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The wages of pollution is tax

By John Haly

How is it that recent parliamentary bloodletting over tax breaks and electricity pricing continues to detract from steady planetary exsanguination?  Are we now to accept that farm tours, milk levies and infrastructure spends are to be the ready tourniquets for our Australian economy?  The political focus on Tax breaks to increase wage rates while the world’s climate renders economics a mute subject, for a planet less habitable, is a distraction we probably can’t afford long-term.  The political rhetoric around these subjects is diversionary, and there is little truth expressed in the alleged relationships between these subjects.

Wages Stagnate

Wage stagnation has a long historical path dating back decades with the dismantling of industrial relations and neo-liberal politics from both Labor and Liberal governments.  Nowadays, even the ordinarily conservative mainstream media is conceding that wage growth is stagnating in Australia and the cost of living accelerating beyond even the means of the employed.  The costs of living in Australia are not at all aided by the increasing costs inherent in power bills (if we are still able to maintain a home) or food (irrespective of where we sleep at night).

All classes of income suffer near identical CPI cost rises

CPI measures a broader range of costs faced by the public, but the news is grim for every income source.  It is worse although than what is illustrated by CPI measures. In general, the CPI fails to account for substitution and it also fails to factor in the price of housing and the cost of financing. Housing has increased at a disproportionate rate until very recently. The signs of foreign buyers falling in the market were identified back at the end of 2016 when Australia suffered a GDP decline in the 3rd quarter of 2016. Though the fall in housing prices is not expected to stop anytime soon, the cost of housing relative to wages will continue to be unaffordable for increasing numbers of wage earners.

All classes of income suffer near identical CPI cost rises

Beyond the broad-ranging statistics many of the embedded linked articles in the paragraph above, there are some interesting reflections by business magnate Dick Smith as his food business faces closure.  Dick Smith blamed Aldi and Amazon for the demise of his business revenue. He suggested these enterprises had “forced him out of business” because they can sell at a meagre cost.  Many in social media lamented this iconic Aussie brand’s impending demise, but few dug deeper to be asking why it was customers could not afford the luxury of supporting Australian products.  In a country where over 3 million live below the poverty line, there is an established class of the working poor, a depletion of income by the abolition of penalty rates, a diminishing middle class; it is no wonder people can not afford the indulgence of supporting iconic Aussie brands. The “demand” may diminish along with the profits, which leads to the Tax debate.

Tax Debate

Instead of raising the minimum wage, reinvigorating penalty rates, or a cessation on undermining the manufacturing industry and public service, only “significant” solution to low wages and the tide of unemployment offered by the coalition is Tax incentives that predominately benefit one class of Australians – the already very wealthy. The presumption that wealth and employment will Trickle down from corporations to the public is an economic theory without any real-world evidence and plenty that it does anything but trickle down.

Productivity and wages unlinked

Providing Tax breaks enables companies to retain more profit for the business, pay dividends, engage in share buybacks (as they have in America following Trump’s tax breaks) and store profits in offshore tax havens such as Luxembourg, Bermuda, the British Caribbean, Panama or our former Prime Minister’s favourite, the Cayman Islands. Companies exist to benefit shareholders or have everyone in the Liberal party forsaken the demand requirements of business economics? Newly minted Prime Minister Morrison’s shift to small and medium businesses for his tax breaks reflects only the inability for him to pass the breaks for larger companies through the Senate. One presumes that smaller businesses, like Dutton’s childcare services, will not just benefit from direct subsidies from the government, but now, generous tax cuts.  Is one to presume that Mr Dutton will begin to pay his workers larger salaries?

No business employs anyone for which there is not a demand created for sales or a regulatory imposition that they do so.  Unless it is a not-for-profit NGO, it’s not a charity. If the existing demand for the company’s goods and/or services doesn’t initiate the need for employment, then no job vacancies are created. Demand is reduced when the public can not afford your products and/or services. A depressed economy where the people have low wages and little resources creates diminished demand which is the reflections of the Australian retail market when business is down.  Fortunately rising population (predominately via migration), and employment (even though at a diminishing rate and increasingly often part-time employment) keeps money flowing in the economy for retail sales to ebb and grow, although lately only at 0.4%. Amazingly, without real-world evidence, trickle-down economics is still “selling” to the public mindset. Unfortunately, “trickling” of any sort is in short supply in drought-ravaged Australia.

Climate Mitigate

The trepidatious concerns of the conservative political pundit are that climate change mitigation risks harming the economy. Despite the apparent value inherent in jobs and demand in the renewable energy industry, government literature attempts to downplay the severity.  The Quarterly update of Australia’s National Greenhouse Gas Inventory, updated for March 2018, says: “Annual emissions for the year to December 2017 are estimated to be 533.7Mt CO2-e. This represents a 1.5% increase in emissions when compared with the previous year.”  But in the preface this government document states; “Emissions per capita, and the emissions intensity of the economy, were at their lowest levels in 28 years in 2017.”

This comment is then followed by charts showing CO2 per dollar of GDP falling. Why would anyone measure the proportion of a chemical compound in the air against an economic measure and have that be the narrative by which we should view pollution? The Coalition of course, although one does admire the ingenuity in finding a way to convert a rise in CO2, into a charitable fall. Not all industry produces pollution, and some industries produce boatloads of it. But is GDP is the measure against which to evaluate how our economy is contributing to greenhouse gas emissions?

