Energy madness

This energy hex we place on ourselves, it’s madness
Since 1999, average spot prices per megawatt hour have leapt from $50 to $110 in South Australia.
The Australian
12:00AM June 23, 2018

CHRIS KENNY

Associate Editor
Sydney

If our worst enemies abroad were given one evil wish to destroy our economy they probably would look to curse perhaps our greatest natural advantage: access to almost unlimited cheap energy.

Yet, as if to prove that fact is stranger than even this madcap fiction, this is a hex we are visiting upon ourselves.

If a prosperous nation decided to burden its people with expensive and unreliable power, imposing hardships including job losses, costs on struggling families, reduced profits and missed investment opportunities, to create a more benign environment for all the people of the world, it would be truly altruistic. But if it were inflicting pain on its citizens and handicapping future generations for no discernible benefit, then it would be an act of sheer madness.

Yet here we are. We are in a self-imposed energy crisis. No one disputes the urgency — Coalition and Labor politicians, state and federal, agree prices are too high; they are spending on diesel generators, large-scale batteries and stored hydro to find a way through; companies are having power cut or being paid to reduce demand; consumers and industries fear dire consequences; regulators sound alarms about lack of supply; and policymakers float a raft of possible solutions.

Yet it is all our doing. By mandating renewable energy targets, committing to global carbon dioxide emissions-reduction goals, subsidising wind and solar generation including by domestic consumers, toying with emissions trading schemes and imposing (for a time) a carbon tax, we have up-ended our electricity market, forced out some of the cheapest and most reliable generation and made our power more expensive and less reliable. The lion’s share of investment across a decade — upwards of $30 billion — has gone into the sure bet of subsidised renewable energy that has a guaranteed market but that cannot be relied on to meet peak energy output at any given time. Billions more have been spent on government payments and grants. All this money is recouped in the end from consumers, who are paying enormous sums to go backwards.

Since 1999, average spot prices per megawatt hour have leapt from $50 to $110 in South Australia and from less than $25 in NSW and Victoria to $80 and $95 respectively. Electricity costs for manufacturers have increased 79 per cent since 2010 and in that period there have been net job losses of about 140,000 in the sector. Price rises have squeezed family budgets, created hardship for pensioners and forced companies to cut jobs or shut down.

South Australia was plunged into darkness for hours and the Australian Energy Market Operator has warned that without remedial action, even in NSW where cheap and reliable coal-fired power has been abundant, there will be supply vulnerability in the coming years that could lead to 200,000 homes going without power during peak summer demand. The closure of NSW’s Liddell coal-fired power station in a few years will make the situation worse.

This month AEMO warned again that the “unprecedented transformation” of our electricity system means Australia “does not have the energy reserves it once had to lean on” when we need it. This is deplorable.

We are the world’s largest coal exporter. We will soon be the largest exporter of liquefied natural gas. We are the third largest exporter of uranium.

Australia powers the economic and manufacturing powerhouses of northeast Asia, and other parts of the world, with cost-effective and reliable energy supplies. But we decline to do the same for ­ourselves.

We may as well feed the people of the world with our wheat and sheep exports while our own people go hungry. Why are we doing this to ourselves? Politicians from both major parties and the Greens pretend — surely they are feigning because they must know the facts — that this is our contribution to global efforts to combat global warming. This is fraudulent.

We need to do what the climate activists constantly implore of us: back the science. All the facts tell us that, scientifically, Australia’s climate action is doing nothing to improve the global environment. We are putting ourselves through extended economic pain, with deep social consequences, for nothing more than climate gestures. This is the hard edge of gesture politics: national virtue-signalling, with the poorest citizens and jobless paying the highest price.

Don’t take my word for it; listen to Chief Scientist Alan Finkel, who the government tasked with revising policy. He confirmed before a Senate estimates committee hearing a year ago that Australia’s carbon emissions amounted to 1.3 per cent of the global total (that proportion is shrinking as world emissions grow). Finkel was asked what difference it would make to climate change if all of our nation’s emissions were cut — pretend 25 million of us left Australia idle — so that world emissions dropped by 1.3 per cent. “Virtually nothing,” was his reply.

