Recessions are traumatic. They up-end prevailing wisdoms and suspend the glib use of concepts such as ‘creative destruction’ because most people know someone who has lost their job or business, and most families experience stress and worry. As a consequence of these personal experiences, recessions cannot be quarantined by the cold numbers of economics, and, one way or another, nations and governments are forced to change.
The social and economic traumas of the COVID-19 pandemic have been immense. But according to a major Smith School working paper by economists Cameron Hepburn, Brian O’Callaghan, Joseph Stiglitz, Nicholas Stern and Dimitri Zenghelis, the traumas caused by climate change will be far greater:
The climate emergency is like the COVID-19 emergency, just in slow motion and much graver. Both involve market failures, externalities, international cooperation, complex science, questions of system resilience, political leadership, and action that hinges on public support.1
The emergencies of COVID-19 and climate change are not just alike: they are related. They are connected by the destruction of biodiversity and the blurring of lines between the industrial and natural worlds. While the impact of COVID-19 has been brutally swift, killing hundreds of thousands of people and creating millions of unemployed within months of its emergence, the slow-motion impact of climate change is no less brutal. However, this much is clear: the epidemiologic and ecologic pandemics of COVID-19 and climate change are economic pandemics as well.
That’s why, as recommended by the Smith School working paper, economic recovery packages should be designed to rebuild prosperity damaged by COVID-19 and accelerate the decarbonisation of industry, infrastructure and human activity to minimise the devastation of climate change. Stiglitz, speaking in a recent webinar with the Australia Institute, spelled out the size and scope of the challenge faced by Australia:
It’s going to take a very large role of government. Individually, we cannot attack something like a pandemic or a problem like climate change. We require collective action. And it’s going to take a lot of collective action, and that means there has to be social solidarity. And that has to reflect a vision of where we want our society to be. That’s going to require progressive taxation. It’s also going to entail a green transition and real hard work to create a more shared prosperity than we had before the pandemic.
That means Australia’s policy approach must change. In recent years, our climate change policies have been like blind man’s buff, with decisions spun around and around until industries and communities no longer know which way to go. As a consequence, we are not on track to meet our obligations under the Paris Agreement. We are not making the investments in infrastructure, industry and education necessary to prepare for a carbon-neutral economy. And we are walking blindfolded into a social, economic and ecological disaster.
What we are on track for is a future with millions more working Australians locked out of the middle class, an industrial economy unable to compete in a carbon-neutral world, and large parts of our country swallowed by either the sea or the desert. And this suffering will be exacerbated by the mass unemployment created by the COVID-19 pandemic. All of which begs the questions: Why hasn’t Australia confronted the climate change crisis before now? What has held us back?
My thinking is that our policy failure on climate change is connected to our policy failures on social inequality. To understand that connection and properly define the problem, we must first understand our history.
It’s generally acknowledged that in Western democracies, the golden age of the middle class ran from the end of World War II until around 1980. During that time, working people saw their share of national income and wealth expand, creating the baby boomer middle class. That golden age of the middle class was possible because there were enough stable jobs with fair pay and entitlements. Not only that: investments in education gave more people the skills they needed to work their families into middle-class prosperity. But the crises of the 1970s—from stagflation to the oil crisis to multiple recessions—put an end to Keynesian thinking and opened the door for acolytes of neoliberals such as Milton Friedman and Friedrich Hayek. In turn, neoliberalism led to Thatcherism and Reaganomics—and the beginning of a dramatic reduction in the wages, entitlements and supports of working families in the United Kingdom and the United States. The global financial crisis exacerbated that inequality. So, too, will the COVID-19 crisis, unless we tackle mass unemployment.
Until relatively recently, Australia’s middle class was protected from rampant inequality. That’s because, in response to the economic traumas of the early 1980s, Prime Minister Bob Hawke and Treasurer Paul Keating created a Prices and Incomes Accord with the Australian Council of Trade Unions secretary, Bill Kelty. The Accord delivered improvements to people’s standard of living and opened up our economy to the world. It also became the cornerstone of the Hawke-Keating reform era, preparing the ground for decades of uninterrupted economic growth because, at a time of economic transition, the Accord protected and enhanced the standard of living of working people and turned what was a tough economic transition for the United Kingdom and the United States into a just transition for Australia.
But since 2014, rises in median full-time earnings for people earning middle and lower incomes have fallen behind rises in inflation. In short, working Australians are going backwards. According to the Australian Bureau of Statistics, the top 20 per cent of Australian households now hold more than 60 per cent of our nation’s total wealth, and the bottom 20 per cent hold less than 1 per cent. Meanwhile, the top-earning 1 per cent take home as much in a fortnight as the lowest 5 per cent earn in a year.
