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Wednesday, 24 May 1989
Page: 2617

Senator COULTER(6.48) —We are debating a number of Appropriation Bills which set aside certain amounts of money for the Government to give effect to its Budget and its ongoing expenses. In Australia recently we have witnessed an attitude of disconcertment with the direction being taken by this Federal Government and the suggestion that the whole economic direction needs to be turned around. We have recently seen the Tasmanian election, which resulted in a substantial number of independent green candidates gaining the balance of power in that Parliament. We have had spokespeople such as Professor David Suzuki addressing very large audiences in a number of States and pointing to the inability of the conventional economic model to address the very severe environmental problems which the world currently faces. He indicated that the direction in which we need to go is quite different from that in which this Government and most other governments in the Western world are going. David Suzuki was reflecting on a message which Paul Ehrlich has been giving to the world for quite a number of years.

In contrast, earlier today Senator Michael Baume pointed to the possibility of negative growth, something which David Suzuki has called a blessing and a requirement. Senator Michael Baume has said that if we go into negative growth we will really be going down the gurgler and that clearly we need to do certain things to stimulate economic growth because that is a sine qua non of a healthy society. The point of divergence between the Australian Democrats and both of the other parties is that we are not committed to that conventional view about economic growth. We are committed to the idea of a sustainable, steady, stable economy rather than continually attempting to make the economy grow. It is interesting to reflect on the fact that the word `economics' and the word `ecology' have the same origin. But over the years economics has moved away from ecology, and economists seem to have forgotten that the basis of economic activity is the natural environment. They seem to have adopted the view that economics can continue to promote growth without concern for the welfare of the natural environment on which it feeds. In the process, of course, economic growth is destroying the environment-it is destroying the very basis on which human life, all other life and economic activity ultimately depend.

A few days after the Tasmanian election, Mr Hawke said that within two to three months he would come out with the world's best environment policy. That caused me to write an open letter to him pointing out that if he were genuine about coming out with such a policy he would have to review seriously the whole economic model on which his policies, and those which the Opposition would impose on us, are based. I said that those policies would need to be reversed and that he would need to move away from growth economics towards sustainable economics. I invited Mr Hawke to openly debate that question with me. So far I have not had a reply.

There is a desperate need to bring economics and ecology together again. In this respect I find that there is no difference at all between the Labor and Liberal policies. Not many journalists seem to have picked this up. However, David Barnett did so in last week's Bulletin. He is one of the first to pick up that what the environmental movement, the green independents and the Democrats are on about is something which cannot be neatly slotted into the vectors on which the Labor and Liberal parties lie. We are really moving in quite a different direction, and the economic policies which we would put in place are quite different.

The Labor and Liberal policies are based on the concept that growth is both desirable and, to some extent, inevitable. They are also based on a belief that the market, the competitive system, will somehow serve the common good and that the free operation of that market will somehow produce a better condition for all who operate in it. We claim that that policy can solve neither the worsening social problems nor the problems of a deteriorating environment. The word `growth' is so loosely used by a number of economists and particularly by politicians that it is necessary to observe what it means. In this context it means growth of gross domestic product (GDP), growth in the dollar value of goods and services consumed year on year. In other words, this year we consumed more than we did last year; next year we will consume more again; and the year after that we will consume more again. This is normally measured as a percentage flow through the economy. There is a attempt to increase exponentially that flow through the economy.

As I have observed in the past, what has been attempted is an exponential increase in the throughput of resources in a finite world. That simply cannot be accepted as rational; it is to attempt the impossible. In pursuing these models, it follows that any measures that are made to save bits and pieces of the environment-and I stress this very much in the context of Mr Hawke's claim of developing the world's best environment policy-be they forests in Tasmania, heritage areas, wild rivers, clean air, clean water, or access to any natural environment at all, will only be temporary as long as governments attempt to make the economy grow. I say this for the simple reason that if we exponentially seek to increase the throughput of resources, sooner or later we will need to consume those very resources which we have set aside and which we hope to preserve in perpetuity.

So there is a fundamental conflict between our desire to look after the environment which, after all, is the only environment we have and probably the only environment we ever will have, and the use of the economic models on which this Government and this Opposition predicate their polities and on which these appropriations that we are looking at at the moment are fundamentally based.

Because of the very marked changes which are occurring in the environment, even those areas which have been set aside so as to protect natural species, short of being destroyed by demand on the resources, will, nonetheless, be destroyed by other elements in the growth economy. The consumption of a wide range of resources is changing the composition of the atmosphere which will mean that all those areas that we have sought to protect because of their unique species, ecologies and habitats, will simply be in the wrong place. Over the next half century or so, we face, quite literally, massive species extinctions as a consequence of the pursuit of economic growth.

There are a number of defects in the model which need to be pointed out if we are to put in its place a different model, if we are seriously attempting to put in place a model of sustainability. For the reason that we are living in a society which is predicated very heavily on economic indicators and measures, we need to use economic tools. Therefore, we need to get the economic indicators right so that they will point us in the right direction.