But wait. Our contribution is much less significant even than “virtually nothing” because we will not eliminate all our emissions. We aim to reduce them by 26 per cent — so our best impact may be a quarter of virtually nothing. Wait again; we become even more irrelevant. Global emissions are on the rise. Led by China (growing by up to 4 per cent so far this year) world CO2 emissions are increasing at close to 2 per cent. So, more science, more facts. China’s annual emissions are about 30 times higher than ours and in any given year the increase alone in China’s emissions can be more than double what we plan to cut by 2030. While global emissions rise our piddling cuts do zip. We are emitting into the wind. Our price rises, blackouts, job losses, investment droughts, subsidies and energy system dilemmas are all for nothing.

Anyone with a pulse must understand this. Why they persist with proposing or backing costly climate policies is the question. They want to display their commitment to the cause. They want to associate themselves with protecting the planet. It is earth motherhood, dictated by political fashion and a reluctance to go against the zeitgeist. What a sad indictment on our political/media class — indulging its progressive credentials for social and diplomatic acceptance at the expense of struggling families, jobless blue-collar workers and our economic competitiveness.

The Coalition is starting to tear itself apart again; led by Tony Abbott, those who understand mainstream concerns are rising up against those stuck in commercial, media and political orthodoxy. Malcolm Turnbull and Josh Frydenberg’s national energy guarantee is a retrofit mechanism to encourage some investment in dispatchable electricity.

As they negotiate for a bipartisan position they could be left with a stark choice: satisfy Labor and its premiers or placate the Coalition partyroom. It may be impossible to do both — the partyroom may at least demand a plan to extend the life of Liddell — and another political short-circuit may be in the offing.

The national energy system is so badly distorted by a decade of renewable subsidies and the threat of future carbon prices that there is no easy solution. All sides of the debate propose expensive government interventions. Investors in anything but renewables are wary.

If we had done nothing on climate action we might have had plentiful and cheap coal and gas power on the back of private investment. But we killed that goose. There is bound to be a reckoning; eventually we will reclaim the energy advantage we export to other nations. And if we ever need a zero-emissions future, we will embrace the silver bullet of nuclear energy. The only question is whether it takes us three years or three decades to come to our senses — and how many political careers will be hoist with this petard in the interim.

The ignorance of many Uni graduates.

Education system produces anti-capitalist millennials

TOM SWITZER,CHARLES JACOBSThe Australian12:00AM June 21, 2018

Anyone over the age of 45 will have clear memories of the ecstatic reaction to the fall of the Berlin Wall in November 1989.The wall had been erected in 1961 because Germans living in the so-called German Democratic Republic were, at the rate then of more than 10,000 a day, walking from the Russian zone of Berlin to the British, American or French zones.

In the “democratic” republic, all but the most corrupt and stupid of East Germans wanted to leave for one overwhelming reason: that the socialism imposed on their society by the Soviet-backed German communists who ruled them had removed their personal liberty and impoverished them. In the end, it was an ideology that could be enforced only by turning their country into a prison and many of its citizens into a network of informers.

Sadly, many of those too young to recall a world damaged by doctrinaire leftism fail to understand the system of oppression and coercion that enforced it.

According to a Centre for Independent Studies/YouGov poll, 58 per cent of Australian millennials — those born between 1980 and 1996 — have a favourable view of socialism, with only 18 per cent having an unfavourable one. They believe government should have more control of the economy.

It is perhaps a sign of grace that the older these millennials are, the more sceptical they become about the socialist dream: 64 per cent of the youngest support socialism against only 51 per cent of the oldest. Perhaps there is a chance that they will, eventually, grow up. However, their support for socialism is only half the story. On, it seems, evidence as flimsy as that on which they base their enthusiasm for the left, millennials also revile capitalism. Almost 60 per cent believe it has failed.However — proving Cicero’s point that “to be ignorant of what happened before you were born is to remain a child” — only 21 per cent of those questioned said they knew well who Mao Zedong was and 51 per cent said they knew nothing of him at all. Just 26 per cent were familiar with Vladimir Lenin and 34 per cent with Joseph Stalin.

