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Tag Archives: Davos

Shipping Oars

shipping oars

Tony Abbott’s brief sojourn in Davos left most of us cringing and somewhat bemused as to the purpose of his journey. He met with some Australian big business leaders and delivered a speech that had nothing to do with the stated priorities of the forum – the problem of increasing income inequality and the economics of climate change. Le Figaro noted Abbott’s address as a footnote, quoting him as calling for more free trade, an idea that was a long way from the agenda – très loin de la thématique – of earlier gatherings. In fact, Tony left before any of these meetings took place.

But he did fit in a few personal meetings.

With Peta Credlin glued to his side, Abbott showed his ignorance of geography and total ineptitude at small talk when meeting with World Economic Forum founder Klaus Schwab. Tony had lined up for his usual photo shoot and looked around with a silly grin as Professor Schwab turned and walked away in a kind of WTF moment as Tony kept waffling on. Peta leant forward looking like a nervous mother whose child has forgotten his lines in the school play.

Apparently the Dutch Prime Minister also requested a meeting. Tony suggested it was a meet-and-greet but I suspect there was a bit more to it than that. The Netherlands are strong advocates for action on climate change and a leader in guiding the developing world to sustainable energy practices.

While serving as EU Council President in 2004, the Dutch promoted their “Clean, Clever, Competitive” approach and, in 2005, led EU environmental ministers to “propose that developed countries should consider reducing their greenhouse gas emissions by 15-30% by 2020 and 60-80% by 2050”.

Economic efficiency is heavily promoted in this approach as the Dutch government states “the Kok report assumes the position that environmental innovation is good for the economy and employment..…[and views] the environment as an opportunity to improve European competitiveness.”

The first green tax on energy in the Netherlands was introduced in 1996. Funds collected are funnelled back into the economy through financial incentives for increased energy efficiency and renewable energy. Sound familiar?

Tony also had yet another meeting with the Japanese Prime Minister. We know he didn’t mention the whales, so what did they discuss? Aside from his unseemly haste to give up our sovereign right to make our own laws by granting corporations the right to sue us (something Philip Morris is already doing re our plain packaging laws), I suspect that Tony is looking for supporters for his backing away from emission reduction targets.

Prior to the Fukushima disaster, Japan, the world’s fifth-biggest emitter, had pledged to reduce emissions by 25 percent below 1990 levels come 2020, on condition that other industrialised countries made similar pledges. Following the Fukushima fallout, imports of oil and gas have soared. It is estimated that just two of Japan’s 54 reactors are online, a sharp reduction for an industry that once supplied 30 percent of the country’s electricity.

Not unexpectedly, on 10 December 2010, the Japanese indicated that they did not intend to be under the obligation of the second commitment period of the Kyoto Protocol after 2012.

Tony is also in frequent contact with his Canadian counterpart, Stephen Harper. Under the Copenhagen Accord, Canada was committed to reducing its GHG emissions to a level 17 percent below the 2005 level by year 2020. However, on 13 December 2011, Canada formally withdrew from the Kyoto Protocol stating that they could only be a part of an accord, which includes all major emitters as parties.

Russia, the world’s third-largest emitter of greenhouse gases behind China and the US, also announced 2 years ago that it did not intend to assume the quantitative emissions limitation or reduction commitment (QELRC) that binds Annex I countries, for the second commitment period.

Together, Canada, Japan and Russia account for 29.2 percent of the world’s greenhouse gas emissions. The future of the Kyoto Protocol–and indeed the entire climate regime–is on the line as big emitters formally withdraw their participation, putting the world at peril. Pulling out of Kyoto now also allows countries to avoid penalties for missing targets.

The pulling out of major emitters means the UNFCCC will look to Asia’s largest emitters–China and India–to play an increasingly significant role in determining the success of the multilateral climate change regime. China has already overtaken the US as the world’s largest CO2 emitter. India is poised to overtake Russia as the third-largest emitter in the near future. Given their huge populations, which jointly cover almost two-fifth of the world population, it is hardly surprising the International Energy Agency (IEA) estimates that China and India will account for 45 percent of global energy demand growth by 2030. Success at climate negotiations will not be forthcoming unless the key concerns of these Asian countries – particularly challenges pertaining to inequities–are sufficiently taken into account in the future development of climate change.

Distribution of global emissions reinforces the need for broad multilateral cooperation in mitigating climate change. Fifteen to twenty countries are responsible for roughly 75 percent of global emissions. Efforts to cut emissions—mitigation—must therefore be global. Without international cooperation and coordination, some states may free ride on others’ efforts, or even exploit uneven emissions controls to gain competitive advantage. And because the impacts of climate change will be felt around the world, efforts to adapt to climate change—adaptation—will need to be global too.