It is necessary to observe that GDP, which is so vaunted by economists and a number of people who speak loosely in this place about economic growth, measures as benefits the things which ordinary people, and certainly most ecologists and environmentalists, would regard as costs. This is where the concerns about the environment and the solution to the environmental problems meet fairly and squarely the concerns which ordinary everyday people have in regard to the cost of housing, the cost of providing all those goods and services which they regard as essential for a quality life and which, if denied, will lead to a deterioration in their lives.

Over the last year or so I have asked a number of questions in this place, principally of Senator Peter Walsh, in relation to this principal defect in the measure of economic growth. I remind the Senate that on one occasion I asked him a question about the $5.7 billion a year that we have to spend as a result of motor vehicle accidents. I asked where that amount appeared in the gross domestic product. Did it appear as an addition? Senator Walsh agreed that it did appear as an addition. After a bit of obfuscation, he concluded his remarks by saying:

. . . to exclude medical costs borne by households would require more fundamental changes to the accounts-indeed, to the extent where it could touch off a spiral in which all of the gross domestic product gradually disappeared.

What those words indicate is that, if we were to start seriously to take out of gross domestic product those things that every normal, rational person recognised as a cost, the gross domestic product might largely, or totally, disappear. That is the point at which people must recognise the link between the fallacies in the economic modelling and what they perceive as being wrong in their ordinary, everyday lives.

The population of this country is slightly over 16 million. Mr Hawke is on record as having said recently that he would like to see the population increase to 20 million by the year 2000-an increase of 25 per cent in 10 years. As I pointed out previously, 80 per cent of the increase in Australia's population over the last 40 years has accrued in capital cities. What Mr Hawke is attempting is essentially to add an Adelaide to a Sydney within 10 years. It is not surprising that Mr Bob Carr, the Leader of the Opposition in New South Wales, has said that Sydney should put up a `house full' sign. Clearly that imposition on an already large and bulging city would produce enormous tensions.

The economy certainly would grow as a consequence. The costs of providing roads, sewers, electricity, education, law facilities, water, telephones, et cetera, would appear as additions to gross domestic product. It costs a great deal more to put people on the periphery of an already large city. People have to travel further to work. They see those things as costs. They have to spend more on petrol and on vehicle insurance and registration. Then there is the likelihood of accidents, as well as the cost of medical care and vehicle repair. People see all those things as costs, yet they go down as additions to the gross domestic product.

It may well be that the costs of growth have exceeded the benefits. That is why we are deceiving ourselves as a country and as a people-a people becoming poorer, not richer. It is also the reason for this paradox of the apparent conflict between what ordinary people perceive as a worsening quality of life and what economists and the Government say about growth in the economy. Precisely because of those measures that are used to put costs down as benefits, what ordinary, everyday people see as a deterioration can be measured by the Government as a benefit.

Moreover, this Government's acceptance of the naked operation of a market system ensures that the cost of housing and all those other facilities that city dwellers need escalates. Because money is treated as a marketable commodity, the interest rates that people have to pay also increase. That is the point at which there are clear parallels between what is wrong with our environment and what is wrong with the economy which impacts on people in their ordinary, everyday lives.

Secondly, gross domestic product, which is the main indicator of the health, or otherwise, of the economy, is a measure of flow through the economy. Unlike private companies, we do not keep the equivalent of a capital account. There is no national capital account. We do not put any value on trees in situ; we do not put any value on forests before they are cut down. We do not put value on iron ore or lead or copper or zinc in the ground; we give it value only as we take it out. When we do that we are simply liquefying an asset. We are taking it out of the capital account, which we do not keep, and putting it into the cash flow account. Private companies do not do that. Every accountant will tell us that a company could not be run in that way, yet we attempt to run the whole country like that. As Senator Sheil has just pointed out, that is liquidation. We are indeed behaving as though we were a company in liquidation: we are liquefying our assets. That is what is going on, and that is the other thing which gives the lie to this economic process and indicates the direction in which we need to move.

Senator Alston —Anyone who uses capital items is in liquidation. Is that what you are saying?

Senator COULTER —No. What I am saying is that a company keeps a capital account. As assets are used up they are depreciated, and money is put back into the capital account. We recognise that there is a capital account. However, a country does not keep the equivalent of a national capital account. We do not have a capital account nationally.

Senator Alston —Aren't we cashing in the capital item?

Senator COULTER —We are cashing in the capital item, but we are not replacing it, as a company would do. There is no depreciation allowance against forest destruction. The consequence of both these defects in the growth model is that no value whatsoever is put on those things that nature provides free-clean air, clean water, access to nature, and so on. But as we destroy those things and spend money to replace them, that money goes down as an addition to gross domestic product. Therefore, by destroying those things, we appear to become better off. It really is a crazy system, and it needs to be turned around. Down the growth road there is no solution either to the very significant social and economic problems that face this country or to the very significant environmental problems facing both this country and the rest of the world. We must turn the model round.

