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The only way forwards is backwards: A budget reply

By Cameron Leckie - posted Tuesday, 17 May 2011


This is a budget reply from the hypothetical leader of the hypothetical catabolic collapse party, placing the not so hypothetical predicament of industrial society into budgetary perspective.

The (hypothetical) catabolic collapse party platform is based on the following principles:

  • The natural bounty of the earth is finite in quantity as is its ability to absorb waste in its various forms.
  • Socioeconomic systems that are based upon perpetual growth in the consumption of the earth's bounty are unsustainable over the long term.
  • Our current socioeconomic system by its very design is unsustainable due to its requirement to continually increase its consumption of natural resources. This in turn, means that it cannot and will not survive indefinitely in its current form.
  • Solving the problems of society by increasing complexity is subject to declining marginal returns. This implies that it is highly unlikely that neither new technologies, additional regulation nor a bigger government will solve industrial society's current predicament.
  • Growth is limited not by the total resources available but by the scarcest of those resources in relation to the systems needs as described by Justus Von Liebig's law of the minimum.
  • At this point in the trajectory of industrial society, catabolic collapse (a prolonged step like decline in the complexity of industrial society) cannot be avoided due to the convergence of stressors including, but not limited to, population growth, oil depletion, financial instability and climate change.
  • The level of disruption and discomfort that will be caused by catabolic collapse can be minimised based upon the choices that Australian's make today. Indeed, there are many potentially positive outcomes that could result.
  • Recognising that catabolic collapse is inevitable, the policies of the party are aimed at reducing its severity on Australia and ensuring that the basic needs of Australians are met through a partnership between the Australian people and its Government.
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Dear Mr Speaker, it is obvious to all that cost of living pressures are increasing. Whilst the political rhetoric of eliminating the deficit and easing 'cost of living' pressures expounded by both the Treasurer and the Opposition leader during budget week is important in the current political environment, it doesn't just miss the point by a little it misses it entirely.

The question that should be but rarely is asked in current political discourse, is why are we facing cost of living pressures? The answer can be summed up in three words; declining marginal returns. Virtually every facet of the industrial lifestyle, from agriculture, to health care and energy production is facing this problem. Perhaps the reason why this is not discussed is because societies that reach the point of declining marginal returns become vulnerable to collapse. The catabolic collapse party, rather than pretending that we are different to past civilisations, confront this problem head on and acknowledge that major changes to our social, political and economic systems are urgently required to minimise the breadth and depth of the catabolic collapse path that industrial societies such as Australia are on.

Of course, Australia is a wealthy country, one of the wealthiest on the planet, the lucky country. But we would be wise to consider Peter Atwater's lesson in Banking 102; "The income statement is the past. The balance sheet is the future." This reminds us that our current prosperity, lifestyles and economic strength are based on the past.

As we look to our balance sheet we find ourselves laden in debt, increasingly dependent upon a declining number of oil exporting nations for our oil requirements and on other nations demand for our natural resources, whilst battling a changing climate. At the same time, there are many storm clouds on the horizon. Storm clouds which are moving closer day by day, year by year, all the time converging, all the time gaining in intensity. Storm clouds that, apart from some tinkering at the margins with regards to climate change, have not been identified by the budgets or parliamentary debates in general, weather radar.

Maybe the radar has just been turned off, maybe it is malfunctioning or maybe the operator can only deal with one storm at a time! It should not take sophisticated radar to detect these storm clouds, after all they are clearly visible to the trained human eye.

These storm clouds form the basis of this budget reply. A reply that proposes measures to prepare for, weather and recover from the storms ahead!

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The first storm cloud is financial. Despite the attention given to it, Australian Government debt is relatively low, particularly when compared to other nations such as the USA. What is of major concern is the level of private debt in this nation, a level which peaked in 2010 at 88% of GDP, a ratio higher than that of the USAs just prior to the subprime mortgage shambles. The question must be asked, how and why do we allow such bubbles to be blown when the long experience of history informs us that bubbles always burst?

The reason is simple enough. We have taken an abstraction, money, and turned it into an end of its own, rather than a means to an end. Money, credit, debt! Through developments such as fractional reserve banking, fiat currencies and low interest rates, our monetary system has become so far disconnected from the finite nature of our planet that it threatens to destroy the very hand that feeds it.

The party's policy position is that sound money must be the basis of a sustainable economy. This requires urgent and revolutionary changes to our financial system. This would be achieved partly through the transformation of the Productivity Commission. It would be renamed the Sustainable Australia Commission, with its underlying economic philosophy changed from neo-classical to biophysical. Its first mission would be the development of policy advice to assist in the transformation of Australia's financial system by investigating options for:

1. Abolishing fractional reserve lending.

2. Returning the Australian dollar to a sound money system.

3. Breaking up banks into 'savings and loan' and 'trading' institutions.

4. Allowing the market, rather than the Reserve Bank, to set interest rates.

In addition, the party would abolish the First Home Owners Scheme, which Steve Keen refers to as the First Home Vendors Scheme, a major contributory factor in both inflating the real estate bubble and the real estate affordability crisis.

