Why is the New South Wales government selling off the family silver?

The latest in the NSW Government's monster garage sale is public land adjacent to schools, hospitals, transport hubs and anywhere else they reckon they can raise a dollar or two.  The question has to be, why?  It is clearly hard politics for them.  Local protests are happening almost every weekend somewhere in the state, protesting the selling off of taxpayers land, usually to property developers.

The politics may be hard for them but it is not as hard as the alternative - raising taxes or borrowing money.  And that is the reason we have 'The Great Big Sell Off' campaign.  For the last couple of decades the anglo celtic economies (US, UK, Aus and NZ) and one or two others, have been driven by a 'small government/zero debt' fetish.  The logic behind the fetish was that business was more efficient than government in providing services.  Leaving aside that assumption (which I will discuss at a later date), this led to tax cuts and paying down government debt.

The end result is that revenues available to the government have continued to reduce (as a percentage of the size of the economy) yet our demands for improved health, education, aged care and public transport has increased.  The government's attempts to privatise their expenditure through public private partnerships, etc, has not been very successful (that is also for another article) which has left them with similar expenditure levels but with less income.  Answer - sell off the family silver.

What have corporations done for us??

To paraphrase John Cleese, not as much as the Romans, despite their claims to the contrary.  Any business impacts our economy in only three ways.  They employ people, they pay taxes and they impact on the flow of currency between Australia and other countries - this is usually referred to as our 'terms of trade' or 'balance of payments'.

They employ people, directly and indirectly.  There are some 11.5 Million people employed in Australia at any one time.  Always bear that figure in mind when industries claim how many people they employ.  For example, black coal mining employs 25,000 throughout Australia.  That is 0.2% of total employment.  Industries also claim 'indirect' employment.  This varies from industry to industry and is always difficult to quantify.  Generally it is somewhere between 3 and 10 times the total people employed directly.  However, these indirect employees would only be affected if a business or an industry closed without there being another business or industry to take its place.  A good example is when BHP closed down their steel mill in Newcastle.  That steel mill provided between 5% and 10% of all employment in Newcastle, yet, with careful planning, staff were retrained, new businesses opened up and Newcastle handled the transition very well.

They pay taxes to the different levels of government.  Corporate tax to the Federal government, payroll taxes and resource taxes to State governments and Rates and charges to local governments.  Off setting these taxes paid are the costs that the government incurs in supporting a business.  Looking after the health of their employees, providing roads and rail to help them move their goods, water, sewage, power to enable them to operate day by day, etc.  Also offsetting those taxes paid are the 'externalities' that are a cost to the government.  The main externalities are pollution and waste.  The additional health costs from smoking, pollution of waterways from mining, increased greenhouse gases leading to climate change, etc.  The amount of tax paid and the offsetting costs vary greatly from industry to industry.  Farmers selling organic products to local people will have minimal offsetting costs.  The car industry, coal mining, etc have substantial offsetting costs.   Sadly these offsetting costs are rarely specifically quantified to individual industries.  Which is a shame because it could be quite telling on the true benefits received from those taxes that are paid.

Finally, every business impacts on our balance of payments.   The vast majority of businesses impact negatively.  That is, they have to import more than they export.  This is why, for many years now, our overseas debt continues to climb.  This primarily has an impact on our exchange rate - though no one fully understands how, nor do they fully understand the long term ramifications of continually increasing overseas debt.   The main industries that are beneficial to our balance of payments are in mining and agriculture.  But their figures do have to be taken in context.  The miners, in particular, are always going on about how much export income they bring into the country.  Some people think this export income goes directly to the government - and the way the miners portray it at times, you would think that it does!  Any export income that a company earns goes straight into their bank account.  But offsetting that income is the money they then have to pay overseas for their purchases.  Most of the operating costs of a mine, excluding labour and utilities, will be for manufactured product, and we all know what has happened to manufacturing in Australia over the last few decades.  Even when the miners purchase from local businesses, those businesses will also have to import product from overseas.  Then there will be further payments made overseas in the form of dividends to their overseas shareholders and interest paid to their overseas borrowings.  Sadly, there is no data identifying these outflows of our currency to specific companies or industries, however I would be surprised if less than 75% of their export income goes back overseas again, directly or indirectly.

