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Lessons from the Vietnam War: part 2

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In fear of China: then and now

Lessons from the Vietnam War: part 2

Barry Naughten (2153 words

An important lesson from the Vietnam War has been held to be that before Australia commits itself to support of U.S. foreign policies it must insist upon a place in the ruling councils of the U.S.  This case was argued in part 1 of this comment, which focused on the limitations or weaknesses of the counter-insurgency paradigm.

This is misplaced emphasis. Far more important is that Australia do its own ‘due diligence’ on foreign policy questions and that it maintain its sovereign independence as far as possible. Being in the ruling councils of other states such as the U.S is at best only one means to this end, and at worst either utopian or about the cooptation of our foreign policy decision-makers.

Part 2 of the comment focuses on a second potential lesson from the Vietnam experience for Australian foreign policy making. The case is that Australian foreign policy at the time was ill-informed, blinkered by ideology and distorted by electoral opportunism.

Resonating with some of today’s preoccupations, its focus was on keeping the U.S. involved in Asia, especially vis-à-vis the then much feared China, even if took a prolonged and bloody land-war to do so.

Foreign policy realism and national interests: of our state and others

National interest and power are the touch-stones of realist approaches to foreign policy. Hence, like the first, this second comment must focus on questions of national interest.

The Australian government at the time thought it was pursuing a realist foreign policy based on national interest, based variously on notions of ‘forward defence’ or an ‘insurance policy’ vis-à-vis the U.S. alliance.

However, this policy was seriously flawed because it was ill-informed, notably about the national interests of the other major players. Defining Australia’s national interest as an input to a realist foreign policy also requires us to consider the national interests of the other major players, not just their actual policies and capabilities.

Accordingly, let us consider the actual compared with the realist foreign policies not only of the U.S., but those of Vietnam and of China as they were at the time.

As previously argued, in respect of its involvement in the Vietnam War, the U.S. was not rationally pursuing its national self-interest. Such a negative case had been argued by leading U.S. foreign policy realist scholars both at the time (Hans Morgenthau and Kenneth Waltz) and retrospectively (John Mearsheimer). These realist scholars did not go along with framing the war as one of counter-insurgency. Not only did they deny the applicability of Cold War logic that was prevalent at the time, they also framed the war as it empirically was: for the Vietnamese a legitimate one of national resistance; for the U.S. a tragic and unnecessary war. Only on that recognition could a reasonable U.S. foreign policy be formulated.

Until the end, U.S. foreign policy-makers on the other hand were not able to understand and follow this advice. This was so in part because they (especially President Johnson but then Nixon) saw themselves as ‘committed’ to continuing a course of action even after it had become evident that the strategy stood no chance of achieving its purported objectives — a good example of the ‘sunk costs’ fallacy. In the case of the Iraq war (2003), George W Bush presented the world with another example of this fallacy. (This is far from asserting that immediate withdrawal is the only rational strategy, much less denying the need to overcome inevitable setbacks in a necessary war such as WWII.)

Another factor underlined by critical realist foreign policy analysts like George Kennan contested the wisdom of U.S. pursuit of a global primacist role. Such a role has never been quite sustained despite apparent ‘unipolar moments’ in 1991 and 2002. By 2012 long-term prospects were instead favouring an increasingly multipolar world.

Conjointly with the economic crisis of 1971 caused in large part by the Vietnam involvement, the U.S. leadership appeared to sense this reality — hence Nixon’s historic visit to Beijing in 1972. Supported by Kissinger’s advice, Nixon had decided to form an alliance of convenience with China against the USSR, while also opening up China to the world. Less than ten years earlier foreign policy hawks had been calling for the U.S. to ‘surgically’ denuclearize a China that saw itself as existentially threatened by both super-powers.

The rapprochement meant that China could then be ‘contained’, in large part through increased economic interdependence, rather than continuing with the failed U.S. policy of its enforced isolation (which was breaking down anyway).

Nixon’s balance-of-power policy with respect to China and the USSR could thus be viewed as a rational response to a setback to U.S. global primacy aspirations subject to Paul Kennedy’s ‘imperial over-stretch’. Today, such a setback has followed the Iraq war, 10 years of conspicuous failure in Afghanistan and the apparently intractible situation vis-à-vis Iran. Hugh White (and here) is just one analyst contrasting Nixon’s successful diplomatic re-engagement with China with the long-standing but recently tightened U.S. policy of globally isolating Iran. This risks cataclysmic war in the Middle East and loss of other mutual benefits. Once again (as in China’s case) foreign policy hawks are calling for war based on Iran’s alleged (but as yet unconsummated) nuclear aspirations.

40 years ago, Vietnam (then caricatured by the U.S. as ‘Hanoi’) was pursuing its national interests by resisting foreign control of its territory. At tremendous human cost, this was an ultimately successful struggle unparalleled in 20th century history. That this ‘security’ goal was paramount against all aggressors became evident when Vietnam expelled Chinese invading forces in 1979, consistent with a pattern of resistance to Chinese suzerainty that had been in place over the centuries, if not millennia.

Turn now to the case of China and its national interests at that time. This was an under-developed China that had suffered a vicious occupation at the hands of imperial Japan in the 1930s and 40s, and before that, regional de facto occupations at the hands of the European powers. China’s provision of material support to Vietnam in its long struggle, first against returning French colonialism and then against the U.S., made sense. The People’s Republic of China was implicitly threatened by any future Vietnamese entity that would have been a client state of its historical adversary the U.S. In the words of C.P. Fitzgerald, this ‘white peril’ would have been a dagger poised at the heart of China. Secondarily, China would have had similar ‘encirclement’ concerns should the USSR have become the only great power successfully protective of Vietnamese national independence.

As just noted, China later saw its national interests in an expedient strategic alliance and agreement with the U.S. Through this, it gained not only support against its rival and territorial aggressor the USSR but also a commitment by the U.S. to end support for its puppet government in Saigon, removing the threat from the south.

Getting it right about China: then and now

The designers of Australian foreign policy at the time wanted to be realist but were badly ill-informed, not least in understanding the national interests of these other players. The main particulars of one critique thereof had been set out in 1967-68 by the young Gregory Clark in a series of public interventions following his conscientious resignation from the then Department of External Affairs. Clark’s resignation was in the company also of his colleague Stephen Fitzgerald, who went on to become Australia’s first Ambassador to China and remains an important commentator.

Clark’s major contribution was his definitive 1968 book In Fear of China. This was the subject of an important review by the eminent Australian historian of China, the aforementioned ANU Professor C.P. Fitzgerald. Of the latter’s older generation of scholars, respected figures such as Peter Russo and W. McMahon Ball had also been among the influential dissenters. Given this background from leading intellectuals, Opposition Leader Gough Whitlam’s ‘official’ visit to Beijing in July 1971 was not so remarkable, though ironic indeed that this occurred contemporaneously with the highly secret preparatory visit of Henry Kissinger, as Nixon’s chief National Security advisor.

The power of Clark’s critique of the Coalition Government and its supporters was not diminished by the fact that was a son of the world renowned economist and prominent Catholic layman Professor Colin Clark. This was especially so given that the strongest current of support for the Vietnam War was from the organised right-wing of the Catholic politics, including such figures as Colonel ‘Ted’ Serong, and the young Gerard Henderson, both of whose roles were noted in part 1 of this comment.

The essentials of In Fear of China included the following.

  • Australia’s foreign policy was dominated by fears of a ‘downward thrust’ of China, a paranoid perspective shared by many Australians, and hence a formula also good for winning elections (as the Coalition resoundingly did in 1966).
  • The Vietnamese national independence struggle was viewed in the Cold war terms that framed debate at the time. Being ignorant of Asian history, official foreign policy advisors (notably Greg Clark’s former colleagues) viewed a united and strong Vietnam as essentially a channel for Chinese power, instead of being part of a process (in a sense) of ‘containing’ China, as became evident in 1979 and still is the case.
  • As a corollary, the then Australian Coalition Government’s foreign policy was hawkish in the terms of the U.S. debate, being centred on keeping the U.S. involved in a land war in Asia for as long as it took, and against U.S. national interests in the sense argued above.

More than four decades latter, with China’s GDP now second only to the U.S. and having become our largest trading partner and the main reason for our economy escaping the worst of the GFC, the relationship remains problematic. But as Professor Hugh White and others have noted, the central concern remains about how that evolving bilateral relationship fits with that involving the U.S. Since White’s intervention, concerns have mounted as a result of the Gillard Labor Government having permitted the U.S. extended basing rights in the Northern Territory. Richard Tanter of the Melbourne-based Nautilus Institute provides an account of silent growth in Australian defence commitments to the U.S. over the past decade.

Australia’s foreign policy: avoiding a dichotomy of false extremes

In the 1960s the ‘insurance policy’ argument was that support for the hegemonic power (‘right or wrong’) would ensure its support in the hour of need. If this were the sole plank of policy then what would be the purpose of foreign policy being ‘well-informed’?

Such an ‘insurance policy’, based on over-simple assumptions of reciprocity, would not seem to conform to the usual criteria of foreign policy realism. In assessing Australia’s grand strategic options over the long-term George Friedman argues the contrary but he sets up a dichotomy of false extremes:

[Australia’s] options are to align with the United States and accept the military burdens that entails, or to commit to Asia in general and China in particular.

The argument here is instead that Australia has served neither its own interests nor even those of the U.S. by its sometimes costly support for the latter’s unnecessary wars.

As to the Iraq war (2003), Australia’s uncritical membership of the U.S. ‘coalition of the willing’ amounted to a repeat performance three decades on, demonstrating the point.

As Geoffrey Wheatcroft suggests, a foreign policy based largely on ‘your country right or wrong’, whether understood in a realist or ethical sense, does not seem wise. None other than the conservative British historian Niall Ferguson made a similar observation. Both comments referred to the so-called ‘special relationship’ between the UK and the U.S. Wheatcroft questions its real substance. As such, his comments about UK foreign policy may not be without relevance to Australia’s situation vis-à-vis the U.S.

The more general lessons

Despite the discredited ‘insurance policy’, the core arguments put in the late 1960s by Gregory Clark and C. P. Fitzgerald still hold true, namely that a sovereign Australian foreign policy needs to be based on sound analysis and good evidence.

Admission to U.S. supreme councils is not an end in itself.

Diplomatically, it is more important to engage closely with all nationstates having a bearing on our security and prosperity. This is partly because security requires insight into both perceived and actual national interests as well as the capabilities (‘power’) of other states, including potential adversaries as well as allies and hegemons.

Militarily, we need to be wary of involvement in the ill-judged and ill-informed wars of others — wars often based on deviations even from the national interests of those other would be allied Great Powers or states, a case well demonstrated by the Vietnam war.

Educationally, we need to move on from cultural dependence, whether British or U.S. Teaching of Asian languages has shown little progress since the 1950s. Similarly, available documentation (2009) indicates precious little focus on the teaching of 20th century Asian history. Again, this compares unfavourably with the 1950s, at least in Victoria (years 9-10), built around excellent texts such as Max Crawford’s Ourselves and the Pacific

It was clear that by 2003, and indeed by 2012, neither the U.S. nor Australian foreign policy has yet fully absorbed the lessons of Vietnam, or those of Iraq (2003-).

Barry Naughten bio

Barry Naughten, PhD, MAIR, MEc, BSc is a Departmental Visitor in the Centre of Arab and Islamic Studies, ANU, where he is completing a book on U.S. foreign energy policy in the Middle East. He was formerly a Senior Economist in ABARE, the Commonwealth Government economic research agency, where he specialised in energy economics. He has published journal articles and book-chapters in these and related fields.

He is contactable on and on






Written by Barry Naughten

August 23, 2012 at 11:39 am

Lessons from the Vietnam War: part 1

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‘Counter-insurgency’: problematic technique; distorting frame

Lessons from the Vietnam War: part 1

Barry Naughten (2366 words)

Australia’s adverse experience with the Vietnam War in the 1960s has been used to support the contention that before Australia commits itself to support of U.S. foreign policies in future it must insist upon a place in the ruling councils of the U.S.

In a recent documentary All the way (ABC TV 12 April 2012) journalists Paul Ham and Anne Delaney have put this case for high level consultation as part of a ‘special relationship’ with the U.S. In making this claim they draw on an interview with Malcolm Fraser, the former Prime Minister but at the time of the Vietnam War, Defence Minister in the then Coalition Government.

In support of this thesis, their case-study is that of counter-insurgency and an implied assessment of how it should have been conducted in the Vietnam War.

However, their treatment of counter-insurgency confuses means with ends. In large part, this is because they fail to note the ways in which involvement in the Vietnam War conflicted with the national interest of the U.S. itself, not to speak of that of Australia.

40 years later and over a decade since 9-11, debate about counter-insurgency continues, and once again ideology is distorting a realist analysis. Two aspects are considered here.

The first touches on recent revisions to U.S. doctrine on counter-insurgency (COIN). Integrally related to this doctrine is the counter neo-conservative notion of a ‘Long War’, a.k.a. ‘the war on (Islamist) terror’ (WOT). Indeed, the leading proponent of the ‘Long War’ in its most extreme form (Norman Podhoretz) had been a prominent hawk on Vietnam. Under the Obama Administration it has morphed into ‘Overseas Contingency Operation’ a.k.a. WFKATGWOT — the latest stage, as Andrew Bacevich puts it.

Hence, the second current aspect is about the U.S. foreign policy paradigm represented by WOT and accompanying COIN as a counter-productive response to the ideological and material spread of jihadist Islamism, as well as having other significant costs.

Whether in ‘supreme councils’ or otherwise, Australia’s position should rest on sound realist analysis of its national interest, not a preoccupation with techniques for ‘digging ourselves out of holes we shouldn’t be in’. In doing so, policy must be cognisant of the interests of other states, especially the U.S. Such analysis is a proper point of departure.

U.S. foreign policy realism about Vietnam and the myth of counter-insurgency

It does not suffice to say: ‘everyone now agrees that the Vietnam War was mistake’. Indeed, a significant minority claim that the ‘mistake’ was to use insufficient force. Public opinion surveys are not unimportant but learning lessons requires engagement with the recorded history—which for many, and for many reasons, can be painful.

Undue focus on counter-insurgency excludes the alternative framing asserted by U.S. realist critics of the war at the time. The same point is made by the eminent historian of Vietnamese anti-colonialism David G Marr. In his review of a recent book, drawing on previously secret CIA documents, by Thomas L. Ahern, Jr., (himself a former senior CIA officer, 1979 station chief in Tehran, no less), Professor Marr comments as follows:

The doctrine of counterinsurgency failed in Vietnam because adherents of the National Front for the Liberation of South Vietnam saw themselves not as ‘insurgents’ but rather as upholding the independence and territorial integrity of the nation declared by Ho Chi Minh in 1945.  The political and military parameters of the ‘Anti-American Resistance’ had been set during the ‘Anti-French Resistance’ (1945-1954), about which Ahern says almost nothing.  The French considered the ‘Viet Minh’ an insurgent threat to legitimate authority, rather than a functioning state.  American analysts then made the same mistake.  No CIA-initiated program, be it `civic action’, `census grievance’, counter-terror’, or ‘political action’, managed to overcome this liability. (emphasis added)

Because they understood this basic point at the time, leading U.S. realist scholars such as Hans Morgenthau and Kenneth Waltz opposed the war. More recently, contemporary U.S. realist scholars such as John Mearsheimer have made valid comparisons with another unnecessary war: Iraq (2003-). As Mearsheimer points out, this realist perception of the Vietnam War was never accepted or admitted by some of the ‘best and brightest’: U.S. liberal internationalist officials like McGeorge Bundy and Walt Rostow. An inkling is evident in Defense Secretary Robert McNamara’s later musings in the documentary film The Fog of War a position he had actually come to decades earlier though not for the public domain. In a memo to Johnson as early as May 19 1967, he had warned:

There may be a limit beyond which many Americans and much of the world will not permit the United States to go. The picture of the world’s greatest superpower killing or seriously injuring 1,000 non-combatants a week, while trying to pound a tiny, backward nation into submission on an issue whose merits are hotly disputed, is not a pretty one. It could conceivably produce a costly distortion in the American national consciousness and in the world image of the United States.

This vastly understates the scale of the holocaust inflicted on the people of Vietnam under both Johnson and Nixon Administrations.

All-the-way with the ‘counter-insurgency’ frame?

The Ham documentary has contemporary relevance in its warnings about the fallibilities of U.S. foreign policy record in our region. For this it was predictably slammed by the political right, as represented by the Sydney Institute’s Gerard Henderson.

Commendably it also includes arresting and important interviews and testimonies from a range of Australian soldiers caught up in an involvement that was obviously not of their making — with a notable exception or two, as outlined below.

However, the documentary does not engage with the above realist arguments against the war and their meaning for Australian foreign policy, then and in the future.

With its focus on the supposedly technical matter of ‘counter-insurgency’ it draws heavily on comments by a CIA counter-insurgency expert, John Nagl and on the experience of Australian troops in Phuoc Tuy province. Two dichotomies are presented:

  • ‘bad’ versus ‘good’ forms of counter-insurgency;
  • counter-insurgency versus conventional high-firepower warfare.

