Is Alexander Hamilton's ideal of a modern commercial republic still relevant today?

 

Alexander Hamilton was one of the Founding Fathers of the United States. He served as secretary to the Treasury from 1789 to 1795 during the presidency of George Washington.

I knew little about Alexander Hamilton’s contribution to American economic policy before reading Samuel Gregg’s book, The Next American Economy: Nation, State, and Markets in an Uncertain World, 2022. Gregg suggests that America faces a choice between a form of state capitalism – top-down interventionism focused on achieving political objectives such as greater economic security for specific groups and “national security” – and a free market economy. He argues that in making the case for free markets it is helpful to take another look at the ideal of a modern commercial republic as espoused by Alexander Hamilton.

Centralization of powers

Prior to reading Gregg’s book, I knew that Hamilton had argued successfully for greater centralization of government powers than prevailed in the original confederation. On that basis, I had entertained the idea that he might possibly have been responsible for much that is wrong with the U.S. today.

Gregg presents a more positive view of Hamilton’s contribution. He suggests that integration of the states into a more unified commercial republic made it easier for Hamilton to apply principles of free trade among the states and between the U.S. and other countries.

Gregg’s line of reasoning poses a challenge both to libertarian globalists, who see national governments as the source of barriers to the functioning of free markets, and to economic nationalists who want governments to prevent foreign economic competition because they see it as a threat to national sovereignty. He challenges libertarian globalists by suggesting that “failure by the government to smooth the economic ups and downs which are part of life in a market economy risks opening the door to political movements that have no particular regard for human freedom”. He challenges economic nationalists by suggesting that tariffs and other measures that protect of American industry from foreign competition are harmful to Americans.

 It isn’t necessary for libertarian globalists, like myself, to abandon utopian thinking in order to see merit in effective unilateral action by national governments to promote free trade. At a national level, the case for free trade rests on it providing individual citizens and their descendants with the prospect of better opportunities than would otherwise be available to them.

To eliminate the excesses of statism, it is necessary for political leaders to exercise statecraft (or what Adam Smith and David Hume referred to as “the science of the legislator”. As Gregg puts it Smith and Hume recognized that:

 “the knowledge furnished by … integration of moral, political, and economic inquiry needed to be brought to bear upon society by statesmen and governments in the interests of its improvement”.

Gregg notes that although Edmund Burke’s involvement in economic policy was “attuned to political realities” he leaned strongly towards promoting greater commercial freedom within Britain’s empire and between Britain and other nations.

America’s Founding Fathers, including Alexander Hamilton, were also influenced by Adam Smith and David Hume.

Hamilton’s vision of a commercial republic

Samuel Gregg explains how Hamilton advanced his vision of a commercial republic in his contributions to the Federalist Papers and in his role as secretary to the Treasury. Hamilton’s vision of a modern civilized nation combined republican government and a private enterprise economy, with merchants subject to the discipline of competitive markets. He hints that character traits that make for commercial success – industry, innovation, economy, self-restraint, honesty, prudence – are also republican virtues.

Hamilton argued for free trade between the states and for revenue tariffs only on international trade. He suggested that tariffs “force industry out of its more natural channels into others in which it flows with less advantage”. He maintained that trade policy should be driven by national interest and was adamantly opposed to use of trade sanctions as an instrument of foreign policy.

What next?

Samuel Gregg ends his book by acknowledging that he doesn’t know whether there is a real possibility that an American commercial republic could emerge to shape America’s future. He hopes that it could on the basis that he can “see no reason why America cannot embrace the habits, incentives, and disciplines associated with markets while also grounding them in the language, norms, and virtues of the American experiment”.

Since 2022, when Gregg’s book was published, it has become clearer that the U.S. is likely to continue, for a few more years at least, down the path towards greater international trade protectionism.  The choice that the two major political parties are offering voters in the 2024 presidential election certainly does not include a candidate offering an alternative to higher trade barriers.

Unfortunately, the adverse impacts of increased trade protectionism in the U.S. cannot be guaranteed to result in a strong impetus for policy reversal. The U.S. economy is sufficiently large and diverse that increased barriers to international trade are likely to have relatively minor adverse impacts by comparison with those that would occur in most other countries if they followed similar policies.

It looks to me as though trade liberalisation is unlikely to occur in the U.S. until influential politicians come to see merit, from a foreign policy perspective, in supporting multilateral efforts to encourage trade among countries that have more than minimal regard for free market principles.

Meanwhile, Samuel Gregg’s book will hopefully be widely read in other countries where some current political leaders may be more receptive to Alexander Hamilton’s vision of a commercial republic based on free market principles.

Conclusion

Samuel Gregg’s book, The Next American Economy, urges Americans to adopt the ideal of a modern commercial republic, as originally espoused by Alexander Hamilton. Hamilton argued for the U.S. to adopt, unilaterally, the principle of free international trade on the grounds that this would serve the economic interests of Americans and promote republican virtues.

Unfortunately, American political leaders do not currently seem to be in the mood to re-endorse Hamilton’s vision of a modern commercial republic.

Hopefully, Gregg’s book will be widely read in other countries where some political leaders may be receptive to messages about the contemporary relevance of the role that free market polices played at an early stage in the economic and social development of the United States.

What makes a narrative good?

 

I asked myself the question posed above as I was reading Michèle Lamont’s book, Seeing Others, How to Redefine Worth in a Divided World. The passage quoted below seems central to Michèle Lamont’s book:

“The hegemony of the American dream manifests in the emphasis Americans put on neoliberal virtues of material success, self-reliance, individualism, entrepreneurialism, and competitiveness. These criteria of worth have gained more and more influence as “models of ideal selves,” and encourage many to internalize blame for the increasing precarity of their lives. This model can also lead people to seek out a scapegoat group to blame.” (p 31)

Those sentences seem to suggest that neoliberalism encourages people to either internalize blame for misfortune or to seek scapegoat groups to blame.

Internalizing blame

The author doesn’t explain why she believes neoliberalism can cause people to “internalize blame for the increasing precarity of their lives”, but she lists several references in the notes section which may support her claims. The one which seems likely to be most relevant is an article by Glen Adams, Sara Estrada-Villalta, Daniel Sullivan, and Hazel Rose Markus entitled ‘The Psychology of Neoliberalism and the Neoliberalism of Psychology’, Journal of Social Issues 75 (1), 2019.

