photo credit: gruntzooki

David Smiley

– Research Associate in the Department of Economics at Macquarie Uni

In a previous article we tracked the failures of massive international efforts to reduce four global problems: poverty, human rights abuses, the degradation of the planet, and war. We asserted that these four problems cannot be solved separately and that none can be solved without land reform. We started with war, surveying theories of conflict offered by psychology, sociology, history, politics and economics. We concluded that they had little relevance beyond western society, and that they paid insufficient attention to conflict over land and natural resources. In the present article, though we will examine a surprisingly wide range of actual conflicts, we will find, in nearly all cases, wars are fought over some form of dispute over land. In the next article we will compare methods of conflict resolution.

INTERNATIONAL WARFARE
Imperialism has been defined as the control by one country over the territory of others, and with colonialism as its main form of implementation. In Africa and Latin America colonists simply pushed native populations into progressively less fertile land until they were forced to leave their traditional lifestyles and work for wages on the colonists’ estates. In other parts of the world, such as India, this process had already been completed by hereditary princes who now had to pay taxes to the invading imperial powers. As Edward Said, in his book on imperialism, said: “The main battle in imperialism is over land, of course”. Neo-imperialism can be defined as the control by one country over the energy and mineral resources of others. (See Ideological wars).

International wars. The realist school of international relations contends that the nation-state system is essentially a war system. Political clout, weaponry, national pride and diplomacy all give shape to wars, but the cause is always in relative deprivation of land and natural resources. National borders, the basis of sovereignty, have resulted from previous wars or from arbitrary subdivision. For example, in Africa and the Middle East many borders follow lines of longitude and latitude running through uninhabited desert. But straddling these lines are quite different, and therefore contested, borders around immense reservoirs of oil, gas and water. And where these extend under the sea, or under the ice, new forms of resource rights and resource conflict emerge.

Ideological wars. Those of fascism and communism have, for the time being, faded and been replaced by an Islamic fundamentalist form of warfare. Since this appears to have taken western social sciences completely by surprise, we will tread carefully here, noting only some implications of resource exploitation and leaving an analysis of western responses to the next article. The realist school of international relations sees the emergence of Islamism as two responses to economic and social changes following the arrival of Western oil companies. The internal response arises from Islam’s approval of hospitality and sharing, and its disapproval of greed. These Islamic values are seen as contradicted by those who now collect and hoard rentier wealth, a leisure class of elite sheiks, who must be overthrown.

The external response to the west reflects Islam’s humiliations: previous humiliations from western colonial intrusions, and new humiliations from western culture and from western superior technology and economic organization Both are responses to a threat to destabilize a powerful religious, cultural and very traditional society, and both concern the rent of natural resources. In May 2008 Osama Bin Laden then put land in the forefront of this whole debate, claiming that the Israeli-Palestinian conflict was at the heart of the Muslim battle with the West.

CIVIL WARFARE
Revolution. As we found in the previous article the roots of revolutions lie, not in capitalism, but in a downtrodden agrarian peasantry, as in France, Russia, Latin America and China. Revolution occurs when the aristocracy extracts a surplus (land rent) large enough to push the peasants down below the level of subsistence. Even the so-called industrial revolution that inspired the Communist Manifesto of Marx and Engels was fuelled by surplus agrarian labour driven from its land by aristocratic enclosures.

Secession. Often disguised as a war of ethnic liberation, secession is far more likely to be recognized as an opportunity to control a region rich in minerals or oil. Not surprisingly, the national government will fight the “rebels”, to the limit of the value it stands to lose. Biafra took much of Nigeria’s oil industry with it when it seceded, leading to four years of civil war. Chechnya’s interest in the oil pipelines and rail links vital to Russia precipitated its resistance movement and its ruthless suppression by the Russian government. Underlying civil conflict in Tibet, superficially over religion and culture, is the recognition that the huge rivers flowing from the Tibetan plateau have potential control over the livelihoods of one quarter of mankind.

Self-determination, as a human right, aimed at the liberation of people under foreign domination. While helping to close a disgraceful chapter in European history, there are nevertheless some unanswered questions. Should not self-determination apply to all peoples, not just those under foreign domination? And what, in any case, is the self of a nation and who determines it? For example, self-determination often means the transfer of landed wealth from one monopolistic elite to another. These, and similar questions raised by war, challenge the concept of territorial sovereignty, answers to which are examined in a later article.

Coups. Between 1960 and 1980 military coups occurred in three-quarters of Latin American states, over half of African ones, and half of Asian ones. Attempts to explain coups by reference to a long list of social, economic and military factors have been completely inconclusive. But missing from this list is the value of the natural resource rents that are transferred to the military. In the case of Burma these values were and still are, enormous.

Land mines. Over 100 million landmines lie buried in the soil of at least 36 countries, possibly in as many as 80. These carry the potential for decades of further death and destruction. One dollar will buy a landmine. But clearing it can cost between $300 and $1000.

Disappearances. In Argentina’s “dirty wars” any political opponent of dictatorial government could be “disappeared”. In Indonesia possibly as many as half a million peasants were “disappeared” (see Timber Scarcity).

