13 February 2009

The bushfires and the meltdown

Was it a case of missing the forest of fuel, for the love of trees; or
missing the fire of trees for the forest of global warming?

Either way all the spending and commitment of communities and government was worthless because their strategic decisions were wrong.

Out of the despair and grief from the ashes of these horrendous fires there may yet be some forgotten wisdom to be re-learned.

Over-indulgence in feel-good greenish solutions and an excessive tilt towards fashionable natural rather than human shaped landscape in habitats in semi-rural Victoria, has contributed significantly to the appallingly high loss of life and injury from Victoria's February bushfires.

A failure to heed the outcome of numerous previous enquiries after bushfire disasters throughout the 20th century, nearly all of which have recommended hazard and fuel reduction by regular hazard reduction burning in forests and the clearing of vegetation around settlements, has significantly contributed to the scale of this tragedy.

It seems local councils and state government departments have for a decade or so deliberately fostered and encouraged green enclaves as part of the housing development strategy for Melbourne's urban fringe and in semi-rural Victorian countryside. These deliberate strategies have actively discouraged human intervention in natural forests from regular hazard reduction fires and the clearing of vegetation near homes. They also have actively encouraged residents to retain and plant canopy trees around their dwellings. This has been done due to a preponderance of green leaning political decisions at local council and state government levels which have focused on ways that citizens can contribute in their own small way to the war against global warming from the build up of CO2 and other greenhouse gases, by living more sustainable lives, friendly to nature and the natural environment.

This self gratifying process has caused responsible people to lose perspective on real and immediate threats to human life in their communities. People have died as a consequence.

If communities do come to appreciate that they did partially lose sight of the actual threats to themselves from the immediacy of fire by concentrating too much on larger imagined threats from global warming, then the refocusing and re-contextualising of threats that result, can be for the common good.

In Australia we have world class rural fire fighting infrastructure and real commitment from local communities to bush fire fighting. This was not enough. It did not make a sufficient difference to prevent the loss of over 200 lives. It seems that no matter how much is spent and how committed the people are to fire fighting, it will not protect the communities they serve if strategic decisions about management of potential fire intensity from fuel sources are ignored. Good decision making in the interests of communities has to be smart and realistic if the resources committed to protecting communities from danger are to be effective.

There are lessons here in other spheres about perspective and priority setting. The allocation of taxpayer funds to varying fiscal stimulus projects and programmes, ostensibly done to reduce distress in communities from the drying up of credit and the erosion of confidence in making new investments during a recession, is clearly brought into focus by this line of thought.

It doesn't matter how much Government spends on new projects and injecting liquidity into the community if it doesn't change people's actual spending and investment outlook over time. Government has only a very limited ability to create or stimulate domestic demand in an economy. It is the governed not the governors who turn business cycles around. Government spending that does not actually change investment attitudes and business confidence in the governed, can only have short term effects. It is essentially just a waste of taxpayers money unless a turn around occurs before the effects of stimulus wears off. Who honestly thinks that there will be a turn around anywhere any time in the next 12 months, even with the massive pointless injections of taxpayer's money and borrowings by government?

Only spending that is believed in by citizens and has real long term effects has any economic justification. Otherwise its just buying shiny new trucks that cannot put out fires because the flames are too large. The community remains unprotected, but everyone is deeper in debt.

The taxpayer's money and resources spent in projects like bicycle paths and giving low income consumers cash entitlements, is like pouring water into sand. Water that could be otherwise be stored to help when the inferno rages. People are not going to change their spending decisions to take investment risks that build for the future based on a perception of one off injections of liquidity. One off spending by government on such things are seen by citizens straight away for what they are: short term, one-off, stop gaps. Except what happens if they don't straddle the gap to the next up turn in the business cycle? If the stimulus effects fall short of that, then they have had no effect in preventing the onset of a recession, and the recession just contiunes inexorable march through the economy. The community still feels the pain of the downturn as it waits for business confidence to return. This largely happens independently of government spending. We get the recession anyway and the polity is just deeper in debt as it enters it worse phases.

The current massive round of fiscal stimulus spending by governments seems like a spectacularly foolish act of short term desperation. It may make people believe that government is doing something, but it in fact all the government is doing is creating financial repayment obligations for the future, with no benefit beyond the moment in the present.

If the government were serious and truthful about getting us out or the recession it would cut taxes, not give handouts. With tax cuts citizens would have reason to believe that in years to come people will have more to spend on a product or service and therefore expenditure to capture some of that wealth can be justified on a risk/return basis. In net, people need to actually believe that there is a source of personable replicable expenditure in future to take investment risks. Boondoggles and make work projects do not do this. The New Deal was a spectacular failure in getting the US out of the Great Depression. That depression became the Great Depression. It lasted more than a decade in spite of the massive expenditures of the New Deal in the early 1930s. The world recovered only after a world war focused expenditure on things that people actually then believed in . . .

Why do these social democrats in the US, the UK and Australia think their species of fiscal stimulus will serve us any better than the failures of FDR's New Deal expenditure? It is like buying new fire engines and implementing new warning systems that do little if anything to prevent loss of life, because they miss the most important priority: the fuel in the forest. In this case the priority must be on turning around the hearts and minds of those making business investment decisions in the community. Not giving handouts to people with jobs, building bicycle paths and school toilet blocks. Worthy as such projects appear they are not likely to create the meaningful investment confidence necessary to put an economy back on the road to expansion and full employment.

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