It is a regrettable comment on the quality of our university education system that almost as many who have been through it share this prejudice as though they have not experienced its benefits.

That 62 per cent of millennials believe Australian workers are worse off today than 40 years ago is in direct contradiction of all available economic evidence: from the mid-1980s to about 2012, the country experienced the biggest national income boom since the gold rushes; and our economy is in its 27th consecutive year of economic growth, surpassing The Netherlands for the gold medal for the longest economic expansion in the modern era.

Again, there is distressing evidence — distressing, that is, to all those who value freedom and personal liberty — that assumptions are made on the basis of wilful ignorance: 61 per cent of graduates among millennials share this wrongheaded idea.

Similarly, they believe — entirely wrongly — that the government is running down the public services: once these people buy into one aspect of the pro-socialist propaganda, they buy it all.

While the wickedness of Mao, Lenin and Stalin is unknown to these youthful idealists, they are well schooled about the wickedness of the extreme right: 73 per cent of them are well aware of Adolf Hitler and his iniquities. It is a problem the world over — not merely in Australia — that establishments never try to be objective about the enormities of all political extremes.

It remains entirely morally acceptable for political leaders on the left to claim an inheritance from Marx, Lenin or Fidel Castro. Were anyone on the right to express admiration even for a dictator such as Francisco Franco, whose crimes were comparatively mild by the standards of other fascists, and certainly by comparison with Stalin or Mao, they would be denounced.

For a politician or public figure to express any admiration for Hitler or his doctrines is, quite rightly, to invite the termination of a career. So it should for those who endorse the doctrines of Stalin or Mao, because of the incontrovertible evidence that those doctrines can, in the end, be imposed only by force, deprivation of liberty and murder.

The predominantly well-educated young people who romanticise socialism should be expected to have the intellectual training to look at the evidence, and thereby to understand the harm that the doctrines they find so attractive have done to economies, societies and, above all, individuals.

There is no economy in history that has benefited from socialism. All economies that have enjoyed sustained growth and have broadened prosperity have done so through free trade and free markets; regulation is the enemy of prosperity, and prosperity is the only means of providing the public services that socialists are so fond of claiming they prize. Socialists need to remember that you don’t tax a loss: you only tax a profit. Without profit — without capitalism — you cannot raise the revenue to provide public healthcare, education, law and order, or defence. That is the central hypocrisy of socialism, and one its adherents would do well to recall before they denounce capitalism again.

The other method socialists have tried to raise resources to provide for everyone is by expropriation of private property and collectivism. Anyone who wishes to see the results of that does not even have to look back to the impoverishment of the Soviet bloc or the misery of Mao’s China: recent events in Venezuela, and the way in which thousands of Cubans have risked their lives trying to escape on flimsy vessels to the US, give more immediate and startling evidence.

Much of the fault of this incomprehension among the young must lie with our education system: not just universities, with their acrid determination to teach leftist values above all others and to promote teachers who adhere to them, but in our schools, with the failure to teach basic general knowledge. This is no minor problem, because one day such people may exercise a vote to impose such appalling doctrines, and their collateral damage, on our society. To use a good old Soviet phrase, the re-education had better start here.

Tom Switzer is executive director of the Centre for Independent Studies in Sydney, where Charles Jacobs is a policy analyst.

Democracy's fragility?

There are four subtle stages on the road to autocracy

Millions of Turks are now terrified of their president. However, plenty admire him for protecting them from the Gulenists. Adem, an estate agent in Istanbul, congratulates President Recep Tayyip Erdogan for “cleaning away the enemies within” — echoing a government slogan. He says of the purge’s victims: “They’ve been arrested because they’ve done something wrong. In America if you steal state secrets they put you in the electric chair, don’t they?”

At an election on June 24, Erdogan is expected to consolidate his power. Despite double-digit inflation and a tottering currency, he is likely to win re-election (though his party may struggle). And his office will become much more powerful, thanks to a constitutional change he pushed through last year. As “executive” president, he will be able to issue decrees with the force of law and pack the judiciary with loyalists.