Minority oppression. The struggles of indigenous peoples and displaced people (e.g. Palestinians) centre on land rights. Refugees, already destitute (see Migration), often face violence in their new country. For example, South Africans have attacked and butchered some of the five million refugees flowing in from countries to the north. Behind the rhetoric of loss of jobs lie other explanations of violence here. Why, for example, has South African land been transferred from white elites to black middle classes instead of to the poor, why is the unemployment rate at 23 percent, and why were these millions of refugees deprived of land rights in their own countries?

EXAMPLES OF RESOURCE CONFLICT
Habitat. Dwellings sit on land, together called real estate. Owners of most of the world’s real estate are not taxed, or taxed very lightly, or taxed inefficiently and inequitably. Taxes on dwellings discourage their reproduction and maintenance. Taxes on land, however, encourage efficiency by forcing unused land into use, and encourage equity by reducing speculation and hoarding of land. (“Thousands of empty homes in a city desperate for housing” reported in the Sydney Morning Herald, May 26, 2008). Unfortunately, much government legislation, for example concerning negative gearing, rent subsidies and home loans, simply push up prices that benefit owners and push up rents paid by non-home-owners. Though inequality of land ownership has not yet led to violence in Western societies, development experts have long recognized the contribution of this inequality to violence in poor countries.

Migration. Steady urban migration in a world that was largely agrarian until recently, will place 60 percent of humanity in cities by 2030. To this must be added the irregular displacement of peoples by environmental and political disasters. But for whatever reason people are displaced, they forfeit the land and natural resources they leave behind. Then, arriving with nothing at their final destinations, they add to the land rent payable to landowners already there, while their struggle to survive in overcrowded camps, slums and shantytowns subtracts from environmental quality and adds to the sum total of frustration, anger and ultimate aggression.

Energy scarcity. The destruction of life and property arising from conflict over African and Middle East oil is seldom far away from the front pages. Less well understood, and therefore confusingly reported, are the roots of conflict in civil wars. For example, that between Nigeria and Biafra was reported as tribal warfare, that between Russia and Chechnya as a problem with Muslims. In each case it was oil.

Mineral scarcity. Conflict over minerals, frequently reported as aggression by tribal warlords, can be traced to massive reallocations of property rights in land and natural resources dating back to the European 19th century “Scramble for Africa”.

Water scarcity. It has been suggested that the wars of the future will be fought over water. There is one right now in Darfur (see Natural Trends)

Timber scarcity. The decimation, not only of the Amazon forest but also of its Amerindian peoples, has been well documented. Less well-known is the intrusion in the 1960s of US interests into Indonesian forest resources, a campaign with indirect links to the liquidation of half a million peasants who were standing in the way (see Chomsky’s book “Failed States” and Susan George’s book “How the Other Half Dies”).

NATURAL EVENTS
There are a number of causes of conflict, traditionally considered natural, which are now being linked more and more to uncontrolled depletion and degradation of our natural heritage by humans. Some are unpredictable disasters. Some are cyclical, and some now appear to exhibit some long term trend.

Natural disasters. Historically, volcanic eruptions have led to crop failure, social unrest and the decline of at least two Mediterranean civilizations. Recently, earthquakes, floods and tsunamis have led to social unrest and violence in the form of food riots. One might ask what causes people to have to live unprotected in hazardous areas.

Natural Cycles. Poor harvests, when inflicted on those already at the edge of subsistence, have led to debts to landowners. Some debts are passed down to the children of fathers who have fled to Mumbai or mothers who have fled to Saudi Arabia, all in search of work to pay off the debts. Custom and religion may delay, but have not prevented agrarian revolutions, in Latin America and China for example. But these revolutions continue to be explained unsatisfactorily by sociology rather than by Ricardo’s law of rent.

Natural Trends. Time magazine, May 7, 2007 reports that “The devastation of Darfur highlights the potentially catastrophic effects of climate change on societies across Africa. The U.N. estimates that the lives of as many as 90 million Africans –most of them in and around the Sahara- could be at risk on account of global warming. Many of Africa’s armed conflicts can be explained as tinderboxes of climate change lit by the spark of ancient rivalry.” Forecasts reported in the Guardian Weekly (March 14-20, 2008) suggest that one fifth of the world’s people could become homeless, and that fresh water supplies could fall by 30 percent. “Climate change will fuel existing conflicts over depleting resources”. Already, the media is reporting rising food and fuel riots in every region of the world.

SUMMARY
We have noted the relationship between land and natural resources and almost every form of armed conflict. In the next article we will critically evaluate four approaches to conflict resolution, idealist, legal, pragmatic and one based on a tax shift from labour and capital onto our uses and misuses of land and natural resources.

Karl Fitzgerald

As published in the Mar – April Progress magazine. Get a copy of this cane paper, veggie ink mag sent to you for 6 free editions
Related Event – Thurs April 30th – Vanuatu’s Sovereignty Surrendered
The World’s Happiest People

A 2006 study by the New Economics Foundation and Friends of the Earth found that Vanuatu was the world’s happiest nation. The study looked at consumption levels, life expectancy and happiness.