In other words, the golden age of the Australian middle class is over and the so-called Lucky Country is fast becoming the Segregated Country. The International Monetary Fund’s World Economic Outlook recently found that among developed nations, Australia has some of the widest gaps between the wealthiest and poorest areas. We have become socially and economically segregated, with wealth and opportunity often concentrated in the inner cities, and disadvantage often confined to outer suburbs and regional areas.
That gap can be measured in more than dollars. New research has found that in Australia, the wealthier you are, the longer you live. The life expectancy gap between the richest and poorest Australians—those in the top 20 per cent and lowest 10 per cent of the population for wealth—is ten years. Between 2001 and 2015, health poverty increased in Australia, with the health poverty rates of Indigenous Australians in particular a national disgrace. Between 40 per cent and 50 per cent of Indigenous Australians now live in health poverty—roughly double the rate of non-Indigenous Australians. Not only that, but socioeconomic inequality actually increased while we were enjoying the greatest mining boom in our history.2
In summary, Australia is one of the wealthiest nations in the world, but people on median or low incomes are being left behind. If you want to know why many working Australians have voted against climate change action, there’s your answer. After all, how can we expect people to confront the threat of climate change tomorrow if they’re struggling to survive today? Australia will keep going backwards on climate change until we start going forwards on social inequality.
Take the 2019 federal election, for example. Analysis commissioned by the Australian Labor Party National Secretariat found that economic insecurity was a significant factor in the result. Seats with high rates of unemployment and low levels of income were more—not less—likely to swing away from Labor. And the swings against Labor were strongest in coal-industry regions. Four of the seats Labor lost—Longman and Herbert in Queensland, and Braddon and Bass in Tasmania—have high unemployment. And across income bands, the largest swing against Labor—2.8 per cent on a two-party preferred basis—was in the lowest-income quintile. Think about that: the income group who stood to gain most from Labor’s policies were more likely to vote against Labor.
In addition, there were swings of 4.7 per cent against Labor in seats with concentrations of so-called ‘blue collar’ workers—technicians, tradies, machinery operators, drivers and labourers. Most of the votes that Labor lost in those seats went to One Nation and Clive Palmer. This loss of Labor votes to the right is in keeping with global trends, where the more secure voters feel, the more likely they are to vote for progressive candidates, and the more insecure they feel, the more likely they are to vote for populist candidates.
In the aftermath of the 2019 election, there was a kneejerk reaction against the parts of the country that rejected Labor’s progressive platform. Much of the vitriol was directed at regional Queenslanders, and much of that vitriol was unfair and ignorant. The hard truth is that the working Australians who voted against Labor’s policies—especially its policies on climate change—knew what they were voting against: they were voting against insecurity and fear because they have been on the losing end of the long boom in the Australian economy and are losing their share of the nation’s wealth. If they are unemployed, they have been systematically bullied and abused by a labour market that uses them as a buffer to control inflation and monetary policy; and if they work in the coal industry, they fear they will be the first casualties of any effort to shift to a zero-carbon economy. In short, their insecurities and fears are very real.
Those insecurities and fears were captured by The Monthly’s Lech Blaine in a feature article published after the 2019 election. Blaine travelled through regional Queensland to the place where my grandmother was born—Clermont, west of Mackay—and met a coalminer called Steve, who was very insightful. He told Blaine:
I know people think that we’re dumb coalminers. Bogans and the rest of it. Which is how the media portrayed us when Labor lost. But lots of people I work with hate coalmining. We’re trying to set ourselves up, so when we have kids we can send them to uni in Brisbane. So they don’t have to be a shitty coalminer.
Steve didn’t see the Coalition’s win as a triumph. He saw it as a reprieve from existential insecurity because he instinctively knew what the data tells us: that there is a reckoning coming on climate change. And people on lower incomes—together with disadvantaged people and those living in regional and remote areas or working in carbon-intensive industries such as coal—will be hardest hit by this reckoning unless we face up to the urgent need for policies that prevent this impact on those individuals and families, and their communities. Steve was facing reality. He hated coalmining but saw it as the path to the education that would unlock middle-class security for his family.
Australia needs to follow Steve’s lead and face reality, too. The reality is that you cannot expect the Steves of the world to support climate change action unless you show them a way out that doesn’t end in poverty. Unless we give people like Steve a path to sustainable prosperity, we are, in effect, telling them their pain and suffering are for the greater good; and that kind of austerity-speak—and the contempt it often masks—didn’t work in Europe and the United States during the global financial crisis and it won’t work here. We have to give people a reason to trust change. We need to work to ensure that the path to a carbon-neutral future has a just outcome for working people—especially people like Steve.