The perceived lack of leadership by central players in the climate change debate—especially the United States—has elicited increasing concern about the long term prospects of the global climate change regime. Although delegations at Durban, Cancun, and Copenhagen developed reporting mechanisms, funding pledges, and unilaterally declared country-specific emissions reduction goals, the ongoing lack of an international enforcement body has left these promises largely empty. Countries, including Australia, have reneged on their pledged contributions to the Green Climate Fund which was established to help developing countries cope with climate change.

In contrast to this, there is a growing view among business leaders and mainstream economists who see global warming as a force that contributes to lower gross domestic products, higher food and commodity costs, broken supply chains and increased financial risk. Their position is at striking odds with the longstanding argument, advanced by the coal industry and others, that policies to curb carbon emissions are more economically harmful than the impact of climate change.

In Philadelphia this month, the American Economic Association inaugurated its new president, William D. Nordhaus, a Yale economist and one of the world’s foremost experts on the economics of climate change.

“There is clearly a growing recognition of this in the broader academic economic community,” said Mr. Nordhaus, who has spent decades researching the economic impacts of both climate change and of policies intended to mitigate climate change.

In Washington, the World Bank president, Jim Yong Kim, has put climate change at the center of the bank’s mission, citing global warming as the chief contributor to rising global poverty rates and falling G.D.P.’s in developing nations. In Europe, the Organization for Economic Cooperation and Development, the Paris-based club of 34 industrialized nations, has begun to warn of the steep costs of increased carbon pollution.

Nike, which has more than 700 factories in 49 countries, many in Southeast Asia, is also speaking out because of extreme weather that is disrupting its supply chain. In 2008, floods temporarily shut down four Nike factories in Thailand, and the company remains concerned about rising droughts in regions that produce cotton, which the company uses in its athletic clothes.

Coca-cola lost a lucrative operating license in India because of a serious water shortage there in 2004 and, today, after a decade of increasing damage to Coke’s balance sheet as global droughts dried up the water needed to produce its soda, the company has embraced the idea of climate change as an economically disruptive force.

“Increased droughts, more unpredictable variability, 100-year floods every two years,” said Jeffrey Seabright, Coke’s vice president for environment and water resources, listing the problems that he said were also disrupting the company’s supply of sugar cane and sugar beets, as well as citrus for its fruit juices. “When we look at our most essential ingredients, we see those events as threats.”

It has been unquestionably shown that the fossil fuel industry is funding the climate change denial debate as well as making significant financial contributions to political parties and advertising campaigns to protect their vast wealth. The fact that 85 individuals have the same wealth as the 3.5 billion poorest people in the world is testament to the “trickle-down effect” being a farce.

If you want to boost the economy, start taxing the superprofits of mining companies and banks, start collecting the tax owed by individuals who hide their money in off-shore tax havens, and address the income inequity that sees 17.2% of Australian children living in poverty. If you want to create jobs then expand the renewable energy industry and give us an NBN that allows us to be competitive and to create whole new areas of endeavour. Invest in education and trades training for the industries of the future.

Instead of all standing on the edge saying “You first”, be a leader – that is your job – start pulling your weight. It is only governments who can save us from corporate greed and it is governments who must demand and legislate for action on climate change. We only have a short time to get this right and unless you all recognise the precipice towards which we are hurtling and start rowing together to avoid it, you will be condemned as those who shipped oars and let us crash.

 

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Abbott Solves World’s Problems! G20 Shocked About How Badly Labor Did.

 

Scene: Davos.

“Hello, Hans, did you catch that Tony Abbott’s speech?”

“No, unfortunately I was delayed. Was it good?”

“Was it good? it was brilliant. I learnt so much. Did you know that this World Economic Forum at Davos has been an important contributor to global progress for over 40 years?”

“Has it? No, I didn’t know that. Wow, I’m sorry I missed it. That would have been really worth hearing. Was that all?”

“No, he was quite an expert in economic matters. I mean I knew we’d have some extraordinary minds here, but this Abbott’s insights were quite breathtaking. For example, did you know that as soon as people have economic freedom, they create markets.”

“Really?”

“Yes. He went on to say that growth would solve all the world’s problems. And he told us that profit is not a dirty word because success in business is something to be proud of.”

“That must have made all the business people rethink things. I mean, many of them so are ashamed of their success that they hide their profits in places like the Cayman Islands.”

“Well, thanks to this Abbott person they can now be proud again.”