Adams et al use the term ‘neoliberalism’ to refer to an economic and political movement that came to prominence in the late 1970s, advocating “deregulation of markets and free movement of capital with an emphasis on fluidity and globalization”. Such usage of ‘neoliberalism’ to refer to advocacy of free markets is now common, even though the term was once generally understood to refer to advocacy of left-leaning policies, e.g. a ‘social market economy’, rather than free markets. Like most advocates of free markets, I would prefer to be referred to as a classical liberal or libertarian, but I can usually assume that I am among good company when I am labelled as a neoliberal.

The authors argue that neoliberalism encourages “an entrepreneurial approach to self as an ongoing development project, an imperative for individual growth and personal fulfillment, and an emphasis on affect regulation”. I don’t object to that characterisation. It describes some aspects of the approach to human flourishing in Part III my book, Freedom, Progress, and Human Flourishing.

However, the authors suggest that neoliberalism also supports psychological “responsibilization” - an ugly word for an ugly concept. The claim they make is that neoliberals advocate that individuals should not only accept personal responsibility for problems which it may be possible to ameliorate through behaviour change (such as obesity and substance abuse) but also to accept responsibility for misfortune more generally.

Neoliberals argue that free markets tend to reward individual effort, but that doesn’t mean that they believe that economic misfortune is always attributable to lack of individual effort. In fact, one of the characteristics of neoliberalism is recognition that social problems of poverty, unemployment etc. are often attributable to foolish government economic policies that are opposed to economic freedom.

I don’t know any neoliberal who would suggest that individuals should “internalize blame” for any disruption of their lives associated with innovation and competition. Neoliberals are more likely to suggest that people who lose jobs or other remuneration because of the disruptive impact of innovation and competition should view such setbacks as beyond their control. The potential for such setbacks is a price that previous generations have willingly paid to enable to enable their descendants to enjoy the benefits of economic growth. Deirdre McCloskey – a prominent classical liberal – has coined the term, ‘bourgeois deal’, to refer to the willingness of people to accept the potential for their lives to be disrupted by innovation and competition in exchange for ongoing expansion of economic opportunities. (See Bourgeois Equality.)

I doubt that many psychologists would suggest that their clients should “internalize” blame for all the bad things that happen to them. When psychologists suggest that individuals should take responsibility for their lives, I am sure that the vast majority would mean that individuals should focus on taking personal responsibility for problems that are within their locus of control.

Who is responsible for the scapegoat narrative?

It took me some time to work out why Michèle Lamont believes that neoliberalism encourages people to seek out scapegoat groups to blame for misfortune. Her reasoning evidently has more to do with her belief that Donald Trump is a neoliberal than with the beliefs of neoliberals.

On the page following the passage quoted above, Lamont writes: 

“From Ronald Reagan to Donald Trump, neoliberalism has come to be understood as a precondition for a successful society”.

I believe that free markets help societies to become and remain successful, but it is hard to understand how anyone could perceive Donald Trump to be an advocate of that view. While in office, Trump administered the final blow to the “neoliberal consensus” on international trade that characterised the post-Cold War period, and he currently favors further restrictions on international trade and international movement of labor.  

Lamont’s claim that neoliberalism encourages people to seek out scapegoat groups to blame seems to rest on the behavior of Donald Trump. She observes that in 2015 former president Trump advanced a false narrative in which immigrants from Mexico were rapists and drug dealers. (pp 51-2). During the 2016 campaign Trump appealed to “America’s forgotten workers” by recognizing their plight and “by blaming globalization and immigration for it”. (p 70)

Lamont also suggests that Trump provided “an empowering narrative” for the working class “who are often perceived as “the losers of the system”. (p 165). Early in the book, she notes:

“Instead of depicting ‘everyday Americans’ as ‘deplorables’, as Hillary Clinton was perceived to do in the 2016 presidential campaign, her opponent Donald Trump affirmed their worth in his various electoral speeches, explaining their loss of social status as a result of globalization and immigration.” (p 8)

Lamont’s narrative

The title of Lamont’s book, “seeing others”, refers to “acknowledging people’s existence and positive worth, actively making them visible and valued, reducing their marginalization, and openly integrating them into a group”. (p 6) She suggests that having one’s sense of worth affirmed “is a universal need that is central to our identity as human beings and our quality of life”. (p 7) She urges that we “bridge boundaries with those who are different” via “ordinary universalism”, or “emphasizing similarities over differences”. (p 144)

I don’t object to those sentiments, and I doubt whether many other neoliberals would either. It is certainly appropriate to recognize that ordinary universalism can be “a vital counterweight” to “Nationalist populism, Islamophobia, and xenophobia” which “are on the rise in many countries”. (p 146) As an advocate of ordinary universalism, however, I think it is unfortunate that the author was not sufficiently “inclusive” to recognize that anti-Semitism also belongs on that list.  

I also object to the idea that “individualist approaches” to improving wellbeing “may harm more than they help, since they pull people’s attention away from more meaningful efforts”. (p 48) The author seems to be suggesting that excessive attention is given to approaches that help individuals to improve their assessments of their own worth. Instead, she urges:

“We need to ask ourselves hard questions about how we decide who matters and what we can do to create a more inclusive society.”

It seems to me that people who are lacking in regard for their own worth are unlikely to make a positive contribution to ensuring that the worth of others is appropriately recognized.

Much of the book is devoted to a discussion of how it is possible to change hearts and minds in order to reduce stigmatization of marginalized groups, and thus build a more inclusive society. That discussion is largely beyond the scope of this essay.

In Chapter 7, however, the author discusses the result of a survey of the attitudes of Gen Z students (aged 18 to 23). She seems a little perplexed that Gen Z tend to “embrace some neoliberal ideals – hard work and success” but is pleased that they “combine personal professional aspirations with the promotion of collective well-being”.

The author claims that apart from “the wealthiest of the wealthy” every other group “finds itself reeling from an onslaught of difficulties, disappointments, and anxieties, grasping for dignity and stability”. (p 47) That is implausible and seems at odds with her message about destigmatization of marginalized groups. However, it fits well with another theme of Lamont’s narrative.   