Does that mean we should slow down or stop climate change action? Does that mean we should stop talking about inequality? Of course not. The closer you look at the challenges of climate change, the more you realise that this moment is an opportunity to solve the intertwined challenges of sustainability and inequality. As a recent report by the New Climate Economy states:
We are on the cusp of a new economic era: one where growth is driven by the interaction between rapid technological innovation, sustainable infrastructure investment, and increased resource productivity. This is the only growth story of the 21st century. It will result in efficient, liveable cities; low-carbon, smart and resilient infrastructure; and the restoration of degraded lands while protecting valuable forests. We can have growth that is strong, sustainable, balanced, and inclusive.
And, as Garnaut writes in Superpower, Australia has an opportunity to use this transition to become a global power in renewable energy:
I have no doubt that intermittent renewables could meet 100 per cent of Australia’s electricity requirements by the 2030s, with high degrees of security and reliability, and at wholesale prices much lower than experienced in Australia over the past half dozen years. More importantly, I now have no doubt that, with well-designed policy support, firm power in globally transformative quantities could be supplied to one or more industrial locations whenever it is required in each state, at globally competitive prices.
Garnaut’s hypothesis has been backed up by the Grattan Institute, with a report by Tony Wood, Guy Dundas and James Ha finding that Australia could win export markets and create 25,000 manufacturing jobs in carbon-intensive industry regions like Central Queensland and the Hunter Valley by harnessing renewable hydrogen to fabricate steel. But to make the leap to renewable industries, Australia must earn the trust and support of working people, because the problem is not just the environment, nor the economy, nor Keynesianism, nor neoliberalism, nor populism. The problem is insecurity.
Think of insecurity as a chasm. On one side of that chasm is the industrial economy we have now, with rising social inequity and rising carbon emissions. On the other side is the ambition of creating a zero-carbon economy by 2050.
The promises of a zero-carbon economy are alluring. For instance, the International Labour Organization has projected that a global decarbonisation of the energy sector could create about 2 million new jobs in the Asia-Pacific region. That’s the opportunity of tomorrow. The challenge of today is to build a bridge across that chasm of insecurity for working people. Without that bridge, you cannot expect people with mortgages and families to take a leap of faith on the promise that somewhere over the rainbow they, their children or grandchildren will be better off—especially when mass unemployment is rising and the global economy is shrinking.
The point I’m making is that you have to give people a reason to trust in the future. If you give Australians a reason to trust in a just transition and outcome, they will show remarkable courage and fortitude. I know they will, because that’s what they did when Hawke, Keating and Kelty gave them a reason to trust in the future through the social wage promises of the Accord.
That’s why I believe Australia must pursue a policy of full employment. Working to achieve full employment in response to the mass unemployment caused by COVID-19 would go a long way to reducing, if not eliminating, the anxiety faced by working Australians. It could also—if job creation and training were focused on, say, making Australia a global power in renewables—accelerate our transition to a carbon-neutral economy.
But a policy of full employment is just the start. If we want to lay the foundations for future prosperity and break Australia’s deep-rooted connection between economic growth and carbon emissions, we must give working people a reason to trust in the future. We must protect them from the worst of the shocks that will come as our economy weans itself off carbon. We must create a new social wage—including an increase for Newstart, now JobSeeker—that protects the quality of life of working people. We must develop and implement nation-building plans to give communities who rely on resource-intensive industries, such as coal, a pathway to future prosperity. And government, industry and unions must commit to the implementation of a 21st-century emissions and employment accord. The Accord of the 1980s worked because it gave working people a reason to trust in the future—and that trust gave Hawke and Keating the chance to lay the foundations for almost three decades of uninterrupted economic growth. An accord of the 2020s should follow that example.
I don’t make the statement lightly when I say Australia needs an emissions and employment accord. I haven’t forgotten how hotly contested the reforms of the Hawke-Keating era were. But one of the lessons of those years is that although good policy is never inevitable, it is always possible. It can be done. And in the case of climate change and inequality, it must be done.
To come to terms with climate change we must address the social and economic anxieties that are holding back Australians. We must find a way to give people from across the country—not just in Sydney and Melbourne—a reason to trust in the future. We must put an end to the undeclared wars on our environment and working families, and stop our descent into a confederacy of warring tribes. We must, from a policy point of view, stop playing blind man’s buff and look at where we want our nation to be beyond the next decade—because only then will we find the path to a just transition and a sustainable future.