Mike Bolan First in a 3-part series
RECENTLY author, broadcaster and activist Phillip Adams gave an excellent talk in Launceston in which he outlined the severe problems facing us.
He rightly focussed his talk on the reality that a perfect storm is a perfect time for change. I hope to expand on that idea and describe some of the threats and opportunities, along with some ideas for action.
I offer this because I believe that progressive ideas are important particularly as our political classes, the policy makers, commentators and decision makers, are mired in old thinking – they are practised in the very thinking that has brought us to our current impasse. This article is about that thinking and its implications for us all.
Part 1 – The frozen LibLabs
Several commentators have identified that the policies of the Labour and Liberal parties are so similar that they might as well be one party – the LibLabs. It may be helpful for us to consider why the two major parties have become so self-similar and why they appear unable to respond effectively to the huge challenges that face us.
Politicians come from all backgrounds, although lately there’s a surfeit of lawyers, financiers, unionists, sports and media people in the mix coupled with plenty of professional politicians. Their skills and comprehension levels vary, although many of them have limited practical experience in the real economy.
Consequently, to understand abstract complexities such as the economy, they rely on simplified understandings so that they can get ‘up to speed’ quickly if elected. Those simplified understandings remove their choices and tend to fix them to some dogma or other.
BIG is GOOD
The economy, as the LibLabs understand it, operates to central controls and comprises large industries, big central governments making top down decisions, huge electrical distribution systems, freeways, dams, big mining companies, massive smelters and goods being shipped all over the world. Their conception of the economy has those components increasing in size so that the overall economy can ‘grow’. The rest of us rely on the central economy for jobs, services and so on.
The centralised concept leads to bigness – large smelting concerns need lots of power which requires a huge electricity grid supplied by giant coal burning power stations. Massive coal exports require vast cargo ships, lots of rail and road infrastructures and big ports with mammoth loading facilities.
As the scale of the centralised economy increases, so do both costs and economic outcomes. Our politicians reach a simple conclusion from all of this…BIG is GOOD along with the important corollary – small doesn’t need any attention.
Another important corollary to the idea of a centralised economy is that any reductions in the structure, scale or capacities of the centralised economy, lead to job and investment losses and hence, political pain.
An important spin off idea is that a central economy offers political parties huge blocks of votes that can be secured by supporting particular groups. One example of this is the industries represented by the CFMEU/ABARE groups, which focus on resources, engineering and power generation, all critical elements of the centralised economy. The entry points to such groups for Labor and Liberal are from different levels within each group, but both parties recognise the need to gain the support of such groupings.
If a party can command such block votes, then electoral success is easier to achieve. On the other hand, if they alienate such voters, they can pretty much kiss the possibility of government goodbye.
Block votes are secured with both policies and political ‘attitudes’. The votes come from the workforce, the management and owners, the subcontractors, families and all ancillary groups that rely on tthat aspect of the central economy such as local store owners and service providers.
Block vote rewards to parties are reinforced by party donations. Industry, union and similar groups command respectable budgets and consequently are able to make substantial donations to political parties.
The overall effects of the political conceptualisation of the centralised economy and block votes are addictive – over time Labor and Liberal parties come to rely heavily on the support of the block votes and of economic outcomes that reinforce the apparent importance of a centralised economy. They become the high priests of the economy – sincerely uttering promises of jobs and stability.
Other voters not captured with the ‘block vote’ policies, are swayed by promises of economic performance, job availability and the possibility of achieving personal aspirations from a well ‘managed’ economy.
Those who proposed alternatives to the central economy, or whose ideas might weakens aspects of it, are rubbished. Politicians’ descriptions of the alternatives to a centralised economy such as ‘living in caves’ and ‘back to the stone age’, demonstrate that those politicians see no real alternative to the central system. Their thinking is limited by what has been rather than by what could be. Besides, if we didn’t have a central system then we wouldn’t need all those politicians and bureaucrats.
It would be the end of life as they know it and hence, unthinkable.
The rise of uncertainty
The kind of big investments in resources, infrastructure and industry that suit a centralised economy require the kind of certainty of return that can be obtained with bi partisan support and a stable economic environment. In Australia, some aspects of the central economy have been placed under stress by infrastructural weaknesses resulting from State government under investment. But whatever those failures, they pale into insignificance compared to the threats arising from both climate disruption and global financial uncertainties.
An important problem for policy makers has been that climate change is, in substantial part, a direct result of operating a centralised economy. Big power, big oil, big transport and big industry produce big CO2. As a result, policy makers are faced with an unpleasant contradiction – how can big be good if it is bad because of climate problems?