‘Bad’ versus ‘good’ forms of counter-insurgency arepersonalised in a comparison of two allegedly influential Australian operatives, Colonel Francis ‘Ted’ Serong (bad) and Captain Barry Petersen (good), presented as being at cross-purposes with each other. Thus, the driven, devout Catholic and anti-communist Serong was:

on a crusade that would eventually consume him, when he later joined the CIA’s controversial and brutal Phoenix program.

By contrast, Petersen was deposed and relieved of his position by the CIA operatives under whose authority he worked. In his own words:

‘After getting up the nose of the CIA for refusing to have counter-terror teams, and wanting to continue doing things my way, they decided I had to be replaced’.

In this account, the alternatives to counter-insurgency are manifested in the failures ofWestmoreland’s conventional high-firepower warfare, the corrupted obscenity of McNamara’s management science and its ‘body counts’, culminating in the horrors of My Lai and its unreported equivalents, each of which atrocity he properly reminds us.

The irrelevance of Thompson

Much of the prestige of counter-insurgency warfare, such as it was at the time, rested on the innovations of the UK military strategist Sir Robert Thompson informing the British-sponsored anti-insurgency campaign in the Malayan emergency (1947-60). But the ‘lessons’ from that campaign were not transferable to Vietnam, where Thompson’s ideas had little influence. Malaya’s inhabitants were predominantly Malay-speaking and of Malay ethnicity and identity. The Chinese were thus a minority whose support for a communist revolutionary movement was related not only to their colonial (or post-colonial) situation but also to their working class role in industries such as rubber-tapping, stevedoring, and as ‘coolies’ and petty traders.

The revolutionary movement in Vietnam clearly also had its class aspects, notably about the differing roles of landlords and landless peasants in the nationalist struggle. Support from the latter was fundamental to its success; but the former were often associated with the previous colonialist regime. Unlike the Malayan case, the nationalist character of the resistance was compatible with the population being predominantly ethnic Vietnamese.

Australia’s role and the problematic lessons from Phuoc Tuy province

Instead of focusing on foreign policy fundamentals, Paul Ham’s account dwells on Australia’s apparent success, supposedly unique, in neutralising Vietnamese resistance activity in Phuoc Tuy province of southern Vietnam. The inference seems to be that had these techniques been replicated by the U.S. elsewhere then the organised resistance might have been defeated.

But even in these terms, such a conclusion is a fallacy of composition. Vietnam was not and could not be Phuoc Tuy province writ large. For example, it might be conceded that due to successful techniques used by Australian forces in this province, resistance forces may have given up or deferred attempts to gain control of this particular region. But they did so in favour of other regions and tactics.

In the event (however hypothetical and implausible) of the U.S. replicating Australian techniques, and abandoning its own harsh and intimidatory methods, it seems highly unlikely that the Vietnamese resistance would have abandoned its armed struggle against foreign domination that had been in place since World War II.

‘Moving on’ from Vietnam: the Petraeus counter-insurgency manual

Post-Vietnam thinking is supposedly reflected in the U.S. Army/Marine Corps Counterinsurgency Field Manual, prepared under the auspices of General Petraeus (December 2006). The above-noted John Nagl was a principal author of this document.

On p. 60, it concludes a chapter as follows:

President John F. Kennedy noted, “You [military professionals] must know something about strategy and tactics and…logistics, but also economics and politics and diplomacy and history. You must know everything you can know about military power, and you must also understand the limits of military power. You must understand that few of the important problems of our time have…been finally solved by military power alone.”

Nowhere is this insight more relevant than in COIN. Successful COIN efforts require unity of effort in bringing all instruments of national power to bear. Civilian agencies can contribute directly to military operations, particularly by providing information.

J. F. Kennedy’s point here is the realist one made above: sometimes this can be the wrong war. Willfully or otherwise, the manual ignores or misconstrues this point. This mis-construction demonstrates how ‘technique’ can become ‘frame’. Forgotten is Clausewitz’s injunction that policy (indeed realist foreign policy) should dominate the application of military force, not vice versa. A problem arises when highly placed military technicians—military ‘pro-consuls’ and the Pentagon—make foreign policy.

Recent reports indicate that even at West Point some military-strategic thinkers are beginning to view counter-insurgency thinking is a poor guide to foreign policy.

Counter-insurgency as ‘technique’ and as ‘frame’: ‘War on Terror’

Twenty-first century wars in Iraq and Afghanistan differ from the Vietnam War and from each other, just as the Vietnam War differed significantly from the Malayan ‘emergency’ noted above. However, counter-insurgency ‘framings’ have been prominent—and potentially misleading—in each case. Whereas Cold War categories once distorted public debate and official decisions now the context of a ‘Long War on Terror’ is counter-productively imposed. As it happens, once again an Australian specialist in counter-insurgency—David Kilcullen—has been a prominent advisor to the U.S. military in this regard. Once again a realist critique is relevant, and is well put by Andrew Bacevich in his review of Kilcullen’s arguments:

….Yet as someone deeply invested in that conflict [the ‘Long War on terror’], he [Kilcullen] cannot bring himself to acknowledge the conclusion to which his own analysis points: the very concept of waging a Long War as the antidote to Islamism is fundamentally and irrevocably flawed.

If counter-insurgency is useful chiefly for digging ourselves out of holes we shouldn’t be in then why not simply avoid the holes? Why play al Qaeda’s game? Why persist in waging the Long War when that war makes no sense?

When it comes to dealing with Islamism, containment rather than transformation should provide the cornerstone of U.S. (and Western) strategy. Ours is the far stronger hand. The jihadist project is entirely negative. … Time is our ally. With time, our adversary will wither and die—unless through our own folly we choose to destroy ourselves first.

The ‘Long War’ was always ill-conceived as a response to diverse and uneven threats associated with variants of Islamist jihadism (not all of which constitute a dire threat).

Robert Gilpin and other foreign policy realists have argued that such a response is unlikely to be successful without active support from the mainstream Islamic world of 1.6 billion people. The good news is that such support is likely to be forthcoming in the presence of sound policies of restraint and international cooperation. Muslim-majority states, and their peoples also in Muslim-minority states, have a strong stake in marginal-ising Islamist jihadism. But such political support is not automatic. Indeed, as conceived and named by its neo-conservative proponents, the so-called ‘long war’ is likely to alienate such support, according to U.S. foreign policy realists like Gilpin and Bacevich.

The historical conditions of Islamist jihadism must be addressed. These include certain highly questionable actions of the U.S. itself over the years — not least its vital support (no secret to Muslim peoples) to autocratic and corrupt regimes in the Islamic world.

Multiple such cases demonstrate the systemic bias in the concept of ‘insurgency’. It is defined (as it was in the case of Vietnam) in terms of movements of opposition to those autocratic ruling regimes (as well as corrupt and failing states) enjoying U.S. support, often on dubious calculations of the long-term national interests of the U.S. itself.

Generalizing, the insurgency frame has more recently been applied also to nation-states unwilling to accept client status within an hierarchical world system headed by the U.S.

Australian representation on U.S. supreme councils?

A key lesson from Vietnam case was supposed to be the notion that if only entry to supreme U.S. war councils were available to Australia then U.S. military strategy might be reshaped to serve our national interests. This is potentially misleading. Protecting the national interest of Australia as a sovereign state requires first and foremost that we do our own ‘due diligence’ on the foreign policy issues at hand, and not leave this to others.

Part 2 of this comment takes up the ‘regional’ dimension of Australian foreign policy. Regarding the Vietnam War it will argue that the Coalition Government thought it was indeed taking up a realist perspective based on national interest. Unfortunately that position was singularly ill-informed, and reflected an irrational fear of China. Part of the argument is that foreign policy should be based not only on actual or perceived policies and capabilities of relevant states (both purported allies and purported adversaries) but also on an informed calculation of the actual self-interests of those states.

Barry Naughten bio

Barry Naughten, PhD, MAIR, MEc, BSc is a Departmental Visitor in the Centre of Arab and Islamic Studies, ANU, where he is completing a book on U.S. foreign energy policy in the Middle East. He was formerly a Senior Economist in ABARE, the Commonwealth Government economic research agency, where he specialised in energy economics. He has published journal articles and book-chapters in these and related fields. He is contactable on and on

Written by Barry Naughten

August 23, 2012 at 11:38 am

Policy on ‘Catastrophic’ Climate Change

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Naughten, B., 2011, ‘Review article: Policy on Catastrophic Climate Change’, Journal of Australian Political Economy, June, issue 67., pp. 121-53.,com_remository/Itemid,26/func,startdown/id,171/



Barry Naughten

Review of:

Frank Ackerman, 2009, Can we afford the future: the economics of a warming world, Zed Books, London and New York, $35

Ross Garnaut, 2011, Garnaut Climate change Review — Update 2011, Update Paper one: Weighing the cost and benefits of climate change action.

John Quiggin, 2008, ‘Uncertainty and climate change policy’, Economic Analysis and Policy, vol. 38, no. 2, pp. 203-10.


We clearly face a crisis in Australian ‘climate politics’. The three major contributions considered in this review article offer materials for a re-framing of this debate so as to put the main focus where it should be: on averting a multi-dimensional ecological catastrophe facing our children and grand-children.

Frank Ackerman’s thesis has two key elements insufficiently prominent in our recent climate debates and in the campaign. The first is the necessity to avert extreme climate events that could be catastrophic to human civilisation. The second is his case against misuse of cost-benefit analysis and discount rates in conceptualizing policy responses. Ackerman’s book[1] provides a critical economist’s perspective but is also important to the campaign because of its accessibility and clarity, including to non-economists.

The other two contributions, by Australian economists, share the elements of Ackerman’s twin thesis. Following Ross Garnaut’s 2008 Review the main focus here is on the first of his series of Update Papers published during early 2011. John Quiggin’s paper is an argument about the connection between climate policy and climate science, drawing on his long-standing,
innovative focus on the economic analysis of risk and uncertainty[2].

Ackerman is involved in Economists for Equity and Environment ( This web-site complements his book and includes important downloadable papers substantiating his twin thesis, notably Quiggin’s published article. Garnaut’s 2008 Review and his 2011 Update Papers are readily available on-line.

Ackerman’s critique, like Garnaut’s review, extends to some leading scholars from mainstream economics who have addressed climate change, especially the senior Yale economist William Nordhaus (2008). Ackerman is somewhat more supportive of Nicholas Stern, whose major report to the UK Treasury (2007) has been subjected to theoretical criticism by other mainstream economists including Nordhaus.

Readers may want to connect Ackerman’s arguments with those in the previous issue, devoted to the political economy of climate change (JAPE 66, 2010-11). This is part of a broader and necessary productive debate within ‘progressive environmentalism’.

Political context and essential re-framing of the Australian debate

Prompted by the Greens and three independents following the 2010 Federal elections, the Australian Government has renewed its commitment to action on climate change. A fixed price on ‘carbon’ has been announced as a step towards a tradable emissions scheme. This has meant political polarisation given that the Opposition under Tony Abbott has been allowed to get away with his wild swings between outright denial (‘climate change is crap!’) and token acceptance of climate science, tailored according to his audience[3].

For the Government and other proponents of abatement action this policy debate has not been going well. In their campaign, these proponents of mitigation have not sought sufficiently to ‘frame’ the debate so as to highlight the damage from ‘dangerous’ climate change and the benefits from averting that damage. Instead, the debate has been largely fought out on the opponents’ favoured ground, focusing almost entirely on the costs of such abatement, how these should be borne and with what policies (‘a great big tax’). Among proponents of mitigation, there has been too much wishful thinking around the vague proposition that ‘we are all believers now’, in human-caused climate change[4].

The three sources reviewed here, together offer important contributions toward a paradigm to reframe the debate, rectify this shortcoming in the science-based campaign for climate change mitigation, and expose Abbott’s demagoguery and cynical opportunism.

Opponents of action on ‘dangerous’ climate change have asserted that Australia should not be ‘taking the lead’ in global mitigation and that any such allegedly ‘unilateral’ action would be ineffectual. This claim fails to take account of the lagging role that Australia has had to date relative to states like E.U. members, other non-U.S. OECD states and even China. It also ignores Garnaut’s conclusion that ‘Australia has a greater interest in a strong mitigation outcome than any other developed country’ (2011: 6). Australia is also globally the highest per capita CO2 emitter due to its high dependence on coal-fired electricity and its prodigal use of energy. Further, as an affluent and growing economy immune to the worst effects of the GFC, it has a higher capacity to pay than most OECD countries.

Global Emission Targets and Atmospheric Stabilisation Levels

Economists vary as to their perspectives, derived from climate science, about future feasible and necessary limits on greenhouse emissions and corresponding implications for global temperature rise (Smith 2011: table 1). For example, compared with the pre-industrial level of 280 ppm (parts per million) of CO2 equivalent, the target proposed by Nordhaus is the least demanding in terms of mitigation effort, at 745 ppm by 2100.

Stern’s specified limit (2007: 265) was to stabilise at 550 ppm by 2050. Part of his stated reason at that time for not targeting 450 ppm was his concerns about the economic consequences of pursuing a target that stringent (2007: 276). However, this assessment is not easily commensurable with the relatively insignificant cost attributed to meeting his then preferred much less ambitious target of 550 ppm.

As regards the 450 ppm target, Garnaut also argues that Stern is unnecessarily pessimistic about the scope for markets with CO2 priced, and R&D policies, to induce required technological progress in ways that have been observed historically[5]. In his Update Paper seven, Garnaut is able to cite significant technological progress made since 2008.

Levels of both comfort and necessity about a target as low as 450 ppm are motivated by a widely shared concern that an associated 2 degrees Celsius of global warming is the upper limit of acceptability (Department of Climate Change 2007-08: 14). Garnaut had noted (2008: 280-1) that:

there are advantages to Australia if the world commits itself at some time to a credible agreement that adds up to the objective of 400 ppm [CO2-e]. This would require agreement on and progress towards a 450 objective, with a subsequent lift in ambition.

More ambitiously (if not central to his main argument), Ackerman (2009: 92) focuses on 350 ppm, less than the present level of 390 ppm which is itself probably the highest level for millions of years.

CBA: Flawed Framework for Economic Analysis of ‘Dangerous’ Climate Change

Averting climate change may appear to be a problem suited to the standard economists’ technique of cost-benefit analysis (CBA). In such a framework the main costs would be those of emissions abatement while the corresponding benefits (net of adaptation costs) would reflect longer-term future damage avoided by this investment in mitigation. Purely illustrative paths[6] in such mitigation costs together with benefits of climate change averted over a period of 100 years are indicated in Ackerman’s figure 2.1.

CBA can be a component part of so-called ‘integrated assessment’ models such as those of Nordhaus. These models attempt to capture (‘endogenise’) within one single ambitious framework the interactions between (i) technologies and policies abating greenhouse gas emissions; (ii) climate damage thus averted, and (iii) adaptation to residual climate change. These models do so over relevant very long future time periods of 100+ years.

As applied to policies to avert climate change, Ackerman strongly questions the validity of the cost-benefit framework. Among economists he is not alone in this. As we shall see, economists of the stature of Jeffrey Sachs and also Garnaut take a similar view.


Ackerman’s objections to CBA are on at least three grounds.

The first is that many key damage costs, and consequent benefits from their mitigation, are both potentially large and difficult to quantify or evaluate, to the point of impossibility.

A second concern stems from misuse of the discounting process and discount rates in the CBA in existing analyses of climate change policy. As Ackerman says, (2009: 18):

the choice of discount rate becomes decisive for the whole analysis. It is not an exaggeration to say that the discount rate is the most important single number in climate economics.

In particular, a bias is imposed because the damage from climate change grows over time and its most severe impacts would be on future generations. But the discounting of both mitigation costs and benefits of climate change averted means that net present values of policy action (benefits minus costs) can be radically reduced or even made negative.

This sensitivity is illustrated[7] in Ackerman’s figure 2.2.  For any discount rate of 3% or more in this case, the discounted net present value of costs exceeds the benefits of greenhouse gas abatement.  That being so, if normal CBA principles were followed, mitigation policy would not be recommended in this simplified illustrative example.


For the lay-reader, Ackerman provides an excellent primer on the various purposes, rationales and interpretations of the discounting process. But these are by no means settled issues among economists.

There is little argument that discounting in economics is, and should be, about efficiency in the allocation of resources over time. However, it is often assumed, very questionably, that discounting can also be used to address the quite distinct question of intergenerational equity. Ackerman convincingly argues that discounting does not function to ensure intergenerational equity, especially over the very long period that is so central to the problem of climate change. The identities of those who might bear much of the cost of climate change mitigation (the present generation), may overlap with, but are also distinct from, those bearing much of the damage and risks of climate change. His chapter heading sums it up: ‘your grandchildren’s lives are important’.