Our recent visit there proved otherwise.

Walking down the main street of Port Villa at sunset and one could feel the glaring eyes of the youth looking at the food in my hands. A riot had occurred in May. In early November, a week before we arrived, a tourist operator was bashed at the local port by a local taxi driver. Frustration boiled over because of the cartel-like control of new visitors by the expat dominated tourist industry.

With urban drift a rising phenomenon in rapidly westernising Pacific nations, the city had an edgy feel .

Something was amiss in the world’s happiest nation.

Within minutes of arriving, the eyes of a roaming renegade economist could soon see traits similar to western societies. Vacant land littered the community. Forests were being cut down on the urban fringe, rivers and streams polluted by the run off. These were effects, but what was the cause?

Vanuatu is a relatively young country, having gained its independence just 29 years ago from the French and English.

The tragedy of this opportunity is that just 29 years since independence, 90% of Vanuatu’s coastline has been sold off. Over 80% of the capital city Villa is foreign owned. Small, locally owned business is a rarity, with just 2 ni-Van owned operations located whilst we were there.

Vanuatu’s background is radical for the region. Walter Lini was their first Prime Minister (1980 – 91). He developed Melanesian socialism. Wikipedia tells us “’Giving’ was based on one’s ability to do so. ‘Receiving’ was based on one’s need”.

Lini also signed the Non-Alignment Movement. Whilst maintaining his independence, he forged closer ties with Libya and Cuba than the US. This concerned America as Vanuatu was the only Pacific country not to have signed with the pro-Western bloc. Lini ’s administration was staunchly against nuclear testing in the region. He was also a proponent of a new Melanesia where the people of East Timor and West Papua were freed.

Many ni-Van’s (indigenous) etch together a living driving taxi’s. Most locals work for expat Aussies or Chinese. With Vanuatu a prominent tax haven, some of the shadier western businessmen have descended on this idyllic life to ’start again’. It’s not hard to find web comments on how ni-Van’s are treated as little kids by these westerners with superior english.

Rayna and I were invited there to speak to the Shepherd Alliance Party, a rapidly growing political party in the volatile world of Vanuatuan politics. In what turned out to be a 4 hour presentation, I ran through the need for the people to gain a share in the bounty of the land.

Having a cultural connection to land, the many chiefs in the audience resonated with this need. We moved through how social progress and population growth naturally added to land values. One of the many Karl’s we met there summed this up as ‘magic money’. How true. ‘We must turn off the tap to the magic money of land speculation’ became the catch-cry.

Over the last twenty years much of the Pacific has moved from kastomary land title to Torrens Title. Going from a socially based form of land ownership to one where property developers are carving up their idyllic coastline with names like Barrier Beach, it was like a step back in time for a Georgist. Here we were rubbing shoulders with politically minded people in an era where their commons were being enclosed day by day.

The people are alive with the inherent understanding of the vitality of land and all the freedom it represents. In what seemed to be a light bulb type moment for the audience, the chiefs were excited by the explanation that land earns a natural bounty to be shared amongst the community in place of all other taxes. Chairman Morris Kaloran summed the essence of this up with ‘No matter what factory they have, they cant make dirt’.

Soon the chiefs passed a resolution to include Land Tax in the party’s constitution.

As with Melbourne’s ‘World’s Most Liveable’ city tagline, the ‘World’s Happiest’ tag was adopted and sculpted by those that owned the most precious resource of all – Vanuatu’s land.

Ironically, the World’s Happiness measure was meant to raise awareness that excessive consumption doesn’t deliver happiness. However, with our two dimensional economic system any such headlines can be marketed to the advantage of those same over-consumers, the wealthiest people on the planet.

Vanuatu’s main newspaper, the Daily Post (19/08/08) reported how chief Mack Paiiamaja from South Santo expressed serious concerns regarding massive uncontrolled land speculation and sub division development.

“Many of these developments have contributed significantly to creating divisions within the communities of rural Santo as a result of land disputes being generated to claim ownership.”

Meetings with senior bureaucrats revealed shocking details. Land valuations hadn’t been performed since independence in some areas. The tourist brochures reminded us that Vanuatu means ‘Land Eternal’. Surely it is valuable then?

In Port Villa it has been over 10 years since land valuations, meaning that the contributions land owners are making to the public purse via land tax are very small.

Compounding the problem, the Land Valuers office is tragically under resourced, with administration soaking up any time to value land. Four work in valuation at the Lands Department. Two people work at the Valuer Generals office. Discussions revealed that valuation skills desperately needed updating.

The Land Tribunal had thousands of disputes but only 2 people. The Lands Department was even shutting services, such was the ineffectiveness of public policy.

The plot thickened when we heard that Land Taxes had mysteriously been reduced from the 2- 3% listed online to 0.83% on pre-historic land values! An administrative decision, rather that a government decree, had led to this secretly sliding through.

A host of differential rates of Land Taxes ensure the system is confusing and open to debate. No wonder so much time is spent in administration.