As already mentioned, Lamont suggests that Trump provided “an empowering narrative” for the working class. She suggests that the Democratic party should counter that with “messages of solidarity and dignity”:

“Redirecting working class anger toward the one percent is more likely to sustain fruitful alliances than driving wedges between diverse categories of workers who have so much in common.” (p 159)

Is Lamont’s narrative good?

It seems to me that appropriate criteria to consider whether a narrative is good include whether it encourages ethical behaviour and whether it is factually accurate.

Regarding ethical behaviour, Michèle Lamont seems to be seeking to “mobilize” good narratives when she suggests:

“We engineer our world together by mobilizing narratives that expand recognition of who is worthy.”

Leaving aside engineering, the message she is attempting to convey seems to be that narratives have a role in reinforcing the ethical intuition that we should respect other humans and behave with integrity toward them, irrespective of gender, sexual preference, race, nationality, religion, wealth, social status, political affiliations etc. I am not entirely convinced that she would include ideological opponents among those who are “worthy”, but she does acknowledge that “it is worth trying to understand even people we may strongly disagree with”. (p 159).   

On the question of factual accuracy, Lamont’s narrative, which suggests that the workers have reason to be angry with the wealthy one percent, seems to me to be just as questionable as Donald Trump’s narrative which suggests that the workers have reason to be angry about globalization and immigration. Neither of those narratives promotes an accurate understanding of economic reality.  

Conclusion

In this essay I have examined Michèle Lamont’s narrative that neoliberalism encourages people to either internalize blame for misfortune or to seek scapegoat groups to blame. My conclusion is that her claim that neoliberalism encourages people to internalize blame is baseless. Her claim about seeking to blame scapegoat groups seems to be based on the false belief that Donald Trump is a neoliberal.

Good narratives should encourage ethical behaviour and be factually accurate. One of Lamont’s objectives in this book seems to be to “mobilize” good narratives that reinforce the ethical intuition that we should behave with integrity toward all other humans. However, the factual accuracy of her narrative that workers have reason to be angry with the wealthy one percent is highly questionable. If accepted by governments that approach would encourage unethical redistributions of incomes and further dampen incentives that are essential to the ongoing growth of widespread economic opportunities.

How do democratic institutions survive in Papua New Guinea?

 

In countries with endemic law and order and corruption problems, outbreaks of rioting and looting often lead to military dictatorship, or some similarly authoritarian style of government.

However, I don’t think many people expect the recent outbreak of rioting and looting in Port Moresby and other major cities in Papua New Guinea (PNG) to result in authoritarian government. In the 50 years since it gained independence from Australia, PNG leaders have muddled through several major crises without resort to authoritarianism. Local leaders, including military leaders, have generally displayed little appetite for radical change. They have responded to major crises by seeking to uphold the PNG constitution. Responses to the Sandline crisis of 1997 are a prime example.

The Sandline crisis

In January 1997, the PNG government approved a contract to engage Sandline International – a firm employing mercenary soldiers – to neutralize the Bougainville Revolutionary Army (BRA). The aim of the exercise was to reopen the Panguna copper mine which had been shut down in 1989 as a consequence of BRA activities seeking Bougainville’s independence from PNG.

General Jerry Singirok, the commander of the PNG defence force, did not believe that the proposed Sandline operation would succeed, and was concerned that it might result in mass civilian casualties. He also believed that the Sandline contract was unconstitutional. He resolved to expel the mercenaries from PNG before they were able to begin military activities on Bougainville. To achieve that objective, Singirok and some trusted colleagues devised and implemented Operation Rausim Kwik. The operation received overwhelming public support in PNG.

I don’t propose to present my view on whether Jerry Singirok did the right thing. I encourage readers of this blog to make up their own minds after reading Singirok’s recently published book, A Matter of Conscience: Operation Rausim Kwik. I enjoyed reading the book. It was given to me for Christmas by one of my brothers, who lives in PNG. As well as discussing the matters of conscience that Singirok had to consider, it provides an exciting account of the planning and implementation of this secret military operation.

My purpose in the remainder of this essay is to sketch out how the Sandline contract and Rausim Kwik were viewed in Australia, and to offer some additional thoughts about PNG institutions.

Australian views of the Sandline crisis

As I remember, there was intense interest in the Sandline affair in Australia. News stories about mercenaries and mutiny always attract attention but the Sandline affair was of particular interest because of the proximity of PNG to Australia, PNG’s history as an Australian colony, and the large number of Australians who had lived and worked in PNG or had family living there.

As the former colonial power, the Australian government didn’t want to interfere overtly unless it became necessary for action to be taken to protect Australian citizens. The official reaction of the government could be described as hand-wringing.

Prior to the Sandline affair, Australian authorities had been trying to persuade their counterparts in Port Moresby that peace on Bougainville could only be achieved via a negotiated settlement. Support provided under the Defence Cooperation Program included a requirement that the helicopters provided could not be used as “gunships”, and other similar conditions. Sir Julius Chan, the PNG prime minister, claimed that it was Australia’s reluctance to provide adequate support that had led his government “to go to the private sector”.

The Australian government did not send a strong message to the PNG government about its opposition to employment of mercenaries in the region until after Jerry Singirok had taken action to arrest the Sandline executives. At that point the Australian PM, John Howard, sent three senior public servants to PNG to urge Sir Julius to cancel the Sandline agreement and deport the mercenaries. The emissaries threatened that Australia might not continue its aid program if the PNG government continued in the proposed use of mercenaries to put down the rebellion on Bougainville.

In his public address to the nation, Singirok reassured the public that he was not conducting a military coup. Nevertheless, he insisted that the government ministers involved should step aside pending a judicial inquiry into the hiring of Sandline.

I think there was as much concern in Australia about Singirok’s mutinous behaviour as about the PNG government’s employment of mercenaries. The actions of the military commander in preventing implementation of government policy seemed like a step in the direction of military dictatorship. Singirok notes that the Australian High Commissioner handed him a diplomatic note from Canberra stating among other things:

“We strongly believe that it is essential that the PNGDF obey the directives of the PNG government and cease any illegal or unconstitutional activity.”

However, I doubt that the Australian government’s hand-wringing had much influence in ensuring that the Sandline crisis ended peacefully.