Turkey exemplifies a dismal trend. The world has grown more democratic since World War II. In 1941 there were only a dozen democracies; by 2000 only eight states had never held a serious election. But since the global financial crisis of 2008, democracy has regressed.

Most watchdogs concur. The latest survey by Freedom House, an American think tank, is called Democracy in Crisis. Last year, for the 12th consecutive year, countries that suffered democratic setbacks outnumbered those that registered gains, it says. According to the Democracy Index from The Economist Intelligence Unit, a sister company of The Economist, 89 countries regressed last year; only 27 improved. The latest Transformation Index from the Bertelsmann Foundation, another think tank, which looks at emerging economies, finds that the “quality of democracy … has fallen to its lowest level in 12 years”. What these indices measure is not simply democracy (that is, rule by the people), but liberal democracy (that is, with a freely elected government that also respects individual and minority rights, the rule of law and independent institutions).

This distinction is important. In The People v Democracy, Yascha Mounk of Harvard University stresses that liberalism and democracy are separable. Voters often want things that are democratic but not liberal, in the most basic sense, which has nothing to do with left or right-wing policies. For example, they may elect a government that promises to censor speech they dislike, or back a referendum that would curtail the rights of an unpopular minority.

At the same time, plenty of liberal institutions are undemocratic. Unelected judges often can overrule elected politicians, for example. Liberals see this as an essential constraint on the government’s power. Even the people’s chosen representatives must be subject to the law. In a liberal democracy, power is dispersed. Politicians are not only accountable to voters but also kept in line by feisty courts, journalists and pressure groups. A loyal opposition recognises the government as legitimate but decries many of its actions and seeks to replace it at the next election. A clear boundary exists between the ruling party and the state.

This system is now under siege. In many countries, voters are picking leaders who do not respect it, and gradually undermine it, creating what Hungarian Prime Minister Viktor Orban proudly calls “illiberal democracy”. Eventually, when enough checks and balances have been removed, a would-be autocrat finds it easier to neuter democracy itself, by shutting down opposition (as in Turkey) or neutering the legislature (as in Venezuela, where the government staged a sham election on May 20).

The mature democracies of the West are not yet in serious danger. Donald Trump may scorn liberal norms, but US checks and balances are strong, and will outlast him. The real threat is to less mature democracies, where institutions are weaker and democratic habits less ingrained. Nonetheless, what happens in the West affects these places. The US once inspired subjugated people and sought to promote democracy. It now has a president who openly admires Vladimir Putin and claims a “special bond” with Kim Jong-un.

Meanwhile, China supplies an alternative model. Having grown much less dictatorial after the death of Mao Zedong, it is reconcentrating power in one man, Xi Jinping, whose term limits as president have just been removed. Some would-be autocrats cite China as evidence that authoritarianism promotes economic growth — though what they often mean is that they too want to be presidents for life.

Globally, public support for democracy remains high. A Pew poll of 38 countries found a median of 78 per cent of people agreed that a system where elected representatives make laws was a good one. But hefty minorities approved of non-democratic alternatives. A worrying 24 per cent thought military rule would be fine, and 26 per cent liked the idea of “a strong leader” who “can make decisions without interference from parliament or the courts”. In general, autocracy was more popular among the less educated.

With such large majorities favouring it, leaders cannot openly admit they plan to abolish democracy. However, many have grown adept at subverting its essence while maintaining its outward appearance. The details vary from country to country, but it is striking how much the new autocrats have in common and how attentively they learn from each other.

To oversimplify, a democracy typically declines like this. First, a crisis occurs and voters back a charismatic leader who promises to save them. Second, this leader finds enemies. His aim, in the words of 20th-century US wit HL Mencken, “is to keep the populace alarmed (and hence clamorous to be led to safety) by an endless series of hobgoblins, all of them imaginary.” Third, he nobbles independent institutions that may get in his way. Finally, he changes the rules to make it harder for voters to dislodge him. During the first three stages, his country is still a democracy. At some point in the final stage, it ceases to be one.