Every time we mentioned to taxi drivers or people we met at the Fest Namaba1 that the land bounty must be shared with the people, there was resounding agreement. It was widely recognised that speculators were doing more harm than good.

So what was the cause to more than 25% of the population living below the poverty line?

Tax policy has been massaged by vested interests so that the direct and costly administrative control of an island nation has been replaced by the invisible chains of land speculation, forcing up rents to astronomical levels. Heads nodded in agreement when we asked whether the many living in central Villa, the educated workers of government, were paying 50% of their money in rents.

One wonders how they received such poor tax advice. Some suggest that land policy was developed pre-independence and has not been reviewed since. With the rapid increase in land privatisation, land use policy seems well overdue for a revamp. An ad hoc process is holding the good people of Vanuatu to ransom.

The easy profits being made in land speculation are tearing up the Pacific Islands. Whilst one can point to religious and racial tension as triggers, one feels that with more investigation of the Soloman and Fiji riots that these were borne of frustration at the radical change in lifestyles thrust upon them by the ‘benefits’ of westernising land title and privatising land rents. One hopes this doesn’t occur in Vanuatu, but with large numbers of unemployed young men in a town witnessing rich white folk driving around town in new hummers (!), the social contract is rapidly melting.

We have a unique opportunity to assist in finding a balance between western and kastomery land title.

What one can experience when visiting HYPERLINK “http://www.barrierbeach.com.au/”www.barrierbeach.com.au is the internationalisation of what was once a sacred resource. The land itself is now being sold off to the highest bidder in a global fire-sale. Local ni-Van’s have no chance of owning a piece of their traditional lands and taking a respectable place in their precious society.

Instead, some of the world’s most beautiful coastline is being sold off to an international coterie of property speculators who know that given enough time, they can sit back and buy and sell exotic locations for massive profits with just a few clicks of a mouse.

Morris Kaloran recounted how ‘In the 90’s there was barely a real estate agent in town. Now there are dozens of them, all making a killing’.

But the tax advice is where the real game of opportunity lies. Which foreign entities have advised the Port of Villa Municipality to charge council rates on buildings only? We are pursuing the answers through the questioning of the Senate Estimate’s committee.

No land is in the tax mix for council rates. This is precisely the reverse of what should be occurring for an effective council rating system. Meetings with senior bureaucrats revealed that many colonial landlords were given exemptions from even these miniscule council rates at the time of independence.

With all this controversy, we had to drive around the island of Effate to survey the lay of the land.

Colonialists used guns to gain access to land. Neo-Colonialists use a potent mix of land speculation, corruption and the promulgation of ineffective economic policy to massage their self interests. Nowhere is this more prominent than the lands of Roi Mata.

Roi Mata was the grandfather of Effate, the main island of Vanuatu, renowned for crystallising peace amongst the tribes. His ancestral lands at Mangaliliu were announced on July 8th, 2008 as Vanuatu’s first World Heritage Site. With signage at the front gate stating that this was proposed World Heritage land, Queensland developers somehow connived their way into clear-felling the forest and offering nine hectares up for sale. This clear-felling happened within one month of the World Heritage announcement. The buffer zone they are operating in came with a set of leasing rules that have been drastically overstepped.

Local chief Reuben Kaloris and William Kalotiti have blockaded the main access road out of concern for what is happening to this sacred land. With legal threats being thrown at the chiefs and local supporters (who are also scared that their house will be burnt down), we hope this story will reach mainstream press by the time you read this.

This clear-felling is happening for a paltry amount. Locals were told that the land would be sold for 4million Vatu (A$55,000) However, the prime beach front site was advertised at 30m Vatu (A$415,000) and is now sold. The remaining 9 sites at advertised prices will reap just $900,000. Trashing a World Heritage site must be worth barely more than a million bucks!

With the GFC accelerating bankruptcies daily, it seems like much of this pristine coastline will sit vacant waiting for the next land boom to take off. As analysts of the land market will understand, these sites will be drip fed to the market over the next 15 years, with at least one guaranteed to go for $1m. More pollution and disturbance will be about all the local community receives in return.

Of added attraction to salivating profiteers is the fact that Mangaliliu is the entrance point to the island that Survivor: Vanuatu was filmed on. Perhaps the potential of exotic marketing slogans highlighting the World Heritage status and views of ‘Survivor’ Island motivated the developers to ruthlessly cut corners. Those taglines, when combined with its intrinsic beauty, would ensure a sizeable price tag well beyond what the local bloodlines would receive in a one-off payment for this sacred land.

Please watch our short film on this outrageous controversy via www.youtube.com/earthsharing

As a demonstration of the difficulty good governance faces in the country, Transparency International, the peak NGO body fighting the ills of corruption worldwide, is represented by a real estate agent in Vanuatu.

A developer with a 2 page criminal record was recently awarded Vanuatu’s highest honour. He has the privilege of enclosing the closest, most beautiful beach to Villa.

Taken from the Vanuatu Investment Promotion Authority website, this developer says:

“To Whom it May Concern

If you are reading this letter than you have made the first step in the right direction.

To invest in the Vanuatu Islands is the smartest move I have ever made, and will be yours also.

