From The Guardian

Among many other challenges in dealing with the failure of urban policy in Australia, the Minns (NSW state) government is faced with the task of renegotiating, or repudiating, the disastrous set of contracts for toll roads in New South Wales made by its predecessors (Labor and Liberal) with the Transurban group. As a review by Allan Fels and David Cousins has found, the government is at risk of being held hostage by toll operators. According to Fels and Cousins, immediate legislation is needed “as a backup to negotiations and to give the government power if necessary to determine final outcomes”.

This is by no means an isolated case. The failure of the National Electricity Market, premised on the idea of competition between private companies, has led state and federal governments to re-enter the business of electricity generation, storage and transmission. The disastrous experiment with private prisons in NSW is being unwound. Plans for the eventual privatisation of the NBN, established in response to the failure of the privatised Telstra to deliver national broadband, have been abandoned.

In the United Kingdom, where the Thatcher government of the 1980s led the way in privatisation, the complex and difficult process of renationalisation has been going on even longer. Rail privatisation was partially reversed with the renationalisation of Railtrack under the Blair Labour government, further limited under the Tories, and is now likely to be completely reversed.

The UK’s new Starmer government is also grappling with the impending failure of Thames Water, privatised under Thatcher and stripped bare by its private owners. Australian readers won’t be surprised to learn that the “millionaires factory”, Macquarie Group, was a leading player here.

The end of the UK’s private finance initiative (PFI), the model for Australian public-private partnerships, is already producing huge problems. But it is now clear to everyone that dealing with these problems is better than persisting with the hopeless failure of PFI.

Even Thatcher’s greatest political success, the sale of council homes, looks a lot less appealing in light of the current housing crisis in the UK, paralleling that in Australia. It seems clear that governments will need to re-enter the business of building and operating social housing in big way.

In fact, the failures of privatisation are numerous and obvious, while unambiguous successes are hard to find. Claimed examples, such as the pharmaceutical enterprise CSL, turn out, on closer examination, to have used public money to build private empires.

Why, then, was privatisation such a popular policy, at least among those who dominated the policy debate from the 1980s until recently?

The simplest explanation is that politicians saw privatisation and private infrastructure as a way to get access to a big bucket of money, which could be spent on popular projects without the need to raise taxes. This was a fallacy, refuted many times over, but resurrected just as often in zombie form. Either the government hands over the right to collect revenue to private operators, as in the case of toll roads, or the public forgoes the earnings of government business enterprises, as with asset sales.

Even now this lesson has not been fully absorbed. On the one hand, the Victorian Labor government has begun the process of reversing Jeff Kennett’s privatisation of the State Electricity Commission of Victoria. On the other, having sold its land titles office, Labor is now poised to sell the Births, Deaths and Marriages Registry where it has already increased charges for the provision of legally required information.

Economists who advocated privatisation mostly avoided this silly error. Indeed, the NSW Treasury repeatedly warned against treating private provision of infrastructure as a “magic pudding”. But, under the influence of neoliberal ideology, they committed a subtler error. Rather than examining the fiscal outcomes of privatisation, they assumed public investments should be subject to a large risk premium to make them comparable to private alternatives. This premium was not needed to cover the actual loss from failed public investments, which has historically been low. Rather, it reflected the mysterious “equity premium” demanded by private investors in financial markets. At least until the GFC, neoliberal economists relied on the “efficient markets” hypothesis to conclude that the price observed in financial markets must be the right one. In a world where meme stocks and crypto scams are now a central part of the financial system, such a hypothesis is no longer credible.

Finally, of course, there were huge profits to be made in the financial sector from the sale process and from exploiting weaknesses in the regulation of privatised companies. The list of former politicians who have sold public assets and ended up with lucrative post-politics careers is, incidentally, rather long.

The era of privatisation is nearly over, at least in Australia and the UK. But cleaning up the mess left behind will take years, or even decades.

Joe Biden’s withdrawal from the US presidential election has prompted me to write down a few thoughts about getting old and being old.

First up, I’m going to rant a bit (in classic old-person mode) about how much I loathe the various prissy euphemisms for “old” that appear just about everywhere: “older”, “aging”, “senior” and, worst of all, “elderly”. I am, of course, aging, as is everyone alive. Similarly, like everyone, I’m older than I was yesterday and older than people who are younger than me. What no one seems willing to say out loud is that, at age 68, I am old. As Black and queer people have already done, I want to reappropriate “old”.