The ‘integrated assessments’ of Nordhaus exemplify this misuse of ‘market-related’ discount rates in addressing both intertemporal efficiency and intergenerational equity. Nordhaus concludes, not surprisingly, against urgent and significant action to abate greenhouse gas emissions, adopting instead a ‘wait and see’ attitude supposedly pending more definite scientific findings. On this basis, Nordhaus specifically rejects the urgency of abatement action underlined in Nicholas Stern’s analysis which incorporates a significantly lower discount rate than that of Nordhaus. As cited by Michl (2010: 542), his critical (and colourful) comment is as follows (Nordhaus 2007: 642):

The [Stern] Review takes the lofty vantage point of the world social planner, perhaps stoking the dying embers of the British Empire, in determining the way the world should combat the dangers of global warming. The world, according to Government House utilitarianism, should use the combination of time discounting and consumption elasticity the Review’s authors find persuasive from their ethical vantage point.

The dispute should not be simply around the level of discount rate. As noted above, the more fundamental point is that discounting is no way to deal with the problems of intergenerational equity and long-term sustainability of human civilisation due to climate change; and a corresponding objection can therefore be made about the technique of CBA. But as Ackerman notes, even Stern is not exempt from retaining the CBA approach.

Yet, as will be argued later in the present review article, the discount rate indeed has an important role in analysis of the efficiency issue of cost-effectiveness in attaining a given emissions target by means of abatement policy. This procedure, known as cost effectiveness analysis (CEA) does not include benefits but only the costs of such abatement, and is about the minimization of these costs, an increasingly important requirement as emissions targets become more ambitious.

Thus, there is no means of avoiding the necessity for informed policy judgments about the target levels of emission reduction required, at both national and ultimately global levels. These judgments are necessarily based on political and expert deliberations at the national and international levels, informed by the climate science as well as by considerations of fairness and equity, again both nationally and internationally.

The case against use of CBA in climate change policy is also implicit in the argument put by the leading U.S. economist Jeffrey Sachs (Lackner, Sachs et al. 2005). This argument was put in the context of the G.W. Bush / John Howard era:

the [UN Framework Convention on Climate Change] calls for a cost-minimizing approach to limiting significant deleterious effects on natural and managed ecosystems, rather than a balancing of overall costs and benefits of mitigation (and adaptation). This is a reasonable approach to a situation where significant ecosystem changes due to anthropogenic climate change are assumed to have large but also unquantifiable consequences on global society. In practice, however, the United States and some other countries (Australia, for example) have failed to respect this approach, reverting instead to a cost-benefit test. The Bush administration has argued that the costs of mitigation would exceed the benefits and has therefore rejected any specific climate targets. (Italicization added)

Coming from such a source, this special reference to the Australian (Howard) Government’s policy may at first sight seem startling. It simply says that Howard was content to discount the dangers of climate change by implicitly adopting what was in effect a CBA paradigm[8].

As reported in his Update Paper one, Ross Garnaut does undertake cost-benefit analysis (2011:11) of mitigation consistent with a target of 450 ppm CO2e.  However, as regards averted damages from climate change, this part of his analysis is confined just to ‘currently measurable market benefits’ of such mitigation — that is ‘impacts on consumption, incomes and economic output occurring before 2100’. On this restricted sub-set of benefits, the present discounted value of such benefits is found to approximate total abatement costs, with the discount rate being in the range 2-3 per cent.

Significantly, Garnaut’s analysis does not rest there. From such a limited cost-benefit analysis he has deliberately and specifically excluded (or abstracted from) three vital additional categories of averted damage that he says cannot plausibly be incorporated in a CBA framework. These other important categories are: (ii) ‘market benefits not readily measurable’; (iii) ‘insurance value of mitigation’; (iv) ‘non-market benefits’, including ‘environmental’ values such as conservation of the Great Barrier Reef.

By highlighting these less tractable elements, Garnaut’s method is aligned with Ackerman and Sachs rather than with the notion of Nordhaus and others that the problem can be encompassed within a CBA (or ‘integrated assessment’) framework. Garnaut argues that, combined with his first category of measurable and predictable damage mitigation, these other benefits must ultimately be decisive. Thus, inclusion of benefit categories (ii), (iii) and (iv) clinches the case for urgent and strong mitigation.

We return later to the question of whether this (four part) approach of Garnaut’s, involving some use of CBA, albeit heavily circumscribed, is the most appropriate.

‘Deep Uncertainty’: Characteristic of Future ‘Catastrophic’ Climate Change

The inability of standard CBA to deal with ‘catastrophic’ but uncertain climate change events is the third of its major deficiencies in this context.

Garnaut’s category (iii) of the ‘insurance value of mitigation’ is the special focus of Ackerman’s argument and that of co-thinkers he draws upon. Central to this argument are concerns about uncertainty relevant to the problem of ‘catastrophic’ climate change[9].

John Quiggin’s 2008 paper is the most valuable and accessible conceptual discussion of the economic and policy significance of uncertainty in the context of climate change. See also Quiggin (2005).

However, as Quiggin points out, it is the depth of more-or-less certain knowledge that has been accumulated by climate science and tested by peer review that first needs to be recognised. This knowledge rests on well-verified theoretical principles[10] and on observation and analysis of key indicators of the more-or-less distant past (paleo-climate science). An improved understanding of future implications is also incorporated in computerized and increasingly sophisticated global climate models. Analysis of the possible effects of climate change extends much more widely within the physical and biological sciences. The central summations for these scientific findings are successive reports of the International Panel on Climate Change (IPCC) under UN auspices.

As Quiggin also notes, a standard ploy of those obstructing mitigation of climate change is ‘fabricated uncertainty’, that is, dispute of scientific consensus[11], or quasi-consensus, by trading on the public’s often flawed notions of the broad scientific project. In addition, perfect scientific consensus is not required in order for abatement action to have a sound scientific and policy basis in the prudential terms set out by Ackerman.

It is ironic that many unwilling to bear the costs of mitigation, or are apathetic about mitigating climate change, want to rely on ‘science’ to produce ‘technical fixes’ without the need for policy intervention. This form of wishful thinking involves several major fallacies.[12]

Garnaut’s ‘insurance value of mitigation’ is about averting ‘catastrophic’ climate change. Drawing on Quiggin, Ackerman and others, this latter in turn has several aspects: (a) very large ecological and human impacts, especially on vulnerable populations and regions; (b) ‘tipping points’ and ‘positive feedback loops’; (c) unpredictable suddenness of such large changes such that strategies of human adaptation are scarcely viable; (d) ‘deep uncertainty’ associated with such effects, given the limits of existing science—not so much in its knowledge of the past or of basic scientific principles, but in its ability to foretell highly complex futures, even with the aid of the sophisticated climate models noted above.

Noting such ‘catastrophic’ effects is not to downplay other forms of damage (listed above by Garnaut) that may be less catastrophic but more predictable, the science of which may be better understood and in respect of which (in some cases) valuation can be attempted.

The Uncertain but Real Risk of ‘Catastrophic’ Climate Change

Ackerman’s argument here is in two parts. The first of these is his third ground for criticism of the cost-benefit framework, namely its typically exclusive focus on ‘average’ or ‘more likely’ projected future outcomes.

Ackerman argues that the focus should also be on the range of possible deviation from these long-term projections, even on plausible outliers[13].

Analogically, precisely this kind of deviation or plausible extreme case provides the rationale for households taking out life assurance or accident insurance. In this analogy, the assumed probability of a given dreaded outcome may be low but its results are deemed so serious that commercial insurance is highly valued by risk-averse insured households or firms, and also profitable for commercially-oriented insurers.

Even this insurance analogy[14] does not fully convey the gravity of the problem regarding ‘catastrophic’ climate change. This is because in the case of private commercial insurance, the pooled risks for the insurer are typically and necessarily calculable through statistical analysis of historical data. Under conditions of ‘deep uncertainty’ associated with catastrophic climate change, however, such confident and quantitative estimates of risky consequences and costs are not possible.

On the contrary, the notion of ‘catastrophic’ climate change[15] refers to significant unknowns over and above projected damage trends which are judged to loom larger as greenhouse emissions and global temperatures increase.

Involved are possible ‘tipping points’ and ‘positive feedback loops’ such as: ice-cap melting (meaning less white ice to reflect the sun’s heat), disruption of the thermohaline circulation (Atlantic Gulf Stream), large scale release of the permafrost’s methane, itself a potent greenhouse gas, etc. The eminent climate scientist Wallace Broecker (2003) offers a representative treatment of such cases. See also Garnaut’s Update Paper 5 (2011: 33-4). A listing of such potential positive feedback loops and tipping point situations has been compiled by a distinguished ANU paleo-climate scientist (Glikson 2011), as indicated in the table below[16].

This list, while daunting, is by no means exhaustive. For example, it does not include the whole major set of impacts, direct and indirect on human health, and in particular effects on the geographical pattern of climate-sensitive major transmissible diseases, like malaria, and heat-wave related deaths (McMichael 2011; Epstein & Ferber 2011).

When climate events such as those listed can happen, even at the 99th percentile of risk, this is not something that can be ignored. Mean temperature increases of between 10 and 20 degrees Celsius could be involved[17]. Ackerman (2009: 39) refers to several papers by the Harvard economist Martin Weitzman (for example, 2007), pointing out that:

Such high temperatures have not been seen for hundreds of millions of years … Because such hypothetical temperature changes would be geologically instantaneous, it would effectively destroy planet Earth as we know it. At a minimum this would trigger mass species extinctions and biosphere ecosystem disintegration matching or exceeding the immense planetary die-offs associated with a handful of such previous geoclimate mega-catastrophes in Earth’s history.

In developing this distinction between calculable risk and ‘deep uncertainty’ in the context of ‘catastrophic’ climate change Ackerman once again draws on the mathematical analysis of Weitzman (2007). This analysis has its arcane side but its essence can be understood in terms of Ackerman’s simple card-game analogy as follows. Calculable risk is exemplified by choosing a predicted playing card from a standard deck where the probability may be low but is precisely known. Increases in both mean values and diversity of outcomes over time can be represented by the dealer’s secretly removing respectively the low cards and then the mid-range cards from the deck.

Deep uncertainty by contrast is more analogous to a situation where the dealer replaces chosen cards from the deck with ‘wild cards’ that may have significantly higher values than those in standard deck. In this case repeated experiments (analogous to projections from recent history) may give little indication of what could feasibly happen.

Within the minority and heterodox political economic tradition of John Maynard Keynes, notions of ‘deep uncertainty’ also play a central role in explaining ‘systemic financial fragility’ and deep, persistent economic crisis[18]. As in the case of climate, the theoretical importance of deep uncertainty has been ignored by mainstream neoliberal economic theory during its three decades of recent ascendancy (Skidelsky 2009: 84-90, 174-5).

Table 1:  Potential Mechanisms For Catastrophic   Climate
Change Through Positive Feedback Loops


Nature of positive feedback

1. The albedo   (reflection)-loss factor inherent in the melting of land ice, sea ice and   snow, opening sea and lake water surfaces which absorb infrared radiation,   warming the water and leading to further ice melt (the so-called albedo-flip   effect). ↑ temperature →

↑ temperature →


2. Elevated atmospheric   greenhouse gas levels result in higher temperatures which, in turn, result in   further release of CO2 from water (which have lower solubility of CO2 with   higher temperatures) and from drying and burning biosphere, notably tropical   forests (Amazon, Congo). ↑ temperature →

↑ CO2

↑ temperature →

3. Warming ocean water to a   depth of 3000 meters, resulting in release of seabed methane-bearing   clathrates as amplifying feedback of climate change. ↑ temperature →

↑ CH4

↑ temperature →

4. Release of methane from   melting permafrost, with consequent rise in greenhouse gas levels, further   warming and melting of more permafrost. ↑ temperature →

↑ CH4

↑ temperature →

5. Decreased salinity of   the North Atlantic Ocean consequent on (1) increased precipitation; (2)   supply of Greenland fresh ice melt water,   and (3) lesser extent of sea ice, retarding the meridional overturning   circulation which drives the North Atlantic Thermohaline Current (NATC), thus   threatening its shutdown. ↑ temperature →

↑ temperature →


6. A slowing down or   collapse of the NATC will result in lesser heat transfer from tropical oceans   to high latitudes, increasing low-latitude temperatures which ensue in   tropical hurricanes. ↑ temperature →

↑ temperature →


Note:↑ = ‘increasing’; → = ‘leads to’

Source: This list is from Glikson (2011) with the right-hand column added by the present author. These mechanisms are separately listed, but they could be mutually reinforcing, each being activated by rising global temperatures.

Thinking Seriously about the Politics Of Climate Catastrophes and National Interest

Possible climate catastrophes such as those listed have highly significant spatial as well as inter-temporal characteristics. Consider the implications of sea-level rise and extreme weather events due to climate change as such a combination might apply to a populous, low income, vulnerable, low-lying country such as Bangladesh[19]. Australia is increasingly an organic part of the Asian region. Under both Abbott and Howard (his predecessor as some-time denialist of climate change), the Coalition has also sought to make political capital out of popular fears concerning waves of sea-borne refugees from Asia. In the debate about mitigation of climate change, Abbott and his co-thinkers should therefore be required to address a not-so-implausible ‘hypothetical’ about waves of ‘environmental refugees’ in such a circumstance of catastrophic climate change (Sachs 2007).

Such scenarios form only a sub-set of many that might be encompassed by ‘climate wars’ (Dyer 2009) where future national interests, and those of our grandchildren, could be threatened by ‘catastrophic’ climate change in these particular ugly ways also. In ethical and in realist terms, young Australians alive today could potentially face very ugly ‘lifeboat earth’ scenarios (Hardin 1974) in which future nationalist demagogues of Abbott’s ilk would be expected to demonize foreign peoples not prominent in the causation of global climate change catastrophe, but nonetheless principal victims thereof[20].

Two Approaches to Limiting the Role of CBA in Climate Policy

Within the ranks of those economists critical of the use of CBA in formulating climate change policy, some differences of approach have been noted above.

In particular, Garnaut has made limited use of the CBA approach. But he has heavily circumscribed it by underlining the importance of major benefits from abatement not capable of effective treatment within CBA. Use of a discount rate, doing questionable double-duty with respect to both efficiency and equity is thus confined in Garnaut’s analysis to a comparison of mitigation cost with just those benefits deemed to be more probable and/or quantifiable, albeit not in the ‘catastrophic’ category.

Compared with Ackerman and Quiggin, Garnaut has also placed less emphasis (two pages in his Update Paper five) on this category of catastrophic scenarios, perhaps on the basis that some of these are deemed of low probability in the period to 2100.

A distinct approach to climate change policy is to reject CBA altogether as fundamentally flawed. This approach is persuasively counseled by Jeffrey Sachs and colleagues, and seems to be implicit in Ackerman. However, as argued in the next sections, such an exclusion of the technique of CBA from climate change analysis by no means precludes an essential role for rigorous cost-effectiveness analysis (CEA).

Cost-Effective Emissions Abatement: Economic Principles and Political Lessons

The cost-benefit analysis framework is either rejected or tightly circumscribed by economists such as Ackerman, Sachs and Garnaut. However, the contribution from applied economists remains significant not least in cost-effectiveness analysis to achieve a given (‘exogenously specified’) emissions target at the least possible cost. Such analyses can take a variety of forms depending on whether the focus is national or global, whether on macro-economic variables (in ‘top-down’ models) or on technology choices over time (as in so-called ‘bottom up’ models).

Such approaches have importance in terms of reconciling environmental with other macro-policy policy goals, in attaining efficient allocation of resources and (sometimes notoriously) in political terms.

As regards economic efficiency, such analyses reaffirm the efficacy of putting a price on emissions that is consistent with the emission levels targeted. Models incorporating technological options and technical progress, can also indicate the types of technological (and behavioural) change that can most cost-effectively reduce emissions. Such model-based analyses can also address the effects on emissions of moderating growth in economic activity and population.

Ackerman favours the pricing of emissions but has two qualifications. The first is that (contrary to Garnaut among many others) he favours carbon taxes over tradable emissions permits[21]. The second is that he also favours rigorously selected ‘complementary measures’, as do both Garnaut and Stern. Ackerman thus cautions against relying on the price mechanism alone (2009:116, 124):

Market-based policies are a second best, less efficient option for dealing with a threat to global survival, a compromise with political reality rather than a theoretical ideal.

But ‘second best’ is a technical term in this context: Ackerman’s argument does not imply support for a ‘command and control’ or so-called ‘direct measures’ as the main approach to reducing emissions. His later comments indicate that such approaches can easily be corrupted.

This brings us a ‘political science’ case for seeking cost-effectiveness and broad social efficiency in reducing emissions. Before that, some remarks are needed about the immediate Australian climate politics.

Under Tony Abbott, the Opposition has broken from the former bipartisan consensus favouring the pricing of emissions and adopted (at least for its rhetorical purposes) what Abbott has chosen to call a ‘direct approach’ and others have called a version of ‘command and control’. This position is adopted neither on ideological grounds (quite the contrary!) nor on efficiency grounds, but on the most cynical political calculations. The single-minded tactic—based on inducing fear through TV grabs, and even concocted rallies and street protests—has been to present the Government’s intention to price emissions as being to introduce a ‘great big tax’ and an attack on the so-called ‘battlers’.