Corporations are a long way behind the Romans when it comes to what they have done for society.  So let's keep it all in perspective.

If you want world class public services you have to pay for them

Over the last 10 years the Australian government's tax take has reduced from 34% of GDP to less than 30% of GDP and its borrowings have reduced from 30% of GDP to less than 10% of GDP.  In both cases they are one of the lowest in the OECD.  Compare to the US with total tax take slightly lower than ours but with horrendous debt, or with northern european countries who have tax takes approaching 50% of GDP but with low debt.  At the same time we are demanding more expensive medical care, smaller school class sizes, better public transport etc. You don't need to be a Harvard scholar to work out that the maths simply don't stack up.

Meanwhile our discretionary income has gone up 60%.  So, instead of having better hospitals, better schools, better aged care, better public transport, we have ......  flat screen TVs, iPads, more cars, bigger houses.   So next time you go out to buy your next gadget or a third car or an extension to your house, ask yourself - "Would I rather have this or would I rather have better schooling for my kids/better aged care for my parents/better trains, trams and buses?"  

What will the world be like for my new grandchild?

There are certain events in one's life that causes you to pause and consider the wonders of life, the universe and everything.  My wife and I were just marvelling at the wonders of modern medicine that has enabled another child to come safely into the world and the wonders of modern technology that enabled her photo to be flashed around the globe within minutes of being born.

There are so many wonderful advances in medicine and technology.  The first bionic eye has been developed.  Google have mixed voice recongnition software with translation software - producing the first, embryonic bablefish.  Around the world poverty is slowly reducing, health and education slowly improving.  We are entering a golden era of social development.

Yet this can all be undone by the insane deniers of the damage we are doing to our planet's climate.  Raving looneys like Lord Monckton, self serving mischief makers like Andrew Bolt, fossil fueled lobbyists like Mitch Hook and opportunist politicans like Tony Abbot do nothing to further society.  They just drag us back to  a selfish, short term, materialistic focus that places having the latest mobile phone in your pocket as being the be all and end all of life.

So what will the world be like for my beautiful granddaughter as she grows up?  It is hard at times to be positive.  The climate catastrophes around the world in the last 12 months are just a taste of her future unless sanity prevails and our politicians do what is right for the world for once.

Attempting to reduce population and consumption will not save us.

There is increasing concern over our over plundering and polluting of our planet.  The common response to this is that it is being caused by a combination of pointless consumption and over population.  There is no doubt that stopping buying new stuff and having less babies would  help, but those are really hard things to do.  It is  fine for us in the developed world to stop replacing our car every three years, our laptops every 2 years and our mobiles every time we change our underwear, but what of those billions that are crying out for the things we take for granted?   Like clean water, regular electricity, refrigerators, internet connections, some means of transport other than a rusty bicycle with buckled wheels.  They surely have every right to improve their lives.  Then what about babies?  Admitedly China has had some success in that area, but even with a draconian and dictatorial approach population has still increased.  And who amongst you is expecting to succeed against the power of those religions to whom procreation is a divine right.  (Not mentioning any names and not pointing to anyone in particular, your eminence!)   Also buying less stuff and having less babies would still not solve the problem.  It would just delay the day of reckoning a century or so at best.

If we take a step back, the only problems we need to address are to stop using non renewable resources and to stop polluting the planet.  If we can fix those two problems, the developed world can improve their lives and people can go on having babies ( I am leaving food out of this for now, as that is a different discussion).

And we can fix those two problems.  We have the technology now to produce 100% renewable energy in all its forms.  We are also able to recycle pretty well everything we produce - though sometimes it does take a lot of energy.  Then we could have limitless economic growth. 

You don't think that 100% renewable energy and 100% recycling is ever possible?  Well if that is the case they we really are stuffed, because eventually we will have to achieve that if we expect this planet to serve us for infinity and beyond - sorry, just watched Toy Story 3 with my daughter!

So dare I suggest we stop whinging about people having babies and our throw away society and get our bums into gear to move us to a fully sustainable economy.  The recylcing bit can wait for a while as most of our resources are OK for the next few decades - with the exception of course of oil.  What is urgent though is that we rapidly transition to renewable energy. 

