What Jesus said about capitalism

Most churchgoers see no great conflict between their beliefs and life in a market economy such as ours. But proponents of the little-known "sabbath economics" argue Christ's teachings have been reinterpreted over the centuries to make them fit with modern capitalism.

All I know about sabbath economics comes from the little book, The Biblical Vision of Sabbath Economics, by the Californian theologian and teacher Ched Myers. I'll give you my summary of the book provided you don't presume I'm an advocate. It's an interesting topic for an Easter Monday.

The name sabbath (the seventh day) is a reference to the biblical injunction - mainly honoured in the breach - that the Jews practice "jubilee". Every 50th year (the year following the passing of seven times seven years), slaves were to be freed, people were to be released from their debts and land returned to its original owners.

So sabbath economics involves an "ethic of regular and systematic wealth and power redistribution". You can see why this is an uncomfortable topic (for me as much as anyone else).

Many Christians would argue this Old Testament stuff was superseded by the New Testament, but Myers counters that the New Testament reveals Jesus as preoccupied with jubilee ideas.

"There is no theme more common to Jesus's storytelling than sabbath economics," he says. "He promises poor sharecroppers abundance, but threatens absentee landowners and rich householders with judgment."

It's certainly true that Jesus was always blessing the poor, challenging the rich, mixing with despised tax-gatherers and speaking of a time when the social order is overturned and "the last shall be first".

It's also true, as Myers reminds us, that many of Jesus's parables deal with clearly economic concerns: farming, shepherding, being in debt, doing hard labour, being excluded from banquets and the houses of the rich.

Myers alleges that many churches handle the parables "timidly, and often not at all". "Perhaps we intuit that there is something so wild and subversive about these tales that they are better kept safely at the margins of our consciousness," he says.

"Most churches that do attend to gospel parables spiritualise them tirelessly, typically preaching them as 'earthly stories with heavenly meanings'. Stories about landless peasants and rich landowners, or lords and slaves, or lepers and lawyers are thus lifted out of their social and historical context and reshaped into theological or moralistic fables bereft of any political or economic edge - or consequence."

Myers devotes a chapter to the incident of Jesus meeting the rich man, who asks "what must I do to inherit eternal life?" Jesus neither welcomes him into the club nor outlines the things he must believe to gain admission.

Rather, he tells the man to go and sell everything he has, give the money to the poor and then come back and follow him. But the man, unwilling to give up his wealth, rejects discipleship and goes away.

Jesus responds, "how difficult it is for the wealthy to enter the kingdom of God ... It is easier for a camel to go through a needle's eye than for a rich man to enter the kingdom of God."

"The clarity of this text has somehow escaped the church through the ages, which instead has concocted a hundred ingenuous reasons why it cannot mean what it says," Myers says.

His interpretation? Jesus is simply saying the kingdom of God is a social condition in which there are no rich and poor. So, by definition, the rich cannot enter - not with their wealth intact.

Myers says that in first century Palestine, the basis of wealth wasn't possession of consumer durables, but land. And the primary means of acquiring land was through debt-default. Small agricultural landholders groaned under the burden of rent, tithes, taxes, tariffs and operating expenses.

"If they fell behind in payments, they were forced to take out loans secured by their land. When unable to service these loans, the land was lost to the lenders. These lenders were in most cases the large landowners," he says.

This is how socio-economic inequality had become so widespread in the time of Jesus. It's almost certainly how the rich man ended up with "many properties", according to Myers. And these are just the circumstances the jubilee is intended to correct.

"Jesus is not inviting this man to change his attitude towards his wealth, nor to treat his servants better, nor to reform his personal life," he says. "He is asserting the precondition for discipleship: economic justice."

Myers offers his explanation of a much-quoted saying from which today's prosperous Christians derive comfort: Jesus's observation that "the poor will always be with you".

This doesn't mean Christ accepted poverty as an inevitable characteristic of the economy, or part of the divine plan. Rather, he says, the divine vision is that poverty be abolished, but as long as it persists, God and God's people must always take the side of the poor - and be among them.

"Privately controlled wealth is the backbone of capitalism," Myers says, "and it is predicated upon the exploitation of natural resources and human labour. Profit maximisation renders socio-economic stratification, objectification and alienation inevitable.

"According to the gospel, however, those who are privileged within this system cannot enter the kingdom. This is not good news for first-world Christians - because we are the 'inheritors' of the rich man's legacy.