In the ‘political’ debate there are several lines of rebuttal. Thus, if Abbott were) really committed to reducing CO2 emissions and (as he may claim) to the same degree as the Government, then the resource costs and shifts required to do so would be more burdensome, and not less, than those entailed by pricing emissions. Greater increases would occur in resource costs, such as in electricity generation, and in jobs lost in high-carbon industrial sectors. But no tax revenues would be available to compensate low-income electricity consumers or to fund retraining and relocation of employees of such sectors. That these costs would be greater under a ‘command and control’ regime such as Abbott’s is likely to be true for two related reasons: first, relatively inefficient resource allocation in abating emissions; second, induced wasteful rent-seeking by vested interests standing to gain or lose from such ‘direct action’[22].

As to the ‘political science’ cases for both cost-effective abatement and for use of ‘market instruments’, these remain intact for the above reasons, and are not simply based on ‘market fundamentalist’ beliefs. Indeed, the more ‘ambitious’ are the emission targets on grounds of the climate science, the more important that such targets be addressed by methods implying the least aggregate cost to the economy and to the community, both nationally and internationally. Such political acceptability also depends on fairness and equity criteria as reflected, for example, in compensation arrangements.

Cost Effective Analysis of Abatement and Discount Rate Choice

Major reconfiguration of national energy sectors over time (not instantaneously!) is vital to the cost-effective abatement of greenhouse gas emissions. Technologies used in this sector (say power stations, buildings or vehicles) have long physical lifetimes, can take lengthy periods to plan and construct and in the case of existing assets can imply high costs of replacement or refurbishment[23]. Rates of growth in the extraction and transmission of energy inputs and in the demand for energy services over the forecast period are also important, as are the projected constraints on greenhouse gas emissions themselves. Relevant modelling forecast periods may be around 30+ years. Because of all these time-related considerations, assumptions about discount rates are important in pursuit of efficient allocation of these physical and energy resources over time.

A related issue is whether discount rates selected in analysis are to be understood as being in Garnaut’s terms (2011:17) ‘positive’ versus ‘normative’ or in Ackerman’s equivalent terms as ‘descriptive’ versus ‘prescriptive’ interpretations (209: 23).

In cost-effectiveness analysis, the case for risk-inclusive—and hence, higher, market-related rates—is associated with the ‘real options’ approach to the analysis of ‘real world’ investment decisions (Dixit & Pindyck, 1994). Such ‘high’ rates are associated with a more cautious approach to investment that incrementally assesses changing risks as further information comes to hand over time.

Use of low, risk-free rates in the analysis of abatement would fail to address the risks associated with investments and be especially inappropriate where such risks are borne by the investors themselves. This would be the case subsequent to ‘market reforms’[24] that have transferred (some) risk-bearing away from governments and taxpayers.

Such ‘low’ discount rates (whether in analysis or as actually adopted by investors) would impart a bias toward investment in capital-intensive supply technologies. In electricity generation such investments would be in capital-intensive, ‘lumpy’, long lead-time technologies, notably, coal-fired generation and especially nuclear generation.

Past analytical use of low, ‘prescriptive’ discount rates has hidden the fact that Governments have borne associated risks as implicit subsidies to such capital-intensive technologies. In the case of nuclear power, such subsidies are also implicit in governments’ carrying the cost of premiums against disasters uninsurable via private commercial arrangements[25].

By contrast, the analytical use of higher, risk-inclusive, market-related discount rates will favour less capital-intensive, short lead-time and more ‘modular’ technologies, such as gas-fired combined cycle gas turbines (CCGTs), decentralised cogeneration and (at least as regards modularity) wind-farms.

Choice of discount rates will also have implications for reconfiguring the energy sector to meet greenhouse gas emission targets. For example, under ideal conditions and as a base-load generating technology, CCGTs favoured by risk-inclusive discount rates have less than half the CO2 emissions of coal-fired generation per kWh. This technology has particular relevance for systems currently dominated by coal, such as China, India, the U.S and Australia (Naughten 2009, 2003; IEA 2006; Jones, Peng & Naughten 2004). Other features of CCGTs, such as their short start-up times compared with coal (and nuclear), mean these technologies are more compatible with renewable technologies in electricity generation. Further, because of their modularity and short lead-times in construction, CCGTs are also more compatible with policies to enhance end-use energy savings. This is because long lead-time technologies such as coal and nuclear, in the face of uncertain long-run demand projections, are more subject to unintended excess supply capacity, in turn undermining such energy efficiency policies.

As regards the latter however, in analysis of CO2 abatement, analytical use of higher market-driven discount rates will in a sense ‘understate’ the efficacy of energy-efficient end-use technologies that offer savings in future use of energy. This is because the market-related discount rates reflect empirical findings that consumers of appliances empirically do not place a high weight on the value of these future savings from energy-efficient appliances (Hassett & Metcalf 1993). But such evidence could also reflect informational or institutional[26] market imperfections correctable by regulatory policies such as energy efficiency labeling.

Finally, the high risk situation now facing investors in the expansion of energy technologies, whether on the supply-side, or in conserving of energy, is massively dependent on how (and by what mean) the political issue of climate change is resolved over time. In Australia, Abbott’s abandonment of the pre-existing bipartisanship has increased this risk.

The discount rate has a necessary role in analysis and promotion of economic efficiency in mitigation. Analytical questions such as those discussed above will remain open but lack of full resolution need not hamper mitigation action.

In the CBAs or ‘integrated assessments’ of Nordhaus, Stern and others the use of ‘low’ rates intended to somehow address intergenerational equity would also have the undesirable and unwanted effect of imposing such inappropriately low rates in analysis of the configuration of technologies to abate emissions, as discussed above.

We can conclude that the choice of discount rate is a more tractable problem when its use is confined to cost-effective mitigation—and not required to address the ethical issue of intergenerational equity in bearing the costs of ‘dangerous’ climate change, a role for which it is ill-suited.

‘Complementary’ and Non-Market Regulatory Measures

As just discussed, the key rationale for pricing CO2 emissions is about minimising the cost of meeting increasingly strict emissions targets. However, a rigorous case can also be made for certain policy measures ‘complementary’ to emissions pricing. As a counter to ‘rent-seeking’, these options can be required to pass cost-effectiveness tests based on empirical evidence, efficient correction of identified forms of market failure and rigorous modelling of cost-effective emission abatement exemplified by the IEA’s recent ‘bottom-up’ analyses (2006).

The ‘imperfect information’ and institutional obstacles to energy-efficient technologies exemplify such complementary policies. A second set of cases involves forms of ‘double dividend’: that is, where correction of a market failure (or external cost) will also reduce CO2 emissions. The reduction of traffic congestion can be a case in point where reduced fuel combustion in private vehicles also occurs but this result is not automatic, as underlined by the literature on so-called ‘rebound effects’[27] However, as will now be indicated, not all proposed ‘complementary policies’ pass the tests of rigour and cost-effectiveness.

‘Magic Bullets that Miss the Target’

Ackerman (2009: 16-19) applies this term in dismissing certain flawed and high-cost options in abating CO2 emissions. His examples are not comprehensive but include biofuels and especially corn-based fuel ethanol, nuclear power and geo-engineering—or ‘tinkering’ with the climate itself, a solution not discussed here but promoted by Nordhaus.

The first two of these fit the cases of ‘rent-seeking’ or ‘vested interests’. Corn-based fuel ethanol has very dubious greenhouse credentials given significant use of fossil fuels in its processing, notably at the distillation stage. It is heavily subsidised and tax-exempt in the USA. In Australia, producers of wheat-based and sugar-based ethanol have called for and received similar support from governments, notably in the form of a subsidy equivalent to full exemption from transport fuel excise, and protection from imports of fuel ethanol, but also in various other ways. Ackerman also rightly underlines the disastrous effects on global food security due to Government support to biofuels such as corn-based fuel ethanol.

Nuclear power has been discussed above as a lumpy and capital-intensive technology that would be often be commercially unviable in the absence of heavy state subsidies. Ackerman’s verdict is

Cheap, safe, drought-resistant nuclear power, combined with a safe solution to the nuclear waste problem, would be widely welcomed — but is not available today. Waiting for a better nuclear option does not seem like a prudent response to the climate crisis[28].

For comprehensive argument about nuclear power’s evident inability to address greenhouse gas abatement cost-effectively and safely see Sovacool & Cooper (2008). Japan’s Fukushima has been a vast setback.

When emissions are priced, the cost-effectiveness of gas and methane combustion relative to coal-fired base-load electricity has also been noted above. However, recent preliminary findings about non-conventional sources of gas and methane (Howarth et al. 2011), cite problems such as fugitive methane emissions, methane being a greenhouse gas more potent than CO2. Increasing concerns about inadequate safety and pollution regulation of methane extraction from shale illustrate the need for continued and situation-specific vigilance about the full range of effects including from supposedly ‘green’, ‘low-cost’ and ‘low carbon’ technologies. Tight, well resourced and accountable safety regulation can be expected to drive necessary innovation and occasionally highlight intractible difficulties, as in the case of nuclear power. Turning a blind eye to such difficulties is not an option for the environmental movement.

Roof-top solar panels can illustrate technologies with promise given further R&D support but, other than in niche markets, not yet consistent with cost-effectiveness except at much higher CO2 prices than are currently contemplated. Over-generous feed-in tariffs and capital subsidies have recently been withdrawn in Australia (Macintosh & Wilkinson 2010; and on the UK feed-in tariff, see Monbiot 2010).

Polemics for the electric car often fail to address its full implications for greenhouse gas emissions. In the U.S. or Australia energy inputs will from an electricity system still dominated by coal-fired generation, or even from expanded nuclear power capacity with its special short and long-run hazards other than climate-related. The case of the electric car illustrates the need for analyses of mitigation to be on energy-sector-wide and full-lifecycle bases.

Ackerman does not spell out the point but his discussion of failed ‘magic bullets’ points to ways that the so-called ‘direct approach’ is likely to be corrupted in practice and that this is an important argument for emission pricing as the core approach. This rebuts Abbott’s phoney prescription where there is apparently to be total reliance on his ‘direct approach’ which is not envisaged as a ‘complement’ to price-based approaches.

Regarding the desirable emergence of an investment context more ‘settled’ on the question of climate change[29], two distinct ‘ideal types’ can thus be envisaged both at the national and at the global levels: (i) in the interests of the ‘carbon polluters’ the issue is indefinitely deferred once again; (ii) emissions levels necessary to stabilise the climate are accepted consistent with economic and other legitimate constraints, this being achieved by a cost-effective combination of emission pricing and complementary measures including rational R&D policies.

Achieving (ii) will also require a range of institutional reforms, implying open and accountable ‘good governance’ nationally and globally[30]. The requirement is for ‘checks and balances’, not only against vested interests such as the ‘greenhouse mafia’ (Hamilton 2007) but also against undue ‘green rent-seeking’ and costly ‘magic bullets that miss the target’. Internationally, the problem is one of coping with ‘hold-outs’, free-riders and saboteurs but also the need to deal with the legitimate concerns of poor and developing economies.

Climate Change Debates Within ‘Progressive Environmentalism’

Clearly, within the progressive environmental movement, as well as within the broader movement focusing on averting ‘dangerous’ climate change, many important issues are open for debate, if not always early and final resolution.

The contents of the preceding special issue of this journal on ‘Contesting Climate Change’ (JAPE 66, 2010-11) reflect a diverse set of perspectives within progressive environmentalism. Of these, perhaps the contributions of Spies-Butcher and Diesendorf are most clearly aligned with the scholars reviewed here, at least in that these two accept central roles for both market instruments and state action. Diesendorf also plausibly underlines over-consumption as well as growth in global population as causes of excessive growth in emissions and resulting climate change.

These and other contributors within progressive environmentalism differ in ways that can be listed but for space reasons not discussed here. These differences include (a) suspicions about ‘market instruments’ of any kind (not only systems of tradable emissions permits) and a consequent preference for ‘direct action’ or ‘command and control’[31] (perhaps especially favouring certain sorts of technologies such as generic renewables over and above the degree indicated by cost-effectiveness); (b) a primary concern with the disparity between global rich and poor, including their ‘energy poverty’ and grossly asymmetric responsibilities in the causation of climate change and vulnerabilities to it; (c) an ethic that prioritises reduced material consumption in the rich countries; (d) a notion of grass-roots political power as a necessary part of a global solution, sometimes combined with a downgrading of the perceived role of state action and nation-states; (e) obversely, attitudes underlining the indispensability of global governance and of international cooperation.

The great policy issue of climate change could be expected to throw up issues of theoretical significance in critical political economy. Along with Quiggin (2011), Ackerman (2001, 2009) is critical of the failure of mainstream economics to take seriously certain of its own results such as ‘the theory of the second best’ and the short-comings of general equilibrium theory. However, these commentators agree with mainstream proponents such as Stern, Garnaut and Nordhaus, that there is no solution to the problem of climate change without the cooperation of nation-states and by means of government intervention against ‘free market’ forces. Almost as universal is a commitment to the use of Pigovian ‘market instruments’ as an approach to cost-effective action (Mankiw 2006).

These and other issues should be and must be rationally and reasonably debatable across the wider movement and the community as a whole.

Lessons in Re-Framing the Debate

As proposed at the outset, and as psychologists underline (Lewandowsky 2011), the ‘framing’ of an issue such as climate change is vital to its analysis, structured debate and effective campaigning. The re-framing urged by Ackerman, Garnaut and Quiggin calls for a campaign incorporating three steps: (i) identifying rationally justifiable fears[32] if effective mitigation is not undertaken, ‘inconvenient’ though that ‘truth’ may be to certain vested interests, politicians and others; (ii) calling for policy responses based on prudential or precautionary approaches that treat the costs of abatement as effectively analogous to a global insurance premium; (iii) thereby offering hope and optimism with respect to the future, and future generations, instead of dread, nihilism or cynicism.

Of course, this chain of reasoning over-simplifies the political task. For example, from the plausible notion that only action at the global level can be effective, some commentators rule out mitigation action altogether since they reject either the possibility or the desirability of such global cooperation[33]. Their stance is that Australia should be a ‘hold out’ (or free-rider) and not join other countries in sharing any kind of leadership role internationally.

Returning to the three contributors here under review, their closely related twin theses must be taken aboard by proponents of mitigation. The first was about the risks of truly catastrophic climate change with abatement action viewed as analogous to an insurance premium. The second was that ‘our grandchildren matter’ implying the discount rates and cost-benefit analyses do not do justice to the problem. This review has also agreed with these authors about the importance of achieving cost-effective abatement if sufficiently stringent emission targets are to be met.

These lessons need to be absorbed if the battle with the climate science ‘sceptics’, the vested interests, opponents of global cooperation and political opportunists will be lost along with valuable time.

Within the progressive environmentalist movement political tendencies can agree on these basic propositions whatever their differences of emphasis and legitimate concerns about other important aspects of this complex existential problem.

Barry Naughten was a Senior Economist at the Australian Bureau of Agricultural and Resource Economics and is currently a scholar at the ANU (Centre of Arab and Islamic Studies). or


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[1]           In the broader context of critical political economy, a shorter form of Ackerman’s argument is in the useful anthology edited by Driesen (2010).

[2]           See also Quiggin (2005). He has published other articles on climate change policy not considered here.

[3]           On Abbott’s own climate change ‘bull-shit’, see the sharp characterisation by former Coalition leader Malcolm Turnbull (2009). Abbott the demagogic spin-doctor now (Owen 2011) says he is “… all in favour of doing the right thing by the environment because we’ve only got one planet, and we’ve got to look after it, and we’ve got to hand it on to our kids and grandkids in better shape than we found it. But we have to do it in ways that don’t make the life of ordinary people worse.”

The final sentence in this rhetoric is essentially the same as President GW Bush’s impossibility condition (Hunold & Dryzek 2002) essentially ruling out anything but token action to abate greenhouse gas emissions. No economically literate commentator suggests that the kind of abatement necessary can be obtained without cost. But Abbott has been allowed to conflate the issue of real resource costs with that of a tax such as a carbon tax, which is essentially a transfer and revenue from which can be used to reduce taxes elsewhere in the economy (implying no necessary deadweight loss) and/or to compensate, for example, vulnerable lower income energy consumers. See further discussion below.

[4]           Garnaut’s Update Paper five, addressing the science of climate change, confirms this where he notes that:  “Despite the increased scientific understanding of climate change, and confidence in the science’s conclusions about climate change, public confidence in the science seems to have weakened somewhat in Australia and some other countries since 2008”.

[5]           In his The Free-market Innovation Machine, William Baumol (2002: 1) notes that mainstream economic theory has strangely neglected the role of markets in revolutionizing technology. He observes ironically that it was Marx and later his bourgeois equivalent Joseph Schumpeter who were fully cognisant of this central role of markets. However, he had also acknowledged that entrenched capital can profoundly inhibit technological progress (Baumol 1990). This obstruction is well exemplified by the abysmal performance of Detroit in recent decades leading up the quasi-bankruptcies of 2008-09, with its ultimately self-defeating lobbying efforts to oppose both tighter U.S. regulation of vehicle energy efficiencies and higher transport fuel tax rates (Goel 2004).  By extension and contrary to this latter experience, human influence on technological change can occur through the ‘social embedding’ of markets, the pricing of emissions being a case in point. See Garnaut’s Update Paper Seven on low emissions technology and the innovation challenge.