It’s not hard to see why people are so timid when talking about getting, and being, old. It is, after all, a journey that has only one terminus. At one time, only a fortunate minority survived long enough to reach old age. But now, most people do, and it would be good if we talked more honestly about it.

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I’ve written another piece on the uneconomics of nuclear power in Australia

The big unanswered question about nuclear power in Australia is how much it would cost. The handful of plants completed recently in the US and Europe have run way over time and over budget, but perhaps such failures can be avoided. On the other hand, the relatively successful Barakah project in the United Arab Emirates was undertaken in conditions that aren’t comparable to a democratic high-wage country like Australia. Moreover, the cost of the project, wrapped up in a long-term contract for both construction and maintenance, remains opaque.  Most other projects are being constructed by Chinese or Russian firms, not an option for Australia

In these circumstances, CSIRO’s Gencost project relied mainly on evidence from Korea, one of the few developed countries to maintain a nuclear construction program. Adjusting for the costs of starting from scratch, CSIRO has come up with an estimated construction cost for a 1000 MW nuclear plant of at least $A8.6 billion, leading to an estimated Levelised Cost of Energy (LCOE) of between $163/MWh-$264/MWh,  for large-scale nuclear. But, given the limited evidence base, critics like Dick Smith have been able to argue that CSIRO has overestimated the capital costs.

Thanks to a recent announcement from Czechia, we now have the basis for a more informed estimate. Ever since the commissioning its last nuclear plan in 2003, Czech governments have sought commercial agreements for the construction of more nuclear power plants, with little success until recently.

Finally, after a process beginning in 2020, the Czech government sought tenders from three firms to build at least two, and possibly four 1000 MW reactors. After Westinghouse was excluded for unspecified failures to meet tender conditions, two contenders remained: EDF and KNHP.  On 17 July it was announced that KNHP had submitted the winning bid, which, coincidentally, set the cost per GW at $8.6 billion. 

Sadly for nuclear advocates, that figure is in $US. Converted to $A, it’s 12.8 billion, around 50 per cent more than the CSIRO Gencost estimate.  At that price, the LCOE, even on the most favorable assumptions, will exceed $225/MWh.  

And unlike the case in Australia, Czechia is offering a brownfield site, at no additional cost. The new plants will replace existing Soviet-era reactors at Dukovany. By contrast, in Australia under Dutton’s proposals, the costs of a nuclear plant would need to include the compulsory acquisition of existing sites, from mostly unwilling vendors. 

The bad news doesn’t stop there. The (inevitably optimistic) target date for electricity generation is 2038, about the time Australia’s last coal plants will be closing. But the Czechs have at least a five year head start on Australia, even assuming that a Dutton government could begin a tender process soon after taking office. In reality, it would be necessary to establish and staff both a publicly owned nuclear generation enterprise and a nuclear regulatory agency with an appropriate legislative framework.

And there’s one more wrinkle.  Westinghouse, excluded from the Czech bid is engaged on long-running litigation with KNHP, claiming a breach of intellectual property. It’s been unsuccessful so far, but a final ruling is not expected until 2025. If Westinghouse succeeds, the Czech project will almost certainly be delayed. 

Summing up, taking the Czech announcement as a baseline, building two to four 1000 MW nuclear plants in Australia would probably cost $50-$100 billion, and not be complete until well into the 2040s. 

If nuclear power is so costly, why have the Czechs chosen to pursue this technology. The explanation is partly historical. The former Czechoslovakia was an early adopter of nuclear power and, despite the usual delays and cost overruns, enthusiasm for the technology seems to have persisted.

More significant, however, is the influence of one man, Vaclav Klaus, a dominant figure in Czech politics from the dissolution of the Soviet bloc to the 2010s.  Apart from sharing the same first name, Klaus has little in common with the architect of Czech freedom, Vaclav Havel.  Klaus was, and remains an extreme climate science denialist, whose views are reflected by the rightwing party he founded, the Civic Democratic Party (ODS).  Although Klaus himself left office under a cloud in 2013, ODS remained a dominant force. 

The current Czech Prime Minister, Petr Fiala (also ODS) has followed the same evolution as other ‘sceptics’, shifting from outright denial to what Chris Bowen has described as “all-too-hard-ism”. And with high carbon prices in Europe, persisting with coal is even less tenable than in Australia.  In political terms, nuclear power is the ideal solution to the problem of replacing coal without embracing renewables.  It’s just a pity about the economics.