PNG institutions

Some prominent PNG citizens helped to end the Sandline crisis by assisting negotiations between Singirok and Sir Julius Chan. Singirok was dismissed as commander of the PNG defence force, but his demands were met. The PM and two other ministers stepped aside while an inquiry was held. Normal constitutional processes were resumed.

Sean Dorney, an Australian journalist with over four decades of experience in reporting on Papua New Guinea, regards the professionalism of its defence force as one of PNG’s strengths. In his book, The Embarrassed Colonialist, published in 2016, he writes about the PNGDF under the heading: “A Developing Country’s Military With No Ambition to Rule”. He quotes General Toropo, who was then commander of the PNGDF, as saying that he cannot see a military coup ever happening in PNG because the PNGDF regards itself as a professional organisation and “has got beyond tribal and regional differences”. Dorney notes that prior to independence, Australia made a conscious effort to recruit soldiers from all around the country so that the defence force would not be dominated by a group from any one province or region.

Dorney has a less favourable view of the police force. He notes that a police department had not even been created until the decade before independence and suggests that inexperienced and untrained staff were major problems at that time. He notes that by international standards the size of the police force relative to population is very low in PNG.

The professionalism of the police force is obviously still a problem. The most recent bout of rioting and looting occurred after police went on strike because of a pay dispute. Hopefully, the increased foreign aid that Australia announced last year to police training etc. will be of some help in improving the professionalism of the PNG police force.

Improved policing is an obvious response to a law-and-order problem, but it may not be necessary to invest vast amounts of public money in crime deterrence in order to make the transition from a high to low crime society. In his book, The Enlightened Economy, Joel Mokyr points out that firm government enforcement of laws could not have played a major role in enabling Britain to achieve a low crime society. In the 18^th century, large parts of Britain were virtual “lawless zones” and in others, legal practice often deviated considerably from the letter of the law. Enforcement was largely a private enterprise with the courts at best serving as an enforcer of last resort. There was no professional police force. Daily law enforcement was in the hands of amateurs and part-time parish constables. Justice had to rely to a large extent on volunteers, local informers, vigilante groups and private associations specializing in prosecution of felons. Private law enforcement remained of substantial importance until well into the 19^th Century (pages 376-379).

The incentive to engage in crime depends on the alternative economic opportunities available to potential criminals as well as on the expected rewards of crime. The more general issue of what has been holding back the growth of economic opportunities in PNG, discussed previously on this blog, is relevant in this context.

Criminal activity has certainly been having an adverse impact on the growth of economic opportunities, and lack of economic opportunity has no doubt tempted more people to resort to crime. However, that does not necessarily make the problem intractable. One possible solution is for police to give highest priority to deterring the violence and theft that is having a major adverse impact on the economic opportunities of poor people.

The survival of democratic institutions in PNG does not seem to be seriously threatened by current levels of crime and corruption. There is a risk, however, that crime and corruption will reach a stage where criminal gangs directly threaten the survival of democratic institutions.  

Conclusions

Democratic institutions survive in Papua New Guinea because local leaders have generally responded to major crises by seeking to uphold the constitution. That was particularly evident in the Sandline crisis of 1997.

The PNG defence force has been aptly described as a developing country’s military with no ambition to rule. The defence force regards itself as a professional organisation that has “has got beyond tribal and regional differences”.

The professionalism of the PNG police force is more questionable. A more professional police force could help ameliorate PNG’s endemic law and order problems by giving highest priority to deterring the violence and theft that is having a major adverse impact on the economic opportunities of poor people.

The main risk to democratic institutions in PNG seems to me to lie in the potential for crime and corruption to expand to a point where criminal gangs take over the government.

Postscript

1. Noric Dilanchian has provided the following comment:

You've written a good article Winton.

As my only closely relevant background, in my last year in law school (1982) I helped a friend write her Law in Developing Societies course thesis about protests by indigenous people on Bougainville Island before the first major conflict.

Our conclusion then was that massive mining pollution and industry behaviour, among other factors I cannot remember, were conducive for societal collapse. It then happened.

I was also reflecting on your thinking in light of three books I read late in 2023 on the 20th century history of Iran. There a central problem was that the royal rulers always sought exclusive rule-supporting control over the armed forces. That had very bad consequences. As for the police in cities, they performed the connected with elites thug role comparable to and evident in Sydney during and before Premier Robert Askin's administration (1965-1975).

2. Pat Green wrote:

If I could draw comics, I would draw a helicopter way up in the sky, and attached to it is a silhouette of PNG. Hanging up high on the rope is a bunch of politicians cutting the rope above their heads with a big tramontina that has "idependence" etched on it.

There is no future in the current system. 

Why were Australian Aborigines still hunter-gatherers in 1788?

Some readers may think this question is based on a false premise. So I will begin by considering the claim that Australian Aborigines were farmers rather than hunter-gatherers before 1788 when Britain established a penal colony in New South Wales.

The Dark Emu debate

 In 2014, Bruce Pascoe published the book entitled Dark Emu in which he argued that, in contrast to what most Australians believed, Aboriginal people were engaged in farming at the time British rule was

established. Unfortunately, Pascoe’s view remains influential despite having been debunked by Peter Sutton and Keryn Walshe in their book, Farmers or Hunter-Gatherers? which was published in 2021.

Sutton and Walshe acknowledge that the 1788 economy was somewhere between simple hunter-gathering and agriculture. They argue:

“Referring to certain regionally specific Aboriginal economic practices as ‘incipient agriculture’, as ‘proto-agriculture’ or as being at ‘an early stage in the development of agriculture’ is to suggest an unfulfilled developmental journey. We seek here to avoid this deficit model of the Old People, which is why we prefer the term ‘hunter-gatherers-plus’. It describes people accurately without attempting to place them in some supposed one-directional evolutionary scheme.”

Sutton and Walshe suggest that the hunting and gathering economy in pre-colonial Australia was as complex as gardening or farming. Even though it did not require deliberate planting of crops, it required fine-grained knowledge of hundreds of species and their habitats, annual cycles, names and generic classifications; of methods for processing them and for preparing them as food, as tools, as bodily decoration, and as ritual paraphernalia.

As documented by Sutton and Walshe, the hunting and gathering lifestyles of Australian Aboriginals does not conflict greatly with what I remember being taught about at school over 50 years ago. I think the main deficiency in the impression I gained was excessive emphasis of the role of British pioneers in clearing wilderness, and insufficient attention to the role of Aborigines in using slow-burning fires to make the landscape more suitable for kangaroos and other grazing animals. 

