A shabby derangement

ROBERT McMAHON

THE derangement of King Lear or Othello is monumentally tragic. As is the madness of Don Quixote. But the lunacy I want to examine is far more prosaic. It is a shabby collective derangement, a particularly Tasmanian quotidian slurry of meanness, deceit, pointless bravado, arrogance, ignorance and greed.

“What possessed you and your government”, I asked Treasurer Michael Aird in March 2009, “to accept a ‘benefits only’ study of the proposed pulp mill from Gunns, and then spend millions of public money to spruik it?”

With no ready answer forthcoming I chanced putting the question another way.

“Michael, why do you think the ANZ bank walked away from financing the project?”

“I guess you can answer that better than me,” he replied with a laugh I took to be perceptive, meaning that he was aware of the campaign, of which TAP was a participant, to persuade ANZ to look to its own Equator Principle and assess all those aspects Gunns and the State government, with the collusion of the Liberal opposition, had deliberately excluded from consideration i.e. the costs, risks and impacts of the proposed mill on the residents and established businesses in the Tamar and further afield, the environmental downside and the forest resource required to feed one of the world’s biggest pulp mills.

“Maybe. The ANZ commissioned an independent assessment of the project, as you know. In fact they commissioned two. I have this from a respected journalist. The journalist told me the first was done by Jaako Poyry.”

(Jaako Poyry was the company that stood to make a motzer out of flogging the pulp mill to Gunns. A conflict of interest you might think? Not in the Lennon/Bartlett Tasmania. But the vaccine of a second assessment granted immunity to ANZ from the Tasmanian contagion.)

“I guess ANZ wasn’t happy with the Jaako Poyry assessment”, I continued, “so they commissioned a second, by whom I don’t know. One presumes the second was more thorough than the first and went beyond ‘benefits only’. It was on the basis of that second assessment, though there may have been other factors involved, that ANZ walked away, declined the invitation to finance the mill.”

The retreat by ANZ turned into a stampede when the remaining big Australian banks; NAB, Westpac and Commonwealth, galloped off into the mountains in hot pursuit of the ANZ dust trail. They didn’t want their money or reputations put at risk either, one presumes. So that meant four of the eleven highest rated banks in the world refused to come up with even one tarnished shekel between them for Gay’s dream factory, nor did they seem prepared in any way to help Gay ‘order the money’, as he once quaintly expressed it.

How hard was it now going to be for Gunns to get any money? Clean money, that is. Because the message of a ‘benefits only’ business proposal, promoted by the government – (with what subsidies, hidden guarantees and dystrophic environmental conditions?) – was that Tasmania was open for a certain type of business. A first world version of a third world model you might say: the shakedown, the skim, the looting of public resource for private profit, the involvement of shady foreign interests. So here was Tasmania taking Indonesian Borneo as its model when some place like Switzerland might have been more appropriate.

This was a classic case of the reversal of intended outcomes. Far from easing the pulp mill birth with a quick and painless caesarean as was the intention, the ‘benefits only’ study and all that went with it, such as the deliberate exclusion of the population from the equation, the bullying of the RPDC, the concoction of the fast track Pulp Mill Assessment Act by Gunns and the government, the hoodwinking of both houses of Parliament to get it passed (not that difficult given the gullibility of the majority of members), the interference with judicial appointments, Kons lying to Parliament, the Commissioner of Police charged, the blatant use of the Public Service for the benefit of Gunns, and so on, meant that the pulp mill birth was shaping up to be an extremely difficult breach, or, in a break with the natural order, the pregnancy just might not eventuate in a birth at all. The pulp mill might just turn out to be a phantom pregnancy.

There is no evidence that Gunns and its fellow travellers have yet awoken from the pulp mill dream into the bleak light of day. Quite the contrary. The spin units are churning out optimistic bombast in the face of a compelling absence. Gunns hasn’t got any money and apparently nobody wants to give them any. Not even the federal government.

Is it true John Gay approached the feds for a massive handout to kick start construction? Was Nick Sherry the minister he approached? Is it true that Gay’s chutzpah caused much amusement amongst parliamentarians? Given that Gunns’ core business is the handling of public subsidies, Gay must have been shocked by the absence of a truckload of cash in the Budget. After all he might have had some expectation that Christmas would fall in May this year given that the Deputy Prime Minister, Julia Gillard, the authentic voice of the CFMEU Forestry Division, (the union Gay owns) is such a gonzo spruiker of the mill. While the mill itself may have missed out in the Budget, the logging industry gravy train rolled on as usual and it was handed a pile.