[6]           This comparison is illustrative or ‘heuristic’ only. For example, Ackerman’s curve representing benefits of damage costs averted rises over time according to a simple quadratic function while his abatement costs are assumed to be constant over time. This smooth benefits curve by no means seeks to capture the very high averted costs that might be associated with ‘catastrophic’ climate change as discussed below.

[7]           Ackerman’s diagram is here enhanced to include the important case of a zero discount rate as classically discussed by Ramsey (1928). But note that this comparison as presented is influenced by ignoring costs and benefits over the period beyond 100 years. Inclusion of later periods will of course significantly affect the illustrative comparison at the very low discount rates.

[8]           The Howard Government’s stance was one of cooperation with President GW Bush’s Administration in undermining the Kyoto protocol. Howard’s opposition could be viewed as not about Australia as a ‘stand-out’ but using its leverage with the U.S. to sabotage the international agreement itself (Hamilton 2007; Naughten 2007; Sharp 2007). Howard’s position identified the national interest with the special interests of the export coal industry and its dependence on future Asian electricity markets that would expand less rapidly if CO2 were (eventually) to be priced in that region in accord with international agreements.

[9]           As to terminology, ‘dangerous’ climate change and ‘catastrophic’ climate change could usefully be distinguished as follows. The former is defined in terms of the Article 2 of the United Nations Framework Convention on Climate Change (UNFCC) which requires stabilisation of greenhouse gases at a level that prevents ‘dangerous human intervention with the climate system’. This is often taken as referring to a threshold of 2 deg. C above pre-industrial levels and in turn this will require substantial greenhouse gas emissions reductions over the next 20-40 years (Department of Climate Change 2008: 14).  ‘Catastrophic’ climate change refers to the type of mechanism by which climate change could turn out to be dangerous: that is, through positive feedback loops and ‘tipping points’ of the type described above. The cited Commonwealth publication (for example, p. 15) makes no reference to these kinds of mechanisms.

[10]         The theory of the greenhouse effect and the role of atmospheric CO2 was first developed in the 19th century, notably by Fourier (1827) and Tyndall (1872) while Arrhenius (1896) was the first to predict large climatic effects from growing human influence on CO2 emissions.

[11]         One claim by ‘sceptics’ (Aitken 2011) is that this quasi-consensus is merely ‘orthodox’ science. This quaint term is presumably on a dubious analogy with ‘orthodox’ and ‘alternative’ medicine; or with the value-laden human sciences, not least economics and political economy! Even if were true that some form of ‘non-orthodox’ science had something to offer (which might be conceivable) the ‘prudential’ case still holds.

[12]         A degree of technological optimism can be bolstered by legitimate historically-based faith in the market’s ability to spur innovation, the claims of Baumol (2002) having previously been noted. However, there are at least two major qualifications to such technological optimism or ‘manna from heaven’.

First (as in the case of carbon capture and storage (CCS) relevant market-driven innovations are unlikely to occur in the absence of relatively high rates of emission pricing and expectations thereof.

Second, fundamental limits are imposed by scientific laws such as first and second laws of thermodynamics. As Georgescu-Roegen puts it (1975: 361): “Even if technology continues to progress, it will not necessarily exceed any limit; an increasing sequence may have an upper limit. In the case of technology this limit is set by the theoretical coefficient of efficiency … Substitution within a finite stock of accessible low entropy whose irrevocable degradation is speeded up through use cannot possibly go on forever.”

[13]         Quiggin puts it as follows (2008: 209): “Because the damage associated with climate change is potentially catastrophic, it is important to consider the entire probability distribution, rather than a limited number of parameters suchas mean and variance. Policy options that provide protection against low probability events inthe right-hand (high damage) tail of the distribution yield substantial expected benefits.”

[14]         Global climate change evidently implies insurance market problems for property-owners at risk from extreme weather events exacerbated thereby. This insurance analogy used in the text should not be confused with any notion that private insurance markets can be capable of addressing the fundamental problem of greenhouse gas emissions as cause of human-induced ‘catastrophic’ climate change (Tol 1998).

[15]         Alternative terminology includes ‘dangerous’ climate change or abrupt climate change. The latter captures an additional important point about (human) adaptability or resilience. A given change in climate occurring over a few hundred years may be so amenable but not if such change were to occur over a few decades, as has been the case over the long-run history of climate change prior to human civilisation.

[16]         For other writings by this author see Glikson (2009 and 2008).

[17]         Quiggin (2008) notes that  “… expected damage, measured in either physical or monetary terms, is a convex function of the rate of change of global temperature. An increase in global mean temperatures of 4 degrees Celsius over the next century would cause far more than twice the damage associated with an increase of 2 degrees Celsius, and an increase of 8 degrees Celsius would be utterly catastrophic. So, the expected damage associated with an uncertain future increase in temperature is more than that associated with a mean or median projection of temperature change.”

[18]         Ackerman notes the relevant emphasis on the importance of disequilibria in Keynes (and Marx) but not the parallel emphasis of these authors on ‘deep uncertainty’ as a fundamental cause of catastrophic economic collapse such as occurred in the 1930s and threatened in 2008 (2009: 11).

[19]         The case of the low-lying small Pacific states also vulnerable to climate-caused sea-level rise is often cited, and rightly so. Realistically, because of the tiny populations involved, this case alone is not likely (within the Australian electorate and otherwise) to give strong political support to global mitigation policies. However, it certainly can be viewed as justification for such populations to be given guarantees of re-settlement in less vulnerable circumstances. Populous and densely populated Bangladesh is a very different case among vulnerable and low-lying countries. See Climate Institute (2011).

[20]         In these ethical terms the climate case is thus very different from Hardin’s example in which he sought with his imagery about repelling life-boat borders to justify self-interested action by the industrialised countries in the face of failure of poor countries to restrain their population growth. Schelling (2007) has noted that it is low income states, often in the tropics, that would bear the brunt of ‘dangerous’ climate change, states that are least able to adapt.

[21]         As does Nordhaus (2011); for the opposite view, favouring cap-and-trade, see Keohane (2010).

[22]        Innumerable examples of ‘direct action’ are of course strongly supported by advocates of cost-effective climate change mitigation and of emission pricing. These include remediation or protective action against effects of whatever degree of climate change is already irreversible. Such examples include higher sea-walls, inhibiting spread of climate-sensitive contagious diseases, installing hurricane-resistant buildings, land-use zoning etc. Such forms of ‘adaptive’ direct action are fully recognised by the IPCC, analysis of which is reflected in its reports.

[23]         Recent and unnecessary confusion in the debate has revolved around a lower emission price necessary to induce gas-fired CCGTs in preference to new coal-fired capacity as distinct from the higher emission price that would be required to induce early retirement of older existing coal-fired capacity in favour of CCGTs or other less emission-intensive electricity generation technologies.

[24]         ‘Market reforms’ should not be identified with privatisation but can equally refer to ‘corporatisation’, where companies may remain in government ownership and subject to parliamentary scrutiny and government regulation but become more autonomous with respect to investment and other decisions, and less likely to be the recipients of hidden subsidies not justified by a public interest.

[25]         For example, when electricity generation was privatised in the UK, this process did not include the nuclear generation sector. As noted by Thomas (2005: 31-32)  “(a) particularly difficult issue with nuclear econom­ics is dealing with and putting on a common basis for comparison the streams of income and expenditure at different times in the life of a nuclear power plant. Under UK plans, the time from placing a reactor order to completion of decommissioning could span more than 200 years”.  As in the case of ‘catastrophic’ climate change, issues of intergenerational equity also arise with regard to nuclear power, for example, as to safe disposal of long-term wastes. Once again, it can be seriously doubted that the use of low rates of discounting can be a means of addressing this problem.

[26]         A case in point is the principal-agent problem, for example, where drivers of company cars, as a tax-free (non-salary) benefit do not have to bear the excise-w

[27]         An exogenous improvement in energy efficiencies will in general not be fully reflected in end-use savings of energy. This is because the consequent reduction on the unit costs of the relevant energy service (such as lighting services from a compact fluorescent lamp) may well result in some increase in consumption of that service (the light is left on for longer). This means some (partially) offsetting increase in the energy input, the so-called ‘rebound effect’. But it is erroneous to conclude that such energy efficiency improvements are fully negated, thereby incorrectly discrediting such policies. In a hypothetical case where a full offset occurs, the term ‘Jevons paradox’ or ‘backfire effect’ has been applied. Rebound effects more generally can be removed by a tax applied on the energy input or on the energy services output, such a tax itself encouraging improved energy efficiencies and savings over the longer run. This efficacy of taxes on fuel inputs is illustrated by the much greater per capita use of transport fuel in the U.S. versus the rest of the OECD, where much higher transport fuel taxes apply. See Wikipaedia references.

[28]         Garnaut, Stern and the IEA all see a role for expanded nuclear and for CO2 capture and storage (CCS) from coal-fired capacity. Assuming away hidden subsidies, these options (especially the latter) cannot be on the agenda without significant emission pricing. Meanwhile, there is a ‘collective action’ case for requiring the export coal industry to contribute to the funding of RD&D activities in connection with CCS, including retrospective action with respect to existing coal-fired generation capacity where feasible.

[29]         The uncertainties induced by this lack of resolution are nowhere more evident than in successive annual reports of the IEA, where starkly different scenarios are defined solely by reference to this question.

[30]         This is the broader topic of ‘green republicanism’ (Barry 2008; Slaughter 2005; Naughten 2006).

[31]         A case in point is illustrated by Butler (2011) representing Green Left Weekly. The argument proposed here was that because a carbon price would allegedly encourage gas-fired CCGTs rather than renewables then such a price-related policy must be misguided. The valid argument might well be for a higher price on emissions but that is not the line taken in this article. Strangely and quite inconsistently, the article supports another price mechanism: (subsidised) feed-in tariffs. Further, the article confuses the principle of cost-effectiveness with that of social equity, which should encompass principles of compensation which can be funded from tax revenues (or indeed from the sale of emissions permits).  This variant of a ‘green leftist’ position has not absorbed the important distinctions made by Karl Polanyi (1944) between his ‘disembedded’ or ‘free’ markets associated with laissez faire (and more recently with economic neo-liberalism) versus his contrasting case of ‘socially embedded’ markets. The latter are exemplified by ‘market instruments’ under social control and in the service of defensible social objectives.

[32]         Such rationally-based or prudential fears are not narrowly self-centred, but in many ways are based on community-based altruism. Such fears are driven by Ackerman’s notion that ‘our grandchildren’ matter. They are also based on rejection of the arguments of those denialists pressing for an ‘adaptation only’ approach in which the rich, and the rich states of the world, would supposedly ‘cope’ with the effects of future climate change but leaving the rest of the world fending for itself despite being far less responsible for a dreadful situation caused largely by rich economies and exacerbated by their uncooperative inaction.

[33]         All kinds of rationales for inaction exist apart from the (rather few) full-time climate science sceptics. Organisations such as the IPA (Institute for Public Affairs) are not fussy about this diversity. For example, its main climate change specialist for many years was a retired CSIRO scientist (Brian Tucker).  He was in no doubt about the reality of human-caused climate change but was a fervent opponent of (or pessimist about the scope for) international cooperation and instead urged an ‘adaptation only’ approach (Naughten 2007). As indicated above, such an approach is a recipe for ‘climate wars’ and environmental refugees. IPA’s current main spokesperson (Moran 2011; with comment by Naughten 2011) takes on the garb of pessimism about global cooperation with the spurious argument that Australia should not ‘take the lead’.

Written by Barry Naughten

August 23, 2012 at 11:18 am

Not Keane on Marx

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Not Keane on Marx

Barry Naughten, letter to The Monthly, April 2011

Not having yet read Eric Hobsbawm’s recent book on the contemporary relevance of Marx and Marxism (The Monthly, March 2011) it is not possible to respond to John Keane’s assessment thereof in his review of Hobsbawm. However, not all of Keane’s comments on Marx are convincing.

Keane commences with an outright rejection of Marx’s claim that capitalism is a crisis-ridden mode of production. But if the system that currently holds sway globally is still capitalism, the evidence of its crisis-prone character is surely evident since 2008—even if Australia and some other countries linked to the Asian prosperity have so far escaped the worst consequences.

Second, Keane wants to claim that Marx, as a 19th century thinker, had no inkling of environmental crisis and was an apologist for the ‘conquest of nature through labor’ (by capitalism). There is much textual evidence to the contrary from the writings of both Marx and his collaborator Engels. See, for example, the recent extensive documentation by John Bellamy Foster.

Thirdly, Keane wants to take Marx to task for having failed to foresee the great crimes of the 20th century—in particular totalitarianism, whether in its fascist (unmentioned by Keane) or in its communist guise.

However, as Hannah Arendt argued (Origins of Totalitarianism 1951), the roots of both WWI and WWII, as well as of 20th century totalitarianism, were in the heightened imperialist rivalry of the period from the 1870s to 1914. It was Marx who laid an essential part of the theoretical foundation for a critique of these most ugly of crisis-prone capitalism’s manifestations. Such a critique is exemplified in the work of Rosa Luxemburg, on which Arendt drew heavily.

As it turned out, the socialist movement—Marxian and otherwise, and constrained as it was within national boundaries—was often unable to resist the pressures of totalitarianism, imperialist rivalry and colonialism. However, there can be no doubt that much of the 20th century’s struggles against both totalitarianism and imperialism have taken major inspiration from the socialist tradition and from Marx as its major theorist. This is a truth that the crimes of Stalin and others should not be allowed to obscure.

John Keane’s Review of Hobsbawm’s How to Change the World

My first scholarly encounter with Eric Hobsbawm happened one afternoon at the London School of Economics, in the late spring of ’89. We were naturally ignorant of the coming revolutions, but the podium was ours on the subject of nations, states and democracy in a divided Europe. The topics of freedom, democracy and the fate of the Soviet Union sparked intense audience excitement, but the sage stood firm. At one point, in reply to talk of civil society, the power of the powerless and the possible re-unification of Europe through peaceful revolution, Hobsbawm suddenly snapped. “Everything will end badly,” said the cold warrior, wagging a hooked finger at all of us. “The end of socialism would be an unmitigated disaster. Capitalism in bloody, nationalist form will be the result.”

Wide sections of the audience hissed; I recall being gripped by a sudden sense of belonging to a different intellectual and political generation. But the sage stuck to his guns, as he still does. How to Change the World is a string of essays written from just before that moment to this day, connected by a stubborn red thread: we are living through a crisis of capitalism that beckons us back to Highgate Cemetery. “We have discovered that capitalism is not the answer, but the question,” he writes. “Marx is, once again, very much a thinker of the twenty-first century.”

Is he? Hobsbawm is unquestionably a great historian but this book’s dogmatic and rather parochial political reasoning ruins its own case for rehabilitating his friend’s insistence that capitalism is a crisis-ridden mode of production. The book is silent about Karl Marx’s outdated philosophical fixation on the conquest of nature through labour, his failure to grasp the constitutive role of language in human affairs and his bogus claim that historical materialism was a science like Darwin’s. There’s nothing substantial on Marx’s neo-Hegelian belief in history, his jumbled theory of state institutions or his cocky dismissals of civil society, parliamentary democracy and constitutional law as bourgeois frippery. Then there’s the oddest and most troubling thing about Marx: despite brilliant polemics against wage slavery, bourgeois stupidity and class domination, the subject of concentrated power – its potential evils and political abuse – simply eluded him. Marx’s preoccupation with property and markets was oddly bourgeois, so quintessentially nineteenth century that he never saw that things politically could get much worse after revolutions, nor that historical materialism could form a conspiracy with hubris, organised bossing, terror and murder.

After the death of Marx, such things repeatedly happened, often in his name, though you’d never know it from reading this book. The fact that Joseph Stalin alone killed more communists than all twentieth-century dictators combined, or that whole nations were made miserable by Marxism, seems as uninteresting to Hobsbawm as those other very bourgeois topics on which Marx has nothing to say: the political remedies for market failure, religion, democracy and civil society, the constitutional protection of human rights and the struggle of citizens to protect their ailing ecosystems.

Terry Eagleton’s Review of Hobsbawm’s How to Change the World


How to Change the World: Marx and Marxism 1840-2011 by Eric Hobsbawm
Little, Brown, 470 pp, £25.00, January 2011, ISBN 978 1 4087 0287 1

In 1976, a good many people in the West thought that Marxism had a reasonable case to argue. By 1986, most of them no longer felt that way. What had happened in the meanwhile? Were these people now buried under a pile of toddlers? Had Marxism been unmasked as bogus by some world-shaking new research? Had someone stumbled on a lost manuscript by Marx confessing that it was all a joke?

We are speaking, note, about 1986, a few years before the Soviet bloc crumbled. As Eric Hobsbawm points out in this collection of essays, that wasn’t what caused so many erstwhile believers to bin their Guevara posters. Marxism was already in dire straits some years before the Berlin Wall came down. One reason given was that the traditional agent of Marxist revolution, the working class, had been wiped out by changes to the capitalist system – or at least was no longer in a majority. It is true that the industrial proletariat had dwindled, but Marx himself did not think that the working class was confined to this group. In Capital, he ranks commercial workers on the same level as industrial ones. He was also well aware that by far the largest group of wage labourers in his own day was not the industrial working class but domestic servants, most of whom were women. Marx and his disciples didn’t imagine that the working class could go it alone, without forging alliances with other oppressed groups. And though the industrial proletariat would have a leading role, Marx does not seem to have thought that it had to constitute the social majority in order to play it.