I arrived here Independence day 2001, just divorced ravaged by tax and lawyers, not knowing where or in what I wanted for my future life.

Alone and lost I immediately felt the warmth of the people, Ni van’s and expats all welcomed me…

On the second day I started real estate hunting, I knew this was my future home, I was fortunate enough to see a double wave break on a white sandy beach not 10 minutes from town. I could not believe I could buy 1 acre on that beach, but I could, the land ownership over here is same as Canberra.”

One can be assured that the friendliness is waning today. Australians have a bad name due to the corners they cut chasing the ‘investment dream’. Another development on Mele beach sees sites up for sale on former swamp land, with the environmental destruction prevalent in clearing the site said to be positive for the community because of the removal of conditions conducive to mosquitoes and their malaria.

As we continued our drive around the island we began to see the impact of the ring road that US Aid was building. Perhaps solidifying the warmth in relations as Vanuatu’s politicians were brought back in line with Western interests, the Millennium Challenge Corporation has signed a five-year, $65.69 million Compact with the Government of Vanuatu.

This aid will deliver eleven infrastructure projects. Pro-aid websites valiantly tell us this will benefit poor, rural agricultural producers by reducing transportation costs.

It is also meant to increase average wages per capita by 15% within 5 years.

This analysis fails to register that western property developers have crept around the island buying up vast tracts of virgin land. We saw land banks for sale every 8 – 10 km’s. With a new airstrip and a sealed road, wealthy westerners can fly in, scoot off to their beach villa and hardly see the depths of poverty in Port Villa.

A new slogan was borne: ‘Foreign aid for foreign speculators’.

Our second stop saw a visit to Chief Andrew Popovi from Tanoliu. His concern centred around speculation and how little land his people had left. Chief Popovi was one of the few to know that a 10% fee was to be paid to the traditional owners when re-selling the land as a subdivision. This amount was often a lot lower than when sold a third time, hinting that perhaps third party companies were utilised to ensure that the flipping profits stayed within the walls of the wealthy.

The chief was concerned that many of the reform measures decided upon at the 2006 Land Summit had not yet been implemented. Land sale contracts are still written primarily in English, rather than including the local Bislama language.

Driving onwards through this largely unsigned country we were desperate for a lunch stop. We had noticed that Beachcomber Lodge had hot spas, the only location on the island with this natural wonder. Upon entering the site, we drove straight to the nearest spot on the beach for a quick bite before heading over to the springs.

A few bites into lunch and this loud voice boomed out from right next to us, scaring the living daylights out of us all. Before we could comprehend how this self-professed land-lord had crept up and yelled at the top of his lungs, he was preaching to us ‘How dare you enter my land, driving all over it. Who do you think you are? Where do people like you come from?’

We were rattled and couldn’t even get in a good comeback line! Where were the cameras to catch this landlord’s insecurity on film? Where were our moral rights to a seat on what is meant to be a public beach overlooking the Shepherd Islands, the traditional lands of our navigators Julie and Rivkin?

With tensions rising amongst the community about access rights to beaches and food sources, the school principal type demeanour this Aussie expat displayed was a shameful reflection of private property rights walloping human rights. I still have moments of anger flash in frustration at my inability to awaken this poor chap’s conscience. One can only imagine how he treats his indigenous ’subjects’.

If I was on my front foot I would have inquired about ‘his’ enclosures. Are the natural springs he enclosed valued at a respectable level? Is the rate paid respective of the right to privatise what once would have been a public meeting place?

We dwelled on these thoughts as we dodged pot holes, gliding through some of the most beautiful lands one could imagine. Soon we arrived at Eton Beach, the only national park we saw, where we gladly paid a 300 Vatu entry fee to the government.

We left Vanuatu shocked at the effect land speculation was having. Adding to the dilemma was that western aid funded scores of young white uni graduates to a loud, beer fuelled aussie existence. Canadian aid workers were wary of us. Western aid promoted a reliance model of handouts rather than self-help.

Let’s do something about this.

With the positive resonance experienced in discussions with bureaucrats, we are making the most of Alanna Hartzok’s Global Land Tools online course as the perfect resource for long distance learning. Within the course we have set up an EarthSharing Pacific class where participants are submitting details on land policy vagaries in their country.

Take it further by joining the class – http://course.earthrights.net/

photo credit: Torley

Selling the environment in order to save it?

Frank Stilwell

Professor of Political Economy
University of Sydney

As published in our Progress Magazine

The Rudd government’s review of climate change policies, chaired by Professor Ross Garnaut, has issued its interim report and will present its final report later this year. Many environmentalists welcomed the interim report because it stressed the magnitude of the climate change problem. The final report looks likely to be more problematic though. The main recommendation will be for the implementation of an emissions trading system. Creating a market for licences to pollute will be our big step forward. It is pertinent to ask what is being sustained here – our environment or free market capitalism?