With luck, Australia can learn from the Czech lesson. Even under the favorable conditions of  a brownfield site and an established nuclear industry, new nuclear power is hopelessly uneconomic.

What to do when we can’t trust our own eyes (or at least, the videos we are looking at.

I spoke last weekend at a panel discussion on Navigating Lies, Deepfakes & Fake News, organised by McPherson Independent. This a group promoting the idea of an independent community candidate in the (LNP held) electorate of McPherson. It’s part of the broader disillusionment with the two-party system we are seeing in Australia and also in the recent UK election.

It was a great discussion. I prepared some preliminary notes, which I’ve provided below. Comments and constructive criticism most welcome

Lies, Deepfakes and Fake News

It’s important to understand that there is nothing fundamentally new here. Both propaganda and forgery have been around at least since the invention of writing.

Deepfakes raise two issues, because they are more realistic and potentially more convincing than ever before.

First, their use in harassment, particularly sexual harassment, is more problematic and distressing by virtue of their greater realism. A range of legal and social responses are needed, but this is outside my area of competence.

Second, a form of evidence we have assumed to be reliable (video) can now be faked. This has happened before with forged paper documents, and then with photography. While there may be technical solutions, the main response must be social and relies on trust, in the form of assured provenance. If we know that a photo or video was taken by someone we trust and transmitted to us through a trustworthy process we can believe it to be accurate.

Similarly, there is nothing new about misinformation. In particular, panics about social media fail to take account of the longstanding role of traditional media (notably, but not exclusively, the Murdoch press).

Given the reluctance of mainstream journalists to attack each other (they might end up working for the same organisation, after all) social media outlets provide an opportunity for critical comment. This comment in turn is bitterly resented and misrepresented by journalists, who amplify the most offensive examples (sexist attacks on women, for example) to justify treating all their critics as “trolls”.

Misinformation works at both an individual and a social level. Individually, we can’t check everything and are prone to ‘confirmation bias’, paying more attention to things that confirm our existing beliefs. Again, we need to find trustworthy sources and (equally importantly) dismiss sources that have been shown to be untrustworthy. As regards confirmation bias, the heuristic “if it sounds too good to be true, it probably is”.

The bigger problem is at the social level. Social groups can help to inform their members, or they can promote confirmation bias, to the point that their members actively desire misinformation. This was true at one time of some groups on the political left and is now true of the political right as a whole, most notably in the US.

There is no effective strategy to correct misinformation once it is firmly established within a cohesive social group. The task is comparable to trying to convert a religious group to an alternative religion or to non-belief.

The only real response is to focus on loosely attached members of misinformation groups, and seek to point out how they have been misled. This is a very slow process, but there are plenty of examples of success.

Climate change provides a good example. Attempts to convince rightwing denialists using a variety of strategies (factual evidence, clever framing etc) have gone nowhere. But, over time, everyone open to being convinced has come to accept the reality of human-caused climate change. Those promoting misinformation have never admitted error, but have been forced to change tack, shifting from science denial to attacks on clean energy and promotion of nuclear power..

Another belated reprint, from The Conversation, 27 June

Opposition Leader Peter Dutton’s plan to build seven nuclear power plants in Australia has attracted plenty of critical attention. But there’s a striking feature which has received relatively little discussion or criticism: the nuclear plants would be publicly owned and operated, similar to the National Broadband Network (NBN).

On the contrary, it received enthusiastic endorsement from free-market advocates such as The Australian’s Judith Sloan, who observed: “It’s how the French nuclear plants were first constructed.” It is also the way Australia built its biggest single piece of energy infrastructure, the Snowy Mountains Scheme.

But there’s a fundamental problem here. Over the last three or four decades the federal public service has been hollowed out in the name of “new public management”. This became very clear during the COVID pandemic, when state governments – who have preserved their ability to act far better – ran most of the response. There is a very real question over whether we have the governmental capacity to achieve net zero.

From NBN to National Nuclear Network?

Dutton’s acknowledgement of the publicly owned NBN as a model worth using is a welcome advance on the view of Malcolm Turnbull, one of his predecessors as Liberal leader.

A decade ago, then-prime minister Turnbull embarked on a disastrous “mixed mode” redesign of the NBN. This reflected his belief – expressed publicly after leaving office – that a publicly owned broadband network should never have existed.

