By David Hetherington
Much hand-wringing over the last fortnight has followed the decision of the Australian National University to divest shares in seven companies from its investment funds in the basis of their exposure to fossil fuels. Tony Abbott proffered that the decision was “stupid” and decried the ANU’s “unnecessary posturing”. Messrs Hockey and Pyne quickly followed suit. The AFR chipped in. And the Chairman of Whitehaven Coal opined that funds don’t have “the right to publicly single out and criticise significant Australian companies”.
All were, of course, quick to observe that it was a decision for ANU alone. But all were equally quick to upbraid the university for the folly of its action. The other common element is that all are staunch advocates of free markets.
This is the key revealing aspect of the reaction to the ANU decision: to these people, free markets are a fundamental principle, to be defended at all costs, until they run counter to one’s own self-interest at which point they can be quietly ignored. They are the ‘freedom-when-it-suits-me’ brigade.
What exactly was ANU’s crime in their eyes? They essence of their argument is that the ANU decision was made on non-financial grounds, that the university’s leaders let their objections to fossil fuels overcome rational economic decision-making. The nub of this argument is that moral judgments have no place in such decisions.
But the ANU is an independent economic actor and is ‘free’ to pursue its economic self-interest as it sees fit.
Economic theory tells us that the rational actor (itself a contested premise) will make decisions based on his/her preferences, but it makes no attempt to explain what those preferences should be. In the jargon, they are exogenous. If I prefer toast to truffles, that’s my business and I don’t have to justify it to anyone. Equally if the ANU prefers consumer goods to coal, that’s its business.
What’s more, nothing in this theory precludes moral judgments in such decisions. Those who forget this are the types who cite Adam Smith’s invisible hand but forget his Theory of Moral Sentiments. People should and do integrate moral judgments into their economic decision-making all the time. People regularly shun tobacco, pornography, and gambling on moral grounds; why not fossil fuels, if that’s their preference?
A more sophisticated critique might argue that the ANU decision-makers are an investment committee charged with maximising their fund’s income and so should not base decisions on anything other than risk-weighted returns. This critique assumes that the committee could not responsibly overlook fossil fuels in a weighted portfolio focused on returns.
Yet this appears to be exactly what the ANU has done. Vice-Chancellor Ian Young explained how the university has commissioned professional external advice on the risk profiles of various stocks, and the companies in question were divested precisely because their fossil fuel exposure presented unacceptable risks.
The ‘freedom-when-it-suits-me’ crowd simply ignores all this. Instead, like so many who pursue narrow self-interest, they simply talk up their own book. They defend free markets at all costs when it comes to deregulation and tax cuts. Macquarie Bank’s Nick Moore displayed exactly this approach in warning the Murray inquiry into financial services not to impose new regulations on banks, despite running to government for help when under-regulation imperiled his bank in the GFC. The crowd is less vocal when it comes to favoured subsidies, tax concessions or other market players pursuing free enterprise that threaten their interests. This was the ANU’s unforgivable sin.
Of course, ‘freedom-when-it-suits-me’ extends beyond economics into politics. Elsewhere David Marr has chronicled the rise and fall of Freedom Abbott. The Coalition championed greater freedom of speech until it proved too politically damaging, at which point it was dropped like a hot potato. A crackdown on individual liberty in the interest of Team Australia promised more political upside. Tim Wilson, the government’s newly appointed Freedom Commissioner, was left like a bride at the alter when the abandonment of greater freedom was announced on the very morning of his Freedom Symposium.
In a week when Gough Whitlam has left us, we are reminded of a time when political leaders didn’t do ‘values-when-it-suits-me’. Instead they had clarity and consistency of purpose which they pursued even in the face of short-term political cost. This commitment to values by today’s politicians is too often in name only.
We’ve seen Labor politicians decrying class warfare when superannuation perks for the wealthy were threatened. And we have a Liberal party whose economic, social and security policies stray far from liberal when their or their mates’ interests are jeopardised. As the The Drum’s Barrie Cassidy described on ABCTV, Gough’s commitment to values made him Labor’s equivalent of the Republicans’ Reagan or the Democrats’ Kennedy. These men didn’t pick and chose values when it suited them. Where are such leaders today?