"So the unequivocal gospel invitation to repentance is addressed to us. To deconstruct our 'inheritance' and redistribute the wealth as reparation to the poor - that is what it means for us to follow Jesus."

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How to improve investment advice to retirees

They say that at every stage of life the baby boomers reach, the world changes to accommodate their needs. So now the boomers are starting to reach retirement, it's the investment advisers' turn to lift their game.

To date, the superannuation industry's greatest attention has been paid to the accumulation phase: how much people need to save to ensure an adequate income in retirement. But the boomers' interest is switching to the retirement phase: how their savings should be managed to best effect.

And there are signs financial planners are working to improve the advice they give retirees. This seems clear from a recent speech by Dominic Stevens, of the annuities provider Challenger. Stevens made extensive use of an article by Joseph Tomlinson, "A Utility-based Approach to Evaluating Investment Strategies", published in the US Journal of Financial Planning. I'll be drawing on both sources.

To date, most advice to retirees has focused on "asset allocation" - how their investments should be divided between shares and fixed-interest securities - and on setting a safe rate at which money can be withdrawn and spent without it running out before the retiree dies.

Tomlinson's objective is to provide advice that is less one-size-fits-all, encompasses more eventualities and incorporates the insights of behavioural economics. These days, computers make it easier to provide more accurate advice and deliver it in user-friendly programs.

Remember, no one knows what the future holds. Who knows what will happen to the sharemarket - or any other financial market? So advice is based on reasonable assumptions and on averages, and advisers seek to estimate expected returns.

But more can be done to allow for the personal preferences of the particular retiree and to take account of the range of likely outcomes around the average.

The first issue is the "risk-return trade-off". The higher returns some investments offer - shares versus fixed interest, for instance - usually reflect a higher degree of risk: risk you won't get your money back, and risk that returns will vary a lot from year to year. It's generally accepted that old people who need to live off their savings can't afford to run the same degree of risk as young people with many years to recover from sharemarket setbacks.

These days more attention is being paid to "sequencing risk". Say you need to live off your savings for 15 years and it's reasonable to expect there'll be two bad years for the sharemarket in that time. Just when those two years occur makes a big difference.

If they come late, it won't be so bad; if they come early you could be almost wiped out and never recover. This suggests retirees need to hold more of their savings in fixed interest than many do.

In any case, most people are "risk averse". Consider this choice: which would you prefer, the certainly of earning $100, or a 50 per cent chance of earning nothing and a 50 per cent chance of earning $200?

If you were "rational" you wouldn't care either way because both options have the same "expected value" (for the second: 50 per cent of $0 plus 50 per cent of $200 equals $100).

If you much preferred the certain $100, that makes you risk averse (and normal). If you fancied the chance of walking away with $200, that makes you a "risk seeker". Risk aversion is pretty much the only departure from "rational" behaviour that economists regularly allow for.

A vital question in working out how much of your savings you should withdraw each year (a common rule of thumb is 4 per cent) is how long you'll live. You can't know, of course.

The advisers' standard approach is to look up in the government's actuarial life tables the average life expectancy for someone of your sex and age.

If the answer was 20 years, this would be used for your planning. But a lot of people will fall a bit below or a bit above the average, and Tomlinson's more sophisticated calculations take account of this wider range of probabilities. At present, the main objective in setting your withdrawal rate is to ensure you don't suffer "plan failure" - run out of money before you die.

The alternative to running out is to die with money left - the "bequest amount".

Conventional economics assumes that, dollar for dollar, your pain at having your money run out before you're ready to die would be equal to your pleasure at knowing you'll be leaving a bequest to your relos.

But this seems highly unlikely. As Stevens argues, if a retiree was living on $30,000 a year and that dropped to $20,000, it would have a more profound negative effect that the positive effect of income increasing to $40,000.

The two psychologists who pioneered behavioural economics, Daniel Kahneman and Amos Tversky, call this "loss aversion" (as opposed to risk aversion). They found that most people hate losing $100 about twice as much as they like gaining $100. Since running out of money before you die is a much bigger deal than losing small sums while you're working, it's likely retirees' loss aversion is a lot greater than the usual rate of 2:1. Some preliminary surveys suggest it might be as high as 10:1.

If so, this means retirees' desire to avoid running out of money (and having to fall back on the age pension) is a lot stronger than investment advisers' conventional calculations assume. And this, in turn, suggests retirees' choice of investments ought to be a lot more cautious than it often is.