The challenge of sustainability is fundamental and multi-dimensional.  Economic sustainability requires the reproduction of productive capacity, including the replacement of depreciating capital, whether natural, human or manufactured.  Social sustainability implies the reproduction of acceptable social structures, social capital and social cohesion. Ecological sustainability is a yet bigger challenge. It requires the maintenance of biodiversity, ensuring ecological integrity, maintaining the stock of natural capital and providing for intergenerational equity. That means that the quality of the physical environment passed on to the next generation should be no worse shape than was inherited by the current generation.

All these requirements are threatened by climate change.  The scientific community, though not unanimous, has generally accepted that the threat is real. The Stern Report in the UK shows that taking remedial action is good economics too. Agreement to remedial policy measures has a strong economic rationale as well as meeting environmental and social needs because the costs of inaction will substantially exceed the costs arising from policies to prevent climate change accelerating. So we have to carefully consider what it means to move to a more sustainable set of economic and social arrangements. Can this transition be made in a way that is consistent with concerns about social justice? Or will market criteria and the exercise of corporate power dominate?

Environmental Economic Policies   

As a professional economist, Ross Garnaut will surely emphasise environmental policies that use economic policy instruments to change market prices. An earlier report that he wrote for the Hawke government on the east Asian ascendancy argued that Australia should specialise in environmentally damaging industries because that is our comparative advantage relative to the nations of Asia. It was not an auspicious beginning for his engagement with environmental issues! One hopes that Professor Garnaut’s thinking has moved on. However, the emissions trading policy that is at the top of his – and the federal government’s – policy agenda at present has similar roots in orthodox neoclassical economic theory.

According to that economic orthodoxy, if a limit is set on the total amount of allowable carbon emissions, and permits to pollute up to that limit are issued and traded in the market, those permits will then be acquired by businesses with the greatest need to pollute and the greatest ability to pay for doing so. The prices of goods and services will then rise to the extent to which the purchase of emissions trading permits adds to their costs of production. Products whose manufacture and supply requires the burning of much fossil fuel would become significantly more expensive. Aluminium products are a case in point, because their manufacture involves the use of enormous amounts of electricity, typically produced by burning coal. Proponents of emission trading argue that, once such products become heavily taxed, consumers will seek to switch to cheaper, less environmentally-degrading products.

The implication of this conventional economic reasoning is that patterns of production and consumption will adjust to changes in market price signals. Technological changes will also create products and processes that use less of the increasingly scarce and non-renewable energy sources and create less pollution. Indeed, the changed market incentives that result from emissions trading could be expected to generate some such responses. However, the overall effectiveness of the policy in practice depends upon how strictly the limit on acceptable pollution is defined, how vigorously it is policed, whether the initial allocation of permits gives preferential treatment to existing polluters, and the conditions under which the market operates. All these practical considerations can result in the application of an idealised neoclassical theory producing a much a muddier outcome in the real world. The experience of emissions trading policies in European nations to date has not been encouraging.

One recurrent problem relates to concerns about equity, understood either as fairness or equality of sacrifice.  Wherever the price of goods rises they become less accessible to the poor.  In the extreme, access to environmental resources – even to the requirements for life itself – becomes a matter of ability to pay. A yet more fundamental concern is that economic policy instruments for ‘environmental fine-tuning’ seek to conserve the environment by putting a price on it.  ‘Selling the environment in order to save it’ is indeed a strange principle.  A narrow market logic does not recognize the more fundamental problems associated with capitalism as an expansionary economic system, and how the extension of markets created the environmental stresses in the first place. 
 
The Australian environmental scientist, Sharon Beder, has written an excellent book, Environmental Principles and Policies, exploring these problems more deeply. She shows that policies based on orthodox economics simply do not measure up against important environmental protection principles – the sustainability principle, the polluter pays principle, and the precautionary principle.  Nor do they rate highly according to three relevant sets of social principles – the equity principle, human rights principles and the public participation principle.  Assessing the proposed economic instruments for pollution control against these six criteria produces strongly negative conclusions. Another prolific Australian author, Ted Trainer, has been arguing a stronger variant of this view for many years, emphasising the environmental limits to growth that require radical changes in our economic structures, going far beyond the ‘fine-tuning’ that leaves the underlying orientation towards relentless profit-driven economic expansion unchanged.

Alternative Policies

A carbon tax would be preferable to an emissions trading system, albeit still subject to some of the same limitations of any market-based policy. Like emissions trading, its effect would be to make products whose manufacture involves intensive use of fossil-based energy resources significantly more expensive. If it replaced the existing flat-rate goods and services tax (GST), other goods and services – those not involving fossil fuels in their making – would become cheaper. Alternatively, if added to the existing GST, then the carbon tax would generate more revenue which could then be used for expenditure by government on promoting renewable energy development, for example.

Why would a carbon tax be better than emissions trading? An orthodox economist would say that both can achieve the same outcome. The former sets the permitted level of output (of carbon emissions) and allows the market price to vary. The latter sets the price and allows the output to vary, in which case the tax rate can be adjusted until the acceptable level of emissions is attained. However, what that orthodox economic reasoning ignores is the power politics. An emissions trading system hands over the market to private interests and thereby creates a powerful political lobby with an economic stake in shaping how the market operates. A few major players – particularly the electricity producers – can be expected to dominate. With a carbon tax, on the other hand, the key relationship is directly between the government and consumers. Adjustments to the tax rate in the light of experience would be politically contentious, no doubt, but less problematic than having a powerful business lobby directly contesting any attempt to reduce their number of tradeable emissions permits.

