Economic literacy for environmental advocates – notes from presentation by Richard Denniss (The Australia Institute)

MISLEADING ‘ECONOMIC’ ARGUMENTS

We shouldn’t spend more money on renewables etc because Australia has a large deficit

Politicians often refuse to spend more $ on pro-environmental actions, arguing it’s too costly and will increase the public deficit, BUT:

  1. We have the third lowest debt in the world.
  2. Many Australians go into debt to buy a house, and call it an investment.
  3. In 1950 when our GDP was 1/8 its current size, the government spent a massive amount of money building the Snowy Hydroelectricity scheme.

It’s not that we cannot afford it, it’s because the top end of town (in politics and business) doesn’t want it. A sensible country would borrow $s for renewable energy and public transport infrastructure.

We need to understand big numbers:

GDP in Australia is $1,400 billion (i.e. $1.4 trillion), therefore a figure like $10 billion is nothing (‘a rounding off error’). The Australian government is borrowing $100 million a day (i.e. $5 per person per day) – a figure some argue is a high debt but it’s not relative to many other standards. We’re about to spend $50 billion building 12 submarines to replace other submarines that weren’t being used. Opposition hasn’t complained about this because they realise it’s pocket money.

Australians pay high taxes

Joe Hockey and others in Opposition often refer to our high taxes. In reality we are the 6th lowest taxing country (from the 34 OECD – developed – countries).

Businesses want a free market economy

There’s no such thing as a free market. Free markets imply an Adam and Eve state. You cannot have a market without rules and regulations. While fossil fuel industries decry carbon taxes they love government subsidies. They make a lot of noise about the regulation they hate. The truth is they love some regulation and hate other regulation.

We must not risk job losses

In Australia this month 350,000 people will move from a state of employment to unemployment. In the same month 360,000 people will move from being UE to employed. This will be described as an increase in employment of 10,000. It doesn’t take into account all the upheaval involved. It’s ridiculous to argue against something on the basis of job losses. Privatisation of electricity by Kennett cost 10,000 jobs, yet that wasn’t a big deal.

DEFINITION OF ECONOMICS: “The science of the efficient allocation of scarce resources.”

When you use up a scarce resource (be it time, a commodity, water etc) you lose the opportunity to use it elsewhere. So if the govt spends money on building roads it has less money to spend on building railways. This is referred to as ‘opportunity cost’ or ‘the production possibility frontier’. If we understand that scarce resources once used for one purpose are unavailable for other purposes we can start talking about allocation.

Businesses rarely confess to the fact that making profits is their priority (witness Twiggy and his claims that he’s concerned about jobs for indigenous people and employment in remote communities). Similarly they will never tell Fran Kelly they’re doing well – firms have no incentive to confess their profits.

When you provide a business with free access to a resource (eg free labour through slavery) their supply increases.  Often free access to a resource (eg water, the atmosphere etc) is not valued. (Consider all-you-can eat buffets where people heap their plates with food but a lot of it is left uneaten). So if you want to ‘efficiently allocate scarce resources’ you need to charge for them.

Giving fossil fuel companies free waste disposal (into the atmosphere) is inefficient. We don’t give the construction industry free hard waste disposal. We now realize the atmosphere is a scarce resource but in the 1900s it was thought to be abundant. Where the politics of economics gets hard is when we’ve already set off in a certain direction (i.e. providing free use of atmosphere).

Notes taken by Lizette Salmon, 5.12.12

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