There are many problems within that contradiction. For example, acting to cut emissions could cripple the centralised economy, break up block votes and destroy political support. Howard’s ‘solution’ was to do nothing, to basically deny that there was a problem. Business and politics could go on as normal.
Globalisation also had the spin-off of allowing people to learn what was happening elsewhere on the planet. Public and international pressure built to a point where change was required. Johnny Hubris’ approach finally lost him both government and his seat but even then events were building to threaten the ideas of his successor.
Debt = money
The Western monetary system isues new money on the basis of debts incurred, the theory being that debt will be repaid through growth, hence we can issue the money in advance of the growth to stimulate the growth. The whole idea seemed sufficiently solid that banks and others began to package the debts up into ‘financial instruments’ that were sold to others, thereby distributing the risks and creating new rewards for those creating the ‘instruments’.
This idea facilitated the centralised economy by making large sums of money more easily available through debt.
All went well until some groups (e.g. US sub-prime mortgage holders) couldn’t pay the debts that they’d incurred and the resulting ‘instruments’ were found to be worth fractions of their supposed value.
The problem was that while we’d had the growth, most of it had been in the ‘shadow’ economy and most people couldn’t pay off any more debt.
Repayment problems were not confined to US mortgage holders, they included property developers, banks, indeed entire countries were so badly mired in debt that they could never repay, particularly if the economy retracted.
It turned out that the scale of the suspect instruments transcended most people’s imagination.
In 2008, global debt stood at around $52 trillion dollars. Of that the USA owed around $12 trillion, the EU around $30 trillion, Switzerland about $4 trillion and Australia $1 trillion. The rest was distributed around the other countries of the world. (1)
Some of those countries, such as Ireland and Iceland, have such huge debts that it is virtually impossible for them to repay – just like the sub-prime mortgage holders.
Various investment banks and financial groups found that many of their ‘assets’ were ‘toxic’, that is worth significantly less than their face value, possibly worth nothing.
Those institutions and countries that also carried high levels of debt suddenly found that they were close to bankruptcy and a wave of corporate collapses followed.
Harvard economist Niall Ferguson puts it like this…
“The harsh reality that is being repressed (in the media) is this: the Western world is suffering a crisis of excessive indebtedness. Many governments are too highly leveraged, as are many corporations. More importantly, households are groaning under unprecedented debt burdens. Worst of all are the banks. Some of the best-known names in American and European finance have balance sheets 40, 60 or even 100 times the size of their capital …
“The delusion is that a crisis of excess debt can be solved by creating more debt. Yet that is precisely what most governments currently propose to do. The solution to the debt crisis is not more debt but less debt.”
Given all of the distortions and deceptions that have permeated not only the media, but also political thinking over the last couple of decades, it’s important to understand what too much debt means in different terms.
Indebtedness is proportional to lack of control of your affairs. It means that you rely on others to loan you resources when you need them, and that you will later divert your energies to paying off those debts.
Reducing indebtedness means gaining more direct control over your own situation. You may not have the resources to grow big or grow fast, but you are in control of what you have.
This point is vital because it leads directly to an understanding of what we need to do to deal with our debt problems.
Unfortunately for all of us, the effects of bigness – lots of carbon pollutants and big debts, are responsible for some of the biggest threats to our survival.
The economic theories of growth that underpin the bigness conceptualisation, are also responsible for runaway population growth, an increase in the likelihood of a global pandemic and a changing and uncertain climate.
Dealing with those threats means thinking about a totally different sort of economy, one that does not have those adverse outcomes.
Trouble is, that would mean that the block votes would no longer be reliable and that party donations from big organisations might dry up completely, something that neither the Liberal nor Labor parties care to consider.
In fact, they cannot really countenance a different type of economy, yet continuing to focus on the centralised economy is clearly getting more difficult as international pressure is exerted for cleaner industrial processes, money for new projects becomes scarce and climate threats become more real and obvious as in the recent Victorian bushfires. Politicians soothing words and glib policies are losing ‘traction’ in the media and in people’s minds. As big business lays off thousands of workers and investment dries up, LibLab prescriptions are coming to be seen as a product of Claytons.
What can the LibLabs do?
Both Labor and Liberal are now frozen with indecision and uncertainty. Locked into policies and donation deals that support the centralised economy, they have lost all flexibility. All they now do is struggle to explain their policies with more spin and glossier ads – a struggle that they are losing as quickly as the economy is winding down, workers are tossed out and the security offered by the LibLabs swirls down the plughole.
The LibLabs are frozen and are unlikely to move in any useful direction. Like that Terminator who got covered in liquid nitrogen and ground to a halt.
Next time – the new political imperative.
Watch this space.
Mike is a complex systems consultant, change facilitator and executive and management coach.