Furthermore, even if politicians suspect the mill is as good as dead, no-one will be saying so, nor will any politician be critical of it for fear that when it falls over Gunns may accuse politicians of having killed it off, and use that as the basis of a big compensation claim.

Having locked themselves into a rigidity trap, a ‘benefits only’ model, Gunns ignored the essential question that any business plan (or military campaign, police operation, mountaineering expedition, school excursion or any human endeavour far that matter) must take into account. WHERE CAN WE FAIL?

As unpleasant an exercise as it is for the hopelessly optimistic or the deranged, a resilient business model is impossible without consideration of all that could go wrong. I have fleshed out the consequence of one possible cause of failure, the addiction to a ‘benefits only’ plan. Capital exits stage right because the risk is untested and therefore too great to countenance.

When you start thinking of how a business may fail, you are limited only by your imagination. Under the old Soviet system any questioning of the Great Leap Forward, the steel production targets for the Five Year Plan or the efficacy of a left gumboot factory, constituted ‘wrecking’, the reward for which was the gulag or a bullet. There are some business cultures in this country that still discourage, in some form or another, scepticism or questioning from employees. This sort of company, like the Jesuits of the past, demands only loyalty and obedience from its charges. Is Gunns one of those companies?

Gunns doesn’t employ me so I shall consider a couple more areas of potential failure for the proposed pulp mill. Gunns is making a big noise about venture partners. What are the risks of venture partnerships? They fail. An 80% failure rate I read recently. Even if it’s only a quarter of that we are still in the realm of a wretched gamble. So a company like Gunns would enter into a venture partnership only if it was desperate, especially if it was a foreign venture partner or partners, because that opens up further risk. The populace of Tasmania is likely to wake from its complacent slumber when it sees our resources of forest, land and water owned or controlled by foreign companies or a foreign government if the venture partner happened to be a Chinese company.

This is the situation we are currently in. Why? Because Gunns has mismanaged their affairs, not least because of the huge debt incurred in expanding their monopolistic business. They have been so aided and abetted in that monopolistic drive by the State government and Liberal oppositions, as well as successive Federal Governments, that our resources, the birth right of generations of Tasmanians, are exposed to foreign takeover.

SPACE. In this space you are invited to consider other potential causes of failure for the pulp mill. Here are two obvious sets of causes that clamour for a place in the sun. The first we may term geo-political. What if there is an economic downturn and the price of an undifferentiated commodity like pulp, collapses? (Ooops! It has). What if there is a worldwide credit crunch and we can’t borrow the money we need because we haven’t got any money of our own, only debt and our share price has collapsed giving us much reduced collateral? (Double oops! That’s already happened as well).

What if the Israelis start splashing Iranian nuclear facilities and oil goes to $300 per barrel? And so on.

The second concerns government itself. Governments are notoriously useless at picking winners. MIS schemes are the current classic case, a tax rort developed by John Howard in his 20/20 Vision to have 3.3 million hectares of tree plantations by 2020. Billions of dollars of public money in the form of foregone tax revenues have been wasted on ponzi schemes that unravelled faster than John Howard’s electoral support in 2007. Therefore, the corollary is that having picked the Gunns pulp mill as a winner, governments have administered the kiss of death to the project.

The ‘benefits only’ model may in time prove to have been the undoing of the pulp mill proposal. But the state government is pushing ahead with its new planning ‘reforms’ (their word), which appear to gag the public voice, close off dissenting expert advice and remove local government from any role other than compliance with planning proposals. This last may be motivated by a desire for revenge for the unconscionable treachery of the Launceston and West Tamar Councils in bowing to public pressure and withdrawing support for the pulp mill, as well as the Hobart City Council in slamming the pulp mill so comprehensibly.

The inevitable message of this planning tyranny to potential investors is ‘stay away from Tasmania’ unless your money has such a stench that canisters of air freshener must accompany it. But don’t worry, the Tasmanian government will provide the air freshener, at public expense. The people will never know. They’ll be asleep. There will be no opposition, just like Lennon promised Gay about the pulp mill. This investor friendly government can guarantee that.