“Such a shame I was late. This sounds like the sort of speech that will prevent a global financial crisis from ever happening again.”

“Yes, according to Abbott, that was not a ‘crisis of markets, but of governance”. We need to strengthen governance without suppressing the vitality of markets.”

“And how does one do that?”

“He didn’t go into much detail. But a man as brilliant as he is would surely have a plan. He then went on to explain how the previous Australian Government really messed things up by not going into recession, and started spending their money on drugs. Or something like that. I wasn’t paying attention. After all, Australian domestic politics is of little interest to me. I’m just interested in seeing that ideas like his are spread as widely as possible.”

“Well, I must go and see if I can meet this Herr Abbott. I understand he is quite an expert on mountain climbing too.”

“Yes, he knows that there are a limited number of mountains and you can’t climb what isn’t there!”

“Well, thank you for catching me up on what I’ve missed, Rupert. I may see you later.”

(For those of you who don’t get the mountain reference, see clip below.)

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A different drummer

Photo: ABC Net

Photo: ABC Net

In the lead-up to the 2013 election, I don’t know how many times I cringed at the thought of Tony Abbott as President of the G20, and now he is there and it is even worse than I anticipated.

The ceremonies at the World Economic Forum in Switzerland opened with words sent by Pope Francis where he implored the elite in business and politics to exert their influence to reform economic policy with the poor and disadvantaged in mind.

“Those who have demonstrated their ability to be innovative and improve the lives of many people by their ingenuity and professional expertise can further contribute by putting their skills at the service of those who are living in dire poverty.”

In the Davos message he referred to his treatise Evangelii Gaudium, where he said the challenge of the world today is economics and inequality. In an era of considerable change and progress in areas like technology he said, “We must praise the steps being taken to improve people’s welfare in areas such as health care, education and communications.”

An annual risk report compiled by the World Economic Forum queried its members about what they think is the most pressing problem threatening the global economy in the next decade. They responded with inequality as the most likely risk.

The creator of the Davos Summit, Klaus Schwab, was pleased with the inequality finding because his philosophy is that capitalism cannot survive if income and wealth are concentrated in the control of a few, which is confirmed by the US Census Bureau statistics.

Oxfam executive director Winnie Byanyima, who will attend the Davos meetings, said: “It is staggering that in the 21st century, half of the world’s population — that’s three and a half billion people — own no more than a tiny elite (85 individuals).” The wealth of the 1 percent richest people in the world is 65 times as much as the poorest half of the world.

These fears are palpable and the concentration of economic resources is threatening political stability and driving social tensions and unrest globally. The pope’s message echoes concerns by others as well.

Christine Lagarde, managing director of the International Monetary Fund, is concerned that the fruits of economic activity in many countries are not being widely shared. Likewise, the humanitarian organization CARE says inequality around the world centres on lack of access to education, public health, chronic diseases, income gaps, and social inequalities such as gender discrimination.

A World Economic Forum report says the failure to mitigate and adapt to climate change is one of the top 10 risks facing the world in 2014.

Scientists say man-made climate change is likely to worsen starvation, poverty, lack of water, flooding, heat waves, droughts and diseases, raising the specter of more conflict and war, unless drastic action is taken to lower emissions of carbon dioxide from the burning of coal, oil and gas from their current trajectories

The global economy may continue to grow, scientists say, but if the global temperature reaches about 3 degrees F warmer than now, it could lead to worldwide economic losses between 0.2 and 2.0 percent of income.

Lord Stern, former World Bank chief economist and author of the key 2006 Stern review on the economics of climate change, also warned that scientific projections and economic predictions were underestimating the risks of global warming. He will be addressing the meeting this year and speak on topics related to the economics of climate change.

Saadia Zahidi, Head of Gender Parity and Human Capital at the WEF said:

“This year is very relevant because we have collaboration with the United Nations Secretary General and the UNFCC, to try to build up towards the UN Climate Change Summit in September and use Davos to try to spark off a very large number of public-private collaborations. That’s going to be happen through approximately 35 climate change and sustainability sessions. We’re going to be looking at themes as diverse as scaling energy efficiency, reducing deforestation, looking at resilient cities and scaling investment for green energy.”

Al Gore spoke at a private session on how leaders can help prevent – and better communicate – catastrophic effects on public health, anti-poverty efforts, clean water and energy supplies from a rise in global temperatures above 4 degrees F.

“The climate conversation has to be won by those who are willing to speak up,” Gore told them. “It is a race against time, but we are going to win.”

The World Wildlife Fund joined many other groups calling on governments to commit to action.

