Comments

Scott, Well, that provoked your fury. But your criticism is mainly of our (imputed) motives. You make only two criticisms of substance. One is that we ignore loadings for expats. Correct. We are interested in why Papua New Guineans move from the university to other jobs. The other is that we use PPPs to compare salaries across countries. How else should make such comparisons? There is no other way, which is precisely why PPPs are always used for such comparisons and more broadly for standard-of-living comparisons across countries. And there is nothing casual about our empirical methods. No-one else has undertaken this analysis before, at least not in public. I think we made a pretty good first effort. If there are flaws, your commentary doesn't reveal them. Of course, salaries are not the only thing that matters. Other reforms are also needed. I agree that UPNG should fix up its website. But it does now have wireless. I used it quite satisfactorily during the PNG Update in June. Your most useful point is that allowances paid to some academics may make others unhappy. It is hard, given the international comparisons, to make the case for an across-the-board increase. But I accept that this might be a second best. Regards, Stephen

In their plea for so-called pay increases where there is competition, Messrs Wangi and Howes do not note that UPNG has had employment differentials between staff, including wages and salaries, for many years. Under various names there have been loadings particularly for expatriate staff,. These amounts in excess of the wages and salaries paid to indigenous staff are usually justified on the grounds that the international demand (ie competition) for more highly trained academics makes it necessary to offer internationally comparable rates of remuneration. No other employment policy has caused more dissatisfaction and dissension at UPNG and many other universities. To add another layer of differentiation as advocated by the writers would make UPNG an even less satisfactory workplace than it already is. To urge that this be explicitly done in one or even some areas of the university, such as economics which is the clear academic preference (bias?) of Messrs Wangi and Howes, merely shows what people trained outside their discipline have known for years. The market is a social, political-ideological construct. Why economics over politics? Does PNG not need better trained politicians and public servants, as well as people working for NGOs? Lawyers? Health workers and teachers? Mathematicians? Statisticians? Is there any evidence that these academic disciplines at what is still primarily a teaching university have lesser need for highly trained, dedicated teachers? Any evidence that the competition for staff in these areas is any less than for economists when the over-all standard of teaching staff across the whole university desperately needs improvement? As one who has written at length about the parlous state of UPNG, I have previously provided ample evidence that shows teaching of politics at UPNG is in a similar if not worse state than Messrs and Howe suggest for economics. However among the many proposals for change I have advocated, preferential wage and salary arrangements for politics staff have not been among them. That all staff in these and other disciplines, no matter how dedicated, are unable to raise their standards of teaching to an international level when there is effectively no internet, no library, little maintenance of teaching spaces or student accommodation, every incentive to avoid teaching through consultancies, and serious deficiencies of managerial leadership. (Does anyone recall the promise made at the ANU by the recently appointed current VC that his first task would be to bring the UPNG website up to date? Check it out-last updated in March 2007. Then for those interested in simplistic comparisons compare with USP's website.) Finally, a methodological criticism of the casual empiricism which Messrs Wangi and Howes use to construct a sole indicator for wage comparability across countries. The PPP (purchasing power parity) device should never be used in this manner. There are more reasons than can be given here why it should ALWAYS be used with other measures. Among them are currency fluctuations, absence of temporal changes in relative wages and the comparative merit of items included and not included in the measures, as well as locational considerations. Anyone who ever uses data employing the PPP should at least show some humility about the usefulness of the data provided.

Did anyone bother to flick the attached article and comments to the PUP Senator? Might be a good idea.