Even so, something did indeed happen between 1976 and 1986. Racked by a crisis of profits, old style mass production gave way to a smaller scale, versatile, decentralised ‘post-industrial’ culture of consumerism, information technology and the service industries. Outsourcing and globalisation were now the order of the day. But this did not mean that the system had essentially changed, thus encouraging the generation of 1968 to swap Gramsci and Marcuse for Said and Spivak. On the contrary, it was more powerful than ever, with wealth concentrated in even fewer hands and class inequalities growing apace. It was this, ironically, which sparked the leftist rush for the exits. Radical ideas withered as radical change seemed increasingly implausible. The only public figure to denounce capitalism in the past 25 years, Hobsbawm claims, was Pope John Paul II. All the same, another couple of decades later, the fainthearted witnessed a system so exultant and impregnable that it only just managed to keep the cash machines open on the high streets.

Eric Hobsbawm, who was born in the year of the Bolshevik revolution, remains broadly committed to the Marxist camp – a fact worth mentioning as it would be easy to read this book without realising it. This is because of its judiciousness, not its shiftiness. Its author has lived through so much of the political turbulence he portrays that it is easy to fantasise that History itself is speaking here, in its wry, all-seeing, dispassionate wisdom. It is hard to think of a critic of Marxism who can address his or her own beliefs with such honesty and equipoise.

Hobsbawm, to be sure, is not quite as omniscient as the Hegelian World-Spirit, for all his cosmopolitan range and encyclopedic knowledge. Like many historians he is not at his sharpest in the realm of ideas, and he is wrong to suggest that the disciples of Louis Althusser treated Marx’s Capital as though it were primarily a work of epistemology. Nor would Hegel’s Geist treat feminism, not least Marxist feminism, with such cold-eyed indifference, or consign one of the most fertile currents of modern Marxism – Trotskyism – to a few casual asides. Hobsbawm also thinks that Gramsci is the most original thinker produced by the West since 1917. Perhaps he means the most original Marxist thinker, but even that is dubious. Walter Benjamin is surely a better qualified candidate for that title.

Even the most erudite students of Marxism, however, will find themselves learning from these essays. It is, for example, part of the stock-in-trade of historical materialism that Marx broke decisively with the various utopian socialists who surrounded him. (One of them believed that in an ideal world the sea would turn into lemonade. Marx would probably have preferred Riesling.) Hobsbawm, by contrast, insists on Marx’s substantial debt to these thinkers, who ranged from ‘the penetratingly visionary to the psychically unhinged’. He is clear about the fragmentary nature of Marx’s political writings, and rightly insists that the word ‘dictatorship’ in the phrase ‘dictatorship of the proletariat’, used by Marx to describe the Paris Commune, means nothing like what it means today. Revolution was to be seen not simply as a sudden transfer of power but as the prelude to a lengthy, complex, unpredictable period of transition. From the late 1850s onwards, Marx did not consider any such seizure of power either imminent or probable. Much as he cheered on the Paris Commune, he expected little from it. Nor was revolution to be simplemindedly opposed to reform, of which Marx was a persistent champion. As Hobsbawm might have added, there have been some relatively bloodless revolutions and some spectacularly bloody processes of social reform.

An absorbing chapter on Engels’s The Condition of the Working Class in England claims it as the first study anywhere to deal with the working class as a whole, not merely with particular sectors or industries. In Hobsbawm’s view, its analysis of the social impact of capitalism is still in many respects unsurpassed. The book does not paint its subject in too lurid a colour: the charge that it depicts all workers as starving or destitute, or living purely at subsistence level, is groundless. Nor is the bourgeoisie presented as a bunch of black-hearted villains. As so often, it takes one to know one: Engels himself was the son of a wealthy German manufacturer who ran a textile mill in Salford, and used his ill-gotten gains to help keep the down-at-heel Marx family afloat. He also enjoyed a spot of fox-hunting, and as a champion of both the proletariat and the colonial Irish maintained a unity of theory and practice by taking a working-class Irish woman as his mistress.

Did Marx see the victory of socialism as inevitable? He says so in The Communist Manifesto, though Hobsbawm denies that it is a deterministic document. Yet this is partly because he does not inquire into what kind of inevitability is at stake. Marx sometimes writes as if historical tendencies had the force of natural laws; but it is doubtful even so that this is why he saw socialism as the logical outcome of capitalism. If socialism is historically predestined, why bother with political struggle? It is rather that he expected capitalism to become more exploitative, while the working class grew in strength, numbers and experience; and these men and women, being moderately rational, would then have every reason to rise up against their oppressors. Rather as for Christianity the free actions of human beings are part of God’s preordained plan, so for Marx the tightening contradictions of capitalism will force men and women freely to overthrow it. Conscious human activity will bring revolution about, but the paradox is that this activity is itself in a sense scripted.

You cannot, however, speak of what free men and women are bound to do in certain circumstances, since if they are bound to do it they are not free. Capitalism may be teetering on the verge of ruin, but it may not be socialism that replaces it. It may be fascism, or barbarism. Hobsbawm reminds us of a small but significant phrase in The Communist Manifesto which has been well-nigh universally overlooked: capitalism, Marx writes ominously, might end ‘in the common ruin of the contending classes’. It is not out of the question that the only socialism we shall witness is one that we shall be forced into by material circumstance after a nuclear or ecological catastrophe. Like other 19th-century believers in progress, Marx did not foresee the possibility of the human race growing so technologically ingenious that it ends up wiping itself out. This is one of several ways in which socialism is not historically inevitable, and neither is anything else. Nor did Marx live to see how social democracy might buy off revolutionary passion.

Few works have sung the praises of the middle classes with such embarrassing zest as The Communist Manifesto. In Marx’s view, they have been by far the most revolutionary force in human history, and without harnessing for its own ends the material and spiritual wealth they have accumulated, socialism will prove bankrupt. This, needless to say, was one of his shrewder prognostications. Socialism in the 20th century turned out to be most necessary where it was least possible: in socially devastated, politically benighted, economically backward regions of the globe where no Marxist thinker before Stalin had ever dreamed that it could take root. Or at least, take root without massive assistance from more well-heeled nations. In such dismal conditions, the socialist project is almost bound to turn into a monstrous parody of itself. All the same, the idea that Marxism leads inevitably to such monstrosities, as Hobsbawm observes, ‘has about as much justification as the thesis that all Christianity must logically and necessarily always lead to papal absolutism, or all Darwinism to the glorification of free capitalist competition’. (He does not consider the possibility of Darwinism leading to a kind of papal absolutism, which some might see as a reasonable description of Richard Dawkins.)

Hobsbawm, however, points out that Marx was actually too generous to the bourgeoisie, a fault of which he is not commonly accused. At the time of The Communist Manifesto, their economic achievements were a good deal more modest than he imagined. In a curious garbling of tenses, the Manifesto described not the world capitalism had created in 1848, but the world as it was destined to be transformed by capitalism. What Marx had to say was not exactly true, but it would become true by, say, the year 2000, and it was capitalism that would make it so. Even his comments on the abolition of the family have proved prophetic: about half of the children in advanced Western countries today are born to or brought up by single mothers, and half of all households in large cities consist of single persons.

Hobsbawm’s essay on the Manifesto speaks of its ‘dark, laconic eloquence’, and notes that as political rhetoric it has ‘an almost biblical force’. ‘The new reader,’ he writes, ‘can hardly fail to be swept away by the passionate conviction, the concentrated brevity, the intellectual and stylistic force of this astonishing pamphlet.’ The Manifesto initiated a whole genre of such declarations, most of them from avant-garde artists such as the Futurists and the Surrealists, whose outrageous wordplay and scandalous hyperbole turn these broadsides into avant-garde artworks in themselves. The manifesto genre represents a mixture of theory and rhetoric, fact and fiction, the programmatic and the performative, which has never been taken seriously enough as an object of study.

Marx, too, was an artist of sorts. It is often forgotten how staggeringly well read he was, and what painstaking labour he invested in the literary style of his works. He was eager, he remarked, to get shot of the ‘economic crap’ of Capital and get down to his big book on Balzac. Marxism is about leisure, not labour. It is a project that should be eagerly supported by all those who dislike having to work. It holds that the most precious activities are those done simply for the hell of it, and that art is in this sense the paradigm of authentic human activity. It also holds that the material resources that would make such a society possible already exist in principle, but are generated in a way that compels the great majority to work as hard as our Neolithic ancestors did. We have thus made astounding progress, and no progress at all.

In the 1840s, Hobsbawm argues, it was by no means improbable to conclude that society was on the verge of revolution. What was improbable was the idea that within a handful of decades the politics of capitalist Europe would be transformed by the rise of organised working-class parties and movements. Yet this is what came to pass. It was at this point that commentary on Marx, at least in Britain, began to shift from the cautiously admiring to the near hysterical. In 1885, no less devout a non-revolutionary than Balfour commended Marx’s writings for their intellectual force, and for their economic reasoning in particular. A whole raft of liberal or conservative commentators took his economic ideas with intense seriousness. Once those ideas took the form of a political force, however, a number of ferociously anti-Marxist works began to appear. Their apotheosis was Hugh Trevor-Roper’s stunning revelation that Marx had made no original contribution to the history of ideas. Most of these critics, I take it, would have rejected the Marxist view that human thought is sometimes bent out of shape by the pressure of political interests, a phenomenon commonly known as ideology. Only recently has Marxism been back on the agenda, placed there, ironically enough, by an ailing capitalism. ‘Capitalism in Convulsion’, a Financial Times headline read in 2008. When capitalists begin to speak of capitalism, you know the system is in dire trouble. They have still not dared to do so in the United States.

There is much else to admire in How to Change the World. In a suggestive passage on William Morris, the book shows how logical it was for a critique of capitalism based on the arts and crafts to spring up in England, where advanced industrial capitalism posed a deadly threat to artisanal production. A chapter on the 1930s contains a fascinating account of the relations between Marxism and science – it was the only period, Hobsbawm points out, when natural scientists were attracted to Marxism in significant numbers. As the threat of an irrationalist Fascism loomed, it was the ‘Enlightenment’ features of the Marxist creed – its faith in reason, science, progress and social planning – which attracted men like Joseph Needham and J.D. Bernal. During Marxism’s next historical upsurge, in the 1960s and 1970s, this version of historical materialism would be ousted by the more cultural and philosophical tenets of so-called Western Marxism. In fact, science, reason, progress and planning were now more enemies than allies, at war with the new libertarian cults of desire and spontaneity. Hobsbawm shows only qualified sympathy for the 1968ers, which is unsurprising in a long-term member of the Communist Party. Their idealisation of the Cultural Revolution in China, he suggests with some justice, had about as much to do with China as the 18th-century cult of the noble savage had with Tahiti.

‘If one thinker left a major indelible mark on the 20th century,’ Hobsbawm remarks, ‘it was he.’ Seventy years after Marx’s death, for better or for worse, one third of humanity lived under political regimes inspired by his thought. Well over 20 per cent still do. Socialism has been described as the greatest reform movement in human history. Few intellectuals have changed the world in such practical ways. That is usually the preserve of statesmen, scientists and generals, not of philosophers and political theorists. Freud may have changed lives, but hardly governments. ‘The only individually identifiable thinkers who have achieved comparable status,’ Hobsbawm writes, ‘are the founders of the great religions in the past, and with the possible exception of Muhammad none has triumphed on a comparable scale with such rapidity.’ Yet very few, as Hobsbawm points out, would have predicted such celebrity for this poverty-stricken, carbuncle-ridden Jewish exile, a man who once observed that nobody had ever written so much about money and had so little.

Most of the pieces collected in this book have been published before, though about two-thirds of them have not appeared in English. Those without Italian can therefore now read a number of important essays by Hobsbawm which first appeared in that language, not least three substantial surveys of the history of Marxism from 1880 to 1983. These alone would make the volume uniquely valuable; but they are flanked by other chapters, on such topics as pre-Marxian socialism, Marx on pre-capitalist formations, Gramsci, Marx and labour, which broaden its scope significantly. How to Change the World is the work of a man who has reached an age at which most of us would be happy to be able to raise ourselves from our armchairs without the aid of three nurses and a hoist, let alone carry out historical research. It will surely not be the last volume we shall be granted by this indomitable spirit.

Written by Barry Naughten

August 23, 2012 at 11:08 am

Posted in Politics

The Free Lesson in Political Theory

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The Free Lesson in Political Theory

Barry Naughten (16-May-2012)

The following is a reflection on a widely emailed political joke with US origins, calling itself ‘The $50 lesson in Political Theory’. The joke emanated from sources sympathetic to the U.S. Republican tea-party, such as Balanced Budget movements and lobbies. A link to a U.S. survivalist movement with same story goes back at least to 2007. As former Secretary of the Treasury and Reserve Bank Governor Bernie Fraser recently pointed out, we can expect more of these sorts of fables from sources such as the tea-party movement, itself a symptom of decaying social fabric in the U.S.

The response here is in several parts. First is a comment on the key debating trick implied in this political joke, essentially the Orwellian technique of ‘the big lie’ This is an analysis recently brought up-to-date by the cognitive scientist George Lakoff in his discussion of the role of metaphor in political communication. A basic recent history on full employment policy logically follows. The second part is a reflection on some relevant history of economic thought, in a search for some deeper lessons about macro-economics and ideology. The third part is about the importance of historical context, notably of the 2008 ‘Meltdown’ and the GFC that followed.

Given this importance of context, we need to be careful about ‘eternal verities’. Instead, we need a better and wider understanding about how economies and societies actually function (or not) as systems, in changing circumstances. But we still face the challenge of simple and clear explanation.

The Joke

The joke isadapted to Australian political terminology and circumstances and is told in the first person singular by its hero:

Recently, while I was working in the flower beds in the front yard of my Canberra home, my neighbours stopped to chat as they returned home from walking their dog.

During our friendly conversation, I asked their 12 year old daughter what she wanted to be when she grows up. She said she wanted to be Prime Minister someday.

Both of her parents were rich Public Servant chardonnay sipping Socialist Laborites – were standing there, so I asked her, “If you were Prime Minister what would be the first thing you would do?”

She replied, “I’d give food and houses to all the homeless people.”

Her parents beamed with pride!

“Wow! what a worthy goal!” I said. “But you don’t have to wait until you’re Prime Minister to do that!” I told her.

“What do you mean?” she replied.

So I told her, “You can come over to my house and mow the lawn, pull weeds, and trim my hedge, and I’ll pay you $50. Then you can go over to the grocery store where the homeless guy hangs out, and you can give him the $50 to use toward food and a new house.”

She thought that over for a few seconds, then she looked me straight in the eye and asked, “Why doesn’t the homeless guy come over and do the work, and you can just pay him the $50?”

I said, “Welcome to the Liberal Party.”

Her parents aren’t speaking to me.

A first response: which parties are in fact less tolerant of unemployment?

Clever? It could be useful to consider the debating tricks in this Tea Party parable.

One (not the only one) of the ‘big lies’ in the joke is to imply that encouraging paid employment is a ‘Liberal’ view and not a ‘Labor’ view — or ‘Republican’ rather than ‘Democrat’ in the original U.S. versions.

On the contrary, the Labor side of politics is the side more disposed to governments reducing unemployment levels — that is, ensuring there are sufficient paying jobs for the workforce. That is the objective for governments stimulating the economy by means of budget deficits during deep recessions, incipient or actual. This observation is not to deny that Liberal (or Coalition) governments like that of Menzies in the 1950s (under the guidance of Keynesian officials like ‘Nugget’ Coombs) shared the full employment objective and the faith in fiscal and monetary policy that went with it.

Expansionary fiscal policy was exemplified by the Rudd-led Labor Government’s courageous and prompt action in 2008 and 2009 in response to the ongoing GFC and its possible deeply-feared effects in Australia. It is central to recall that this policy was opportunistically opposed by a Coalition that in Opposition (under all three leaders but in particular Turnbull and Abbott) could have learnt from the Menzies Governments’ examples of the 1950s and 1960s, but chose not to do so. Why might this be so?

The reason (contrary to the ‘joke’) that Labor-inclined and social democratic Governments have historically favoured putting people to work with lower rates of national unemployment than tolerated by the more right-wing parties was discussed as far back as 1943 by the Oxford economist Michal Kalecki. As Kalecki pointed out, as the prime political representatives of business, the major conservative parties tend to place a greater weight on there being ‘sufficient’ unemployment (and sufficiently low unemployment benefits) so as to weaken somewhat the wage-bargaining power of employees. This is a rather different story from that told in the ‘joke’.

However, this business-oriented logic about so-called ‘wage discipline’ applies only to an economy that is relatively close to full employment. When the reality or prospect of full scale economic collapse looms, both sides, capital and labour, can be exposed to prolonged economical failure and suffering. These aspects, pertinent once again in Europe and the U.S., are explored in the remainder of this reflection.

