Budget Debate 2011: Dr Kennedy Graham: A Green Vision of an (Sustainable) Economy

This year's Budget is essentially more of the same: a traditional neoclassical Budget in a time of national austerity. Let me critique it from a Green perspective, and offer an alternative, ecological Budget in a time of global crisis.

The 49th Parliament has passed 224 Acts in 30 months. These Acts reflect the Government's world view to make New Zealand a better place as it sees it. What stands apart in importance for every Government and every Parliament is the annual Budget, which sets the course for a country's macroeconomic policy.


The two overarching issues in every Budget are how large the national pie is, and how we slice it—how large the economy is, and how we share in its product. Government policy hugely influences how large the pie is, how much the country produces, how much it trades and under what conditions, how it controls debt, and what exchange rate it maintains. We measure the size of our economy by GDP. We compare ourselves with others through our relative GDP ranking. We are relatively well off here in God's own, yet in our abiding provincialism we compare ourselves only with OECD countries, and harbour neurotic fears and compulsions as a result.

A Green Budget aspires, above all, to attain sustainability. How we measure this is not an easy task. It is a work in progress and we have only just begun, but we shall get there.
We fall about arguing over catching up with Australia, yet the New Zealand pie is relatively large, as humanity goes. How we slice the pie is the secondary issue for the Government—the question of social policy. This addresses taxation, employment, labour, health, education, and social welfare. Add in law and order and we have the general picture of our society, and of how Government sets out its strategic direction in the Budget.

Political debate among our parties traditionally reflects the left-right spectrum: large or small government, high or low taxes, more or fewer benefits, how much expenditure, and how to spread it. It reflects whether the annual tilt is towards defence or aid, health or education, prisons or community service, youth or the elderly, research or subsidies. The annual Budget addresses these left-right issues. The two major parties, forming successive Governments in New Zealand over the past century, revolve around the centre of the horizontal spectrum, centre-left or centre-right, spinning a helix of mild variation around the Western world view of the past 2 centuries. The 2011 Budget is no exception.

The centre-right Government of the day, facing economic and financial pressure, seeks to recover the good life by regenerating growth through reducing government, making welfare leaner and meaner, incentivising the private sector with lower tax and more support for entrepreneurship, and further opening the national economy to the global market.

The Budget is designed, through a rather touching faith, to retrieve material prosperity in the 21st century through 20th century economic policy. The year's topics of choice for debate are KiwiSaver, Working for Families, and student loans. Labour, for its part, critiques the Budget through polar opposite argumentation while retaining the identical prescriptive and analytical framework. Labour too wishes to see regeneration and growth. Labour members criticise smaller Government, oppose tax cuts, and shout in anger over welfare cuts. None the less, they would concur with a reinvigorated private sector and an open economy plugged into the prevailing neoliberal global economic grid.


The Opposition and the Government share the same world view of how to grow the national economic pie, differing over how to slice it domestically. Both world views are born of a bygone age. The philosophical beliefs derive from the 18th and 19th centuries, with the freedom of Smith and Paine and the equality of Rousseau and Marx, and the economic policies derive from the 20th century, with the market forces of Marshall and Freedman and the State custodianship of Keynes.

This Government's Budget and the alternative Labour version revolve around the same economic paradigm. I do not hold these beliefs to be irrelevant, but they are secondary in today's world. The past few decades have seen the birth of a new political philosophy and new economics. We are not talking simply about the social movement known as environmentalism to be tacked on to the current political agenda; we are talking about a new political agenda, a complete change of world view, and a new age: the age of sustainability.


We are not talking about smouldering resentment and a protest movement; we are proclaiming a transformational mindset and a reform ethic for governmental management. Where people once yearned for political freedoms or social equality they yearn above all today for a healthy planet. Where movements once embraced declarations of the rights of man they now embrace the earth charter.


I do not declare the left-right spectrum to be irrelevant, but it is now secondary. Superimposed over it is now a vertical spectrum of sustainability versus collapse. Without sustainability, freedom and equality are unattainable. In this new age our institutions are failing in a time of need. Governments pay lip service to sustainability, but they do not understand its import or magnitude. Our parliamentary procedures, which are locked into 19th century tradition, fail to assist.


Where are the Budgets that address the real problems of our time: land deforestation, land deterioration, water scarcity, ocean degradation, biodiversity lost, and atmospheric pollution?


Where is the global Budget that identifies the safe operating space for humanity, the nine planetary boundaries, the ecological overshoot of the planet's resources, the global energy imbalance, the need for carbon emissions to peak by 2017, and the switch to a low-carbon economy by 2030? And how is our national Budget to reflect these global concerns? Where in the Minister's statement is there recognition of these concerns and how to participate in a coordinated response? Where is the Budget that begins at the beginning, with population growth and density around the world and here in New Zealand?


Does this Budget consider our national ecological footprint? Does it identify whether we have an ecological surplus or deficit and how this might relate to the needs of the world? Does the Budget incorporate as its central objective the taming of climate change through contraction and convergence and a genuine price on fossil fuel? Does it embrace a world view before it asserts the national interest? Or does it assert the national interest without much of a care for the rest of the world?


The world's problems are our problems. The fate of the earth will be the fate of New Zealand. Our destiny lies not in seeking a false competitive advantage but in pursuing a genuine cooperation with other nations for our common survival.


A Green Budget rests on this philosophical premise. A Green Budget recognises first the global population growth within a lifetime from 2 billion to 9 billion and a global density growth of 13 to 45 per square kilometre. It recognises the current 50 percent global ecological overshoot and rejects this as a moral outrage against other species and an irrational act of human self-destruction.


A Green Budget takes as its major goal the preservation of our natural resources in perpetuity. It recognises that human success lies in ensuring that economic activity must be undertaken in harmony with nature's bounty and must cease if it crosses certain thresholds, rather than simply patch up the damage. It estimates our national population growth and our need to account for the greater number. It identifies as its main criterion of success the index of human well-being, into which mortality and health, education, crime, and the integrity of the environment are integrated with traditional indicators of GDP, interest rates, unemployment, current account balance, and debt levels.

A Green Budget aspires, above all, to attain sustainability. How we measure this is not an easy task. It is a work in progress and we have only just begun, but we shall get there.

My Public Finance (Sustainable Development Indicators) Amendment Bill, which is in the ballot, would impose an obligation on the Minister of Finance to develop a Budget along these lines. It would not be content to countenance an environmental reporting Act and debate on the environment separate from the Budget. That leaves the traditional approach to macroeconomic policy supreme and environmental concerns secondary. It needs to be the other way round. This Government and this Budget is more of the same.

A Green Budget would turn the ship of State round before it is too late