Labor is in no position to oppose Dutton’s calls for public ownership. State Labor governments in Victoria and New South Wales have re-established publicly owned electricity enterprises, while South Australia’s Labor government has floated the same idea.

Whatever technological choices we make, it is clear our days of relying on the private sector to provide vital infrastructure are coming to an end. The question now is whether the public sector can recover to take the lead.

The National Energy Market, for instance, was meant to promote competition and drive electricity prices down. It has failed to do so, resulting in a string of government interventions, some more successful than others.

Arguably the biggest failed intervention was the now-defunct Energy Security Board, a politically driven response to South Australia’s statewide blackout in 2016.

The board sought to patch up the National Energy Market with a capacity market, which was immediately dubbed “CoalKeeper” due to incentives for old coal plants to keep going, as well as new grid access charges, promptly dubbed “Solar Stopper” due to discouraging new investment in solar. Energy experts did not favour this approach.

What proved more successful as a response to South Australia’s big blackout was the decision by the state government to fund the Horndale big battery, which was, when built in 2017, the world’s largest utility-scale battery storage.

Should new power be private or publicly owned?

Both major parties are flagging more intervention. The federal government has stopped waiting for markets to provide clean energy in favour of seeking tenders for new renewables through a capacity investment scheme. The scheme received 40 gigawatts worth of bids from renewable developers, far beyond the goal of 6GW.

This shift has come in response to developments bogging down, hampered by inadequate regulation and local opposition driven by a combination of genuine concerns about environmental impacts and culture-war driven science denialism.

Labor’s current renewables-led strategy requires 10,000 kilometres of new publicly built transmission lines, to meet our net zero goals. We’d need even more transmission if we are to become a major exporter of clean energy, either as electricity or in products such as green hydrogen and ammonia.

On the Coalition side, no private firm is likely to accept the risks involved in creating a nuclear power industry from scratch. Government would have to lead.

As Nationals leader David Littleproud has now acknowledged in relation to finding sites for nuclear plants, the national need for clean energy is too important to allow “not in my backyard” opponents – some with only a tenuous connection to the area in question – to slow or stop government plans.

If government is to lead, it must have the capacity

What Dutton’s nuclear gambit shows us is that, surprisingly, Australia’s two major political parties are in strong alignment on the need to rebuild state capacity.

Whether it’s Labor working to get transmission lines and offshore wind up and running or the Coalition working to create a nuclear industry from scratch, it will take a strong government with the capacity to articulate a plan, and the legal, financial and human resources to make it a reality.

All of these requirements were met when we constructed the Snowy Mountains Scheme, a decades-long federal government initiative undertaken in cooperation with Victoria and NSW.

Are they still in place? Not yet. Government capacity to act has been eroded over decades of neoliberalism. Particularly at the national level, public service expertise has been hollowed out and replaced by reliance on private consulting firms.

To rebuild the federal government’s capacity to act will require recreating the public service as a career which attracts the best and brightest graduates – many of whom currently end up in the financial sector.

The private sector still plays a central role in the construction of infrastructure, as was the case with the Snowy Scheme. But it’s up to governments to take the lead in finance and planning.

This poses particular challenges for the Liberal Party, which has long favoured the interests of businesses small and large, and has been historically opposed to public ownership. But from the late 1990s until relatively recently, Labor was also keen on privatisation.

The French Prime Minister Georges Clemenceau once observed that “war is too important to be left to generals”. As we are discovering to our cost, infrastructure investment is similarly too important to be left to private investors.

The third in the famous trilogy of spurious Chinese curses that begins with “May you live in interesting times” is “May all your wishes come true”. I may have triggered this curse with a piece I wrote for The Conversation in March. headlined “Dutton wants a ‘mature debate’ about nuclear power. By the time we’ve had one, new plants will be too late to replace coal” which ended

Talk about hypothetical future technologies is, at this point, nothing more than a distraction. If Dutton is serious about nuclear power in Australia, he needs to put forward a plan now. It must spell out a realistic timeline that includes the establishment of necessary regulation, the required funding model and the sites to be considered.

In summary, it’s time to put up or shut up.

Much to my surprise, a few days later, Dutton chose “put up”. And even though his preferred models keep falling over, he has pushed ahead, accepting the need for public ownership and compulsory acquisition of sites.