Some lessons from the history of economic thought

In several respects, the ‘joke’ has resonance with an argument put by the political economist Rev. Thomas Robert Malthus in the context of an English economic depression following the final victory over Napoleon (1815) at Waterloo. This depression may have been caused in part by the attempts of the British government to meet its enormous war debt.

Unlike his personal friend but adversary in the study of political economy David Ricardo, Malthus rejected Says Law to the effect that supply creates its own demand — and that by so doing this ‘Law’ ensures against an economic depression resulting from the collapse of economy-wide demand for investment and consumer goods.

The fact that Malthus sought to explain was the reality of such a deep recession, whatever Ricardo’s theories. His conclusion was that there was a shortfall in aggregate demand in the economy as a whole. Malthus was thus acknowledged by John Maynard Keynes as a precursor to his own thinking about the same problem in the 1930s, indeed, as Geoff Harcourt reminds me, Keynes designated Malthus ‘the first of the Cambridge economists’.

Politically, Malthus was aligned with the land-owning aristocracy. It was difficult to see that this class had an active role in the economy apart from collecting the rent on their inherited property. How could this wealth, in itself, become socially beneficial?

Malthus’s under-consumptionist idea was that the shortfall in aggregate demand causing deep recession could be corrected by leadership from the landed aristocracy. If that class could be persuaded to spend more of its wealth on goods and services — not by giving charity to the unemployed! — then jobs would be created and the economy would recover.

This notion has some resonance with the claim of the first person ‘hero’ in the above ‘joke’! However, there are some all-important difficulties and complications regarding implementing any analogy with Malthus’s ‘aristocracy-led recovery’ such as a ‘private gardening-led’ one.

Despite the reality of economic depression left unexplained by Ricardo, Malthus could never quite get his argument together. This had to await Keynes’ General Theory (1936). Keynes allows for the possibility of long-term slump and deep unemployment. But he underlines that this does not have to be a permanent state of affairs because there are measures available to Government to set the economic process in motion again.

What are the complications? First, the modern Liberal party (as cited in the ‘joke’) has an ideology that is more like the Ricardian version that believes the universal validity of Says Law — or its modern variant ‘the efficient markets hypothesis’. It thus ruled out in advance what became the reality of the Wall Street Meltdown and subsequent GFC. This ideology denies that the government has a responsibility to stimulate the economy by creating jobs in such a recession, for example, by running a deficit. This claim is maintained even in a situation (unlike that of the U.S.) where a government, such as Australia’s, is not over-burdened with accumulated debt, and the Federal budget can be brought back into balance as the economy recovers and tax revenues rise as a consequence.

In a deep recession, ordinary citizens (like the ‘hero’ in the joke) are less likely to purchase luxury goods like additional gardening services. This is because there is likely to be a loss of consumer confidence just as there is a loss of business confidence typical of deep recessions. Keynes pointed out that this situation, which he called the ‘paradox of thrift’, is also an example of a ‘fallacy of composition’. That is, the virtue of thrift is actually bad for an economy in deep recession. Macro-economies don’t behave as the individuals and firms of which they are comprised. When times are tough it makes sense for the individual to reduce spending but this is bad medicine for the economy as a whole.

If all this is occurring in a deep recession, the hero of the ‘joke’, if representative, can be assumed ‘thrifty’ in the above sense. That is, if he spends on the luxury good of additional gardening then he will cut back his spending elsewhere and this will tend to cause a compensating loss of jobs unless the public sector picks up the slack.

These are the reasons why government is required to intervene in an economy facing deep recession. In Keynes’ message it would do so, for example, by public investment and budget deficits, so as to kick-start the economy. This would allow an increase in economic confidence so that the level of employment can be restored by resumption of normal private economic activity.

To the extent that government provides jobs for the unemployed specifically (whether or not funded by a temporary deficit) it is likely to draw the ire of economic conservatives for whom any increase in government expenditure is anathema (at least rhetorically). Such jobs, especially for the less skilled or for those losing jobs that had required skills no longer in demand, are often contemptuously dismissed by these right-wingers as ‘leaf-raking’. It is perhaps refreshing that the job offered by the benevolent hero in the ‘joke’ is precisely one of leaf-raking, or is it?

Context can be all-important

Parables and political jokes are often presented as eternal verities, but in the real world context matters.

Thus, Steve Keen, Nouriel Roubini and a few other economists predicted and warned about the Wall Street meltdown (2008) and subsequent global recession. As part of the causal background they identified that private and public sectors were carrying levels of debt that were unsustainable given over-inflation of private asset values. In turn, this over-valuation, the bubble that burst, had been driven in large part by private sector’s over-indebtedness. Lack of fiscal discipline was evident also in government sectors around the world, instanced in the U.S. case by the policies of the G. W. Bush Administration: gratuitous tax cuts for the rich and Middle East wars authoritatively estimated to have a lifetime cost to the U.S. of $3 trillion.

This was a regrettable absence of frugality to the point where net U.S. national savings ratio was around zero, a situation made possible in large part by foreigners’ preparedness to purchase and hold U.S. bonds, even at rock-bottom interest rates. In effect, as Michael Hudson and Robert Wade have long maintained, these foreigners, and notably the Chinese and oil-rich Middle East governments, were (involuntarily) funding the foreign wars and entanglements of the U.S. Government as well as its other excesses.

The 2008 Wall Street crash and its GFC sequel has now reversed some of these unsustainable excesses. But this reversal could hardly be called a market ‘correction’. Rather, it has left the U.S. and other economies indeed to face Keynes’ ‘paradox of thrift’. By reducing the propensity to spend after the crash, the inherited burden of over-indebtedness reinforces that ‘paradox’ in the private sector and promotes a dysfunctional ‘austerity doctrine’ with respect to government sector spending.

Along with  its dependence on the China-based mineral exports boom, Australia’s situation is mixed: over-indebted in the private sector but able to countenance measured fiscal stimulus through public sector spending without the risk of unsustainably rising government debt.

The economy is a complex system so choose your parables carefully

What this case demonstrates among other things is that ‘paradoxes’, ‘fallacies’ etc. are not only verbal but can be inherent in social reality. This is because we are often dealing with “complex systems” — in this case an economy. As in the case of the climate system and other natural and social systems with which it interacts, the economic system can involve destabilising positive feedback loops and ‘tipping points’ that need to be either managed or avoided at all costs.

One kind of ‘common sense’ is that purveyed by the dominant class in society. That is all about ‘blaming the victim’ and attachment to ‘convenient’ non-sequiturs such as the ‘fallacy of composition’, in which the economy is promoted as just the individual or family writ large. These metaphors are easy to grasp but their purpose is often to mislead.

Appeals to ‘common sense’ are the stuff of debate but unfortunately some kinds of common sense can be poor guides to good policy when we are dealing with a complex system. The more is this so when ‘common sense’ propagated over recent decades has been reversion to pre-Keynesian austerity doctrine. Thus, as Krugman puts it:

The infuriating thing about this tragedy is that it was completely unnecessary. Half a century ago, any economist — or for that matter any undergraduate who had read Paul Samuelson’s textbook “Economics” — could have told you that austerity in the face of depression was a very bad idea. But policy makers, pundits and, I’m sorry to say, many economists decided, largely for political reasons, to forget what they used to know. And millions of workers are paying the price for their willful amnesia.

Fortunately, in this case we have surer guides about how the economy actually works, notably those associated with Keynes and those extending similarly critical insights as circumstances change and recur in changed forms.

Barry Naughten bio

Barry Naughten, PhD, MAIR, MEc, BSc is a Departmental Visitor in the Centre of Arab and Islamic Studies, ANU, where he is completing a book on U.S. foreign energy policy in the Middle East. He was formerly a Senior Economist in ABARE, the Commonwealth Government economic research agency, where he specialised in energy economics. He has published journal articles and book-chapters in these and related fields.

He is contactable on and on

Written by Barry Naughten

August 23, 2012 at 4:01 am

Barry Naughten: CV and publications

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Barry Naughten: CV and publications



05-Sept.-1943 (Melbourne); Australian citizen


PhD (ANU, 2011), MAIR (hons., ANU, 2004), MEc (ANU, 1987), BSc (physics, MelbourneUniv., 1965)

Contact and present affiliation

Contacts: +61 (0)2 6286 3435

Since 2004: Centre for Arab and Islamic Studies (CAIS), Australian National University (ANU), Canberra 0200; current status: Departmental Visitor.

[head of Centre: Prof. Amin Saikal; ]

CV and occupational history prior to 2003

Senior Economist, 1994-2003, ABARE (Australian Bureau of Agricultural and Resource Economics), Canberra

Senior Project Officer, ABARE 1987-1994; Department of National Resources and Energy, 1978-87; Departments of Urban and Regional Development and later, Environment, Housing and Community Development, 1973-78

Senior Research Officer, Commonwealth Treasury, 1971-73

Research Officer, Department of National Development 1969-71

Administrative Trainee, Commonwealth Public Service Board, 1968

Secondary School Teacher (Science and Mathematics) Victorian Education Department (1966-68)

Laboratory Assistant, Sugar chemistry, CSIRO (1961-62)

Papers, publications, theses and selected on-line comments

Theses and subtheses

Naughten, B., 2011, U.S. foreign energy policy and grand strategy choice: the challenge of global and regional systemic crises, Centre of Arab and Islamic Studies, ANU, Canberra, PhD thesis approved by external examiners, June 30.

Naughten, B., 2003, American empire: a critical, agent-centred approach, December; Sub-thesis submitted as part of course requirements for Master of Arts in International Relations (MAIR), Department of International Relations, Research School of Pacific and Asian Studies, AustralianNationalUniversity; degree with honours awarded, 2004.

Authored articles in peer-reviewed journals

Naughten, B., 2011, ‘Review article: Policy on Catastrophic Climate Change’, Journal of Australian Political Economy, June, issue 67., pp. 121-53.,com_remository/Itemid,26/func,startdown/id,171/

Naughten, B., 2010, ‘US foreign energy policy and grand strategy choice: global systemic crises confronting the Obama Administration’, Int. J. Global Energy Issues, Special Issue: Energy Security in the 21st century (ed. Dr Lynne Chester). Vol. 33, Nos. 1/2, pp. 89–119.

Naughten, B., 2009, ‘The Climate Change Case for US-Iranian Engagement’, pp. 67-72, in Viewpoints Special Edition, The 1979 “Oil Shock:” Legacy, Lessons, and Lasting Reverberations, The Middle East Institute, Washington, DC.

Naughten, B., 2008, ‘Asia’s rising energy interdependence: security and environmental challenges for the US’, Int. J. Global Energy Issues, Vol. 29, No. 4, pp. 400-433.

Naughten, B., 2003, ‘Economic assessment of combined cycle gas turbines in Australia: some effects of micro-economic reform and technological change’, Energy Policy, vol. 31, no. 3, February, pp. 225-45.

Jones, B.P., Peng Z–Y. and Naughten, B., 1994, ‘Reducing Australian energy sector greenhouse gas emissions’[1] Energy Policy, vol. 22, no. 4, April, pp. 270-86.

Naughten, B., 1993, ‘Climate change, Australian impacts and economic analysis’, Climatic Change  vol. 25, no. 3, pp. 255–270.

Naughten, B., Bowen, B. and Beck, A. 1993, ‘Energy market failure in urban road transport: Is there scope for ‘no regrets’ greenhouse gas reduction?’, Climatic Change, vol. 25, no. 3, pp. 271–288.

Hogan, L. and Naughten, B., 1990, ‘Some general equilibrium effects of declining crude oil production in Australia’[2], Energy Economics, vol. 12, no. 4, October, pp. 242-50.

Contributions to edited volumes

Naughten, B., 2009, ‘The Climate Change Case for US-Iranian Engagement’, pp. 67-72, in Viewpoints Special Edition, The 1979 “Oil Shock:” Legacy, Lessons, and Lasting Reverberations, The Middle East Institute, Washington, DC.

Naughten, B., 2007, ‘The impact of the new Asia-Pacific energy competition on Russia and the Central Asian States’, chapter 8, pp. 128-158 in Wesley, M., (ed.), Energy Security in Asia, Routledge.

Harris, S. andNaughten, B., 2007, ‘Economic dimensions of energy security in the Asia-Pacific’, chapter 10, pp. 174-194 in Wesley, M., (ed.), Energy Security in Asia, Routledge.

Goldstein, G., DeLaquil, P., Naughten, B., Chen, W., Sato, O., and Lee, J., 2002., Including New and Renewable Energy Technologies into Economy-Level Energy Models, APEC#202-RE-01.11, ISBN 0-9726293-0-0, November.

Naughten, B., Melanie, J. and Dlugosz, J. 1996, ‘Supports’ to the electricity sector in Australia Consultancy Report by ABARE to OECD Environment Directorate, January; chapter in Reforming energy and transport subsidies: Environmental and Economic Implications Report to OECD Directorate, 1997 OECD, Paris

Naughten, B., Melanie, J. and Dlugosz, J. 1996, Modelling ‘Supports’ to the electricity sector ABARE Conference Paper 96.27 presented to OECD Environment Directorate Conference ‘Environmental Implications of Energy and Transport Subsidies, Rome, 11–13 September, published as a chapter in Report Environmental effects of ‘supports’ to electricity and transport sectors OECD Environment Directorate, OECD, Paris

Naughten, B., 1995b, Modelling the ‘rebound’ effect and ‘no regrets’ reductions in greenhouse gas emissions using PRDMENSA, ABARE Conference Paper 95.35 presented at the International Symposium on Energy, Environment and Economics, Melbourne University 20–24 November; published in Transactions of the symposium, The University of Melbourne.

Book Reviews in International Journals

Naughten, B., 2012, ‘Review of Stephen Kinzer Reset Middle East — Old friends and new alliances: Saudi Arabia, Israel, Turkey, Iran’, Middle East Journal, Winter (forthcoming).

Naughten, B., 2001, ‘Peter Singer: A Darwinian Left: Politics, Evolution and Cooperation’,Capitalism, Nature, Socialism, March, vol. 12, no. 1, pp. 161-5.

Research Monographs (ABARE)

Holmes, L., and Naughten, B.1993b, Natural Gas—Economics of Natural Gas as a Vehicle Fuel, ABARE Research Report No. 93.13, Commonwealth of Australia, Canberra.

Hinchy, M. D., Naughten, B.R., Donaldson, P. K., Belcher, S. and Ferguson, E. 1991, ‘The issue of domestic energy sector market failure’, ABARE Technical paper 91.5, Commonwealth of Australia, Canberra.

Recent contributions in reverse chronological order

July-December 2012

Naughten, B., 2012, Climate science and policy: the tension between ‘argument’ and ‘debate’, The Conversation, 13 August.

Naughten, B., 2012, Stabilising the Middle East: lessons from the US rapprochement with China, 2012, The Conversation, 7 August.

January-June 2012

Naughten, B., 2012, ‘Review of Stephen Kinzer’s Reset Middle East — Old friends and new alliances: Saudi Arabia, Israel, Turkey, Iran’, Middle East Journal, Winter (forthcoming).

July-December 2011

Naughten, B., 2011, 2011b, ‘Uncertainty, complex adaptive systems, conflict and inter-disciplinary applications’ paper presented to 10th conference of the Australian Society of Heterodox Economists 5-6 December, The University of New South Wales, Sydney Australia, Conference Proceedings, non-refereed papers,  pp. 113-140.

January-June 2011

Naughten, B., 2011, U.S. foreign energy policy and grand strategy choice: the challenge of global and regional systemic crises, Centre of Arab and Islamic Studies, ANU, Canberra, June 30. PhD thesis approved by external examiners.

Naughten, B., 2011, ‘Review article: Policy on Catastrophic Climate Change’, Journal of Australian Political Economy, June, issue 67.,com_remository/Itemid,26/func,startdown/id,171/

Naughten, B., 2011, Five on-line comments on Mark Aarons’ ‘The Greens and Fundamentalism’, The Monthly, May on-line edition.

Naughten, B., 2011, letter commenting on John Keane’s review of Hobsbawm’s How to Change the World, , Abridged version published in The Monthly, April hard copy; full version on-line edition.

July-December 2010

Naughten, B., 2010, letter commenting on Peter Conrad’s review of Hugh Lunn’s Words Fail Me, The Monthly, Dec-Jan on-line edition:

January-June 2010

Naughten, B., 2010, U.S. foreign energy policy and grand strategy choice: the challenge of global and regional systemic crises, PhD thesis submitted from Centre of Arab and Islamic Studies, ANU, Canberra, June 30.

Naughten, B., 2010, ‘US foreign energy policy and grand strategy choice: global systemic crises confronting the Obama Administration’, Int. J. Global Energy Issues, Special Issue: Energy Security in the 21st century (ed. Dr Lynne Chester). Vol. 33, Nos. 1/2, pp. 89–119.

July-December 2009

Naughten, B., 2009, The contentious role of natural gas in averting ‘dangerous’ climate change:response to Saturday Extra’s interview on 22 August with David Knox, CEO, SANTOS.

