Politics

The Gold, the Red and the Green

There has been one constant in the defining struggle in politics over the past two centuries. That struggle has been between those who want more of their country’s resources and incomes to be “fairly” shared on some politically determined basis, and those who want the incomes and resources to be retained by the people who earn and own them, allowing those people to consume their income and wealth with minimal restraint on the direction of such consumption.

We might best define that struggle on a collectivist–individualist axis. Over the twentieth century and in the centuries that preceded it, insofar as domestic politics was at issue, the major battleground of the struggle was between socialism and free enterprise.

Failure of the great socialist experiments of the twentieth century demonstrated that the pursuit of individual self-interest, private ownership of property and competition in commerce has no rival in the creation of high living standards. But, as the slogans of the Occupy Wall Street (OWS) protesters demonstrate, income and wealth “redistribution” remains a siren song for those who don’t understand or don’t care how wealth and income are created. The OWS movement’s signage is the primal scream of a new generation requiring to be disillusioned anew. But real-life examples of the damage of forced redistribution are fast disappearing.

The OWS movement is however a sideshow, since in the past thirty years we have seen the emergence of environmentalism as a new dimension in the collectivist–individualist struggle. This has been largely focused on the use of natural resources, with the two sides ranged against each other in terms of trade-offs between private and communal use on issues about how land and mineral development is owned and controlled, use of the atmosphere and water, and the sorts of goods and services that may legitimately be offered for sale (or free distribution).

Environmental collectivists in earlier times were, like their less successful brethren the consumerists, genuinely concerned citizens operating within the mainstream and seeking to smooth what they saw as undesirably rough edges in a capitalist system that was in most respects quite satisfactory. But either through taking over and radicalising existing organisations (as occurred with the Australian Consumers Association) or forming new ones, these concerned citizen groups have been converted into “useful idiots”.

The modern militant environmental activists share with the socialists a reverence for authoritative self-selected leadership guiding the general populace. However, they differ markedly from the collectivists in the socialist mould in terms of the goals to which resources should be directed. The socialists sought equality of incomes and developed a theory which claimed that this would also be accompanied by more efficient production. Environmental collectivists see the struggle focused on preserving the natural environment from human use and, where possible, returning it to an arcadian pre-industrial condition. The central goal is to have conventionally defined productive use reduced. Some, though not all, in the movement recognise that this also means lower income levels. Environmental collectivists see greater value in the unpriced benefits in minimising urban development, farming, forestry, fishing, water use and mining. In some cases they prefer to see no human access to these resources.

Where environmentalists’ claims have most merit is with assets that were previously so abundant that they were unowned but have since become scarcer and subject to conflicting uses. The atmosphere is among these, as are certain seas and rivers (those where the waters are not already owned and where the ownership has imposed costs on people downstream). Processes are required for resolving these conflicting uses where the property rights may have shifted or evolved.

In most countries the collectivist arm of this confrontation has become dominated by political movements that label themselves “green”. The movement’s aspirations have moved well beyond the resolution of conflicts into seeking to control private property that might impinge on public goods.

In this, they share much in common with, indeed are often leading components of, the OWS movement and other political overrides of private decision-taking. It is, as the Marxists would say, no coincidence that with socialism diminished in credibility and popularity, communists like Lee Rhiannon and Adam Bandt moved to the Greens. In this respect the watermelon epithet which has been used to denigrate “greens” is more accurate than some of its original formulators realised.

With both greens and socialist collectivists, the battle lines blur over particular issues. Thus, with some issues, green collectivists find common cause with interests that are more akin to the genteel concerned citizenry that earlier comprised the environmental movement.

This can be seen in the campaign of the London Daily Telegraph against further urban development in rural England. In that campaign, which is mirrored in other countries, a conservative journal is seeking to redefine some individual property rights so that they are used for the benefit of others. Beneficiaries of this are those incumbents in the areas where housing development is proposed who see use of their neighbours’ land for more housing as reducing their own land values. Other beneficiaries include recent purchasers of housing close to other areas near urban centres, who paid a premium price for their properties as a result of restraints and would see new housing depress those prices. To a lesser degree, all incumbent owners gain from restraints since these raise the land value of all properties other than the mainly farmland that is excluded from commercial development. The losers are the land-owners whose property rights have been partially collectivised and those who face excessive housing costs as a result of land access regulations.

This common cause between conservatives and greens on environmental matters has its counterpart in contemporary issues regarding socialist control of the means of production. While there is no longer any plausible or large group of people calling for government ownership of the means of production, there are conservatives who share common ground with socialists in the successor agenda to this, namely areas of industry policy with what is sardonically referred to as “winner-picking” by governments. This normally means government selecting promising areas of development and assisting firms in those areas. The idea is to preserve a considerable scope for individual initiative and property rights, to bring operational efficiency, by not discriminating in favour of particular firms and, by and large, avoiding the waste inherent in direct government investment. Even so, the success rate of such policies is very low.

The allure of planning to avoid the seeming waste of resources moving into blind alleys is long-standing. The Institute of Public Affairs in the early part of its seventy-year history was among those conservative voices in favour of tariffs and selective industry support and the policies remain attractive to many on the right of Australian politics. Among more recent exponents is the Australian-born chairman of Dow Chemicals, Andrew Liveris. In his book Make It in America: The Case for Re-Inventing the Economy, Liveris has called for government identification and support for selected industry sectors. While not seeking in the words of the British Labour Party’s Clause 4 (repealed in 1995) to seek “common ownership of the means of production, distribution and exchange”, this does move towards such a position. 

Collectivisation, whether socialisation of property or in its modern environmental dimension, generally means diverting income-producing assets to activities that will produce less value in its conventionally measured sense. It may well have been the case that the reservation of vast parkland tracts for, say, the Great Barrier Reef brought greater benefits than if the resources were to have been left to private ownership, but each such increment adds less value.

Collectivisation of Australian land accounts directly for around 11 per cent of the nation in designated national parks, with a further 15 per cent under indigenous ownership and control. However, land use regulation, environmental requirements, planning and heritage requirements and planning restraints for urban development mean the remaining 74 per cent of the nation is also semi-collectivised.

All of the restraints on individual use divert activities away from the uses that individuals who own the resources would prefer. In addition the creation of the rules necessitates a bureaucracy which can be successfully overcome only through extremely costly procedures. As an example, for those who want to build a new house on land previously used for farming, Victoria’s Growth Areas Authority has identified over 500 regulatory steps that must be navigated. This is before a house can be constructed even in an area designated as within the Melbourne Urban Growth Boundary.

The costs of inflexibilities and bureaucratic paperwork can never be accurately assessed. However, in agriculture production has stagnated—ABARE reports that output over the past forty years has increased a mere 0.3 per cent a year. This is in spite of massive advances in pesticides and new plant varieties—though green pressures have prevented many of these that use genetic modification being grown in Australia (and in the EU).

Much of the stagnation of agriculture has been the result of withdrawing land from production in certain areas, excluding land from clearing in pursuit of international Kyoto agreements, and denying the use of water. With respect to irrigation, allocations are being reduced in the Murray-Darling Basin, which produces one third of Australia’s agricultural output. These restraints on water use, which are planned to increase, are motivated by chasing an illusion that we should transform the nation’s most prolific “working river” into an environmental totem. In fact the outcome of returning the river to some previous ideal, as well as destroying productivity, would be most unwelcome in view of its natural swings from flood to parched trickle. Other restraints prevent the use of water in the northern “wild rivers” for irrigation.

Unlike agriculture, mining development has proceeded rapidly in Australia. This is in spite of increased regulatory controls and excising of land with mineral potential through national parks, Mabo restraints and the like. The extent of this regulatory restraint is such that it is unclear what the counterfactual would be. It is certain that even faster development could have been possible and in this regard notwithstanding some pressures on labour supply, it must be remembered that mining employs only 1.5 per cent of the labour force.

The costs of transferring assets to collective decision-making is not always clear, especially since the damages are likely to be in the form of forgone income increases. But the costs are real and manifest in terms of poor resource use, wasteful expenditure of government and private resources to assess the merits of particular uses, and discouragement of enterprise. All of these mean less output for the economy and lower living standards.

These measures are proposed to be augmented by imposing special new taxes on mining activity, taxes originally proposed, with Greens support, to provide higher levels of government spending and which are now at least for the present confined to the two most important mineral products, coal and iron ore.

The Australian government, in introducing a tax on domestically consumed fossil fuels, is adopting a policy that may be unique, in that it involves the nation deliberately sabotaging its own competitiveness by shackling the industries that represent the highest value in terms of productivity: coal and electricity. It would be worse than the United States abandoning information technology or Denmark deciding that dairying should be phased out—worse, because of the ubiquitous nature of fossil-fuel-sourced energy in the economy and because the alternatives come with very low levels of productivity.

In the light of the impending legislation, the forward wholesale price of electricity for the fourth quarter of 2012 compared with the current year is up by $20 per kilowatt hour, or more than 60 per cent.

Proponents of the carbon tax concede, albeit reluctantly, that their policies will mean lower income levels. They have to admit it because the Treasury modelling which lends them respectability says that will be the case. That modelling elevates Treasury into the world of technological forecaster, since it has assumed the emergence of new technologies, such as carbon capture and storage, and low-cost wind power. And this comes on top of the heroic assumptions, against all the evidence, that the whole world will swing behind the tax.

Perhaps even more importantly, Treasury has not drawn its willing political supporters’ attention to the fact that its modelling is circular—it shows increased productivity because this is one of the assumptions. So no matter how heavy the sledgehammer taken to economic drivers, the model would inevitably forecast increased national income. This would be the case if the carbon tax was at $23 or $1000 per tonne.

Although the Treasury forecasting arm tells the Labor–Greens coalition that, even with its fantasy assumptions, according to the modelling income levels will be lower, the politicians and their auxiliaries in government and among government-financed institutions don’t really believe it. They tell us about the merits of getting in on the ground floor with these new industries which will give us the incentive to develop Solyndra-like factories that will take the Chinese and Indian markets by storm twenty years hence. Solyndra, like its smaller-scale variant, the Victorian windmill blade factory that got taxpayer funding to open up a new world-conquering infant industry, went into liquidation. Government-created industry champions just never seem to cut it. 

There appear to be constant and at times irresistible pressures to shift resources towards collectivism and politicisation of decisions that were previously under the control of individual owners or discoverers. Rarely does the shift take place in the opposite direction. Testimony to this is the almost inexorable increase in the share of government in national incomes. It seems that only the onset of economic catastrophe produces the sort of wind-back of government seen in the Thatcher years in the UK and more recently in Scandinavia. Even the imminence of disaster has sometimes not led to pressures to reverse the trend, as can be seen in Argentina over many decades and, more recently, in Venezuela. We have not yet seen any nation reversing the green regulatory communalism that is now far more pervasive than the socialist framework of the twentieth century. 

Alan Moran is the Director of the Deregulation Unit at the Institute of Public Affairs.

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