In 2007-08 the oil storm cloud made an appearance, regularly making the nightly news as the oil price reached new highs with its flow on impact on food prices, motorists, trucking companies and airlines. The GFC and the subsequent crash in the oil price saw this storm cloud recede into the middle distance, but not for too long. Rising demand and oil production that has flat lined, despite a prolonged period of historically high prices, means that this storm is returning once again from over the horizon.

Unfortunately, over the last century we structured our entire socioeconomic system on a substance that is finite, unlike the denial shown by the major political parties, and subject to depletion. Whilst the Chief Economist of the International Energy Agency suggests that we leave oil before it leaves us, both Labor and the Coalition have actively sabotaged any such moves.

With global conventional oil production having peaked in 2006, Australia's domestic oil production having peaked in 2000, our oil imports are required to increase by five per cent per annum over the next 20 years to meet future demand. At the same time as the volume of oil exports will decline significantly and permanently, the party's policy position is that Australia needs to leave oil before it leaves us.

Whilst the Government's reform to the car fringe benefit is welcome, it is but a miniscule development when compared to the task at hand. To assist in this momentous project, the following policy actions would be taken:

  • The fuel excise tariff, currently at 38c per litre for ground based fuels and 3.5c per litre for aviation fuels will be raised by five per cent per annum to provide a price signal to oil users to both increase the efficiency of use and decrease total consumption.
  • The diesel fuel rebate scheme would be phased out over the next five years for all industries with the exception of agriculture.
  • Investment in all new road and airport infrastructure will be halted pending a review of the business cases for such investments based in light of oil depletion.

The revenue raised or saved by these changes would be reinvested into rail, public and active transport, with the aim of structurally reducing Australia's dependence on oil.

The final thundercloud to be discussed here, but by no means the last one on the horizon, is that of population. If, as seems increasingly likely, the availability of critical inputs into industrial society, such as oil, phosphorous and many metals decline over the course of this century, then a growing population is a recipe for much lower living standards, social unrest and conflict over scarce resources. Exponential population growth is essentially a Ponzi scheme, where those born early enjoy the prosperity gained from cheap and abundant resources whilst later generations fight over more expensive and increasingly scarce resources. A smaller population both globally and in Australia is a must for any chance of a prosperous future.

The party's position is that the Australian population is unsustainable over the long term. This implies that Australia needs to reduce its population to sustainable levels, or pay the penalty through a crash in living standards.

To achieve this, the baby bonus scheme will be modified to encourage a reduction in Australia's fertility rate such that parents will receive double the current allowance for the first child, half the current allowance for the second child and nothing for subsequent children. This will also be extended to child-care rebates, where the rebate for the first child of a working parent/family is raised to 75%, for the second child reduced to 25% and nothing for subsequent children.

Immigration levels will also be capped to match emigration. These policies will over time see the Australian population stabilise and then decline to more sustainable levels. A target for Australia's population will be set after a Sustainable Australia Commission review into a sustainable population after consideration of the impacts of climate change, oil and other resource depletion on Australia.

It is likely that many people who read this budget reply will complain that the introduction of these policies would plunge Australia into recession, possibly even a depression. Indeed, that maybe the case but there is a method in this approach. The various storm clouds that are approaching and interacting with one another in many and varied ways will likely induce severe economic contraction and political upheaval regardless of what we do now.

But it is critical to our long term future, that this contraction does not end in synchronous failure, the simultaneous collapse of political, social and economic order. Avoiding such a scenario is both vital and mammoth.

Roughly put, it entails halving our oil consumption over the next decade, eliminating the greater proportion of the debt currently outstanding and halving our population over the next half century or so. This is why these policies are so important; they will reduce the risk of synchronous failure and provide the opportunity for what Canadian political scientist, Thomas Homer-Dixon, refers to as catagenesis, the opportunity for creativity and renewal after the breakdown.

To position ourselves for catagenesis, we need to transform our society to one that conserves over consumes, saves rather than spends, simplifies rather than complicates and prefers low tech over high tech. Such a society will be well placed to deal with the storm clouds of the future, unlike the Australia of the present.

Neither the Government's budget nor the opposition's response in their current form, will assist in this transformation. It is time for a change of direction. Perhaps going backwards is the only way forwards!

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About the Author

Cameron Leckie has a Bachelor Science and a Graduate Diploma in Education. Employment experience includes a range of management positions both in Australia and overseas in the telecommunications industry. He is a member of the Australian Association for the Study of Peak Oil and Gas (ASPO Australia). Since finding out about peak oil in 2005, he has written extensively on the topic and in particular, its impact on the aviation industry.

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