such as no public gatherings – were meant to be temporary. But in some nations, life has not returned to normal.

Unscrupulous leaders, like Hungarian Prime Minister Viktor Orbán, have exploited the virus to impose measures that they have long sought. Orbán has used the health crisis as a pretext to push through legislation which enables him to rule by decree indefinitely, effectively removing any oversight of his government.

In Russia, the assaults on democratic institutions have been even cruder. Foul play is believed to be behind the suspicious deaths of two doctors and the serious injury of another doctor. All three doctors mysteriously fell out of hospital windows. Each had criticised the country’s handling of the crisis and decried the lack of personal protective equipment.

Predictably, US President Donald Trump has also politicised the pandemic. Among other things, he attempted to quash dissent by limiting the press’ access to public health officials critical of his response. Trump also threatened to override the authority of governors to impose stay-at-home orders.

Trump’s disdain for independent institutions and for the separation of powers is shared by Brazil’s far-right leader, Jair Bolsonaro. He has been following the same playbook as Trump, albeit in a more thuggish way. Bolsonaro called for a shutdown of the Supreme Court and Congress which are investigating him.

Like Trump, Bolsonaro displays utter contempt for his country’s system of checks and balances. Bolsonaro admires Trump and Trump, in turn, is a staunch ally of Bolsonaro. The nonchalance of both men in the face of a global pandemic is part of their shared political disposition.

Both leaders view the coronavirus threat with skepticism – Bolsonaro called it a “little flu” and Trump labelled it the “kung flu”. Bolsonaro sacked one health minister and provoked another to resign while Trump continues to squabble with his scientific advisers.

The Indian government, under Prime Minister Narendra Modi, has used the virus to advance its anti-Muslim agenda. Hindu nationalists within the government have agitated against the Muslim minority, scapegoating them for causing the virus. This has led to physical and verbal warfare being waged against Muslims, pushing further their ostracisation in Indian society.

Iran, a government obsessed with tight control, has used the epidemic to deploy security forces to clear the streets. It has also used disinformation and cover-ups to keep the infection rate low so that – like all authoritarian governments – it can look competent and effective.

Across the world, public health officials are brushing up against ideologically-minded national leaders hell-bent on using COVID-19 as a cover for repressive, discriminatory or unconstitutional measures. Borzou Daragahi, an international correspondent for The Independent writes:

Months-long anti-government protests in Iraq, Algeria, and Lebanon that have been a severe thorn in the side of the elites have been suspended. In Turkey, the conservative Islamist-rooted government has ordered bars, nightclubs and libraries to close over coronavirus fears, but is allowing shopping malls, stores and restaurants to remain open. … Leaders facing critical leadership challenges such as Benjamin Netanyahu in Israel and Romania’s prime minister Ludovic Orban found their political problems vanishing, at least temporarily.

The Romanian parliament reluctantly gave the embattled premier full powers. Meanwhile, Netanyahu was temporarily spared the indignity of appearing in court on three corruption cases after his hearings were postponed for two months due to coronavirus restrictions on large gatherings.

The pandemic has also highlighted how voting systems cannot handle disruption. As noted in one report:

Local and national elections around the world are being suspended – the logistics are too overbearing and costly in the midst of a crisis, and social distancing impossible during polling. These delays will undoubtedly erode trust in the system as leaders without a credible mandate bungle their way through an unprecedented crisis.

There is also concern over contact tracing apps. The governments of Singapore and Israel have used the crisis to track people through their mobile phones. Other countries have also loosened their restrictions on privacy by allowing surveillance apps that in normal times would be outrageous.

Guy Verhofstadt, a former Belgian Prime Minister, believes that the mass adoption of contact tracing apps is a slippery slope. He writes:

Before long, Europeans, Americans or others could find themselves living more like the Chinese, with every move monitored, every violation – even of unwritten rules – punished, and a “personal rating” dictating one’s access to travel and public services. This may seem far-fetched, but one need only consider the latest developments in Hungary or Poland to see just how vulnerable democratic institutions can be. If we are not careful, the biggest casualty of COVID-19 could be democracy.

It’s clear from what is happening across the globe that civil liberties have been severely weakened. Despots everywhere have tightened their grip on power to run roughshod over democracy and human rights. A recent article posted on the University of Melbourne’s multi-media platform, Pursuit, reported that:

An unprecedented number of countries have partially suspended their commitments under international human rights treaties and simultaneously established a state of emergency. … More than 50 countries have postponed elections, often with little certainty as to when and how they will be held. Concerns run high.

