BOOK REVIEW News Weekly
The economist who became a Christian
, May 11, 2013
ECONOMICS FOR LIFE:
An Economist Reflects on the Meaning of Life, Money and What Really Matters
by Ian Harper
(Melbourne: Acorn Press)
Paperback: 184 pages
Reviewed by John Ballantyne
Australian left-wing commentators routinely demonise any public figure whose views differ from theirs. In 2005, Professor Ian Harper was fiercely attacked in the media when he was appointed by the then Howard Government’s Minister for Workplace Relations, Kevin Andrews, to chair the newly created Australian Fair Pay Commission (AFPC).
He was denounced as being a right-wing free-market ideologue, because of his membership of the Wallis Committee inquiry into reforming Australia’s financial system. He was accused of having received “secret instructions” from John Howard to abolish the minimum wage. His critics noted that he was a Christian and, therefore (it went without saying), a religious extremist.
None of these accusations of course was true.
Ian Harper is a distinguished economist of international standing. In the early 1980s, he headed a research team at the Reserve Bank of Australia. In the late 1980s, he spent time at Princeton University where he rubbed shoulders with Nobel Prize-winning economists. On his return to Australia he was appointed professor of monetary and financial economics at Melbourne University. He is an especially lucid writer and lecturer.
Unlike many in his profession, he is deeply preoccupied with the ethical dimensions of economics, and is as far from Ayn Rand’s philosophy of radical individualism as it is possible to be.
His book, Economics for Life, was winner of the 2011 Australian Christian Book of the Year Award, presented by the Society for Promoting Christian Knowledge Australia (SPCKA).
He will be a keynote speaker at the World Congress of Families, Sydney, May 15-18, 2013. (For information, go to: www.wcfsydney2013.org.au).
Professor Ian Harper.
Professor Harper explains in the preface his purpose in writing the book. He says: “Some people worry about economics and economists. They shake their heads in exasperation. Fittingly, some economists shake their heads at the rest of society. Why can’t other people see the good sense in economics and what economists have to say? I have written this book with these two groups of readers in mind.”
He achieves his objectives admirably. His book is a lively and thought-provoking study, suitable for both economists and non-economists alike, of such things as Australia’s economic development since European settlement; our country’s future challenges and opportunities; how the world’s financial markets have evolved in recent decades; the causes of the 2007-08 global financial crisis (and some useful ideas on how the financial sector can be better regulated to prevent a recurrence); and, last but not least, the author and his wife Roslyn’s journey to a solid Christian faith.
Professor Harper is quite happy to describe himself as an economic rationalist. He says, “Although the term is often misused, ‘economic rationalism’ is a handy way to describe the body of scientific knowledge about economics.”
He does, however, concede that economic rationalism is commonly perceived as being dismissive of any dimension of economics that cannot be reduced to monetary comparisons. He suggests that “economic reductionism” might be a more accurate term for this sort of outlook.
Economics, he says, is certainly concerned with material aspects of the human condition, but it should still “encompass things like health and environmental amenity which, even though they are difficult to value in monetary terms, are obviously integral to our welfare”.
In 1995, he was appointed by the Victorian Kennett Liberal government to the Metropolitan Hospitals Planning Board (MHPB). Harper described his job as his “first real exposure to the ‘political economy’ of economic policy-making”.
He believes that some economists are unjustifiably cynical about the workings of government. However, he warns, economics “gives no warrant for the more extreme anti-government views expressed by some economists”. Here he clearly parts company with those economists of the Austrian and Chicago persuasions, who would slash government’s role almost to zero.
In 1966, Harper was invited by Treasurer Peter Costello to join the five-member Wallis Committee of Inquiry into the Australian financial system.
Harper, who played a prominent and distinguished role in the committee’s work, explains: “Unlike its predecessor, the Campbell Inquiry of 1979-81, the Wallis Inquiry did not focus primarily on deregulation of the Australian financial system. Our concern was more with re-configuring regulation and regulatory institutions to facilitate appropriate commercial responses to changing financial conditions, while at the same time preserving financial system safety and stability.”
Harper says of securitisation and the subsequent “atomisation of risk”: “Securitisation is a brilliant invention, but it exposed the financial system to additional risk … [and] helped to transmit what began as a localised problem in certain states of the US into a truly global financial crisis.”