In Hungary, two shocks undermined faith in the old order. First came the financial crisis. Before it, many Hungarians took out absurdly risky foreign-currency mortgages. When the Hungarian forint crashed against the Swiss franc and they lost their homes, they were furious. Fidesz, a party that was once quite liberal but has become dramatically less so, won an election in 2010 by blaming the previous government and vowing to make borrowers whole.

The second shock was the Syrian refugee crisis of 2015-16. Hardly any Syrians settled in Hungary but thousands passed through on the way to Germany, so Hungarians saw them on television. They gave Fidesz’s leader, Orban, two handy enemies: the Muslim hordes and the liberal elite who wanted to let them in.

Orban built a fence that largely stopped the flow of refugees. But he continued to play up the threat. His government ordered a poll asking voters what they thought of a fictitious plan by George Soros, a Hungarian-American billionaire, to bring one million Middle Eastern and African migrants to Europe. A campaign poster showed Soros grinning evilly and embracing opposition leaders holding wire cutters. “They would remove the fence together” ran the slogan.

On April 8 Orban’s party was re-elected with a thumping majority. In May Soros’s foundation closed its office. “Hungary disproves the notion that when you reach an income per head of $US14,000 your democracy is safe,” Mounk says of a theory popular with political scientists.

Picking the right enemies is crucial. Migrants are good because they cannot vote. Soros is even better because he is rich, funds liberal causes and is, you know, Jewish. He can be painted as allpowerful; but because he is not, he cannot harm the demagogues who demonise him.

Stirring up ethnic hatred is dangerous. So rabble-rousers use dog-whistles. Former South African president Jacob Zuma denounced “white monopoly capital” rather than whites in general. Many leaders pick on small, commercially successful minorities. Former Zambian president Michael Sata won power after railing against Chinese bosses.

Criminals make ideal enemies, since no one likes them. Rodrigo Duterte won the presidency of The Philippines in 2016 on a promise to kill drug dealers. An estimated 12,000 extrajudicial slayings later, the country is no safer but his government has an approval rating of around 80 per cent.

Would-be autocrats need a positive agenda, too. Often they pose as defenders of an identity that voters hold dear, such as their nationality, culture or religion. Poland’s ruling party, for example, waxes lyrical about the country’s Catholic way of life and lavishes subsidies on big families, who are likely to be rural and religious.

Parties of the nationalist right have learned from the left how to exploit identity politics. Both sides tend to favour “group rights” over those of individuals. The “Hungarian nation is not a simple sum of individuals”, Orban said in 2014, “but a community that needs to be organised, strengthened and developed”.

To remain in power, autocrats need to nobble independent institutions. They do this gradually and quietly.

The first target is often the justice system. Poland’s ruling party passed a law in December forcing two-fifths of judges into retirement. On May 11 Duterte forced out the chief justice of The Philippines, who had objected to his abuse of martial law.

The media must be nobbled, too. First, an autocrat in waiting puts his pals in charge of the public broadcaster and accuses critical outlets of spreading lies. Rather than banning independent media, as despots might have done a generation ago, he slaps spurious fines or tax bills on their owners, forcing them to sell their businesses to loyal tycoons. This technique was perfected by Vladimir Putin in Russia, and is now widely copied. In Turkey, the last big independent media group was sold to a friend of Erdogan in March.

Getting the security forces on side is essential. Former Zimbabwean president Robert Mugabe took their loyalty for granted and was thrown out. Other strongmen are less complacent. To keep the men with guns happy, Venezuelan President Nicolas Maduro lets them loot the national food distribution system. Egyptian president Abdel Fattah el-Sisi, who won 92 per cent of the vote in March, lets the police top up their salaries by robbing civilians.

With the courts, press and armed forces in his pocket, a strongman can set about neutering every other institution that counts. He can sideline parliament, redraw the electoral map and silence serious opponents.