Tomlinson argues that particular retirees' degree of loss aversion ought to be taken directly into account when determining the best investment strategy to meet their needs. When you do so, the bottom line of the calculation is not the average expected return on their savings but the average expected utility from those savings.

His refinement takes account of the possible size of plan failure - whether your savings are gone one year before you die or 10 years - not just whether or not failure is likely.

It also acknowledges the size of bequests is likely to suffer from diminishing marginal utility. Each extra dollar gives you less satisfaction than the one before.

Shifting the focus from expected returns to expected utility could make investment advisers' advice a lot more realistic and thus a lot more helpful.

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How business is white-anting the weekend

Whether or not they realise what they're doing, Australia's business people, economists and politicians are in the process of dismantling the weekend and phasing out public holidays. And they're doing it in the name of making us better off.

Historically, the two arrangements that have protected the weekend and public holidays from encroachment by employers are state government restrictions on trading hours and the requirement in industrial awards that employees required to work at "unsociable hours" be paid an additional penalty rate.

Charging employers a penalty was intended to discourage them from making unreasonable demands on their employees unless absolutely necessary.

The first assault on community-wide days off came in the second half of the 1980s with the deregulation of trading hours as part of micro-economic reform.

Not much later, the move to bargaining over pay rises, and then bargaining at the enterprise level, allowed employers to push for penalty rates to be abandoned in return for higher "annualised" wages.

Employers inculcated the view penalty rates were an anachronism standing in the way of progress and modernity. Many still think that way. One of the goals of John Howard's Work Choices was to make it easier - and less expensive - for employers to get rid of penalty payments.

(Another of its provisions was to make it easier for workers to "cash out" part of their annual leave - to exchange days off for money. How this squared with the original rationale for forcing employers to give their workers paid holidays was never explained.)

Julia Gillard's Fair Work changes to Work Choices represented the first setback in the push towards the 24-hour, seven-day-a-week economy. They made it harder for employers to buy out penalty payments. And the "modern award" process - which replaced the various state awards with single national awards - inevitably involved increasing some penalty rates in some states.

But now the push has resumed. Last week, the NSW government moved to join Victoria in allowing all shops - not just those in the CBD - to open on Boxing Day. Now, say the retailers, all we need is for restrictions to be lifted on Easter Sunday.

And this week, the major banks revealed their intention to push for the definition of ordinary hours in the national banking award to be extended to include Saturday afternoons and all of Sundays. The banks say they'd still pay penalty rates, but the union doubts this promise would last. It says the banks' goal is to be able to roster employees to work any five days of the week without recognising traditional work patterns.

What's the banks' justification for seeking such a change? To promote "flexible and efficient modern work practices in a way that has proper regard to the considerations of productivity and employment costs".

Ah yes. It would make the economy more flexible and efficient, and thus raise productivity. Well, in that case, say no more. Silly me.

It's not hard to see why there's been so little public questioning of this push towards a 24/7 economy. It's highly convenient to be able to shop whenever we have the time. The more two-income families we have, the more we value the ability to shop throughout the weekend.

It also fits with the trend towards leisure being commercialised - becoming something we buy (a meal out, a show) rather than something we do (kick a football in the park with our kids).

But this belief that life would be better if shops, restaurants and places of entertainment were open all hours rests on the assumption you and I won't be among those required to work unsociable hours to make it happen. An even less obvious assumption is that the push for a 24/7 economy will stop when it has captured shopping and entertainment; it won't continue and reach those of us who work in factories and offices.

As usual, the "flexibility" being sought is one-sided. Employers gain the ability to require people to work - or not work - at times that suit their firm's efforts to maximise its profits.

If those times don't fit with your family responsibilities - or just with your desire to enjoy your life (you selfish person, you) - or if the boss's requirements keep changing in unpredictable ways, that's just too bad.

It's the price to be paid for getting more prosperous (with the boss's standard of living rising quite a bit faster than yours).

But this is the part of modern life that makes no sense to me.

Accepting the economists' argument that keeping the economy running for more hours in the week is more efficient and so will raise our material standard of living, how exactly will this leave us better off?

Why does being able to buy more stuff make up for husbands and wives being able to see less of each other, having less time with the kids, having a lot more trouble getting together with your friends, and having your day off when everyone else is at school or working?

Why is this an attractive future? Why should our elected representatives reorganise our economy in ways that suit business and promote consumption, but do so at the expense of employees' private lives?