“There’s a rising recognition that we simply have to find a way to break through,” Jim Leape, director general of Geneva-based WWF International, told AP. “The big governments each need to renew their commitment.”

South Korea’s President Park Geun-hye told the forum “the world must act as one” to tackle climate and environmental challenges.

The meeting was dominated last year by the Euro-crisis, but this year Schwab says will be different. “It will be an exciting meeting and it will be different from the last year’s because it will not be overshadowed by one single crisis.”

There will be a number of topics addressed including social inclusion and job creation. He did not elaborate on “social inclusion,” but this could suggest the social and economic inequality the members believe is a global concern.

Other topics are the war in Syria, structural changes in China’s economy, building resistance to natural disasters.

“What we want to do in Davos this year in this respect, is to push the reset button. Let me explain. The world is much too much still caught in a crisis management mode, and we forget that we should take ‘now’ into our hands and we should look for solutions to the really fundamental issues. We should look at our future in a much more constructive, in a much more strategic way. And that’s what Davos is about.”

Tony Abbott has used his opening address to the G20 Economic Forum in Switzerland to advertise that Australia is “open for business”, a line he apparently stole from David Cameron. He has stressed that the private sector should lead the way to prosperity while governments clear the path by removing regulations and lowering taxation. In fact, his speech was almost exactly the same as his election speeches, even to the point of criticising our previous government, something usually avoided on the international stage.

Abbott has had meetings with Australian big business people, who presumably accompanied him, and avoided any discussion of ‘unpleasantness’ like Syria or whales. He has stressed that the focus for the G20 under his presidency will be how governments can facilitate big business and free trade.

It was interesting to read a tweet by Chris Giles, Economics Editor for the Financial Times UK, who said

“Sign of the times. Rouhani packed out the hall. everyone is leaving before Tony Abbott explains Australia’s ambitions for the G20 in 2014″

So why the walkout? Were they not interested in our fearless leader’s economic guidance? Or is his agenda so far removed from the rest of the world that they just couldn’t be bothered wasting their time.

I think our Tony may be feeling a little out of his depth and somewhat alone, or he is purposely marching to the beat of a different drummer.

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Davos Nothing to Do With David, and We Only Want Stronger Borders Sometimes.

tonyabbott

“All models are wrong but some are useful.”

George E. P. Box

Now think of the economy like a household and think of government debt like your credit card. Use that model. Get it firmly in your head. Then judge every action of the government in the same way you’d judge running your household like that.

In this household model, of course, nobody ever explains how tax actually fits in, given that for a government it’s revenue. I suppose that it would be your investments and wages. Mm, so it would seem an obvious way of reducing debt would be to get a second job. Or raise taxes if we’re using this model.

Of course, ignore your mortgage. Or for the purposes of this. If you’ve taken out a mortgage, image that it’s on your credit card. The same if you have a car loan. If any of your kids are considering going to university, consider that HECS debt as being on the credit card too.

Good God! You are in a mess, aren’t you? Better stop spending money. Don’t, whatever you do, call a tradesman to fix something or make improvements to your property. That’s just saddling your kids with more debt. They can have the hot water fixed when they have children of their own.

I suspect there was a lot of this simplistic thinking behind Tony Abbott, when he announced at the World Economic Forum:

“No country has ever taxed or subsidised its way to prosperity. You don’t address debt and deficit with yet more debt and deficit.

“And profit is not a dirty word, because success in business is something to be proud of.”

When he talks about profit, is he suggesting that governments should be making a profit? Remember that a budget surplus means that they take more in revenue than they give back in services. Sometimes this will be necessary for the health of the economy, but should a government always be planning to run surpluses?

We also heard that Labor had messed up by trying to spend its way out the GFC:

“Well, the reason for spending soon passed but the spending didn’t stop, because when it comes to spending, governments can be like addicts in search of a fix.”

There’s an assumption in there that stimulating the economy in a time of crisis is the only reason for spending. Sometimes spending on things will be worthwhile in the long run. For example, we spend far more per capita on education than some of the poorer African countries. Is Mr Abbott suggesting that they wouldn’t eventually improve their economic situation by spending more on education? Or that well-targeted subsidies haven’t helped certain businesses in their early phase?

Well, I look forward to his removal of all the subsidies to the fossil fuel industry.

No, we need that simple model of the household. Keep government out of the way, keep taxes low and business will prosper. And, if particular businesses don’t, well that’s capitalism.