Is it time for state insurance for property damage from fire and flood?

I friend of mine reminded me of the history of fire insurance.  It was originally offered by the early local fire brigades.  If you paid your premium, you were given a plaque to place on your property.  Then, if it caught fire, the fire brigade would put the fire out.  If you didn't have a plaque they would let it burn.

We have now gone full circle.  The people who insure their properties pay a loading for the fire brigade, but the firies will put out your fire, whether or not you are insured.   With more and more climate carnage coming our way is it now time for the state to provide fire and flood cover with an across the board levy on, say, our council rates bill?  That way, everyone would be insured and there would be clear financial disincentives for local councils to allow development in high bushfire risk areas and flood plains.   Too simple??

Will democracy survive climate change?

We have just witnessed a year of climate carnage around the world.  There is hardly a country that has not experienced one or more extreme climate events.  Yet whenever anyone tries to tie in all those deaths to our continued out pouring of greenhouse gases they are drowned out by the denialist movement.

It is clear that, no matter how many people are killed and how much the climate carnage costs us, those denialists will refuse to move from their position and continue to feed the press to sow seeds of doubt such that no action is taken.  The end result will, of course, be just more and more extreme climate events.  So where will this end?

Is there a point where extreme climate events become so bad that Western governments will declare states of emergency, muzzle their press and mobilise their armed forces to achieve rapid change? And will those governments then look at China with a longing for the certainty that their dictatorship gave them to manage their own change to a world of renewable energy?  Could this then put us on the slippery slide to less and less individual freedoms and the overriding of individual rights for the benefit of the community at large?  Why am I asking all these questions?? :-)
 

I love this map. It matches GDP and population of individual countries to US states

It gives you an idea of how big the US of A really is.  Australia's economy is approx. the same size as New York state.

Courtesy of The Economist.  There is interactive version here - http://www.economist.com/blogs/dailychart/2011/01/comparing_us_states_countries 

See - statistics can be sexy!

A great article in my favourite magazine, The Economist, on making statistical data look sexy with lots of videos of Han Rosling's presentations.  Not just good presentations but some interesting data being presented as well.  Check it out here http://www.economist.com/node/21013330

Australia - the really dumb country?

We are an arrogant bunch aren't we.  Constantly crowing our praises at our umpteen years of uninterupted economic growth and even avoiding the Global Financial Crisis.  But, just hold on a minute.  Almost half of that growth has simply come about through immigration. The bigger the population, the bigger the economy.  Is it suprising that governments love immigration?  As for the rest of our economic growth, that has primarily come from the fact that we happen to be very lucky to have so much stuff we can just dig out from the ground and ship overseas.   The real test of how smart a country is, productivity, is rarely mentioned by our pollies for the simple reason that it is pretty poor.  And it is productivity that primarily gives us a better life, not more population and not just digging stuff out of the ground.   As the Australian Bureau of Statistics says "In the long-term, (productivity) ... is the ultimate source of economic growth and higher living standards.  http://tinyurl.com/6jvm4ug.  So how are we doing in productivity.  Pretty poor it works out.   Australia's multi factor productivity for the last 10 years went backwards by 0.1% a year.  Not so smart after all, are we?

China blitzing us on renewable energy investment

When will Australia wake up to the Chinese?   They are storming ahead with investment in renewable energy.  Over 20% of all investment in renewable energy is in China.  Last year, they invested US$50 billion.  $10 Billion up on the year before.  How much did Australia invest?  US$ 1 Billion if we are lucky.  And, yes, China's economy is bigger than ours, but only 10 times bigger.  We need to quadruple our investment in renewable energy if we are to just keep pace with China.  Which, of course, we won't do, which will leave us dependant, yet again, on overseas technology and manufacturing.  We really are the dumb country that just digs dirt out of the ground and can't even be bothered to kill our sheep and cattle, prefering to ship them live instead.  What ever happened to the concept of 'value add'??

More deaths and more billions – the true price of our inaction on greenhouse gases.