Economists use arguments such as `Growth allows us to spend more on looking after the environment'. One has only to observe that what we spend on attempting to repair the environment goes down as an addition to gross domestic product to realise the complete fallacy in that argument. In other words, if we spend more on repairing the damage that we have caused, our gross domestic product grows. If the argument were valid, we could spend more on looking after the environment, and that money also would go down as an addition to GDP. Thus, we would become richer and richer as we repaired the environment, and could spend more and more. Of course, it is a ridiculous argument. What it does is count a cost-the cost of repairing the environment-as a benefit, and and so we think that we can spend it twice or thrice over. As a country-indeed, as a world-we must adopt a sustainable, steady state economy.

Senator Cook —Why does it have to be a steady state? If it is a state, can it not be an expanding one?

Senator Alston —Equilibrium is not static, is it?

Senator COULTER —Clearly these honourable senators do not understand what a steady state is. A steady state can be a dynamic steady state, one in which there is a flow through the economy, but one in which the inputs and the outputs remain stable. It is qualified by the words `sustainable steady' state. If one imagines that one has a large container of water with a tap pouring water into it and a hole in the bottom of the container, provided the inflow and the outflow are the same the level of water in the container will remain static, but there will be a continuous flow through that container. That is a steady state condition. If one likens that to population, one could have a large input, a large output or the same population-equivalent to a high birth rate, a high death rate and a very short life. One could keep the same level of population by having a very small input and a very small output, which would correspond with a very small birth rate, a small death rate and longevity. I suggest that that latter state is more desirable.

In relation to resources we need to maintain a throughput in the economy sufficient to maintain a stock of items which we need for a reasonable quality of life. That stock is obtained by minimising the throughput of resources, not by maximising it, which means attempting to minimise the gross domestic product for the maintenance of that stock. It is the stock that we should value-the stock which at the moment we do not even measure. We should not simply attempt endlessly to increase the throughput of resources, be they material resources or human labour. It makes no sense to increase the throughput of human labour, either.

Senator Cook —How do Third World countries get on?

Senator Alston —Is any net increase in population a bad theory?

Senator Hamer —Sit under a palm tree and eat coconuts?

Senator COULTER —Clearly, these ideas are quite novel to many honourable senators in this place. I think it has been extremely useful to raise these issues because it seems that they are hearing them for the first time. I may be playing a useful educational role. There is a vast amount of literature on this subject.

Senator McGauran —It is unworkable.

Senator COULTER —Senator McGauran says that it is unworkable. I point out to him that we are rapidly destroying this planet at an incredible rate. The economy is not producing the welfare that people are looking for. The present economy is failing. It is not for me to establish that what I am saying is workable in Senator McGauran's eyes because Senator McGauran clearly believes the present system is producing the goods when clearly it is not. He has not even opened his eyes to see what is happening around him.

In order to move in this direction, as I have already indicated, because we live in a society which is predicated on economic matters and because it takes account of these economic matters, it is necessary to use economic levers, to establish a number of different economic indicators and to establish qualifiers in those indicators that we already have. It is necessary that we establish a national capital account and that we give value to those resources in situ which we are progressively, as the honourable senator on my right indicated a minute ago, liquidating. When we take resources out of the ground and export them overseas without any value added component, we are simply shifting money from the capital account to the cash flow account. We are not becoming richer. This generation may have generated some cash flow; future generations will be poorer because those resources have been liquidated.

To draw a parallel, Amory Lovins, an American writer of considerable note who is perhaps not known in this chamber, some years ago remarked, `Whoever heard of developing a bank account by taking money out of it?'. That is precisely what we are doing with our resources. We need to establish a national capital account and to modify very heavily the gross domestic product measure. We need to take the costs out of gross domestic product, put the costs down as costs and the benefits down as benefits. When we do that we might see that the costs of growth are now outweighing the benefits. That would demonstrate to people why they sense they are becoming, and are indeed, poorer. Finally, we need to put beside those measures independent non-economic measures of real human welfare, such as health, morbidity and literacy measures. We need to measure suicide and nutrition rates, access to and quality of education in our society, access to natural areas and per capita pollution. These are all things which could be measured and, when put beside those economic indicators, give us a much better indication of whether society is becoming better off in a broad sense rather than in the very narrow sense in which we now believe we are becoming better off-a simple increase in GDP.

We need to change direction from mindlessly pursuing growth for growth's sake-a direction which is destroying the environment on which the economy ultimately depends and on which we, as human beings, and all other life on this planet ultimately depend-to a direction which is sustainable in the long run. Nothing short of this fundamental change will ensure that the environment will remain for our children and our children's children. There are very severe problems which most people perceive in their ordinary everyday lives, and there are very severe environmental problems. Those two sets of problems which appear so disparate have exactly the same common cause-the pursuit of growth. That is something that the Government and the Opposition share. It is something which divides the economic policies of the Democrats from the policies of those two parties.