Public ownership warrants more attention in these circumstances. It cuts against the grain of the privatisation process that has been such a central theme in the neoliberal transformation of the state in Australia, and in many other nations, during the last quarter century. Public enterprises do not necessarily adopt more ecologically sensitive technologies than private enterprises. However, taking the current issue of electricity privatisation in New South Wales as a case in point, it is clear that the prospective shift from public to private ownership would close off policy options.  Privately owned energy providers have a direct stake in increasing the demand for their product.  What is needed is precisely the opposite.  We need electricity to be provided by institutions that will encourage their customers to use energy-efficient appliances and develop strategies to reduce electricity consumption.  From this perspective, public ownership, if not a pre-requisite for the adoption of more ecologically responsible managerial practices, at least keeps open the progressive possibilities.

Government expenditure and subsidies are also a necessary means of promoting the development and implementation of alternative technologies that are less environmentally damaging. Investment in more ecologically sustainable transport technologies is a case in point. It is no good making car use more expensive, for example, through higher taxes on petrol, unless there are readily available public transport alternatives. The provision of better infrastructure and public transport services is therefore a precondition for lower emissions and less per capita fuel consumption.  More comprehensive subsidies for installing solar power, encouraging the use of renewable energy sources and providing the industry policy arrangements necessary for the development of alternative technologies can also contribute directly to more ecologically sustainable outcomes.

Direct regulation is the yet more emphatic role for government. It is implied in ‘cap and trade’ emissions trading, to the extent that the ‘cap’ (on the total amount of permitted carbon emissions) is set by the government regulator. More regulation is anathema to neoclassical economists because they regard restrictions on economic activities as less sensitive than market incentives to change. But  the outright prohibition of particularly environmentally hazardous activities may be increasingly necessary. Having a high energy-efficiency rating could be a condition for permitting particular electrical goods or motor vehicles to be on the market at all. Getting serious about sustainability needs changes to the market rules, rather than allowing the market to rule.

Global Dimensions

It is at the international scale that yet more dramatic challenges arise. Three are particularly important – the challenges arising from uneven development, from neoliberal free trade policies and of making transitions to local production for local consumption. A radical paradigm shift is implied, going well beyond the current agenda of the Garnaut review.

The problems that result from uneven development are fundamental. Glaring international economic inequalities require that the more advanced industrialised nations take a lead in substantially reducing carbon emissions, as a precondition for gaining the cooperation of poorer countries.  The latter are understandably more reluctant to embrace policies that they see as likely to slow their rates of economic growth, unless they see yet more vigorous initiatives from the wealthier nations. A recent report, International Assessment of Agricultural Science and Technology for Development, illustrates the importance of this distributional dimension. It notes that “the unequal distribution of food, and conflict over control of the world’s dwindling natural resources, presents a major political and social challenge to governments, likely to reach crisis status as climate change advances and world population expands from 6.7 billion to 9.2 billion by 2050″. The report further argues that the present system of food production and trade has created a very unequal distribution of benefits and created serious adverse ecological impacts, contributing to climate change.

We must surely be coming to the end of the period of neoliberal globalism in which creating unrestricted growth of international trade has been the dominant drive. The challenge is not just to a dominant economic ideology though.  It is also to the power of the transnational corporations that are so dominant in the capitalist economy today, and to the World Trade Organisation, the International Monetary Fund and other institutions that are deeply wedded to economic practices that prioritise profit-seeking over deeper societal and ecological concerns. The free trade policies promoted by these institutions are prodigiously expensive in terms of energy and other scarce resources. Bilateral trade agreements are equally problematic because they frequently inhibit the autonomy of national governments, including their ability to implement environmental protection policies.  Yet Australia is locked into such agreements, such as the free trade agreement with the USA, and other similarly restrictive agreements are currently being negotiated.

Australia’s capacity to transform itself into an international environmental exemplar is also constrained by its economic dependence on mineral exports. It is the world’s largest coal-exporting nation. This creates a particularly strong tension between the economic gains from environmentally unsustainable production and the moral imperative to embrace radical reform.

It would not be practical to envisage the Australian coal industry being closed down in the next few years,  but the Rudd government needs to introduce a transitional program if it is serious about making the structural changes in the economy that are necessary for ecological sustainability in the longer term. That transitional program would require arrangements for shifting workers to new, sustainable jobs, and regional policies to address the particular needs of coal-mining areas like the Latrobe valley, the Hunter valley and the Illawarra region. The development of those industry policies and regional policies would indicate a government commitment to actively engage with the challenge of climate change, going beyond the easy options. But don’t hold your breath waiting for the Garnaut review to embrace interventionism like this that lies ‘beyond the market’.