170 dead and $2 Billion for the Victorian bush fires.  Over 40 dead or missing and $20 Billion for the Queensland flooding.   Homes ruined, livelihoods destroyed and billions more for flooding in the other states. Suicides, depression and broken families during the drought with a cost to our economy of tens of billions of dollars.  These are the true costs of our politicians inaction on reducing greenhouse gases.

These gases, that keep our planet some 30 degrees warmer than the moon, were identified 140 years ago and we have been warned about the impact on our climate for over 50 years.  Impacts which we are seeing, not just in Australia but around the world. 

Yet what do we hear from our politicians?  They wring their hands and put on their saddest faces.  They talk about commissions of enquiries.  They throw out some quick fix solutions - change the planning laws, build a levee, increase building regulations, build a dam. But do enough of them give a damn, beyond getting themselves re elected?  Hopefully, more and more of them do, for how can anyone still claim that “climate change is crap” after witnessing the last 12 months of climate carnage around the world.

The ball is now firmly in the Coalition’s camp.  They should throw out their federal leader who has delayed the action that the majority of Australians demand. They should then work with The Greens to move us from our dependence on job poor, 19^th Century, fossil fuel technology to the job rich, 21^st Century of renewable energy, clean air and a healthy climate.

Have we all been suckered in by China?

Over the last few years China has welcomed overseas factories into their country and rigidly controlled its exchange rate to make its exports simply irresistible to the West. So where does that tactic leave China now? Well, let’s see.

• First they have state of the art, modern factories designed and funded by the West – but which are still 51% owned by the Chinese government.

• Second they have learnt from the manufacturing expertise that Western companies have introduced and then copied and duplicated many of their products.

• Third, they have taken the West’s cash in return for goods and then lent the money back to the West, effectively giving them the ability to bankrupt many Western economies, thus discouraging Western countries getting too heavy handed with them.

• Fourth, they are now in a position that, if they worked together with the governments of the Middle East – where, remember, all the oil is and who also have vast foreign reserves - they could potentially control the global economy.

• Fifth they can use their foreign reserves to manipulate smaller countries currencies and make even more money.

Damned cunning these Chinese. They have taken the West’s insane consumption fetish and drive for globalisation, linked it with corporate greed and the short term thinking of Western capitalism and quietly put themselves in a position to potentially dominate world trade and finance.

Awesome, eh!

Climate Change and Ockams Razor

I used to be a climate change sceptic. That was about 10 years ago, but having witnessed horrendous floods in the UK and the continuing droughts in Australia I researched all the arguments for and against and then took an Ockams Razor approach:

1. Something keeps the earth some 30 degrees warmer than the moon
2. Nearly 200 years ago Joseph Fourier theorised that it was the atmosphere
3. 150 years ago, John Tyndall identified that only water vapour, carbon dioxide and ozone blocked infra red heat from earth escaping back into the atmosphere.  Oxygen and Nitrogen, which make up 99% of our atmosphere, had no effect.
4. Methane, Nitrous Oxide and CFCs have also been identified as greenhouse gases.
5. Burning fossil fuels and general industrial processes release carbon dioxide and other greenhouse gases into our atmosphere
6. Greenhouse gas concentrations in our atmosphere have been increasing
7. Global temperatures have been warming.

I may be slightly misquoting Mr Razor, but I do see that the simplest explanation is usually the right one.  Particularly so as, having studied all of the counter arguments, non of them stand up to peer reviewed assessment as having any long term affect on global temperatures, though some do have short term impact.

Where things get more problematic is the impact of a warming planet on our climate.  No one really knows how it will impact, especially at a local or regional level.  However the predictions made over the last 50 years or so of melting ice, greater extremes of climate, longer and deeper droughts, greater precipitation leading to flooding, more powerful storms, more prevalent heat waves and bush fires all seem quite logical from a warmer atmosphere and seem to be playing out around the globe.

You have to also take into account the level of risk.  Current predictions are for temperatures to increase over the next 90 years from 1 degree up to 6 degrees.  1 degree itself would cause some problems.  6 degrees would be catastrophic.  For comparison, if we were going to be 6 degrees cooler, we would be heading for the last ice age where New York and London were under meters of ice.

I don’t know about you, but that is not the sort of risk that I would like to gamble on for my kids and grandkids - a new one of which is due any day now - grandkid, I hasten to add!