Bill Gammage’s book, The Biggest Estate on Earth (2012) made it abundantly obvious that European pastoralists did not need to make huge improvements to the land to make it suitable for grazing of sheep and cattle. Gammage compiled numerous descriptions of the landscape written by explorers and settlers and his book contains many landscape paintings made at the time of invasion/settlement.

The painting by Joseph Lycett at the top of this article shows people and scenery in about 1820, somewhere near Newcastle (possibly Eleebana on Lake Macquarie, close to where I currently live). Lycett was a convict who had been convicted of forgery. The local authorities made good use of his skills by encouraging him to paint what he saw.

What prevented Aborigines from farming?

 Sutton and Walshe make it clear that Aborigines were botanically knowledgeable. It was not lack of knowledge that prevented Aborigines from farming:

“Knowing—as the Old People did full well—that plants grew from seeds and tubers, ignorance played no role in this rejection of farming. It was cultural resistance, and loyalty to their own ways.”

Sutton and Walshe note that Aborigines in northern Australia adopted some of the cultural practices of Torres Strait people but did not adopt their horticultural practices. They also note that British settlers “tediously and repeatedly” claimed that many of the Aborigines they encountered were “averse to hoeing, weeding and planting”.   

The Aboriginal aversion to farming seems to have been associated with religion. They saw the practical aspects of obtaining food as “inseparable from their commitment to a spiritual understanding of the origin of species, to conservative values in relation to change, and to a cosmology in which economics had to be in conformity to ancestral authority”. In their way of thinking, the combination of “spiritual propagation” and practical resource management made farming unnecessary.

Sutton and Walshe explain the concept of “spiritual propagation” as including speaking to the spirits of ancestors and other rituals at species-related sites, maintaining a rich system of totems for various species, and handling food resources with reverence. They provide examples of the ways in which spiritual maintenance and practical resource management combined to characterise “the classical Aboriginal economy” in different parts of the country.

My response to the question posed at the outset is that Australian Aborigines were still hunter-gatherers in 1788 because they did not have strong incentives to adopt different lifestyles. By today’s standards their pre-1788 societies were not idyllic, but a stable equilibrium seems to have evolved in which change-resistant cultural practices had become embedded.

That is only a partial answer to the question of why Australian Aborigines did not become farmers. At some stage in the past, people not far away had also been hunter-gatherers before adopting farming practices. They must have faced different incentives. Perhaps their cultures evolved to become less hierarchical, providing greater scope for innovative individuals to try new ways of doing things. Perhaps they had an incentive to begin farming because population pressures were a greater problem for them. If so, that raises further questions. For example: Was climate change a greater problem in the regions in which they lived? Was their mobility restricted in some way to make a hunting and gathering lifestyle impossible to sustain?

Conclusion

 Prior to the establishment of a British colony in Australia in 1788, the lifestyles of Australian Aborigines can best be described as complex hunter-gathering. Their lifestyles required at least as much botanical knowledge as does simple gardening or farming.

 Lack of botanical knowledge certainly does not explain why Aborigines did not become farmers. Peter Sutton and Keryn Walshe suggest that Aborigines had an aversion to farming that stemmed from their religious beliefs. As Aborigines saw it, the combination of spiritual propagation of species and practical resource management made gardening or farming unnecessary.

Aborigines were still hunter-gatherers in 1788 because they did not have strong incentives to adopt different lifestyles. A stable equilibrium seems to have evolved in which change-resistant cultural practices had become embedded. However, that leaves open the question of why people living nearby on Torres Strait islands had stronger incentives to adopt gardening practices. 

To what extent do international differences in economic freedom reflect people's values?

 

This is a companion piece to the preceding post in which I considered the extent to which international differences in personal freedom reflect people’s values.

The extent to which international differences in economic freedom reflect different values is of interest because it has bearing on the extent of popular support likely to be given to policy proposals involving expansion or restriction of economic freedom. If people feel that existing economic policy regimes are aligned with their personal values, they are less likely to support radical change.

The accompanying graph suggests the existence of a positive relationship between an index of facilitating values and economic freedom. As suggested in the label of the horizontal axis, the index of facilitating values reflects the priority that people in different countries place on autonomy, and the extent of interpersonal trust in different countries.

Indexes

I am not aware of any other index of values facilitating economic freedom similar to the one I constructed in preparing the graph, even though there has been a substantial amount of previous research undertaken on cultural values supporting economic growth and institutional change. (Nicholas Moellman and Danko Tarabar have referred to some relevant literature in their article, ‘Economic Freedom Reform: does culture matter?’, Journal of Institutional Economics (2022), 18, 139-157.)

The priority people place on autonomy seems likely to be important in facilitating economic freedom because respect for individual autonomy implies respect for individuals engaged in commerce, particularly innovators. Trust of strangers seems likely to be important in facilitating economic freedom because it reduces the tribal instinct to seek to use the powers of the state to advance the interests of group members at the expense of other groups.

I have used Christian Welzel’s autonomy index to measure autonomy. This index uses three items in the World Values Survey (WVS) which ask respondents their views about desirable child qualities. Autonomy is considered to be valued more highly by those who independence and imagination as desirable child qualities but do not consider obedience as such a quality. (See: Christian Welzel, Freedom Rising, 2013). I used an updated version of the index based on the latest round of the WVS (2017-2022).

Welzel’s generalized trust index was used to measure interpersonal trust. This index gives higher weight to trust of strangers than to trust of family. I reconstructed the index for the latest round of the WVS by combining items covering close trust (trust of family, neighbours, and people you know personally), unspecified trust (whether most people can be trusted) and remote trust (trust of people you meet for the first time, people of another religion and people of another nationality). Unspecified trust was given double the weight of close trust, and remote trust was given three times the weight of close trust.

In constructing the facilitating values index, autonomy was allocated 75% of the weight and generalized trust was allocated 25%. Those weights were chosen on the basis of regression analysis using the autonomy and generalized trust indexes as explanatory variables to explain economic freedom. (Researchers seeking further information about the methodology used in constructing this index are welcome to contact me.)

