Rudd's dangerous liaison
Terry McCrann
March 29, 2007 12:00am
Article from: Herald-Sun
KEVIN Rudd has recommitted a Rudd Labor government to damaging the economy in the short-term and destroying it in the longer-term.
What he proposes would do far more economic damage, sow far worse social chaos, and specifically and directly hurt individual Australians more than the damage we are still suffering from the disastrous Whitlam period all that time ago in the 1970s.
That's of course, if words mean anything. In this case I suspect not: that Rudd is only mouthing 21st century religious pieties much as people did over the previous two millenia. Before they promptly kept on sinning.
The danger is also of course, that symbolism can matter; can be made to matter. That you are actually forced to live up to your pieties.
Yesterday, Rudd restated that Labor would sign the Kyoto protocol on greenhouse gas emissions; and that its policy was to target a 60 per cent reduction in Australia's emissions by 2050.
Now it's a fair bet that Rudd won't be around to be held answerable to the outcome in 2050; or indeed at an earlier period where it's reasonably clear where the emissions are trending.
Nevertheless a Rudd government that lasted only as long as Whitlam's, could still do huge damage if it actually sought to start on that journey.
It's already fairly clear that Rudd is not big on arithmetic. He's wisely leaving the sums to the duo of shadow treasurer Wayne Swan and shadow financial minister Lindsay Tanner.
But let me give him one number. A target to cut total emissions by 60 per cent would mean something like a 90 per cent reduction in emissions per person or per unit of economic output.
Just think of that in personal terms. Could you really cut petrol use by 90 per cent? Electricity? And then essentially 90 per cent of everything else?
Even assuming a lot of windmills and solar panels, that is beyond any rational possibility. We really reduce emissions by 60 per cent by 2050, we will have dramatically shrunk the economy.
Rudd was repeating Labor policy, in gushing adoration at the feet of one of the high priests of the First Church of Climate Apocalypse, Sir Nicholas Stern, visiting Australia on a -- ahem, flying -- visit.
The Stern Review which carries his name purports to examine the Economics of Climate Change. It does no such thing. It merely preaches the same apocalyptic hysteria. And does so dishonestly.
It purports to establish by rigorous economic analysis that if we tackle climate change, by reducing emissions of carbon dioxide -- Stern said yesterday, by between 60 and 90 per cent by 2050 in the industrialised world -- the cost will be equivalent to 1 per cent of global GDP a year.
The off-setting benefit would be between 5 and 20 per cent of global GDP a year. A sort of 'negative' benefit, because that is what we would lose if we didn't stop emissions and we were overwhelmed by catastrophic temperature change.
Presented like that, it's a no-brainer. Using current global GDP, that's trading around $US500 billion for between $US2.3 trillion and $US9 trillion a year. Where do I sign?
Problem is it's entirely shonky. It's apocalyptic hysteria masquerading as economic analysis.
The real costs, cutting emissions, happen now; the benefits (avoidance of climate costs) happen in the future. To line them up you have to use what's called a discount rate.
Again a simple question. If I said I'd pay you a salary of $1000 a week, but you would only get the money in 20 years' time, would you be happy with only getting $1000 then?
No way. You'd probably like the $1000 to be compounded at say 10 per cent a year; you might accept 6 per cent a year. The discount rate is that in reverse, counting back from some time in the future.
So what discount rate did the Stern report use? Just 2 per cent. And in 700-pages it couldn't find the space to actual disclose that -- so much for analytical rigour.
Why does it matter? Think of your $1000 being compounded at just 2 per cent a year.
In the Stern context, it has the effect of dramatically overstating the relative value of those future benefits. Use a more realistic 6 per cent, and today's costs of attacking climate change will be greater than tomorrow's benefits.
Why did Stern the supposed economist use 2 per cent? On the basis that catastrophic climate change was so bad, when it happened in, say 2050, it was almost as bad as happening right now.
That is Stern not an economist but a fully fledged member of The Church. Not analysing the costs and benefits of climate change but factoring the negatives as timeless absolutes.
The Stern Review is not an economic analysis of climate change, but just another climate change (hot) gospel.
And Rudd wants to sign Australia up. At least on paper. Presumably it will come with the 21st century version of a confessional.
All of this utter lunacy was captured with exquisite perfection by Sir Nicholas's closing words on the telecast of his address to the National Press Club yesterday.
Earlier asked what could Australia do now, his response had been "set a target (for reducing emissions) for 2050".
His closing words were to admonish Australia for not signing up to Kyoto, even though "we'd be one of the few countries actually meeting our commitment".
So almost nobody is meeting the relatively soft Kyoto targets; so the solution is to set much tougher targets manana.
Priceless. You could not make this stuff-up if you tried.