MARK DIESENDORF. Lessons from Covid-19: Strategic Planning for Future Risks

May 6, 2020

A key lesson from Covid-19 is that markets cannot manage major risks and that strategic planning is necessary.

Through JobSeeker, JobKeeper and other payments, the Australian Coalition government has recognised implicitly that the unguided market cannot respond adequately to the health and economic impacts of Covid-19 and the recovery from these impacts. This, together with the then Labor government’s response to the Global Financial Crisis of 2007-2009, indicates that strategic planning on a long-term basis is necessary to prepare for other major risks that may occur in the future.

Some major risks are obvious, either because they have high probability or are already impacting society to a significant degree and are threatening to grow rapidly in the absence of intervention. These risks include new viral diseases, global financial collapse, mass unemployment, climate change, loss of biodiversity, wildfires, freshwater overuse, air pollution and its health impacts, land degradation, pollution from wastes, loss of essential imports and loss of democratic decision-making in our political systems. Although nuclear weapons proliferation receives negligible media coverage nowadays, it has been continuing, partly under the cloak of nuclear power, and the Doomsday Clock now stands at 100 seconds to midnight.

The goal of strategic planning should be to foster a resilient society, economy and institutions that can reduce the likelihood of these events and enable their effective management when they do occur. For some of theses risks, cure or adaptation is either impossible or so expensive that it can only play a minor role and so the principal emphasis should be on prevention.

Some measures to prevent, cure or adapt are expensive, others are cheap and some will save money in the long term. Part of the funding of strategic measures could be obtained by ensuring that multinational corporations selling goods and services in Australia are taxed. Other possible measures include: removal of the arbitrary cap on the tax to GDP ratio and cancelling proposed tax cuts (Australia is actually a low tax country), reform to negative gearing and the capital gains tax discount in the residential property market, reform of superannuation tax concessions, imposing super profit taxes and introducing a financial transactions tax.

Some strategic planning policies could increase social equity (e.g. a carbon tax in which the revenue is returned equally to all adult citizens as a dividend) and public amenity (e.g. increased funding for cycle-ways, pedestrian areas and the management of national parks), while others could decrease both (e.g. government subsidies to fossil fuels and the forest industry). In choosing strategies and policies to implement, those with multiple benefits are highly desirable.

Consider energy generation and use as a case study. Cutting greenhouse gases by transforming the energy sector from fossil fuels to energy efficiency and renewable energy reduces air and water pollution, respiratory diseases, water use, land degradation, and electricity bills. It also improves thermal comfort in buildings and creates more jobs than will be lost in the fossil fuel industry.

Because of the low and declining costs of solar and wind power, the transition to 100% renewable electricity is inevitable. Although it is bringing multiple benefits, wind and solar farms are being delayed unnecessarily and their economics is being undermined by lack of adequate transmission lines. (It should be noted that the existing transmission grid was not created by the market but mainly by cross subsidies from urban to rural electricity users.) The solution, the creation of Renewable Energy Zones (REZs) and their connection to our cities and industries by new and upgraded transmission lines, is recognised by many electric power engineers and energy policy analysts. Funding is needed urgently from both federal and state governments, but the federal government appears reluctant to contribute unless the deal for a particular REZ is tied to the expansion of fossil fuel use. This is counter productive.

Additional measures needed to smooth the electricity transition are reverse auctions, grants and finance for energy storage, and reform of the objective, structure and rules of the National Electricity Market.

Policies requiring that all houses, apartments, offices and shops that are sold or rented must have an energy audit that is included in the sale or rental contract, will create jobs in energy auditing while improving thermal comfort and reducing energy bills. (This is a requirement for house sales and rentals in the A.C.T.) Furthermore, building more energy efficient public housing reduces homelessness, improves social equity, creates jobs, reduces the cost of hospital emergencies and saves energy.

Expanding and upgrading urban public transport, cycleways and pedestrian areas has many economic, health and social benefits (see e.g. here and here) that can offset the costs of the infrastructure. Providing fast charging stations for electric vehicles on major urban and intercity roads reduces air and noise pollution and Australia’s dependence on imported oil, which is currently a very risky situation.

None of these strategies – REZs with transmission infrastructure, electricity market restructuring, energy audits for sale and rental of homes, transport infrastructure – can be driven by the unguided market. The same is true for physical isolation, testing and physical protection equipment to combat pandemics, the purchase of firefighting aircraft, regulations to protect biodiversity, control pollution and manage wastes and a treaty on the prohibition of nuclear weapons. For issues of vital importance to the future of human civilisation and the biosphere, leaving it to the market has very limited effectiveness.

In order for such strategies to be publicly acceptable, the community must be involved in the strategic planning process. It cannot be solely a top-down process or left to the unguided market. Citizen juries could be set up in each state, territory and local government area to discuss the issues and options and to feed-in advice to the public, business and all levels of government.

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