David Henderson
OECD head of economics who criticised ‘corporate citizenship’ and UN climate change projections
DAVID HENDERSON, who has died aged 91, served as head of the Economics and Statistics Department of the Organisation for Economic Cooperation and Development (OECD) in Paris from 1983 to 1992; a Keynesian turned free market liberal, he became an outspoken critic of the type of sloppy policymaking in which “virtue signalling” is prized over economic efficiency.
He set the stage for his emergence as the outspoken scourge of bien pensant thinking in 1985 when he gave the BBC Reith Lectures under the title “Innocence and Design”. He used the platform to tear into the lazy “DIY economics” of policymakers who fail to think through the likely consequences of their interventionism. Too often, he argued, under pressure from interest groups and lobbyists, a “soap operatic” approach is adopted whereby some aspects of economic reality are highlighted and caricatured, giving issues a spurious simplicity and leading to wrong conclusions being drawn.
Examples of this approach included the Franco-british project to build Concorde and the Central Electricity Generating Board’s investment in the advanced gas-cooled reactor – which he described as the most wasteful such project ever undertaken. Other examples of flawed thinking included the persistent belief that manufacturing should be assigned a leading role in the economy as if it were somehow more honourable to make things than provide services.
Henderson’s willingness to court controversy seemed to intensify after his retirement from the OECD. In 2001, in a booklet for the Institute of Economic Affairs entitled Misguided Virtue, he took issue with the fashion among politicians and business leaders to urge companies to be “good corporate citizens”, attending to the needs of “stakeholders” and contributing to “sustainable development” and other environmental and social goals.
Henderson argued that advocates of “corporate responsibility” suffer from a basic failure to understand why capitalism works, advocating policies that have an adverse impact on the sort of public welfare they are supposed to promote. Applying principles of corporate social and environmental responsibility does harm by raising costs and prices and displacing attention and effort from the firm’s real business, which is making money for shareholders who are perfectly capable of making charitable decisions for themselves.
Moreover, in encouraging companies to seek a level regulatory playing-field based on their ethical insights, rich-country “good global citizens” limit competition, worsening the performance of the global economy as a whole and putting developing countries at a disadvantage.
The following year, in a paper written with Ian Castles, former head of the Australian Bureau of Statistics, in the journal Energy and the Environment, Henderson examined predictions by the International Panel on Climate Change (IPCC), in its massive Third Assessment Review of 2001, which reported that the Earth’s average “surface temperature is projected to increase by 1.4 to 5.8C over the period 1990 to 2100” based on a combination of climate change modelling and economic forecasting. The figures became the most cited in environmental politics and served as a basis for the Kyoto Convention on reducing greenhouse gas emissions.
But, according to Henderson and Castles, the IPCC got it wrong by assuming that the US (and most of the developed world) would stop growing by 2030, while the rest of the developing world would catch up in terms of per capita income, then surge ahead so that, by 2100, such economic tigers as Algeria, Argentina, South Africa, Libya, and North Korea would have surpassed the US in terms of standards of living.
Moreover by using market rate methods to convert currencies for the purpose of comparison, the IPCC assumed a much higher amount of economic growth (and thus higher levels of carbon emissions) needed by developing countries to catch up than would be justified by the more realistic purchasing power parity conversion approach. Once these questionable economic predictions were fed into climate change models, they had exaggerated the likely rate of output growth and greenhouse-gas predictions by a factor of three or four.
In a lecture delivered in 2000, Henderson identified a dangerous counterattack against free-market reforms, led by NGOS which had co-opted both corporations and governments in what he called a “new millennium collectivism”.
An “alarmist consensus” on the environment, plus the portrayal of developing countries as “victims” of globalisation (when the real problem is their non-participation) had been embraced by broad swathes of the Establishment. Under the triple banner of human rights, corporate social responsibility and sustainable development, these forces had effectively won the public relations battle.
Patrick David Henderson was born in Sheffield on April 10 1927. His father died when he was three and his mother when he was nine, so he was brought up by aunts and uncles. Educated at Ellesmere College, Shropshire, he went up to Corpus Christi, Oxford, where he took a First in PPE. After graduation, he was appointed a tutorial fellow at Lincoln College Oxford and a Proctor of the University – in which capacity he was instrumental in bringing the Danish architect Arne Jacobsen to Oxford in the building of St Catherine’s College.
In the 1950s he became an economic adviser at the Treasury and in the 1960s he served as chief economist at the Ministry of Aviation. From 1969 he worked as an economist at the World Bank, directing its economics department from 1971 to 1972 when he resigned the position after falling out with the bank’s president Robert Mcnamara.
In 1975 he returned to London to take up a chair in Political Economy at University College London.
Henderson’s growing scepticism about the value of interventionism brought him to the attention of Mrs Thatcher’s Conservative Party and in 1983 her government was instrumental in his appointment to the OECD.
During his nine years in Paris, he spearheaded the organisation’s shift to an evangelical role in urging an end to discriminatory trade policies and promoting the potential prosperity gains accruing from more liberal trade and investment rules.
After leaving the OECD in 1992, Henderson became an independent author and consultant, and was a visiting fellow or professor at many institutions, including the Royal Institute of International Affairs and the Institute for Economic Affairs.
From 2001 to 2009 he was a visiting professor at the Westminster Business School, London. He also served as a member of the academic advisory council of the Global Warming Policy Foundation founded by Nigel (Lord) Lawson.
He was appointed CMG in 1992. In 1960 he married Marcella Kodicek, who died in 2011. He is survived by their son and daughter.
David Henderson, born April 10 1927, died September 30 2018