Mining boom drinks us dry

When I first began to study political science in the late 1970s, we were preoccupied with understanding the phenomenon called ”the state”.

In practice, this meant grappling with the writings of some difficult Europeans – not just Marx, but later thinkers such as Habermas, Althusser, Gramsci and Poulantzas. In those days, when the structural connections between the economy and politics were perceived to be of the first importance, puzzling about the nature of the state in capitalist societies seemed entirely natural. The Australian state seemed a particularly apt subject for study. Of the many authors whose works we read on our history, whether they were men or women of the left or not, none doubted that economic development was the main theme of the story – the economic and the political were closely intertwined.

As political economists Greg Crough and Ted Wheelwright put it in 1979, Australia’s economic development was ”more than ever being conditioned by the requirements of international capitalism”.

While the study of political economy (and economic history, for that matter), has languished in the intervening years, the perspectives these approaches offer remain important. Looking back from 2013, we see above all the effects of successive resources booms and busts on our national life.

There was the wool boom of the 1950s, the resources boom of the 1960s and 1970s, the bust of the 1980s and 1990s, and then the surge of the most recent boom, which has proved longer-lasting than any in our history. Each of the booms corresponded to events elsewhere – the wool boom to the Korean War, the boom of the 1960s and 1970s to the economic rise of Japan and South Korea, and the boom of the 2000s to the rise of China.

For a nation, the possession of resource treasures is like coming into an inheritance. It seems lucky, but there are some real management issues involved if you want to make the most of your luck. The temptation is to spend the proceeds, rather than use them to generate a more lasting legacy.

The Australian state (including federal, state and local governments) has been entrusted with this difficult balancing act. How well has it been doing? Over the past 20 years, we have experienced almost uninterrupted growth, low unemployment and low inflation. Yet there is a sense that if what we have experienced is as good as it gets, we have not really made the most of our good fortune. Individuals have prospered, but collectively the picture is not as good as we might have hoped.

If ever a state had an opportunity to develop its quality of thought, life and action, it is ours. We have the resources to do wonderful things, yet somehow we remain stuck in unproductive holding patterns. Our health system does not work as well as it should. Our infrastructure lags. Our cultural and research and scientific industries are struggling. Indigenous Australians continue to suffer. Our agriculture, once so important economically and culturally, is diminishing.

These are problems that neither party shows much interest in addressing. Perhaps, in a globalising world there is not much the governments of nation-states can do. The decisions that shape our lives are made either in China or by people who seemingly inhabit a kind of transnational cyberspace, where, if they are accountable at all, it is certainly not to governments.

The fate of Labor’s so-called ”super-profits” tax on mining companies exemplifies the problem. Companies such as Rio Tinto and BHP Billiton (as well as many other companies) have made super-profits out of their Australian operations in recent years. It is true that during that time they have paid billions in company tax and royalties to federal and state governments. But measuring and taxing ”super-profits” is not easy. If the state is too late, too clumsy and too timid, as it appears ours has been, the intended subjects of the tax will easily escape. In these circumstances, a super-profits tax is simply redundant.

There are many anomalies from having seemingly inexhaustible reserves of gas, coal and iron ore. One is that while Australia exports vast quantities of gas from the west coast, in the eastern half of the country we don’t have enough to go around. AGL and other companies warn of looming shortages unless the coal-seam gas industry is further developed in NSW and Queensland.

There is more than enough gas being produced in Western Australia, but supplying overseas customers is likely to prove more lucrative than selling to east coast customers. The result, in NSW at least, is that some of the state’s most significant agricultural areas are being opened to coal-seam gas exploration and extraction. New coalmines for export are being opened in the Hunter Valley and in other prime agricultural areas such as the Liverpool Plains.

Proponents of change argue that these are the forces of the global marketplace at work. If more and more farms are replaced by holes in the ground, at least they are profitable holes in the ground.

Like many Australians, I wonder where all this is leading us. The high dollar is up to a point unavoidable. But when we need it most, the Australian state seems to have become increasingly addled. Rather than its component parts working constructively together, they bicker incessantly. Incessant party politics distracts the Prime Minister as much as it irritates the rest of us.

We look to the state to act as a buffer, not as a conduit, for global economic forces. A degree of manufacturing loss may be inevitable. But in the case of agriculture, we are witnessing a prolonged assault on a group of industries we used to consider integral to our national prosperity, if not identity.

Consider the toll we are exacting. Irrigated agriculture will have to be wound back to allow for extraction caps on water from the rivers of the Murray Darling Basin. The competitive voracity of the supermarket giants is threatening to destroy even the most efficient farmers supplying them. And plans to open up the far north to agriculture are likely to go the way of their predecessors.

As Geoffrey Blainey put it, mining made us. But mining is a boom-and-bust activity. You cannot eat coal, gas or iron ore. There is no such thing as a sustainable coalmine. If we allow substantial parts of our country to be dug up and shipped overseas, and that is essentially what we are doing, we can never get them back again.

When the boom slows, we will wake up from this dream of affluence to find many of our industries are missing. What should we have done? If we were a more strategic state, we would probably have tried to slow the boom, perhaps by means of export taxes, certainly by giving more emphasis to the values of conservation, heritage and community when these are under threat from the mining giants.

We might take a leaf from the political economists who 30 years ago told us, correctly, that to understand the world from an Australian perspective, you needed to factor in the political power of the trans-national companies and the economic power of transnational states. Worshipping at the altar of market forces is all very well, but at some point the gods are going to desert you.

First appeared in the Canberra Times 18 March 2013

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