He adds: “The GFC could have been a lot worse. The prompt action of governments and central banks around the world stabilised financial markets and kept banks afloat when they would otherwise have been overwhelmed by events.” Banks still have an indispensable role to play, “especially when regulated properly by well-informed and vigilant regulatory agencies”.
Professor Harper’s left-wing critics were wrong when they protested against his appointment in 2005 to chair the Australian Fair Pay Commission (AFPC).
Unlike the Australian Industrial Relations Commission, which conducted its hearings in a legalistic and adversarial manner, the AFPC under Harper adopted a far more informal and personal approach to its work, consulting with large numbers of the unemployed and low-paid who would be directly affected by its decisions.
Harper recalls: “Many people told me personally of their anguish at being unemployed, of their desperate need to keep their jobs and of the difficulty of making ends meet on low wages. It is far more difficult to make decisions in the abstract when you have met and spoken personally to the very people most affected and learned something of their circumstances.”
Contrary to the expectations of its critics, the AFPC, in three of the four decisions it made, actually increased the minimum wage.
The commission’s consultative process won increasing respect, even, albeit grudgingly, from the trade union movement. The current Prime Minister, Julia Gillard, then Minister for Workplace Relations, nominated the AFPC for a United Nations award.
However, in 2009, the Rudd Government disbanded the commission and replaced it with the Minimum Wage Panel, which discontinued its predecessor’s practice of informal consultations.
Not all News Weekly readers will necessarily agree with Professor Harper’s endorsement of tariff reductions and increased workplace flexibility.
He maintains that Australia benefited from the introduction in the 1980s of enterprise bargaining agreements (EBAs).
He argues that Australia failed to achieve cost-effectiveness in manufacturing, despite decades of protective tariffs. At the end of the 19th century, Australia enjoyed the highest standard of living in the world. By the mid-1970s, its relative position among the developed nations had dropped to 14th. Since the unwinding of industry protection (much of it carried out by Labor governments) and the advent of greater workplace flexibility, Australia’s position in the per head GDP league table rose to ninth place by 2011.
Harper looks to the services sector, which now accounts for 75 per cent of annual GDP, as offering Australia opportunities for the future. He says that “by far the major factor raising the productivity of services is the input of knowledge and skill”.
He warns: “We have no natural advantage in the Knowledge Economy. There is no equivalent of the North West Shelf or the Darling Downs in our knowledge sector. We will have to make our own comparative advantage…. The bounty of the mind, not the bounty of the land, will build our future prosperity.”
Harper argues forcefully on the need for economic life to rest on sound ethical foundations. “Most economics textbooks”, he observes, “say plenty about the principles of making money and growing wealth, but very little about the ethics that might guide these activities.”
He says of wealth-creation: “Wealth undermines good character if it fuels pride, arrogance, selfishness, idleness and greed among the affluent. Among the poor it fuels subservience, strife, envy and covetousness. On the other hand, the accumulation of wealth, especially through industry and enterprise, can promote the virtues of diligence, industriousness, prudence, courage, cooperation and self-reliance.”
He is not impressed by materialism. He says, “If the market economy is to work for the ultimate good of humanity and not against it, the notion that self-centred pleasure-seeking is the highest moral good must be repudiated.”
He condemns the confused priorities of the contemporary world and asks: “How do we categorise the morality of a society where the cutting down of trees is protested more vehemently than the cutting up of human foetuses; where it is permissible to portray explicit sexual intercourse in a public cinema and yet not to project an advertisement in that same cinema of a person smoking a cigarette…?”
Harper acknowledges that market values can at times collide with family values. He quotes approvingly Tim Keller, author and pastor of a large church in downtown Manhattan, who “likens the sacrifice of family time demanded by high-paying jobs to the child-sacrifices demanded by idol-worshippers of biblical times”.
Harper concludes: “For the market to edify rather than corrode virtue in society, a critical mass of the community must value good over evil and strive to make ethically sound choices in their lives, including the choices we make as citizens as well as consumers. Good laws as well as good values frame the institutional setting within which the market operates and direct it towards moral rather than immoral ends.”
One can only regret that there are not more economic rationalists like Professor Ian Harper.
John Ballantyne is editor of News Weekly.