 The Fraser Institute’s economic freedom index incorporates a large number of indicators relating to size of government, legal systems and property rights, sound money, freedom of international trade and regulation.

Discussion

My focus is on the outlier data points in the accompanying graph, and particularly on those countries which have substantially lower or higher economic freedom than might be predicted on the basis of values facilitating economic freedom.

One of the first things readers may notice in the graph is that values facilitating economic freedom are shown to be higher in China than in the U.S. and Australia. That may seem surprising if Geert Hofstede’s analysis, or your knowledge of cultural heritage, has led you to expect Chinese people to be much less individualistic than Westerners. If you need to be persuaded that many Chinese people have an individualistic perception of human flourishing, you might like to read an article I wrote on that topic in 2021.

While you are thinking about China, you might like to compare economic freedom in that country with that in Singapore, Hong Kong, and Taiwan. The most obvious reason why the latter jurisdictions have greater economic freedom is because they have adopted market-friendly ideologies.

Similarly, adoption of market-friendly ideologies explains why Albania has substantially greater economic freedom than Iran and Libya, and why Chile has greater economic freedom than Argentina and Venezuela.

Conclusion

The existence of values facilitating economic freedom helps to explain why some countries have higher economic freedom than others. However, it seems that a substantial part of international differences in economic freedom can be explained more directly in terms of prevailing government ideologies which either support or oppose free markets.

To what extent do international differences in personal freedom reflect people's values?

 

The accompanying graph shows that personal freedom tends to be greatest in countries where people hold the most emancipative values (on average). However, it also suggests that in some countries personal freedom is much less, or much more, than might be expected on the basis of the values commonly held by the people. For example, there is less personal freedom in Belarus than might be expected, whereas there is more personal freedom in Armenia and Georgia than might be expected.

Before going further, I need to explain what emancipative values and personal freedom actually measure.

The concept of emancipate values was developed by Christian Welzel to measure the beliefs that people hold about such matters as the importance of personal autonomy, respect for the choices people make in their personal lives, having a say in community decisions, and equality of opportunity. Welzel’s research, using data from the World Values Survey, suggests that larger numbers of people have tended to adopt emancipative values in an increasing number of societies as economic development has proceeded. The strengthening of emancipative values is explained by growth of action resources (wealth, intellectual skills, and opportunities to connect with others) rather than civic entitlements such as voting rights. As emancipative values have strengthened, more people have come to recognize the value of civic entitlements and have used their growing material resources, intellectual skills, and opportunities to connect with others, to take collective action to achieve such entitlements. The process has been ongoing, with people showing greater concern for promoting more widespread opportunities—including greater opportunities for women, ethnic minorities and the disabled—as material living standards have risen and emancipative values have strengthened. (There is more information about Welzel’s research on emancipative values here.)

The personal freedom component of the Fraser Institute’s Human Freedom Index incorporates indicators of rule of law, security and safety, freedom of movement, freedom of religion, freedom of association and civil society, freedom of expression and information, and relationship freedom.

As already noted, international differences in personal freedom don’t always reflect people’s values. The reason why that is so is fairly obvious when one looks at the country labels I have shown on the outliers in the graph. What is it that Armenia, Cyprus, and Taiwan have that Egypt, Iran, China, Belarus and Vietnam do not have?   Representative government. 

Two cheers for democracy!

What is holding back the growth of economic opportunities in PNG?

 

Why should you care about the economic opportunities available to the people of Papua New Guinea?  Perhaps some readers didn’t even know the location of Papua New Guinea (PNG) before looking at the accompanying map.

There is a lot to be said for the view that the people of PNG should be left to solve their own problems for themselves. However, one of the problems the people of PNG need to solve is how to reduce their dependence on foreign aid. Another problem they need to solve is how to cope with living in a part of the world in which China and the United States are increasingly competing for influence.

Joe Biden, the president of the United States is to visit Port Moresby, the capital of PNG, on May 22 for discussions with Pacific Island Forum members, while on his way to Sydney for a Quad meeting.

My personal interest in the economic opportunities available to people in PNG stems from having worked there as a consultant on economic policy, having visited as a tourist on several occasions, and not least, from having relatives who live there. I maintain an interest in economic and social development in PNG and have written about it on this blog in the past (here, here, here, and here).

In this article I suggest that opportunities for human flourishing in PNG are less promising than recent macroeconomic indicators might suggest. After considering some macro-economic indicators, I briefly discuss population statistics, corruption and profligacy, the law and order problem, poor opportunities for young people, and lack of economic freedom.

Macro-economic indicators

The World Bank’s latest Economic Update paints a fairly rosy picture, with economic growth of 4.5 percent for 2022. Government revenue from mining and petroleum taxes surged (reflecting the impact of Russia’s invasion of Ukraine on natural gas prices). The increased revenue led to a reduction in the fiscal deficit. The magnitude of public debt remains a problem, with interest payments exceeding public spending on both health and education.

Inflation at around 6 percent per annum is not unduly high by comparison with other countries, but rising food prices have made life increasingly difficult for many people in urban areas. Foreign exchange rationing, associated with pegging of the Kina against the USD, has been a hindrance to business.

Population statistics

I mention population statistics mainly because questions that have recently been raised about the reliability of official estimates of the population illustrate the existence of deep-seated problems in public administration. The official estimate of population for 2022 is between 9 and 11 million. However, a leaked UN report has suggested that the population could be as high as 17 million. In this instance, the official estimate seems more likely to be correct. However, the last credible census took place 20 years ago, so no-one really knows the size of the PNG population.

It is widely accepted that the population of PNG has been growing rapidly and that the majority of people are relatively young, probably under 25 years old.

Corruption and profligacy

Corruption is still a major problem in PNG, although there seems to have been some reduction over the last decade. Of the 180 countries included in the Corruption Perceptions Index, only 50 were rated as more corrupt than PNG in 2022.

Profligacy in spending of public money by some government ministers is legendary. For example, in 2018, when PNG hosted the APEC summit, Justin Tkatchenko attracted controversy by purchasing 40 custom-made Maserati luxury cars. He claimed that they would sell like hot cakes after the event. Unfortunately, that didn’t happen. More recently, the same minister again attracted criticism for taking an overly large contingent of people with him, at public expense, to the coronation of King Charles III. It was his intemperate response, labelling critics as “primitive animals”, which eventually led to his resignation from the position of Foreign Minister.