Whatever ideology they profess, autocrats are often opportunistic. Daniel Ortega in Nicaragua started as a revolutionary Marxist, seizing power in 1979. He lost an election in 1990 partly because he was anti-Catholic. So he rebranded himself as a devout Catholic — pushing a ban on abortion even if the mother’s life is at risk — and was re-elected in 2006 against a divided opposition. Last year his wife, Rosario Murillo, became vice-president, thus establishing a dynasty resembling the dictatorship he once overthrew.

Ortega and his Sandinistas have commandeered the Supreme Court, which abolished presidential term limits, and created shell “opposition” parties to simulate choice while repressing genuine opponents. Critical media find themselves under new ownership, often that of Ortega’s family.

None of this chipping away at democracy sparked unrest. It was only when Ortega tried to grab Nicaraguans’ pensions that they rioted. The ruling Sandinistas’ mismanagement and graft has left the public pension pot all but empty. Ortega told workers to top it up. In response, tens of thousands took to the streets in April and tore down statues erected in honour of Murillo. The regime has clung to power by shooting people.

Autocrats who plan to stay in power forever need to indoctrinate children. “Most countries don’t have events from two years ago in their school history books. We do,” says a Turkish liberal, aghast that Turks as young as four are taught that their President saved the nation from the Gulenists. Venezuela’s Bolivarian University offers free tuition to students who submit to lectures blaming the US for food shortages.

Much has been said about the failures of liberal democracies. Although they are typically rich and peaceful, many of their citizens are disgruntled. Globalisation and technology have made them fear for their jobs. The culture wars ensure more or less everyone feels disrespected by someone. The rise of autocracy is in part a reaction to these big historical trends. But it is also because power-hungry leaders have learned how to exploit them. You cannot have autocracy without an autocrat.

Most authoritarian regimes are filthy. Of the countries and territories in the dirtiest third of Transparency International’s corruption perceptions index, not one is rated “free” by Freedom House. Of those in the cleanest 20, only Singapore and Hong Kong fail to qualify as free.

Autocracy and graft create a vicious circle. Power with few constraints enables those who wield it, or their friends, to get rich. The more they steal, the more incentive they have to rig the system to remain in charge. If they lose power, they risk prosecution, as Zuma is discovering in South Africa. Thus, whenever an autocrat makes a stirring speech about national pride, his real aim may be to deflect attention from his own skulduggery. Orban’s opponents would love to discuss why his friends are now among the richest people in Hungary, or why there is a huge football stadium in his tiny home town. But his friends control the media, and would rather talk about immigrants.

Democrats can fight back. Five recent examples stand out.

In Sri Lanka, the opposition united to beat a spendthrift, vicious autocrat. In the Gambia, the threat of an invasion by neighbouring countries forced a strongman to accept that he had lost an election. In South Africa, an elected leader who subverted institutions and let cronies loot with impunity was tossed out by his own party in January. In Armenia, an autocrat was ousted in April by mass protests.

And in Malaysia, former prime minister Najib Razak tried to steal an election in May but failed. Despite his gerrymandering, censorship and racist appeals to the Malay majority, voters dumped the ruling party of the past 61 years. Its sleaze had grown too blatant.

America’s justice department has accused Najib of receiving $US681 million from 1MDB, a state fund from which $US4.5 billion disappeared. He says the money was a gift from an unnamed Saudi royal. The opposition gleefully contrasted the vast sums Najib’s wife spends on jewellery with the difficulty ordinary folks have making ends meet. “Najib just makes up his own rules,” says a taxi driver who switched sides to back the new government.

That strongmen make up their own rules is why liberal democracy is worth defending. And in the long run, it seems to deliver better material results. A study by Daron Acemoglu of the Massachusetts Institute of Technology found that switching from autocracy to democracy adds 20 per cent to income per head across 30 years, though some economists dispute these findings. Guillermo Vuletin of the World Bank argues that autocrats fall when economies slump, and the democrats who succeed them take credit for the inevitable recovery.

What is certain, however, is that freely elected governments bound by the rule of law have less power to abuse citizens. “Little by little they took away our rights,” says a journalist in Diyarbakir in southeastern Turkey, who was recently arrested for five innocuous tweets. “Every day I check the news to see which of my friends has been detained.”