This is a classic case of business people, economists and politicians urging on us a mentality that prioritises the economic - the material - over the other dimensions of our lives. Yet again, no one pauses to ask what these "reforms" will do to our relationships.

Why is it the politicians who bang on most about the sanctity of The Family are also those most inclined to make family life more difficult?

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Let's slow down the mining boom

Innovative thinking is not only in short supply in Australia's businesses - as our weak productivity performance attests - it's also hard to find in the economic debate.

You could count on one hand the economists who do some lateral thinking and throw into the debate some new way of viewing a problem and overcoming the familiar difficulties.

But one economist who does come up with new ideas to think about is Dr Richard Denniss, director of the Australia Institute. He observes that while everyone's been debating whether the mining boom's a good thing or a bad thing, no one's focused on the obvious question: what rate of growth of the mining industry is consistent with the national interest?

And in a paper to be published today, written with Matt Grudnoff, he puts his conclusion: The Macro-Economic Case for Slowing Down the Mining Boom.

Why has this idea not occurred to anyone before? Partly because of the unthinking belief of almost all business people, politicians and economists that all economic growth is good and the faster the better.

When the new Queensland Premier announced his intention to speed up the approval process for new mines, most of the aforementioned would have nodded in approval. But why is faster than the economy can cope with better?

Partly, Denniss argues, because

of the way economists divide economic issues into micro and macro. As a micro issue the focus is on allowing private interests to make profitable investments as they see fit, with no more government intervention than is necessary to limit damage to the local environment.

As a macro issue the focus is on taking whatever strength of demand the private sector serves up and "managing" it to ensure it leads to neither excessive inflation nor excessive unemployment. If demand's too strong you raise interest rates to chop it back; if it's too weak you cut rates to beef it up.

But Denniss argues the boom's too big to fit this neat division. According to the Bureau of Agricultural and Resource Economics, there are 94 mining projects worth $173 billion at an advanced stage of development (plus a lot more at earlier stages).

For the miners to attempt such a huge amount of activity in such a short space of time inevitably creates what Denniss calls "macro-economic externalities" - adverse spillover effects on the rest of the economy, in the form of skilled labour shortages, wages pressure and probably a higher-than-otherwise dollar.

No one understands this better than the Reserve Bank, of course. But the higher-than-otherwise interest rates it has and will use to limit the inflation fallout from the boom aren't intended to (and couldn't be expected to) limit the boom.

Rather, they're intended to crimp the rest of us - in particular, consumer, housing and non-mining business investment spending - to "make room" for the boom-crazed miners. This will succeed in controlling inflation, no doubt, but what reason is there to believe it will lead to the most efficient allocation of the nation's resources?

Denniss suggests this thought experiment: if all of Australia's mineral resources were controlled by a profit-maximising monopolist, would it respond to the present exceptionally high world prices by building as many new mines as possible as quickly as possible?

Would a monopolist bid against itself for scarce labour and infrastructure capacity (to get the minerals to port and onto ships)? Or would it invest in training and infrastructure before it began expanding production?

His point is not to advocate monopoly, obviously, but to make clear the potential for conflict between the interests of the miners and the interests of the nation.

We are a monopolist in the sense that all the natural resources belong to us. Which means it's up to us to ensure they're exploited in the way that benefits us most. In this we need to remember the miners are largely foreign-owned (meaning we retain little of the after-tax profits) and the resources are non-renewable.

How much do we lose if they stay in the ground a little longer? Are we really expecting that within a decade or so the world won't be willing to pay much for them?

We're a monopolist also in the sense that it's our economy and we bear all the cost of the inflation and excessive exchange rate generated by the foreign miners' mad dash to expand production. We aren't a monopolist in the sense that we control the world supply of coal and iron ore, but we are big enough in the world market for our actions to have a significant effect on world prices.

A monopolist would be more inclined to sit back and enjoy the high world prices and less inclined to madly expand production and thereby undermine the high price (to coin a phrase). And to the extent a monopolist did expand, it would start with the most profitable opportunities and progress towards the least profitable.

Denniss's point is: why should we allow the miners to turn the decision about which mines get built first into a race rather than a ranking? And why should we bear the macro-economic costs generated by the miners' race to be first out the door with our resources?

He proposes that new mining projects be required to bid at auction for a set number of development permits. This would ensure the most profitable projects proceeded first.

And if you don't like the sound of that, he says the same effect could be achieved by removing the mining industry's present subsidies on fuel and alleged research and development spending.

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