Recent reports would have you believe that Tasmania is a basket case and in desperate need of another bailout. The Fairfax-owned Launceston Examiner recently ran a story headlined “Tasmania’s economy is nation’s worst”. Not to be outdone, an editorial in Hobart’s Murdoch-owned Mercury stated that in the forthcoming election, “It’s jobs, jobs, jobs”.
These opinions reflect the views of narrowly trained neoclassical and Keynesian economists. For both approaches, the secret to social welfare is never ending growth as measured by gross domestic product (GDP).
What is GDP?
Officially, GDP is the sum total of the market value of goods and services produced in a country, with adjustments made to deduct intermediate goods to avoid double counting. It is a truly bizarre way to measure how a country or a state is going economically, socially or environmentally.
GDP only counts market transactions. So, for example, if your mother retires and offers free child care to your kids, then the fact you are no longer making child care payments is bad for the economy. Conversely, if you have a car accident, all the subsequent expenses related to insurance and repair is good for the economy because it all gets added into GDP.
From an economic perspective, your loss of welfare is the economy’s gain!
There are other dramatic failures with GDP as a measure of welfare when it comes to considering the environmental and social costs of market activity. A billion dollars in coal mining profit is equal to a billion dollars profit from building solar panels. An economy that grows by ten billion dollars is doing well regardless of how it is distributed. If the rich get nine billion dollars and the rest only one billion, it makes no difference to GDP.
GDP growth and Australia
Now that we grasp the perverse nature of GDP as a measure of total welfare, let’s consider what is actually happening when comparisons are made between Tasmania and the rest of Australia. Unless you’ve been living a hermit’s existence, you will know that Australia’s growth over the past decade is a result of the mining boom, a boom in which coal exports have featured prominently.
Now, all the activities of Australia’s coal industry have contributed to the nation’s inflated GDP. Nothing has been deducted for any of the negative social and environmental impacts it and the broader mining boom have been having on local communities and the climate.
There are several consequences of the mining boom that have been much remarked on. First, we can simply note that mineral resources are inequitably distributed around the country and that resource extraction has been concentrated in Queensland, Western Australia and the Northern Territory. Other states, including Tasmania, have been significantly less impacted.
Thus, second, the “miraculous” growth of Queensland, WA and Australia over the past decade is not due to individual or collective genius but to dumb luck. Mining contributes around 28% to Western Australia’s gross state product today, up from around 25% in 2008.
Third, rather than simply admit they’ve been lucky, mining barons and politicians would have us believe they are the new business gurus, a view that then justifies them lecturing us on their quaint economic notions.
Finally, while Tasmania has not “benefited” – thankfully – from an unsustainable mining boom, it has, like many regions around the country, had to bear the costs. These, most notably, have taken the form of the high dollar that has played havoc with Australia’s overseas competitiveness.
GDP, unemployment and Tasmania
Is Tasmania in desperate strife? In March 2008, according to the official figures, Tasmania’s workforce was 241,687; today it is 250,064, a growth of 3.5% over the five year period. Total unemployment was 12,118 in 2008 and 17,741, a difference of 5,623.
Life is undoubtedly very tough for those people out of work and something definitely needs to be done about it. However, being stampeded into growth-for-growth’s-sake policies by those hypnotised by the GDP fetish is not the answer. A sober assessment of why Tasmania’s unemployment is higher today than it was in 2008 is required.
A moment’s reflection enables us to pinpoint why: the restructuring of the state’s unsustainable timber industry. According to a detailed study of the industry by Australian National University researcher Jacki Shirmer, almost 3,000 jobs were lost since 2008, a figure that accounts for almost half the observed job losses and probably a good deal more when multiplier effects are included.
A A$15 million package is already in place to help transition many of those who lost their jobs in the forestry sector as part of the Tasmanian Forestry Agreement. The TFA is also rolling out A$100 million in regional development grants that will generate more jobs over the next several years.
Sustainable Tasmania; unsustainable Australia
Tasmania’s failure to meet mainland standards of GDP growth is not a sign of the state’s regionality, cultural backwardness and failure to innovate.
Rather it is a sign that Tasmania – an island state with tight-knit communities, gourmet food, world class natural heritage, a vibrant cultural tradition, and more – is moving towards sustainability even as the rest of Australia is turning its back on it.
The irony of all this should be savoured. Unsustainable, fossil-fuel intensive development in the rest of Australia that has generated hyper-inflated GDP and employment rates is being used as the benchmark for judging Tasmania, which is actually travelling down a more sustainable path.
In the race for a higher GDP, it is mainland Australia that is using steroids: no wonder Tasmania’s performance is suffering by comparison.