In a survey of 142 countries’ exposure to ‘pandemic backsliding’, the Varieties of Democracy Institute, which investigates the concept of democracy as a system of government, found emergency measures posed little threat to democracy in only 47 countries, including Australia. It also found that 82 countries are at high (48) or medium (34) risk, with the pandemic response accelerating or emphasising established trends of democratic decay, including some of the world’s largest democracies – the USA, Brazil, India, and Indonesia.

The alarming uptick in authoritarian behaviours by governments around the world is concerning. The global assault on liberal democracy is real with emergency powers being used to arrest protesters and sidestep democratic norms.

Let’s hope that temporary restrictions don’t outlive the crisis.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

Where is the pandemic stimulus money coming from?

The Economist / Otto Dettmer
CREATING MONEY OUT OF NOTHING

Governments around the world are spending up a storm. They have loosened their purse strings and are shovelling truckloads of cash into their respective economies. Collectively, it represents the biggest relief package in history – in excess of US$10 trillion globally. For most nations, every penny of their mind-boggling spendathon is borrowed.

In doing “whatever it takes” to combat the COVID-19 pandemic, governments have shown that they can sustain levels of debt far greater than previously thought. Consequently, the coronavirus has challenged orthodox economics in just a few weeks. The belief in balanced budgets has been thrown out the window. Public debt is no longer seen as a drag on economies but a critical lifeline.

Proponents of an unconventional economic framework – Modern Monetary Theory (MMT) – welcome the ramp-up in government spending. MMT posits that countries which issue their own currencies can’t go bankrupt as they can never run out of money in the way businesses and households can. That’s because governments with their own sovereign currency are able to “print” (or more precisely “create” with a few keystrokes) as much money as they need to pay creditors.

Not surprisingly, traditional economic thinking warns that such spending is fiscally irresponsible as the debt balloons and inflation skyrockets. Critics of MMT cite Hungary in the 1940’s, Brazil in the 80’s and Mexico in the 90’s as examples where easy money policies (governments creating piles of cash) led not just to inflation but hyperinflation.

But this has not deterred MMT advocates who argue that increased government spending will not generate inflation as long as there is unused economic capacity or unemployed labour. It is only when an economy hits physical or natural constraints on its productivity that inflation happens, because that is when supply fails to meet demand, jacking up prices.

This is what occurred in Zimbabwe in the late 1990s and mid-2000s. The economy collapsed, but not because Robert Mugabe printed ever-more Zimbabwean dollars. Rather, the economy nosedived when farming production plummeted by 60 per cent as Mugabe forced experienced white farmers off their land and gave it to inexperienced soldiers to farm.

The resultant decline in output caused a shortage of goods. At the same time, demand rose as Zimbabweans had more paper money. The combination of more money chasing fewer goods – the classic definition of inflation – caused a supersonic rise in prices. Wallets were replaced with wheelbarrows as hyperinflation peaked in the African nation in November 2008 at an estimated 89.7 sextillion per cent – an eye-watering number with 21 zeros after it.

Of course, Robert Mugabe’s gross economic mismanagement of Zimbabwe cannot be compared to Shinzo Abe’s savvy stewardship of the Japanese economy. A basket full of groceries in Japan in 2020 does not cost a bucket full of money as it did in Zimbabwe in 2008. That’s because Japan’s expansionary monetary policy has not been inflationary – spending has not exceeded the economy’s capacity to produce.

Despite having the highest public debt in the developed world, Japan has not experienced runaway inflation (in fact, it has been battling deflation for two decades!) and remains an economic powerhouse. Supporters of MMT cite Japan’s success as proof that their unorthodox ideas work. But critics – including world renowned economist and Nobel laureate, Paul Krugman – strongly disagree.