Irrespective of whether parts of Geldof's talk could be called a rant, the fact is that for decades we have been claiming to in principle support the Pearson-led aid target (0.7% of GNP to aid). When Rudd came to power there seemed brief recognition in Australia that a fairer world was not only a nicer world but more secure, and I half-hoped he and then Gillard would keep their promises. (Only half as I also half-expected their promises would be broken). I was in Kolkata when Abbott announced in his election campaign that he would cut foreign aid in part to build freeways in Melbourne. I am ashamed of many of our policies, including miserly foreign aid, and miserly promises we can't keep. That doesn't solve aid quality issues, but the first element of that is to sincerely want to to reduce poverty. It is my belief that while many ordinary people and a few of influence want to do that, most people with power (whether here or in many places like India) don't. They like the status quo. Spending 0.7% of our wealth on aid would still leave us 99.3%. And, actually, that investment would save us funds in the long run, especially by reducing the "push" factors that drive migration. It was great to see the coverage of Geldof's colourful speech, though I doubt it will make any difference in the short run. Perhaps the next generation, better connected via the internet, will be less selfish than mine (the baby boomers).

The difference between good advocacy/publicity for a cause, and ill informed passion probably depends on your point of view. I don't necessarily defend Geldof and what he says, but no-one can deny he is an effective operator. Make Poverty History and Geldof's own organising of Live8 and other events around the G8 Meeting in Scotland in 2005 probably did more than any other campaign in recent memory to focus developed countries' attention on Africa. It could also be argued that this same activism resulted in the large increases in ODA promised by the G8 participating countries (especially Britain). It wouldn't be much of a stretch to suggest that this had a flow on to the Howard Government's own subsequent promises to increase the Australian aid program. Maybe Sir Bob is taking this broken promise personally.

Ashlee it is true that Africa does not have a monopoly on poverty. However, if you believe that saving lives is a very important goal of aid, then ensuring Africa has sufficient aid to provide basic health services for all people is a sensible priority. For example, almost half of all the world's child deaths occur in Africa, only 4.5% in South East Asia and just 0.2% in the Pacific (Source: UNICEF Childinfo).

Thanks Ashlee for this honest account. Might such a rant (your term) stimulate public protest at the government cuts to aid? This is an interesting proposition an it is also troubling, I believe. Such posturing by Geldof has the potential to limit the debate to the need for 'more' aid monies. While this might be important, we know ‘more’ is not a solution in and of itself if investments are not wisely targeted and well delivered. The focus on ‘more’ also ignores the real possibility (I would argue reality) that within the existing investment envelope there is still waste – addressing such inefficiencies immediately creates the ‘more’ so passionately sought. The debate would be a whole lot more credible if there was some consideration for how we can ensure what is available is invested well, and importantly, where can such investment be leveraged to create transformational gains. I am all for passion but as your post yesterday highlights, ill-informed passion is unhelpful.

Let's not forget two other important points: 1. Unlike people from developing countries, Tasmanians are free to move to other states in search of employment or higher wages - and many do. 2. Tasmania is supported by the Commonwealth Grants Commission, which redistributes GST revenue from other states towards Tasmania. Other fiscal transfers are also very significant, given that tax revenue from Tasmania is lower on a per capita basis than for other states, while benefits (pensions etc) are higher. The WA Govt bitterly complains that it transfers $20bn to other states each year. Tasmania receives over $4.5bn - similar to the entire aid budget, and much larger than any the share of aid received by any one country!

Hi Mel, Thanks for your comment, and I agree that it is an important dimension of the inequality discussion. I actually had it in my talking points with Andrew but somehow managed to miss it in the actual discussion. My apologies. I highly encourage you or any of our other readers to contribute (in comments or a submission) thoughts on gender and inequality. Jonathan

Jonathan Thanks for an interesting synopsis, and by association, to Andrew for his time generosity and articulate discussion of an important issue. I have yet to dive into the full podcast, so maybe this question is addressed there; however I am curious about the absence of a gender conversation in your synopsis. It would seem that inequality is not necessarily uniform, globally, and certainly in the context of development the gender dimensions of inequality in all of its forms (power, access, voice, violence against women etc) needs to remain front of mind in conversation and in action. If it was not discussed, this is a particularly curious omission when one refers the new aid policy and its opening statement in the context the stated priority for gender equality and empowering women and girls – “gender inequality persists in our region…” Not suggesting you are less time poor than the rest of us, if this was in the discussion and just not captured in this synopsis, it would be great to have an addendum with this information shared. If gender was not discussed in the conversation as it pertains to inequality…well that is a whole other issue.

