U.S. to South African poor: "stay poor, we can't afford more carbon emissions"

I would be among the last to endorse giving money to the World Bank so it can in turn finance projects that help the world's underdeveloped countries. That's because I think they are typically wasteful, inefficient, and likely candidates for massive corruption, and could be much better undertaken by private capital. But I was amazed to learn, thanks to good friend Don Luskin, that the U.S. government has declined to endorse the Eskom Power Investment Support Project, whose aim is to finance $3.75 billion worth of energy generation projects in South Africa.

Why? Here is an excerpt from today's press release from Treasury:

South Africa and the region face urgent energy needs to promote economic growth and address critical challenges, such as poverty, education and health.  This project would provide significant energy capacity to meet these essential needs.  We recognize that South Africa faces limited options that could provide the required energy base for South Africa and the region in lieu of the project, and that there is a lack of alternative private financing options in the wake of the financial crisis.  We also recognize that, if South Africa's base load power needs are not met, the country's economic recovery will suffer, adversely impacting electrification, job creation, and social indicators.

Despite these benefits, the United States is concerned about the project since it would produce significant greenhouse gas emissions, and uncertainty remains about future mitigation efforts.

In other words, the U.S. can't countenance a project that would help lift the poor and promote the economic development of South Africa, because it would involve an increase in greenhouse gas emissions. I find such blind adherence to ideology (especially in the face of all the recent scandals that seriously undermine the science behind global warming) outrageous. It is also deeply troubling in its implications for our own economic development, since it betrays an obvious bias to put ideology first and the living standards of our citizens second.

Fear subsides, prices rise

A quick update on an enduring theme that has been one of the best explanations for how the recession of '08-'09 got started and how it ended.

A simple Irish solution to cutting deficits

Alex Pollock, writing in yesterday's WSJ, has a neat solution to cutting state, local, and federal government deficits. Cut government salaries. As Glen Reynolds notes, "if government workers know that proliferating deficits threaten their salaries, you turn them into a lobby for responsible spending." And as Mark Perry noted last month, this isn't a very draconian solution, since public sector workers already make a lot more than their private sector counterparts: "Total compensation costs for state and local government workers averaged $39.60 per hour worked in December 2009 (including benefits of $13.50 per hour), which was 44.5% higher than compensation for private industry workers."

Having had a long run of high growth and success, Ireland has now had a severe bust, the deflation of a housing bubble, and a financial crisis. Plus, its government is running big deficits. Sound familiar?

In response, the current Irish government budget takes these steps (translating from euros to dollars and rounding):

• Government employees' salaries up to $40,000 will be reduced by 5%.

• The next $54,000 of salary will be reduced by 7.5%.

• The next $74,000 of salary will be reduced by 10%.

When these tranches are added together, this gets you up to salaries of $168,000. Government salaries over this amount may be subject to marginal reductions of as much as 15%.

This looks like a very sensible plan for nonmilitary government employees.

Ireland has already worked out the plan. All the U.S. has to do is implement it.