Exactly what are we stealing from our children?

Using the budget bottom line as the sole measure of our future viability begs some huge questions. [27 May 2014 | Peter Boyer]

A road in Delhi, India. PHOTO URBAN REVIEW

Street scene, Delhi, India. Road transport is estimated to account for about half of the $3.5 trillion annual global cost of air pollution. PHOTO URBAN REVIEW

For a change, here’s a positive thought about this year’s federal budget: it’s based on the very sound principle that managing today’s affairs responsibly means thinking ahead decades into the future.

“We can’t go on stealing from our children to spend in the here-and-now,” Tony Abbott said last week. Government Senate Leader Eric Abetz mused yesterday that leaving a “huge burden of debt” for the next generation was “economically irresponsible and quite frankly immoral”.

Abbott and his Treasurer, Joe Hockey, pronounced that the 2014-15 budget aims to be a long-term blueprint for Australia that will position us for a sustainable future by reducing our reliance on debt.

They’re all talking about money, used to measure market activity. But an economy is far more than this. For instance, the value of highly-prized things like leisure, health and life can’t be measured solely by market transactions. In all the talk of intergenerational theft, this is not a trivial issue.

To take a simple example from the budget, if you’re among those who have to count every dollar before any can be spent, the knowledge that you don’t have to find money to pay a doctor when you’re worried about your health or need a flu vaccine has a real value.

If poor people are required to pay for a doctor, financial stress is a cost additional to their money, as is the physical damage that can result when they’re sick but decide not to make the visit. When these things happen to many people over a long time, that cost becomes a major economic issue.

This is the message that comes through powerfully in a new publication by the Organisation for Economic Cooperation and Development (OECD), representing the world’s developed countries. It was written by Rana Roy, a Hobart-based specialist in public and infrastructure economics.

Roy, who earned his doctorate investigating “the economics of technical change over the long run”, was the principal author of an intensive study of Tasmania’s vulnerability to oil price rises released late last year.

The cost of air pollution: Health impacts of road transport, launched last week in Leipzig, Germany, is Roy’s detailed analysis of how pollutants from cars, trucks and buses directly affect our health. But it turns out to be much more than its title would suggest.

I had the pleasure of a long conversation with Roy last week before he jetted off to Berlin for a meeting organised by the World Health Organisation to investigate environmental health impacts.

His OECD study, which seeks to put a price on “real” economic value, estimates the cost to health of air pollution in developed countries in 2010 was about US$1.7 trillion, half of it attributable to road transport. In India and China it cost another US$1.8 trillion.

Interestingly in light of the budget discussion about the diesel fuel tax rebate currently available for off-road commercial vehicles, Roy draws attention to the much greater environmental impact of diesel over petrol emissions, with powerful long-term implications for the future of the rebate.

But he’s at pains to point out that only a small fraction of the huge costs involved in these estimates is recorded in budget items. In other words, cost measured in dollars paid and received doesn’t begin to describe the total cost, when measured as the loss of value.

The issue goes way beyond road transport. It touches on every kind of pollution source, from power stations to factories, building sites, ships, aircraft – you name it – and every kind of pollution: toxic and greenhouse gases, airborne particles, asbestos, radioactive substances, heavy metals and so on.

The difference between cost measured in money transactions and cost measured as a loss of value lies at the heart of the debate raging around the world over what we should do to contain our impact on natural systems, now threatening our future.

Roy looks at this from the perspective of “real” economics, the economics that lies behind what he calls “the monetary veil”. This is what the best economists have sought to do for centuries, from Francois Quesnay and Adam Smith down to Kenneth Arrow in our own time.

Roy’s study shows that to grasp fully the cost of environmental damage and the value of preventing it, we must see past the dollar sign to physical outcomes. We must get to understand what makes up these processes, where they come from, and what they do to people and their world.

Financial accounts don’t disclose real profit and loss, prosperity and poverty. With the veil lifted, the unacceptable risk of supporting environmentally-damaging activities for short-term savings or profit, and of failing to invest in safer options, becomes clear.

Of course we must spend within our limits, but the Abbott government won’t know what those limits are until it lifts its gaze beyond the financial bottom line. Only then will it know just what we’re “stealing from our children”, and what the real cost will be.

Happenings

Last week saw the Hobart launch of the National Energy Efficiency Network, (NEEN) which has a handy online toolkit for organisations and households to monitor and reduce their energy consumption.

NEEN was supported by the Energy Efficiency Information Grants Program, which won’t be funded after the end of June. The Abbott government is legislating to shut it down.

After tonight’s public discussion about the changing energy scene (Giles Parkinson and Paul Gilding, 6pm at UTAS Stanley Burbury Theatre, Sandy Bay), you might feel a need to explore “the art of happiness”, the name of a three-part Hobart event beginning on Friday at 5.45pm.

Presented by Sustainable Living Tasmania, the event explores the benefits of happiness in our lives. In the first session at IMAS Waterfront (Castray Esplanade, Battery Point), psychologist Bob Cummins presents recent research into well-being and happiness. Entry is free.

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