Good news

It’s that time of the semester, so I have been somewhat remiss in noting some good news stories recently. Here’s a quick rundown of some well-known, and not so well-known, examples of the world getting better.

1. John Humphreys is one of the most energetic people I know, and his list of accomplishments is impressive. A highlight among them is the Human Capital Project, a not-for-profit NGO that is “aimed at investing in the education of students in Cambodia who would not otherwise be able to afford university”. It takes donations for now, but is designed to be self-supporting once enough students have gone through, as they pay back 10% of their post-degree income into the project (for 5 or 10 years). It’s an example of “personal equity” finance, not a student loan, and is progressive in the sense that the more the graduate earns, the more they pay back. Donations are like those sponsor-a-child deals – pay a few hundred dollars a year, for 4 years, and you get the warm fuzzy glow that comes from making a genuine change in one person’s life, with the addition of all the positive externalities that come from providing education to those without.

The whole idea is good news in itself, but I’m happy to report that the HCP has now been going long enough to have its first graduate, Nhim Chamnan, who is now employed by the micro-finance arm of World Vision. That choice of employment is probably an example of the affirmative action effect found in US studies – underrepresented minority graduates are more likely to go on to work in underserved areas, or in jobs that help the socioeconomically deprived.

2. Cuba has finally acknowledged that their economic system is unsustainable, unworkable, and long overdue for an overhaul. Fidel Castro openly said as much recently. They implicitly recognised these facts years ago, and had some stop-start reforms, and then when Fidel was succeeded by his brother Raul, the process was increased in scope but still minimal. They have now decided that quick action is needed, telling 500,000 to 1 million people who were on the government payroll that they will have to run their own business or join private enterprises. That Cuba is taking such drastic action strongly suggests the economy is worse than I thought.

While I applaud the move towards more capitalism, I’m worried that the abrupt change will be disruptive and hurt the population and economic activity in the short term, like Russia suffered after Communism collapsed. I would have preferred an accelerated process of reform, but not dumping up to a fifth of the workforce in one year. I am confident that eventually Cuba will be much better off by taking this path, but I suspect that the swift changes will be more than Cubans can cope with, especially since there’s little hint that complementary changes will occur. Capitalism is a system that works best when all its components are in place and functioning properly. Half-arsed reforms could be counter-productive. If that eventuates, watch how Naomi Klein and her ilk hold it up as an example of how capitalism is bad, never realising the irony.

A thoughtful look at the situation can be found here, though it is telling that even a clear-eyed look at the facts can lead some to the wishy-washiest of conclusions when ideology trumps practicality.

3. The Kings Cross injecting room will be made permanent, 10 years after opening on a trial basis. Medical studies show it has saved thousands of lives, and pushed thousands into treatment instead of prison. Criminology studies have shown that it doesn’t attract addicts and crime to the area. Anecdotes from residents show that the ‘nuisance factor’ that comes with drug users has been decreased by the injecting room’s operation.

When it comes to drugs, the irrationality of our governments needs a decade of overwhelming evidence to convince them that this form of harm minimisation is a good idea, and even then their acknowledgment is grudging and qualified. No other injecting rooms are on the cards. But still, it’s good news. Our ridiculous drug laws can only be changed incrementally, and the longest journey starts with a single step.

4. BHP Billiton chief executive Marius Kloppers has endorsed the revenue-neutral carbon tax I have long advocated (after being convinced by none other than John Humphreys), on the grounds of investment certainty for the long-term projects that power generation entails, and the high likelihood of a global carbon price in the coming decades. This is an astounding development, blowing away several of the arguments made by those opposed to a carbon tax. It is nothing but good news. Graeme Bird is going to be apoplectic.

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7 Responses to Good news

  1. Yobbo says:

    and the high likelihood of a global carbon price in the coming decades

    This is the sticking point for most people still opposed to a carbon tax. There will never be a global price on carbon, it will be up to countries like Australia to introduce one unilaterally, making Australian businesses take a competitiveness hit in the process.

  2. Jordan Rastrick says:

    These are all excellent pieces of news. In particular I want to thank you for bringing the Human Capital Project to my attention – I wasn’t aware of its existence, and had been wondering of a while if these kinds of personal equity arrangements existed in any poor countries (and if not whether there was an impetus to set them up…)

    By the looks of their sponsor list, they don’t seem to take small scale investments/donations, though? I can’t afford to pay for anything like an entire scholarship on my current income, but I’d like to be able to put some money towards the idea. Would my best bet be just to email an inquiry to John Humphreys directly at the email address listed on that site, do you think?

  3. Jarrah says:

    Jordan, that sounds like a good idea. Maybe you could team up with others if you can’t afford a whole sponsorship yourself, though?

    Yobbo, what if the carbon tax is offset by a reduction in company tax?

  4. Jordan Rastrick says:

    I might talk to some other people about it, although actually looking at their reports I think the degrees cost substantially less to sponsor than I’d thought (based on their examples), so it might be affordable for me after all.

    As far as Carbon goes, I’ve come around to the idea that a straight tax is preferable to an ETS myself – if only because its less complex to explain politically. However I think Pigovian Taxes (of all types) should always be designed in such a way that they are inherently revenue neutral – e.g. money raised from taxing carbon emitting energy generation should be used only for a general subsidy od non-emitting energy. A corresponding cut in company tax might happen, at the moment, to be revenue neutral; but in 10 years it almost certainly won’t be. In this particular case, this is a long-term expected revenue loss for the government, because income from a Carbon Tax should (hopefully) fall, eventually to zero.

    Libertarians might cheer this as a way to shrink the size of government by stealth, but I think it is a recipe for disaster (even for Libertarians) because it gives future governments financial incentives to encourage ongoing emission of carbon in other ways.

    For examples of this problem, look at speeding fines – because they go into general revenue the government is always open to controversy concerning whether they are an effective safety measure, or just a money spinner. Likewise, the NSW government these days makes simply too much money from pokies to not have a strong conflict of interest in the regulation of gambling. I don’t think this is healthy for the political system.

  5. Ruby says:

    Very pleased about the Human Capital Project. I visited Cambodia last year and most children can’t even afford to go to school, let alone University. I think this is a very positive way of empowering Cambodians instead of simply giving them handouts, and I hope it will be successful.

  6. john walker says:

    Jordan- you make an interesting point, the example of Sydney water and its ‘need’ to maximize consumption and thus revenue versus its need to conserve water springs to mind. This might be a good argument for a trading system , no?

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