Both sides of this debate were outlined in a 2019 article published in The New York TimesModern Monetary Theory’s Reluctant Poster Child: Japan. Notwithstanding Japan’s hesitance to be labelled an MMT practitioner, proponents of the theory insist that Japan has been a testing ground. As explained in the article:

The country (Japan) is their (MMT’s) equivalent of Charles Darwin’s Galápagos Islands: a natural experiment that reveals a fundamental truth about the way the world really works. Since the country’s boom ended in the early 1990s, Japan has borrowed deeply. Currently, its debt level is approaching 250 percent of its annual economic output. Critics say it is an economic basket case. Despite all that, Japanese inflation and lending rates remain low. In fact, some bond rates are negative, meaning Japan can profit when it borrows money. Its standard of living remains competitive with those of the United States and other developed countries.

Bill Mitchell is a professor of economics at the University of Newcastle in Australia and one of the founders of Modern Monetary Theory. He has been closely studying Japan since the 1990s. “It is my laboratory,” he explains, calling the country “a really good demonstration of why mainstream macroeconomics is wrong”. He argues that Japan has established “the principles of MMT and the consequences of different fiscal and monetary policy initiatives”.

Japan has blurred the lines that traditionally divide fiscal and monetary policy. Other nations, including Australia, are currently doing likewise with their pandemic stimulus packages. Historically, governments have raised money to fund spending by issuing bonds which are bought by a range of investors. But some nations are now self-funding their stimulus packages by issuing and then buying their own bonds, thereby creating money out of thin air.

This funding mechanism bypasses the need to pay interest to investors on newly issued money and is at the heart of MMT – the fusion of fiscal and monetary policy. MMT links fiscal policy to monetary policy by using the central bank to buy the debt (bonds) issued by its government. If all of that sounds double Dutch, then let me share with you another explanation.

In a recent article in the Sydney Morning Herald, Don’t add government debt to your list of things to worry about, economics writer, Jessica Irvine, quite rightly points out that the Reserve Bank of Australia (our central bank which is responsible for monetary policy) has exhausted its traditional method of stimulating our economy (lowering interest rates). So, the RBA is helping the federal government (which has responsibility for fiscal policy) stimulate the economy by buying Australian government bonds.

In answering the question: Where does the stimulus money come from?, Irvine writes:

A large part of (it) … will come from the Reserve Bank. Weird, you might be thinking. Does that mean that one arm of government – albeit a statutory independent agency – is now lending to another arm of government, the executive branch? To whom, in such a situation, do taxpayers ultimately owe the money? Themselves? The answer is: well, yes. … And if we only owe the money to ourselves, what’s to stop us spending as much as we like? Another very good question, and one to keep in mind in the strange debates to come.

Irvine underscores that MMTers would prefer that the government simply print the money, rather than borrow it from the private sector in a money-go-round they decry as “corporate welfare”. According to MMT, government issued bonds aren’t strictly necessary. Instead of issuing $1 in bonds for every $1 in deficit spending, the Australian government could just create the money directly without issuing bonds.

The belief that governments do not need to issue public debt is supported by Dr Steve Hail, a lecturer in economics at the University of Adelaide and an MMT proponent. He sees no need to match public deficits with debt issuance for a currency issuing government. Such governments should gain the necessary political approval for additional spending and then be able to do it. “Spending is self-financing,” he asserts and “does not have to be funded”.

In a recent article Dr Hail wrote for the news and opinion website, Independent Australia, he stated:

… central governments like those of Australia, New Zealand, the USA, the UK and Japan face no purely financial constraints at all. Never mind a “money tree”, they have a money computer. They can create limitless amounts of their currencies when they need to do so. They are not dependent on the goodwill of the bond market, or of credit ratings agencies. They are monetary sovereign currency issuers.

It’s clear that MMT is a controversial idea that has detractors and admirers worldwide. The coronavirus pandemic has moved MMT from the fringes of economic debate to centre stage. It is receiving unprecedented attention now that policymakers are (knowingly or unknowingly) implementing some of its basic tenets. This is MMT’s moment in the sun and only time will tell if it works as advertised.

For the record, I do not believe that government deficits are inherently bad. Nor do I believe that government budgets, like household budgets, should always be in the black. So, my belief is that MMT should not be dismissed out-of-hand nor should it be approached with a pre-existing economic ideological bias.

Remember, the economics profession (it is jokingly said) is the only field where two people can win a Nobel prize for saying the exact opposite thing!

PS. Professor Stephanie Kelton is the public face of MMT and its foremost evangelist. Her recently released book, The Deficit Myth: Modern Monetary Theory and How to Build a Better Economy, provides a comprehensive and lucid explanation of MMT.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting