Last evening
Monday 17 June 2013 Professor Ross Garnaut of the University of Melbourne launched
the Australia21 book “Placing
global change on the Australian election agenda: Essays on vital issues
that are largely being ignored”.
Following is
the text of his address to the invited audience.
ADDRESS
For over a decade I have been talking about The Great
Australian Complacency of the Early Twenty First Century. The book that we are
here to launch today represents an uncomplacent and thoughtful effort to bring
Australians closer to the large challenges that are part of their contemporary
reality and of the reality within which Australians must make their lives in
the years ahead. We and our successors face these challenges whether we are
aware of them or not.
Australians over the past decade and now more than ever enjoy
the highest incomes that they or their forebears have ever experienced,
absolutely and relative to the main developed countries against which we have
habitually compared ourselves. At the turn of the century, our average incomes
converted into international currency were significantly below the average of
the United States, the European Union and Japan. Now we are one quarter higher
than the United States, one third higher than the European Union and one half
higher than Japan. The proportion of work-age Australians in employment is now
well above that of the United States, when two decades ago it was well below.
Our net exports of beverages were about zero when Australia
embarked upon a great venture of economic reform thirty years ago. They rose
steadily and strongly for nearly twenty years, reaching a peak at the
remarkable level of 0.25 percent of GDP. Now in the Great Australian
Complacency we are drinking the surplus ourselves. I have described this as a
journey from Champagne to Coonawarra and back to Champagne.
When we embarked on that reform venture, about 50% more
Australians travelled abroad for tourism than foreign tourists came to
Australia. By the early years of this century, that ratio had been reversed: we
were receiving 50% more visitors than Australians were travelling overseas. Now
we are back to the old ratio.
Much the same story is told by total exports of manufactures and services.
These recent years have been good times, with Australians
enjoying an abundance of consumption well beyond the experience of earlier
Australians or by citizens of other substantial high-income countries.
And yet the conventional wisdom has it that Australians are
doing it tough. Our political leaders have spent the past decade empathising
with the pain and suffering of Australians, and doling out cash palliatives.
These last ten years were the best of times to accept a
small fall in current consumption to begin the process of decarbonising our
economy, and so to match part of the efforts that Chinese, Americans, Japanese,
Koreans, Brazilians and Europeans are making to reduce greenhouse gas emissions
and to reduce the risks from dangerous climate change to the welfare of future
people in Australia and all over the world.
Just last year we put in place policies that allow a modest start on what will be a long journey to decarbonisation of our economy. The results of those modest efforts are showing up in a notable downward shift in the trajectory of our greenhouse gas emissions, albeit of smaller dimension than will prove to be necessary.
I will come back to that in a moment.
This volume brings to our attention many of the big issues
that could blight the lives of future Australians if we do not deal effectively
with them now; climate change; challenges to energy and food supplies; threats
to ecosystems that are important and perhaps fatefully so to our civilisation;
risks from short-sighted use of chemical processes; and unpredictable
consequences from loss of senses of community and place.
As we read these thoughtful contributions to discussion of the big issues facing Australians, we should keep in mind that modern economic growth and all of the social, political and biophysical change that go with it are young and raw. The progress of modern economic growth frequently throws up surprises—sometimes pleasant and sometimes existential threats to economic growth and to our civilisation. Humans living today in Australia and also in much of the rest of the world are heirs to the investments that have been made by earlier generations in recognising and dealing with challenges before they overwhelmed societies, polities or economies.
Sometimes the foresight of our forbears was incomplete and
the responses flawed. The consequences of those past errors are small compared
with the consequences of our failing on some of the big issues that are brought
to our attention in the work that we are launching this evening.
This is the thought that I hope that Australians will keep
in their minds as they read the contributions to this important volume.
Australia 21 seeks to get us discussing the big questions
rather than to give us the answers in a package.
Let me then add a couple of points to the discussion.
First, I suggest that we think hard about what we mean
before we draw take a hard position against economic growth on the grounds that
it damages ecosystems that are important to life. Sure, current patterns of
economic growth have those effects. But economic growth is not inherently in
conflict with conservation of the natural environment. Increases in human
material well-being (and that is the proper definition of economic growth)
derive from increases in population, in the amount of capital used by each
worker, and increases in productivity (increases in output per unit of capital
and labour applied).
Yes, inexorable increase in population is by definition in
conflict with finite natural resources. In our experience so far, increase in
material standards of living is the one reliable way of reducing fertility
below replacement levels and ending population growth. This process has turned
out to be stronger than the edicts of Imams as well as Popes.
Increases in capital per worker can be resource-saving or
resource using. There are many examples of resource-using investment. But there
are also resource-saving increases in the use of capital-Japan in the late
seventies and early eighties is one example. Watch and you may likely to see
another and larger example in China in the years immediately ahead.
The same goes for productivity growth deriving from
technological change. Much technological improvement results in less pressure
on natural systems per unit of economic value that is generated.
When we see economic growth in this light, we do not need to
make enemies of the whole of the developing world’s people as they seek higher
standards of living.
When we see economic growth in this light, we recognise that
the important thing is to make sure that we put in place policies that
encourage resource-conserving and discourage resource-using capital
intensification and technological change.
That is what has Australia has done in a small but so far
effective way with its carbon pricing and associated clean energy policies. The
link of the carbon price to that in the European Union will probably lead to
lower carbon prices for a while and diminished pressure for use of
carbon-conserving investments and technologies. However, the presence of the
carbon pricing causes firms to consider the likelihood that European prices
will rise in future, and to think twice about the carbon intensity of future
output from investments that they are making now..
To expect Australians to put the welfare of future
Australians near the top of their priorities may be too much to ask as we live
through what I hope are the later days of the great Australian Complacency. But
surely it is not too much to expect that we will not make things worse, by
retreating on the modest steps forward that we have made in addressing one of
the great challenges facing our people.
Ian Dunlop has contributed much to Australian discussion of
the issues for the future by drawing to our attention the need to reduce our
use of fossil fuels. He has two good reasons for this: fossil fuels, first of
all oil, are not finite, and would not always support human use at the current
intensity, let alone the levels to which intensity would rise if recent trends
were to continue. And climate change.
I myself would be less worried about our prospects for
avoiding dangerous climate change if we were closer to peak fossil fuels. If
the known reserves of oil and coal and gas were one tenth of current levels and
the prospects for greatly expanding them were poor, the prices of the fossil
fuels would be high and rising. Business would be getting on with the job of
developing alternative sources of energy, supported by government support for
innovation in new technologies. The commercialisation of known alternative
technologies would be accelerating.
If peak fossil fuel were approaching, the world of energy
would look a bit like it did for a while when the developed countries received
a scare about the security of oil supplies in the 1970s. Even the great oil
companies developed branches and subsidiaries directed at alternative sources
of energy.
No-one would be talking about declining uses of fossil fuels
being the end of economic growth, or the end of the historic convergence of
many people in the developing countries towards the material standards of
living of the developed world. We would celebrate the reduction in Chinese
manufacturing costs for solar photovoltaic panels by 90% between 2008 and 2013.
We would make sure that the progress in use of algae as a source of bio-fuel,
reported by Julian Cribb, was amply funded. We would calculate that the
development of an alternative energy system that did not depend on fossil fuels
a few decades hence would take just a small proportion of the increment of
incomes if we managed our economy well. We would take note of the Japanese and
Chinese investments today in reducing the costs of batteries to drive electric
cars, note the Chinese intention to have 5 million electric vehicles on the
road by 2020, and calculate that the transition to cars without conventional
fuel would be much cheaper in a few years than it would be today.
The transition to a low-carbon economy is difficult not because it is technologically complex or economically costly, but because, prior to the peak oil and peak fossil fuel crashing upon us, it depends on human foresight and sound policy.
This collection places a great deal of emphasis on climate
change, as it should. It is a diabolical policy problem because of the way in
which human frailty gets in the way of conversion of the science and the
technology into a solution.
Ross Garnaut
University of Melbourne
17 June 2013
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