The law-and-order problem

There has been a law-and-order problem is PNG for many years. In 2015 I wrote:

“It is unsafe for tourists to walk around most parts of Port Moresby alone except within the boundaries of major hotels, modern shopping malls and other locations where security is provided. The same applies to local residents. Tourists are more fortunate than most of the locals because they can afford to be transported safely from one secure area to another.”

It is particularly unsafe for women and girls to be in public places. A recent article on DEVPOLICYBLOG by Sharon Banuk, a university student, describes the nature of the problem that she has faced in staying safe.

PNG is ranked second, behind Venezuela, as the country with the highest number of reported crimes per 100,000 people. The ranking of PNG seems to have remained the same since 2017, having risen from 16^th place in 2015.

Poor economic opportunities for young people

The law-and-order problem has been linked to the increasing problem of youth unemployment in an article by Ms. Julian Melpa for the National Research Institute. A recent study found 68 per cent of people aged between 14 to 35 in Port Moresby were unemployed. Even people with tertiary qualifications often find it difficult to obtain employment.

The difficulty of finding employment is illustrated the accompanying photo of job seekers, published with a report in The National newspaper on Feb 6, 2023. The crowd were competing for a few advertised vacancies at a hotel in Port Moresby.

Lack of economic freedom

International agencies tend to label the main deficiencies in economic freedom in countries like PNG as governance problems. That labelling may make their advice more palatable to politicians who have ideological hangups about free markets but it obscures the adverse impact of lack of economic freedom on incentives to invest, innovate and create greater opportunities for human flourishing.

Only 36 of the 176 countries included in the Heritage Foundation’s index of economic freedom have a lower ranking than PNG. A similar picture emerges from the Fraser Institute’s economic freedom ratings. Only 43 of the 165 countries included in the Fraser index have a lower economic freedom rating than PNG.

PNG has particularly low ratings for rule of law (covering property rights, judicial effectiveness, and government integrity) business freedom, and investment freedom.

PNG governments have obviously been having major problems in performing the core functions of government in protecting natural rights of individuals to be safe and have opportunities to flourish. Governments face a formidable challenge in protecting economic freedom in PNG, with most of the population living in village communities and having little contact with the market economy.

However, similar challenges face governments in some other countries. Some African countries which face similar challenges now seem to be performing better than PNG in facilitating growth of economic opportunities.

Postscript

Readers who are interested in a more comprehensive picture of the well-being of people in PNG should visit the relevant country site of The Legatum Prosperity Index. For the purpose of the Legatum index, prosperity is defined broadly as occurring "when all people have the opportunity to thrive by fulfilling their unique potential and playing their part in strengthening their communities and nations".

My article mentions a visit to PNG by Joe Biden, which was scheduled for May 22. Unfortunately, this  visit will not occur as planned because he has given higher priority to political negotiations over the U.S. government debt ceiling.  

Can cottage industries exist in a machine age?

 J C Kumarappa posed that question his book, Economy of Permanence, which was first published in 1945. He argued that in the final analysis “values and valuation” would determine the direction to be taken. He viewed the choice between cottage industry and large-scale production as an ethical choice as to which type of economy would be preferable. He associated cottage industry with “permanence and non-violence”, and large-scale production with “transience and violence”.

Kumarappa has been described as an ecological economist. He was a follower of Mahatma Gandhi, who wrote a foreword to his book.

Some of Kumarappa’s views seem to have been largely a product of the context in which he lived, but others resonate more broadly. Similar views have been taken up by many affluent consumers in high-income countries. In what follows, I will discuss first why Kumarappa associated large-scale production with violence before considering why he associated it with transience.

Violence

Kumarappa recognizes the potential for specialization and market transactions to be mutually beneficial for the people involved. On that basis, readers might expect him to view wealth accumulation via specialization, trade, and market competition to be a peaceful process.

However, Kumarappa argues that large-scale production prompted industrialized countries to hold other countries in political subjection to obtain materials. He also suggests that large-scale production “is the root cause of wars”. He claims that machines must make full use of productive capacity, rather meet market demand. That results in surplus production. Wars are started to capture markets.

I see several problems with that line of reasoning, but I will only focus on the most obvious one here. Kumarappa seems to assume that manufacturers have control of armies that can be used to ensure access to raw materials and markets. That seems to me to be a strange assumption to make, but I can understand why an Indian economist might see things differently in the light of the history of British colonial rule.

Transience

Kumarappa argues that an economy based on large-scale production is built on the “quicksands” of “profit, price, purchasing power, and foreign trade”. He suggests that material standards of value and personal feelings of consumers cannot have “any degree of permanence” because people change and are perishable. For permanence to be achieved, the standard of value must be objective and controlled by ideals that have enduring qualities. He claims that civilization had endured in China and India because it was based on altruistic and objective values.

The value that Kumarappa places on permanence may require explanation because Hinduism, the dominant religion in India, shares with Buddhism the doctrine that everything is in a constant state of change. Kumarappa was a Christian, but I don’t think that explains as much as his reverence for what he describes as “the secret of nature’s permanency”.  He was referring to ecological factors which “function in close cooperation to maintain the continuity of life”.

Kumarappa was particularly concerned about the impact that the products of large-scale production were having on traditional village life. He argues:

“We are often led away by low money prices ignoring the great gashes in our economic and social organisation made by such short-sighted choice of ours.  … Money value blinds the vision to a long range social view, so that the wielder of the axe fells the branch on which he is standing”.

Kumarappa argues that moral values are attached to every article sold in the market. We should not ignore such values and say “business is business”. Accordingly, anyone who enters into a commercial transaction has a grave responsibility to ensure that she does not become party to circumstances that she would not consciously support. He believed that the consumer is only able to bring her scale of values into play when goods are made locally.

Different views of progress

Kumarappa had a very different view of economic growth than is presented in my book, Freedom, Progress, and Human Flourishing. It may be worthwhile to try to pinpoint the reasons for this.

I don’t think Kumarappa would have any problems with my definition of progress as the growth of opportunities to obtain the basic goods of a flourishing human. He would probably agree, more or less, with my list of the basic goods – wise and well-informed self-direction, health and longevity, positive relationships with others, living in harmony with nature, and psychological well-being.