So, we are indeed having the debate the LNP has long demanded. It’s not going well for them, I think, but Labor is hamstrung by its embrace of AUKUS and acceptance of an indefinitely continuing role for coal and gas, at least internationally.

The second in the trilogy of curses is “May you come to the attention of important people”. I don’t suppose that my little article played any real role in Dutton’s decision to cross the Rubicon on nuclear power. But I’ll be pushing hard to show how misconceived that decision is, from now until the illusion of nuclear power is finally dispelled.

My latest in The Guardian

henever I mention concepts such as gross domestic product (GDP), there’s a high probability that arguments about the merits of “growth” and “degrowth” will erupt. Almost invariably, these arguments are stuck in a conceptual framework that’s 50 years out of date, or even more.

The national accounting system, of which GDP is a central part, was developed in the 1930s. It was designed to measure the working of the industrial economy that had emerged in the 19th century and remained the dominant form of economic activity until the late 20th century.

The industrial economy could be conceptually understood in terms of three sectors. Primary industries, such as agriculture and mining, produced raw materials. Secondary industry (manufacturing, broadly defined) turned raw materials into useful products. Tertiary industry (services such as wholesale and retail trade) took the products from the factory to the consumer. Other services, such as accounting, finance and law, greased the wheels of the entire process. Activities such as education and health, which didn’t really fit the model, were thought of as reproducing and taking care of the labour force needed to keep the economy going. Finally, the waste products of the system were burned or dumped.

In the industrial economy, growth involved an increasing number of workers, each of whom produced more of everything: more primary products, turned into more manufactured goods, sold in bigger and better shops, generating more and more waste. Growth was achieved primarily by equipping workers with more capital, owned by employers (hence, the term “capitalism” to describe this economy). More sophisticated analyses took account of technological progress and of “human capital”, that is, the skills acquired by workers through education and training.

By the middle of the 20th century it became evident that this process couldn’t continue indefinitely. As was regularly observed, infinite growth in the output of physical goods is impossible on a finite planet.

As it turned out, however, the mid-20th century marked the beginning of the end of the industrial economy. The services or “tertiary” sector accounted for half of US employment by 1950 and that share has increased steadily to about 80% today. Within the service sector, ever fewer workers are engaged in the “tertiary” activities of distributing the output of farms and factories, through retail, wholesale and transport. Many more work either in directly provided human services, such as health care and hospitality. But the truly spectacular growth has been in “office jobs” relating in one way or another to information.

The industrial model, in which all stages of the production process expand in a proportional fashion, is no longer relevant – at least in rich countries. Output of physical goods, and particularly the characteristic products of the 20th-century industrial economy (cars, household appliances and so on), has largely stabilised. For example, the number of motor vehicles sold in the US has fluctuated around the 15m a year mark since 1980, even though the US population has grown.

Meanwhile, the growth in the production and dissemination of information has been so rapid as to defy traditional methods of measurement and any kind of intuition about growth. The volume of information we generate (whether useful or trivial) has grown at about 60% per year since the advent of the electronic computer. To give some intuition that means that every millisecond we collectively generate as much information as we did in an entire year in the 1970s. A concept of “growth” that averages such unimaginable rates of expansion with the nearly stationary output of cars, fridges and so on is meaningless.

And if “growth” is meaningless, so is “degrowth”. There’s no technological or ecological reason why we can’t have more and more services, from health and education to TikTok videos. And, if we can continue to improve the technology, there’s no real limit to our supply of solar and wind energy. What we need to reduce is the “throughput” of the residual industrial economy, beginning with the extraction of resources and ending with the dumping of waste. It’s here that ideas like that of the “circular economy” remain relevant.

In summary, neither “growth” nor “degrowth” makes sense as a long-term objective for economic policy. That doesn’t mean that GDP is useless as a statistical measure. If GDP drops sharply from one year to the next, it’s usually not because a society has become less concerned with material goods and marketed services. Rather, sharp reductions in GDP, such as those during the global financial crisis and the early 1990s “recession we had to have”, usually arise from external shocks or economic mismanagement. GDP statistics provide economic policymakers with valuable information about the short-run state of the economy.

In the long run, however, GDP is not a useful measure. And in an economy subject to the wildly divergent trends we now observe, there is little value in looking for a single number (such as a statistical measure of happiness) that will replace it. We can and should seek better and richer lives, while reducing and repairing the harm that the industrial economy has done to our natural environment and, most notably, to the global climate.