Naughten, B., 2009, ‘The Climate Change Case for US-Iranian Engagement’, pp. 67-72, in Viewpoints Special Edition, The 1979 “Oil Shock”: Legacy, Lessons, and Lasting Reverberations, The Middle East Institute, Washington, DC.

January-June 2009

Naughten, B., 2009, Population pressures,ON LINE opinion  – Australia’s e-journal of social and political debate. Posted Thursday, 22 January 2009

Naughten, B., 2009,The Elephant In The Greenhouse, published on, 14 Jan

July-December 2008

Naughten, B., 2008, Robert Kaplan, imperial America and the Obama Cabinet: response to Saturday Extra’s interview on November 1st with Robert Kaplan, 6 November.

Naughten, B., 2008, ‘Asia’s rising energy interdependence: security and environmental challenges for the US’, Int. J. Global Energy Issues, Vol. 29, No. 4, pp. 400-433.

January-June 2008

Naughten, B., 2008, Secure gas supplies and reducing China’s CO2 emissions: the US foreign policy stance. Paper presented to Annual Conference of the International Association of Energy Economists (IAEE), Istanbul, Turkey, 18-20 June.

Naughten, B., 2008, Submission to Garnaut Climate Change Review, submitted 24 April, revised 11 May, 38 pp.$File/D08%2049078%20%20General%20Submission%20-%20Barry%20Naughten%20(ANU).pdf

July-December 2007

Naughten, B., 2007, Petro-Politics: Iraqi Oil—Cock-Up or Conspiracy, New Matilda, posted 27 November.

Naughten, B., 2007, Iran-US policy tensions: implications for Iran’s oil and gas development, seminar presented at CAIS Al-Falasi theatre, Bldg 127, Ellery Crescent, AustralianNationalUniversity, 12 November 11am.

Naughten, B., 2007, ‘Energy security’ and responding to ‘dangerous’ climate change: the case of China and West Asian natural gas, The Diplomat website, posted Nov. 2.

Naughten, B., 2007, Obfuscating the debate on climate change, The Diplomat website, posted 1 November.

Naughten, B., 2007, ‘The Howard-Bush Coalition’s Agenda on Climate Change’, Arena Magazine, number 89, June-July, pp. 42-45.

Naughten, B., 2007, ‘Climate science and ‘de facto denialism’: the ABC Revisits Denialism (1)’, New Matilda, posted 11 July.

Naughten, B., 2007, ‘Climate change as anti-Third World conspiracy? The ABC Revisits Denialism (2)’, New Matilda, posted 11 July.

January-June 2007

Naughten, B., 2007, ‘Sabotaging Kyoto: Howard’s real agenda on climate change’, Dissent, 23, Autumn-Winter, pp. 38-39.  

Naughten, B., 2007, Environment: The Clean Coal Con Job, New Matilda, 4 April

Naughten, B., 2007, Howard’s Kyoto Sabotage,New Matilda, 21 February, Issue 130.

Naughten, B., 2007, ‘The impact of the new Asia-Pacific energy competition on Russia and the Central Asian States’, chapter 8, pp. 128-158 in Wesley, M., (ed.), Energy Security in Asia, Routledge.

Harris, S. andNaughten, B., 2007, ‘Economic dimensions of energy security in the Asia-Pacific’, chapter 10, pp. 174-194 in Wesley, M., (ed.), Energy Security in Asia, Routledge.

July-December 2006

Naughten, B., 2006, Central Asian oil & gas and energy security, presentation to Symposium on Energy Security, 11 October 2006,  held at the AIIA Conference Centre, Canberra, jointly sponsored by the Australian Institute of International Affairs (AIIA) and the Australian Homeland Security Research Centre.

Naughten, B., 2006, Climate change: Howard holds a monkey wrench, New Matilda, 15 September.

Naughten, B., 2006, The political economy of transport fuel bills, New Matilda, 18 August.

January-June 2006

Naughten, B., 2006, Global energy security and dysfunctionality in United States oil policy, paper presented to Annual Conference of the International Association of Energy Economists (IAEE), Potsdam, Germany, 7-10 June.

Naughten, B., 2006, ‘Ecological energy security in an Adversarial Society: Australian Government Policy and Global Warming’, ISAA Review, Proceedings of Annual Conference on The Adversarial Society, 13-14 October 2005, pp. 129-144.

July –December 2005

Naughten, B., 2005, Lecture and Q&A: ‘Background to political economy of oil markets to 2025’, contribution to ‘Day 3: Energy and Security; Week 14: The Middle East’, 27 July 2005, Centre for Defence and Strategic Studies (CDSS), Weston, ACT; a component of Defence and Strategic Studies Course, entitled ‘Understanding the Strategic Environment’, managed by Deakin University.

Naughten, B., 2005, Asia-Pacific oil and gas competition: impact on Russia and Central Asia, paper presented to Workshop, Energy Security in the Asia Pacific Region hosted by the Griffith Asia Institute and the Asia Pacific Futures Network; Stamford Plaza Hotel, Brisbane, 31 August and 2 September; final version to be published in book edited by Michael Wesley.

Harris, S. and Naughten, B., 2005, Economic Dimensions of Energy Security in the Asia-Pacific, paper presented to Workshop, Energy Security in the Asia Pacific Region hosted by the Griffith Asia Institute and the Asia Pacific Futures Network; Stamford Plaza Hotel, Brisbane, 31 August and 2 September; final version to be published in book edited by Michael Wesley.

Naughten, B., 2005, Can we withdraw from Iraq? The Australia Institute Newsletter, December, issue 45.

Naughten, B., 2004, ‘Increasing long-term oil dependence: implications for global energy security and United States’ policies’, CAIS Bulletin, ANU Sept.

Selected other publications available on the net

Naughten, B., 2001, Viability of sugar cane based fuel ethanol, ABARE report
to AFFA, October, ABARE, (Australian Bureau of Agricultural Economics, Canberra.

Naughten, B., 2002, Some MARKAL capabilities in Australian energy policy analysis & modeling the mandated target for renewable electricity in Australian MARKAL, May.

Naughten, B., 2001, Meeting The Mandated Renewable Electricity Target. Some results from ‘least cost’ modeling, Paper presented at Annual Conference of Australian Agricultural and Resource Economics Society (AARES), January, Adelaide.


Naughten, B. (with Ian Lowe), 2009, Discussion on Australian policy with respect to climate change and population, Bush Telegraph, ABC Radio National; interviewer Michael Cathcart, January 28.

Naughten, B., 2008, Robert Kaplan, imperial America and the Obama Cabinet: response to Saturday Extra’s interview on November 1st with Robert Kaplan, 6 November.

Other authored publications:

International organisations and conference proceedings etc. [7]

ABARE OUTLOOK conference papers [8]

Other conference papers, publications and presentations [12]

ABARE Consultancy reports [10+] 1989-2002.

Private Consultancy Reports [3] 2004-05.

Consultancies, training activities and contract lectures

Immediate client Project Ultimate Funding source
Centre for Defence and Strategic Studies   (CDSS) Australia Lectures on global oil markets and energy   security, 2004, 2005 CDSS via   DeakinUniversity
ABARE (Australian Bureau of Agricultural   and Resource Economics) Independent review of reports Energy   Policy Systems Analysis Project (ASEAN), 2004-2005 Australian foreign aid agency (AusAID) via SMEC/IES via ABARE
ASEAN Centre of Energy (ACE), Jakarta Training in computerized energy system   modelling (MARKAL), 2000-01 AusAID
PDOE (Philippines) as above, 1999-2000 USAID via ….
Hong Kong Dept of   Energy as above, 1997-98 Hong Kong Dept of   Energy
BPPT (Indonesia) as above, 1997-98 AusAID
TERI (India),   BIDS (Bangladesh), PDOE (Philippines) as above, 1996-97 Asian Development Bank (ALGAS Project)

Dr Barry Naughten

Departmental Visitor

Centre for Arab and Islamic Studies (CAIS)

Australian National University (ANU)

6286 3435

[1] Cited in:

IPCC 1995, Climate Change 2995: Economic and Social Dimensions of Climate Change, Contribution of Working Group III to the Second Assessment Report of the International Pane on Climate Change, CambridgeUniversity Press.

Diesendorf, M. 1998, Australian economic models of greenhouse abatement, Environmental Science & Policy, Volume 1, Issue 1, March, Pages 1-12.

Diesendorf, M., 1996,How can a ‘competitive’ market for electricity be made compatible with the reduction of greenhouse gas emissions?, Ecological Economics, Volume 17, Issue 1, April Pages 33-48

[2] Cited in:

Alan Powell and Richard Snape, 1993, ‘The contribution of applied general equilibrium analysis to policy reform in Australia’ Journal of Policy Modelling vol. 15, no. 4, pp. 393–414 as exemplifying the ORANI model’s application to supply shocks on the Australian economy.

Bhattacharyya, S. 1996, ‘Applied general equilibrium models for energy studies: a survey’ Energy Economics, vol. 18, pp. 145–64.

Written by Barry Naughten

August 23, 2012 at 2:06 am

Stabilizing the Middle East: lessons from U.S. rapprochement with China

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Stabilizing the Middle East: lessons from U.S. rapprochement with China

Barry Naughten

Naughten, B., 2012, Stabilising the Middle East: lessons from the US rapprochement with China, 2012, The Conversation, 7 August.

The mismatch between continued U.S. pursuit of a global primacy role and the changing terms of its own national self-interest is increasingly evident. This is so in the light of developments such as the dramatic and costly failures of its foreign policies in the Middle East and Western Asia, its role in causing the GFC and the continued and rapid rise of new great powers, as well as ongoing social and political decay at home.

One major index of this multiple failure has been U.S. inability to develop a policy toward Iran independent of Israeli veto power. As discussed below, this failure is of great concern because it leads to a more dangerous and unstable Middle East. In addition, there are multiple positive reasons for U.S. foreign policy cooperation with Iran, not least in retrieving dangerous situations in Afghanistan and Iraq as the U.S. continues to withdraw as rapidly as its declining prestige will allow. These reasons have been spelt out by Stephen Kinzer (2010).

Nixon-Kissinger’s ‘China card’

Some historical lessons can be drawn from the U.S. position and response to the economic crisis of 1971, caused as it was in large part by the costs of its ill-conceived Vietnam involvement. While still embroiled in Vietnam, the then U.S. leadership was beginning to sense this reality of changed circumstances. One crucial response was Nixon’s historic visit to Beijing in 1972. Supported by Kissinger’s advice, Nixon had decided to form an alliance of convenience with China against the U.S.S.R, while also accepting the opening up of China to the rest of the world.

Less than ten years earlier, foreign policy-makers and hawks in the U.S., and U.S.S.R (and Australia) had been calling for ‘surgical denuclearization’ of an isolated China that had seen itself, with good reason, as existentially threatened by both of the nuclear super-powers.

The rapprochement initiated by Nixon and warmly received by China meant that the latter could then be ‘contained’, in large part through its inexorably increasing international economic interdependence. It meant a firm rejection of the failed U.S. policy of China’s enforced isolation.

Nixon’s balance-of-power policy with respect to China in the context of the U.S.S.R could thus be viewed as a rational response to a setback to U.S. global primacy aspirations, subject first to Paul Kennedy’s ‘imperial over-stretch’ as a consequence of the Vietnam debacle, and second to its relative decline consequent on the economic rise of Europe and Japan over the 25 years following WWII (and not much later, the definitive rise of OPEC’s influence).

For and against ‘preventive war’ on Iran

Some U.S. foreign policy hawks now advocate wars of ‘regime change’ or ‘surgical de-nuclearization’ on Iran. They are supposedly prompted by the latter’s alleged (but as yet unconsummated) nuclear weapons aspirations. They join the urgings of the Israeli leadership. The calls echo those just described regarding China (1950s & 1960s) but rejected ─ and also those regarding Iraq, which of course actually suffered such a war in 2003, with no nuclear weapons capability found to exist.

One such strident voice has recently been from Mitt Romney, the Republican nominee for the Presidential elections who has surrounded himself with neoconservative advisers. As to the Obama Administration, like its GW Bush predecessor, it continually claims that it will ‘use all elements of American power to prevent Iran from developing a nuclear weapon’. ‘Bunker-busters’ are threatened.

Many other commentators oppose such calls for preventive war on Iran. One such powerful critique has been from Stephen Walt (2012). Taking a slightly different tack, the leading foreign policy realist Kenneth Waltz has recently (2012) argued that, as in the case of China, Iran’s aspirations toward a nuclear deterrent are perfectly rational and reasonable in terms of its own national security. This is especially so in the light of very real threats from Israel and the U.S. He also notes that once China actually acquired its own international nuclear deterrent in the early 1960s it necessarily became a more responsible international citizen.

This does not mean that we need to go all the way with Waltz’s severely parsimonious rationalism. The U.S. could hardly be expected to accept a nuclear Iran as a totally desirable outcome. However, what makes sense is to accept that Iran’s aspirations toward a level of capability (perhaps like Japan’s) would allow mechanisms of a stabilizing mutual deterrence to emerge vis-à-vis both Israel and the Arab Middle East in particular.

A first practical step would be to withdraw punitive economic sanctions now in place on Iran. Such harsh measures are more likely to harden Iran’s resolve, an unintended consequence pointed out by Ned Lebow in a general context.

Another step toward such a rational and prudent strategy would be to decisively take ‘off the table’ the option of ‘preventive war’ on Iran ─ that is, aggressive war. As in the case of the war on Iraq (2003), this option is illegal under the UN Charter, and for good reason.

The path of U.S.-Iran engagement in the above terms would of course by no means remove the option of future defensive war on Iran should it plausibly threaten to use such weapons unprovoked, or indeed to wage aggressive war against its neighbours. However, even such a graduated and ‘defensive war’ option would need to be weighed carefully in the light of prevailing circumstances.

Israel’s veto on the U.S. seeking to normalize its relationship with the Iran

Israel would be one of the main losers if the Middle East were to descend into greater chaos as a result of military strikes on Iran. Yet, as already noted, Israel’s hawkish leadership has been shrill in threatening its own ‘preventive war’ on that country.

Unfortunately, Israel’s foreign policy hawks have been dangerously emboldened by several factors. The first is the forty years or so in which Israel has possessed the only (albeit ‘ambiguously’ denied) nuclear weapons capacity in the region, not to speak of its being at a comparable level to China, France and the UK in terms of delivery and ‘second strike’ capabilities. This unchecked power has not been a stabilizing force in the region, especially given that this has been heavily supported by U.S. military aid over the same period.

A second source of unreality in the Israeli leadership’s thinking has been its faith in the continued influence of a so-called (but misnamed) ‘Israel Lobby’ well connected within the U.S. foreign policy establishment. This lobby is intermeshed with the same neoconservative and bellicose Wilsonian liberal influences that have brought U.S. foreign policy failure over the past decade, and indeed as far back as Vietnam. Hawkish republicanism and Christian Zionism are also influential. The Lobby is far from reflective of Jewish public opinion in the U.S. Indeed, some of its main critics are of Jewish origin (for example, J-Street, the above-noted commentator, Stephen Kinzer).

The fact that Israel seems able to exert a veto power over U.S. policy in the Middle East (not so evident 20 years ago) is unduly exhilarating for Israeli leaders. But for the U.S., such a constraint can be viewed as one more index of U.S. relative decline at a time when its own security is increasingly dependent on more rational foreign policy-making, for example in its avoidance of both ‘imperial’ and fiscal ‘over-stretch’ in the Middle East and elsewhere.

A third factor has been crisis in Israel’s domestic politics, which has entailed the rise of more right-wing, bellicose and often corrupt elements. A fourth and closely related difficulty is the continued U.S. and Israeli failure to address the Palestinian question, and to move toward its equitable and secure resolution.

Australia’s role then and now

The U.S. has the power to address the central issues constructively but is unlikely to do so without effective argument and pressure domestically and from the rest of the world, including from such allies as Australia, a country with a history of opposition to even-handedness on the Palestine question.

That Australia can play either positive or negative roles is well demonstrated by the related histories of our relations with China (and Vietnam). Then Opposition leader Gough Whitlam’s coinciding visit to China in 1971 indicated a degree of international awareness. This initiative was a corrective to the then Coalition Government’s pressure in support of hawkish U.S. policy directions evident in both its ill-conceived commitment to land-war in Asia and its ideologically-based opposition to normalizing relations with China.

That pressure from the then Coalition Government did the U.S. no favours and did nothing to advance Australia’s own security.

As indicated in recent contributions by Hugh White (and here) and James Curran, these lessons remain relevant today for Australia’s foreign policies with respect not only to Asia and the U.S. but to the continued over-interventionist role of the U.S. and other Western powers in the Middle East region.

Barry Naughten bio

Barry Naughten, PhD, MAIR, MEc, BSc is a Departmental Visitor in the Centre of Arab and Islamic Studies (CAIS), ANU, where he is completing a book on U.S. foreign energy policy in the Middle East. He was formerly a Senior Economist in ABARE, the Commonwealth Government economic research agency, where he specialised in energy economics. He has published journal articles and book-chapters in these and related fields.

He is contactable on and on


Written by Barry Naughten

August 23, 2012 at 1:25 am