Kia, thanks for reading the piece and raising those interesting questions. I will need to think a bit more to respond to your questions properly, but here are a few quick thoughts. On the differences/similarities in challenges facing a Pacific island country and a small remote community in a geographically large country, the latter often has far deeper economic integration with the rest of the country than a Pacific country does with a major neighboring country. Goods and factors of production can flow without manmade restrictions, fiscal transfers are often much larger, and transaction costs are reduced by the use of the same currency. In many respects, this relationship is quite similar to that between Cook Islands and New Zealand. There are studies which show that non-sovereign states tend to do better than sovereign states, and the degree of economic integration is likely to be a key determinant of this difference. To enjoy high living standards, people in a remote community in a large country do not have to live and work there. Economic geography suggests that they are often better off moving to nearby economic centers. The existence of an extracive industry does not guarantee high living standards for everyone in a remote community. It is tough to retain talent in a small community. The real issue is whether brain drain of this type is good or bad for people who are left behind. Inbound remittances tend to mitigate the negative impact of brain drain, but what would be the counterfactual to brain drain for people who are left behind? This certainly deserves a PhD dissertation. Yongzheng

My thanks to Yongzheng for an excellent presentation. I'm the current Economic Advisor to the Cook Islands, and many of the issues outlined above resonate for the Cook Islands. Between 2002 and 2012 our economy grew 58% in nominal terms, but only 10% in real terms. This masks significant variation though – real GDP grew 4.4% in 2012 (our most recent national accounts data). Tourism has been the major boom industry over the last two decades, with visitor arrivals more than doubling (mainly from New Zealand). For a population of under 15,000 residents, we receive around 123,000 visitors – meaning that during the peak season, around 1 in 4 people in the country is a tourist. The islands are still far from crowded, but the limitations you outline on the investment environment are likely limiting the growth of the industry (reliable industry data is difficult to obtain). For us, agriculture will probably always be a niche exporter due to labour constraints (not enough labour supply and a high reservation wage) and low productivity (especially compared to tourism). We are also extremely remote and have no deep harbours that could receive trans-shipments, meaning that shipping costs will also be high regardless of scale arguments. Labour services will also be a limited growth opportunity as Cook Islanders have New Zealand passports and have readily settled in New Zealand and Australia for work, education or other opportunities (moving as a family, and hence remittances are not significant, indeed we remit more than we receive). An aside on the currency: the scale of tourism is such that if we had our own currency, it would rapidly appreciate due to a huge trade surplus (reducing cost of living pressures through cheaper imports, but limiting tourism/export growth). There has been no evidence of inflationary pressure (with CPI inflation generally below 3%) and despite no central bank, money supply does not appear to be an issue (either too much or too little), although labour shortages may be combining with excess money supply to lift wages above productivity (evidence of this would be hard to prove either way though). I agree that the nations of the region need to look at their internal environments and make challenging reforms where bottlenecks exist (‘create enabling environments’). The small nature of what I term ‘nano-States’ (less than 50,000 people) mean that economies need to allocate their scarce resources even more efficiently than their larger peers, and where necessary, accepting that some things are better not pursued even when resources go unused (agricultural land being a good example). Given their status as nation-states, PICs need a sound macroeconomic environment. But given their size they need to focus on microeconomic reforms (‘nanoeconomic’ reforms?) that range from administrative issues and public sector efficiency, through to industry specific regulation, or even letting go of some of their long-held import levies. To succeed, the PICs need to have business environments that are world-class and entrepreneurs that are innovative and well connected. I guess my question would be: how different are the challenges in the Pacific to small remote communities in geographically large countries? Even with stable macroeconomic environments and greater connectivity, how have these remote communities performed if they don’t have a resident extractive industry? And on a slightly different tack: how can the PICs retain the top talent they need to make this happen, when their best and brightest are part of an international labour market that attracts greater returns elsewhere? Kia Manuia James