We need to remove all borders and allow free trade. Except when it comes to people smugglers, then we need stronger borders. What’s so bad about people smugglers? They’re just profiting from human misery. I thought profit wasn’t a dirty word! That’s only when companies are engaged in legitimate enterprises. Like the AWB in Iraq, or ANz in Cambodia?

Yep, let’s not think too deeply about economics. Otherwise I might be forced to point out that all the companies Mr Abbott praises in Davos have a much higher debt to asset ratio than the Australian Government.

But, just as it’s a mistake to think of the government as a household, it would be a mistake to try and model a government on a coorporation. I remember the quote from George W. Bush.

“When I’m president, I plan to run the government like a CEO runs a country. Ken Lay and Enron are a model of how I’ll do that.”

I leave the reader to decide how closely Bush came to achieving his aim.

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The Davos Experience

Tony Abbott speaking at Davos (image from news.com.au)

Tony Abbott speaking at Davos (image from news.com.au)

On day two of what Tony Abbott refers to as “the Davos experience”, he had what he described as “an excellent meeting with some of Australia’s most senior and important business people”. One may wonder why he has to fly to Switzerland to meet with Aussies but Mr Abbott assured us that it was “not because we love travel, but because we want to do the right thing by the people, the workers and the businesses of our country.” He explained the purpose of the meeting in a press conference:

“The interesting thing about my discussions with Richard Goyder of Wesfarmers, with Nev Power of Fortescue, with Gail Kelly of Westpac, and with David Thodey of Telstra is that …. the leaders of those businesses are here at this conference because they want to ensure that right around the world we have got the policies in place which are going to promote private sector-led growth, investment and employment. What that requires is sensible government which gets taxes down, which gets regulations down, which gets productivity up because if we can do all those things we get growth up and that means more jobs and more prosperity for our people.”

So do these business leaders want prosperity for all?

According to Wesfarmers website,

“The primary objective of Wesfarmers is to provide a satisfactory return to its shareholders.

It is one of Australia’s largest listed companies – a conglomerate with many ventures including Coles supermarkets, coal mines, chemicals, energy, fertilisers, and insurance.

Two months after the election, Wesfarmers chief Richard Goyder sent a clear message to Canberra not to interfere with the nation’s supermarket sector, warning that an attempt to cap the market share of Coles and Woolworths would lead to higher prices for shoppers.

Coles and Woolworths, who currently enjoy an estimated combined grocery market share of about 70 per cent, are concerned that government may one day try to push through caps on market shares to open up competition from chains like Aldi and Costco. The ACCC has promised investigations into Coles and Woolworths for alleged treatment of farmers and suppliers, as well as shopper-docket schemes for fuel discounts at supermarket-owned petrol stations.

Mr Goyder said he gets

“a bit perplexed when Coles is blamed for many of the challenges in the farming/food sector today. The farming and food industries do have challenges today, as they have had for many years. They are not helped by our strong currency, as well as productivity issues and cumbersome regulations. But, it is just too easy, too simplistic, to blame the supermarkets for a lot of these difficulties.”

Wesfarmers have also been actively expanding production and purchasing new coal mines despite the falling price of coal.

In a statement to the Australian Securities Exchange, Wesfarmers said total coal production in the December 2013 quarter was 3.7 million tonnes, a 6.8 per cent lift compared to the 3.5 million it produced in the December 2012 quarter.

Wesfarmers said in a separate statement it had agreed to acquire a mineral development licence from Peabody Energy for $70 million. The group said the purchase will increase the total base of coal reserves available at Curragh by 29 per cent and reflects confidence in the long-term outlook of its export business.

Another arm of Wesfarmers is CSBP, a major manufacturer and supplier of chemicals, fertilisers and related services to the mining, minerals processing, industrial and agricultural sectors. Along with their affiliated companies, their products include

“Fertilisers, Ammonium Nitrate, Sodium Cyanide, Ammonia, Industrial Chemicals, Solution sodium cyanide, Solid sodium cyanide briquettes, PVC resin, wood-plastic composites, Residential LPG, AutoGas, Kwik-Gas, Bulk Gas, Industrial (45s and Speciality Gas), Natural gas and liquefied natural gas (LNG).”

No wonder Mr Goyder is keen to get rid of “cumbersome regulations”. They could be a hindrance to “satisfactory returns”.

Whilst seemingly unable to say anything sensible about Syria, and sticking to his “Don’t mention the whales” stance with Japan, Mr Abbott has found time to consult with the miners and bankers on how to increase their superprofits, and with the supermarkets and Telstra on how to protect their monopoly markets.

Mr Abbott’s aim may be to see “more prosperity in Australia” but for whom, and at what cost?

 

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