Kumarappa would probably begin to object at the point where I assert that economic growth counts as progress to the extent that people aspire to have the goods that it offers. He might suggest that people who aspire to have those goods are mistaken because they could flourish to a greater extent by maintaining a simple lifestyle. The more powerful argument he would offer is the one presented above - that the products of new technology are disruptive to existing economic and social organisation.

I would respond by referring to what Deirdre McCloskey has referred to as the bourgeois deal. People in industrialised countries have been willing to accept the possibility that the introduction of new technologies might disrupt their lives because they have good reasons to expect that they, and future generations, are likely to benefit from the expansion of opportunities that it provides.

If that line of argument had been presented to J C Kumarappa in 1945 I imagine he would have viewed it as “pie in the sky”. I am less sure that he would hold the same view today.

Cottage industry

I don’t know much about the economic health of cottage industry in Inda today, but it does continue to exist. The photo shown at the top of this article was taken at Kalra’s Cottage Industry in Agra, when I visited there last year. (By the way, the service offered was excellent. The hand-knotted floor rug I purchased was delivered to my home in Australia without any problems, and in perfect condition.)

My point is that as their material standard of living rises, many people are willing to pay more for high quality products of cottage industries than for mass produced items. Many people also become increasingly concerned about such things as the levels of remuneration of workers who produce the products that they buy and potential environmental damage of production methods. People tend to pay greater attention to such concerns when they feel that they can more readily afford to do so.

How did the gold fever of the 1850s affect Australian Aborigines?

 

I began thinking about this question while reading Michael O’Rourke’s recently published book, Passages to the Northwest, The Europe they left and the Australia they discovered 1788-1858, A miscellany and scrapbook of national, regional and family history, From Ireland, Scotland, England and Germany to Liverpool Plains in colonial New South Wales, Volume II.

The full title provides an accurate picture of the nature of the book and what it is about. The history of how Michael’s family came to live on the Liverpool Plains, in the north-west of NSW, is central to the book but its focus is mainly on the context in which family members lived. I suppose Michael tells readers as much as he has been able to glean about the lives of individual family members. However, as anyone who has dabbled in family history would know, it is difficult to find much more than names and dates pertaining to ancestors unless they happen to have been rich, famous, or infamous.

Michael explains:

“I was able to pour the genealogy, almost like cream, into the dry chronicles of local history while also keeping an eye on social changes and the national political and cultural scene, especially in Australia and Ireland”.

I agree with the author’s suggestions about who might benefit from reading the book. He suggests that apart from his family and relatives, those who might benefit include people who are interested in detail about the impact of European occupation on Aboriginal people, and people who live in the north-west of NSW. Some people who are heavily involved in family history research might also find the book useful to provide context for names and dates.

Michael has provided an index of topics at the front, and a detailed index at the back, which I found helpful. I have only read those parts of the book that particularly interest me at present. I expect that is probably how the author would expect most readers to approach it. At some later stage (perhaps when I am pondering the injustices that my ancestors may have suffered) I will probably go back to read more of what Michael has written about Ireland and Scotland.  

European occupation

I was particularly interested in Michael’s discussion of the relationships between Aboriginal people and European pastoralists (sometimes referred to as squatters, settlers, or invaders) in the Liverpool plains area. By 1835, the European occupation of Aboriginal land had extended beyond Narrabri, up to 550 km from Sydney. There was violence, but as Michael describes it, the incoming settlers “so effectively swamped the locals that there were only rare clashes, peaking in 1836-38”.

Introduced disease had a devastating impact on the Aboriginal population. An epidemic (probably smallpox) killed many during 1830-31. Venereal disease became rife, as convicts - who became shepherds living in remote outstations - infected Aboriginal women.  

The pastoralists were known as squatters because they originally occupied the land without approval of the colonial government. By 1836, however, they were able to exercise sufficient political influence to have the government grant them short-term pastoral leases.

By 1850 the remaining Aboriginal population had apparently established their home bases near to the pastoral stations. Pastoralists employed Aborigines as shepherds during the 1840s but also employed Chinese in that role.

Gold fever

With the discovery of gold in 1851, many Chinese and European workers left the pastoral properties abruptly to go to the diggings, sometimes apparently leaving flocks they had been tending to the mercy of dingoes. The flocks became scattered before the owners were aware of the situation. Michael quotes from the published account of what followed according to Mary Jane Cain, a mixed-race matriarch:

 “The squatters had to go practically cap in hand to the blacks they had dispensed with, and entreat them to again assume the role of shepherds. They got the flocks together, and generally made a good save. After that the squatters steered clear of Chinese labour for a long while”.

The discovery of gold apparently led indirectly to a substantial improvement in economic conditions for aboriginal people living on the Liverpool Plains.

Michael’s account of the indirect impact of gold fever led me to look further for other information on the impact of gold discoveries on the lives of Aborigines. Some accounts view it as “a second wave of dispossession”, but also note an increase in demand for the labour of Aboriginal people on pastoral properties at that time. Aborigines became employed as police on the goldfields. They sold food and clothing to the miners and were employed as guides. They also became expert gold seekers.

Ararat

The illustration at the top of this article is a painting by Edward Roper, which depicts the gold rush at Ararat, south-west Victoria, at its peak in the late 1850s. At the centre of the scene, an Aboriginal family observes the activity around them.

Michael has included the illustration in his book. I thought it appropriate to have it accompany this article because some of my ancestors came to the Ararat diggings in the 1850s and later settled in that district.

Conclusion

The more I learn about the detail of the impact of European occupation of Australia on Aboriginal people, the more persuaded I become that “European settlement” is an inadequate description of what happened. Words like “conquest” and “invasion” are also inadequate because they conjure up images of warfare that have little resemblance to the sporadic resistance that some of the occupants of this country offered to the European squatters. The detail includes massacres, but disease seems to have been a much more important cause of depopulation. The best option for the indigenous people was co-existence with the new occupiers, but that required a radical change in their lifestyles.

Seen in that context, the advent of gold fever in the 1850s opened new opportunities for Aborigines to become more heavily involved in pastoral activities. I see this as an interesting example of the way disadvantaged people can respond to new opportunities. I hope there were lasting benefits for at least some of the families involved but I have no evidence of that.