Nor is the principle of ‘local production for local consumption’ likely to get a guernsey. This principle is the antithesis of the neoclassical economic orthodoxy that has underpinned the push for free trade and the growth of international trade agreements. It is a heresy deserving particular attention in the current environmental circumstances though. A prodigious use of energy and transport resources is involved in moving products around the world to increase the variety of products available to consumers. The ‘global supermarket’ rests on factory production and agribusiness activities in low-cost nations and complex networks of long-distance sea, rail, road and air cargo movements. These arrangements are not sustainable in the context of increased resource scarcity and the threat of climate change.

There is sometimes an environmental economic rationale for long-distance transport. It is better to import pineapples to Tasmania than to grow them locally, for example, because the latter option would be technically feasible but highly energy-inefficient. However, introducing energy-efficiency and environmental criteria into considerations of trade would generally favour more local production for local consumption. Some consumers are already starting to recognise the advantages – including food freshness – of consuming products that are local in origin. The embrace in government policy of a preference for local rather than global sourcing would indeed signal a significant paradigm shift.

The Politics of Change

We are not on the ‘level playing field’ assumed by orthodox economic theorists. It has been dramatically tilted by the problem of climate change, and furrowed with the problems of resource depletion, uneven development and the unsustainable character of current economic production and transportation. These complex problems cannot be adequately resolved by creating markets for licences to pollute nor by tinkering with the price system. The emissions trading system expected to result from the Garnaut review is a modest starter, at best, and perhaps a false start.

A more comprehensive policy package is necessary, breaking with the neoliberal orthodoxy that prioritises market arrangements and the extension of trade. Charting that radically different direction is the big political economic challenge created by concerns about climate change. It confronts two interrelated constraints – one arising from the vested interests of corporate capital and the other arising from the timidity of government.

The constraint imposed by business interests and organisations is particularly problematic. As Clive Hamilton documented in his book, Scorcher, corporate interests in Australia have played a pernicious role in obstructing the embrace of more ecologically responsible policies. Of course, businesspeople are citizens too, and ultimately just as vulnerable to the problems of climate change and environmental decay. In the short run, however, many of them profit from the very activities that create the environmental problems. That is the sense in which the challenge of sustainability is a class issue.

Business organisations are not monolithic though, and there are promising signs of awareness about the need to change.  Some are embracing principles of corporate social responsibility and a triple bottom-line accounting that monitors environmental and social, as well as financial, outcomes of business activity.  It remains to be seen whether the rhetoric is matched by behavioural change. Meanwhile other business interests remain dug in to reactionary positions. A recent editorial in the Australian magazine Wealth Creator began by saying ‘Kevin Rudd’s decision to sign Australia up to the Kyoto protocol could cost the country billions of dollars and hundreds of thousands of jobs’. This sort of aversion to anything that threatens their short-run profitability is a long-standing feature of capitalist businesses, as is the attempt to represent the threat as one to the nation or to their employees.

The constraint imposed by governmental timidity is equally troublesome. The federal Labor government led by Kevin Rudd is evidently committed to differentiating itself from its environmentally negligent predecessor. That is a good start. So too was its signing of the Kyoto protocol immediately on coming into office. Environment ministers Penny Wong and Peter Garrett also have strong personal commitment to making lasting change, but they operate within evident political constraints. The continuing adherence of Federal Labor to neoliberal economic principles – and Kevin Rudd’s own declared preference for a conservative approach to economic issues – bodes ill for the adoption of a more progressive environmental agenda. If market criteria dominate, then the prospects are correspondingly poor. Indeed, to have a NSW Labour government proceeding with electricity privatisation at a time when we should be emphasising energy-efficiency rather than increased electricity supply is symptomatic of the political problem.

The Rudd government’s response to rising petrol prices in recent months also shows lack of clarity in responding to the changing environmental economic conditions. The government should be telling the public that rising prices are inevitable, irrespective of the influence of monopolistic elements on short-term price fluctuations in the market, because oil is a depleting natural resource. Simultaneously, it should be investing substantially in public transport and renewable energy technologies so that people can adjust to the increasingly economically stressful situation. The rising fuel prices should be treated as an early-warning signal of the growing tension between the environment and material living standards. Maximising economic growth without regard to environmental hazards cannot continue to be the principal policy goal. Therein, of course, lies the direct confrontation with the interests and ideologies that pervade modern capitalism and unlimited consumerism. ‘Waiting for Garnaut’ is not a plausible excuse for facing up to this tough conclusion.

Conclusion

Responding to the challenge of sustainability requires a different mindset and policy stance.  A shift from competitive and individualistic to co-operative and collectivist behaviours is implied. So too is the embrace of a comprehensive policy package – for industry restructuring and regional development, investment in new technologies using renewable resources, sustainable ‘green’ jobs, energy-efficient consumption patterns, and new approaches to international trade and development. Action for sustainability, if it is to embrace social justice, must also challenge the interests and power of the dominant political and economic institutions. Environmental ‘fine-tuning’, driven by economic instruments that work through market processes, will not suffice. Market-based economic incentives, Garnaut-style, are more about sustaining capitalism as an economic system than about sustaining a planet on which we can live in reasonable harmony with nature.