After 30 minutes each of Peter Costello and the instant Budget analysts, I switched to an SBS TV doco called Waste = Food, about a couple of visionaries who advocate designing and making products to be 100 percent recyclable into new, high-quality products. This concept provides a useful perspective on the painful posturing, spin and myopia that comprises Budget Night in Australia.
The visionaries mentioned are William McDonough and Michael Braungart, and their clients include Ford, Nike and the Chinese Government. They and their clients are demonstrating practical, profitable ways to revolutionise our industrial civilisation so that it uses the Earth’s resources far more efficiently and promotes the health of the living world. They hold the mirror up to the reality that we must either face or be overrun by.
Even in the limited terms of conventional politics and economics it was hard to discern any coherent strategy behind the Treasurer’s grab-bag of small bribes and reactive adjustments, other than the re-election of the Coalition. Kevin Rudd, in his response two nights later, at least spoke of the need to look a decade ahead and featured climate change as the second of three challenges his putative Government would address, the others being productivity growth and fairness in the workplace.
The Government’s recent tinkering with WorkChoices and Rudd’s more substantial proposed rollback of Howard’s Industrial Relations policies, both acknowledge the current imbalance of power in the workplace and the resultant imbalance between work, family and free time that degrades many people’s lives. However, neither of these moves comes to grips with the issue of why people still have to work so hard if we’re as rich as they keep assuring us we are.
Anyone my age will recall hearing, back in the 1950s, that by the end of the 20th century we would be working only 20 hours a week. Why, instead, have we gone from being the ‘Land of the Long Weekend’ to working as many hours as the Japanese?
Speaking of the 1950s, when will a modern Treasurer be able to proclaim unemployment of 1.3 per cent, GDP growth of 5.2 per cent and inflation of 3.3 per cent? In Paul Keating’s words, those could indeed be regarded as a ‘beautiful set of numbers,’ but we haven’t had anything close to them since Keating initiated the so-called ‘modernising’ of our economy in 1984. Yet those are the averages that prevailed through the 1950s and 1960s, when Bob Menzies’s economic management was more like social democracy, viewed from the austere neo-liberalism of the present.
Rudd’s promised productivity growth would be a good thing, but we also need to look at how much we produce, what we produce, and why. Increased productivity might allow us to work fewer hours to produce the same amount of stuff, leaving more time to enjoy life but the current obsession is to produce ever more stuff.
Of course, it is the endless growth of our output of stuff and of the resources we use to produce it that is causing the current planetary crisis. Sometime very soon, we need to start talking about an economy that improves quality of life while reducing, Ã la McDonough and Braungart, the quantity of material resources it devours and excretes.
A more conventional but still fundamental issue not mentioned in either the Budget or the Budget In Reply speeches is our enormous and still rapidly increasing burden of debt, recently documented in New Matilda by Steve Keen. Private debt has gone from around 23 per cent of GDP in 1950 to over 150 per cent in 2006 the ratio of debt to GDP increasing by an average of 3.9 per cent per annum since 1963.
Only some of this borrowed money has gone into productive investment. A great deal of it has gone into consumer goods and bidding up the price of housing. Costello (like Keating before him) ought to be regarded as one of our most reckless Treasurers, because these figures mean we’re living seriously beyond our means, even as we experience another minerals boom.
Thanks to Fiona Katauskas
Regarding economic management, Rudd has to be seen to insist on balancing the Federal Budget because of the widespread but incorrect perception that doing so is good economic management. Federal Government debt is not automatically irresponsible (that depends on how the money is used). And the idea that it is irresponsible seems to come both from neo-liberal anti-government ideology and from a lingering attachment to the ‘twin deficits’ theory. That theory should have been consigned to history long since, as the records clearly show that government debt and national debt are quite uncorrelated.
What the punters crave from their economic managers is smooth economic sailing so their mortgage interest bills don’t go up and so they won’t be thrown out of work. It is therefore a great irony of the present slanging match that mortgage interest payments, as a fraction of household disposable income, are now higher than they were under Keating’s infamous 17 per cent interest rates because house prices are now so much higher.
One likely reason for this, little remarked upon, is the greater inequality of income we now have, which allows the wealthier to bid up the price of houses as investments.
A second reason is the great increase in personal debt, which has climbed in a feedback spiral with house prices and which has been irresponsibly promoted by the deregulated banking system the Government has done nothing to restrain.
So whose fault is the high mortgage bill of your average punter? Most definitely the Howard Government.
The other big bogey in economic management is Recession and the high unemployment that results. Yet unemployment is not much affected over the long term by economic growth, as the figures quoted earlier attest. The rise of unemployment as growth slows is a short-term response.
Better, then, to look for underlying sources of instability that can cause growth to slow. One obvious source is the financial markets. Since deregulation, they have become dominated by speculation, which greatly amplifies any natural fluctuations (the currency markets, especially, trade at absurd rates, about 100 times faster than the productive economy requires).
Financial market instability could be reined in by a small tax on financial transactions (known as a Tobin tax) that takes the profit out of speculation and focusses investors’ minds on companies’ longer-term prospects. This idea has a venerable pedigree, but it has slipped completely off the radar thanks to the current neo-liberal worship of unfettered markets.
Many Australians are coming to see the current, extended drought and the disastrously low flows in the Murray-Darling river system as products of global warming. The drought, water shortages, mega-fires and cyclones of recent seasons are still only a small foretaste of what global warming might have in store for us. Some prominent scientists are now saying that even one degree of global warming might tip the climate into runaway overheating.
It is to Rudd’s credit that he put water and g
lobal warming fairly high on his list, but Labor still isn’t seriously addressing the problem. The Coalition, of course, is still at the stage of applying political bandaids. Both sides should quit their talk of subsidising distant, uncertain and compromised options, like ‘clean coal’ and nuclear, and let properly structured markets do the sorting out. A price on carbon burning is essential, and urgent.
Cutting greenhouse gas emissions will not wreck the economy. The Stern Report and other economic models summarised in the most recent IPCC Report show that major reductions of greenhouse gas emissions will reduce GDP growth only marginally (by around 0.1 per cent). Instead of rising by 80 per cent by 2050, our GDP might reach that level by 2053. That’s a pretty trivial cost for insuring against major disruptions to our industrial civilisation.
The news gets better if we pay attention to smart designers like McDonough and Braungart and seriously pursue dramatic improvements in energy efficiency. In the words of energy analyst, Amory Lovins:
Increasing energy end-use efficiency … is generally the largest, least expensive, most benign, most quickly deployable, least visible, least understood, and most neglected way to provide energy services.
Cheap energy has given rise to great inefficiencies through inattention. But this is our greatest opportunity, because eliminating those inefficiencies can be profitable. If this seems unlikely, you should know that DuPont cut its emissions by 72 per cent and saved $2 billion in the process, and they are not alone.
We don’t have to wait for the rest of the world, we should be cutting emissions anyway. There are multiple flow-on benefits, including more jobs and greater competitiveness.
As we learn to do more with less energy, renewables become more affordable and sufficient. This is the path towards living compatibly with the rest of the living world. Instead of just living under dire threat, we can work to give our grandchildren the gift of an indefinitely long future in a richly endowed world.
That is a vision that would be worth crowing about on Budget night.
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