GDP is not ever a good measure for some things, as there are far better measures of economic performance. But lets, for now, look at GDP and the assumption that all growth is good growth. It fails to measure significant aspects.

  1. The savings in renewables. For example, reducing spending on subsidies and savings inherent in energy-efficient devices reflects the failure of GDP to differentiate between efficiencies in productive economic activity.  GDP views economic activity as the end not the means to an end. So a coal smelter burning fossil fuel or industry dumping waste that pollutes the rivers and air generates GDP growth is an ”end”. Industry production and product subsidies (such as the $1.8B to Coal) are not added to the GDP calculation and so skews the accounting valuation in relation to the output of CO2. There is neither a relationship between subsidies and emissions for any given industry nor is there a pricing mechanism on pollution emissions for any industry.
  2. Disproportionate subsidies to coal industry versus farming. Farming and Coal may both contribute to GDP but the damage Coal’s greenhouse gas emissions are wreaking on the environment harms farming.  Farming does not reciprocate this harm (although suffering from it) yet received barely more than half the financial aid granted to the Coal industry.
  3. The costs of pollution. Healthcare as a product is added to GDP increasing the value of it, even if the need for it, reflects detrimental factors in a society like suffering from avoidable pollution related conditions. In essence, we fail to price the “cost of pollution” to our economy but add the health expenditure.
  4. Outsourcing pollution.   Abbott and Hockey’s dismantling of manufacturing to the point that we have the lowest share of manufacturing employment of any OECD country has in no way curbed our appetite for cars or manufactured goods.  Manufacturing and Industry were large users of energy in Australia, and by offshoring our manufacturing base to  China, Korea and Japan. We have also offshored our industrial emissions. As we continue to de-industrialise and have more of our goods offshore, we are merely outsourcing the costs of coal pollution, and not accounting for Australia’s remotely attributed carbon emissions.

So measuring CO2 against GDP when GDP fails, on the one hand, to estimate the saving inherent in renewables that don’t pollute, factor in the costs of offshoring pollution from industries and add health costs caused by pollution; is inherently deceptive. While, yes, the report admits on one hand that CO2 has still risen, and then indulges in a gross deception to suggest there is anything positive about this.

The initial capital costs of solar, (including solar towers and molten salt energy storage that can generate power overnight), geothermal, wind turbines, Hydroelectric, Biomass, tidal waves and even the rain; may have been expensive. It is evident the ongoing costs of renewables that will be cheaper than coal for the future of either industry. The economic burden of power costs to lowly-compensated consumers can be mitigated by renewables and shifting from scheduled generation to scheduled load markets, but the government persistently resists these changes for ideological reasons.

Future Economic Fallout

Ignoring anthropogenic climate change and the increasing CO2 emissions not only in Australia but what we have outsourced to other countries, in the face of recurring climate instances such as the recent heat wave in the Northern Hemisphere, will only harm the future of Western economies. Low wages and high living costs hasten reduced demand and spending.  Whether by way of increasing power, housing, health and living costs or the necessary mitigation, insurance or repair of harm caused by a changing climate, we will all eventually, pay the piper.


4 comments

  1. Bronte ALLAN

    Very interesting statistics John! Sadly, whilst we all suffer under this inept, lying, obscenely over paid so-called “liberal” government, none of us will ever enjoy a fair days pay for a fair days work. These bastards would rather donate any rises to ALL their obscenely wealthy industrialists, pastoralists, mining barons, media barons etc etc. WTF?? And you are correct abut this stupid bloody “trickle down” affect! It has never been proven to work & is really just another example of just how much this mob really thinks about the welfare & conditions of ALL the “normal” people here in Australia! The sheer contempt they exhibit to the working class, the unemployed & people on Welfare as well as ALL the Trade Unions is beyond belief! Sadly it has always been this way with every liberal government! Cannot wait for this rabble to be kicked out of the Federal Parliament & Labor to be elected!

  2. Jon Chesterson

    The devil is in the detail but Scott Morrison prefers slogans and gutter politics from his mount. He also prefers to dig for coal and burn it, demonise refugees, force slave labour, fund religion, news corp, mining magnates and fake environmental protection foundations… so if you can’t see a link between all of these, all you have to do is fabricate a link such as GDP and CO2 emissions. Compare the two simple… Just follow my smug arse and commandments, and don’t forget to bow and burn a few bushes on your way out!

    The truth is out there somewhere, but you won’t get it from Scott Morrison in a month of Sundays or could that be just another 40 days in the wilderness.

  3. John Haly

    Thank you Bronte and Lawrence, for your expressed appreciation. I in particular like your icon Lawrence, as I have a similar theme for my logo for the writing part of my business. Yes, there are a number of issues presented regularly and wages, trickle down and climate denial is merely scratching the surface. I have been writing for a while on a wide variety of issues and with the exception of unemployment and marriage equality, I have never had the time to revisit an issue. There is always some new lie or agenda to expose. I can’t keep up with them all by myself, but I do make what effort one can. And yes, Jon, the GDP and CO2 link were absolutely absurd and I was stunned to discover it was the attempt they made to find a claim that they were acting to mitigate climate change.

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