Covid-19 is a dry run for climate change lockdown

If you were wondering what the impact of climate change policies such as New Zealand's Zero Carbon Bill will have on the economy, the Covid-19 lockdown provides the perfect prototype. The Government's own estimates stated that passing the Zero Carbon Bill would reduce this country's GDP by up to 22% by 2050 ceteris paribus (e.g. see this document [PDF]), and the OECD recently estimated that the Covid-19 lockdown would reduce our GDP by around 30%, so the two events are roughly comparable in ultimate impact.

This comparison is not an idle one. Policy makers are already talking about using the Covid-19 lockdown as a prototype for zero carbon policies. The UN's Paris Accord organisation sees it as an “opportunity to...relaunch economies on low-emission, climate-resilient trajectories”. The UK's Climate Assembly sees it as a "test run" for the for potential climate change shifts they have been proposing. According to assembly representative Ibrahim Wali, the UK could achieve its zero carbon target if “people could stay home more, work remotely. Sometimes in life you just need a challenge to change the way you live and operate." In other words, we could save the world from climate change if we could just make the lockdown permanent. In France, the citizens' assembly set up by President Macron has similarly proposed closing down hypermarkets, prohibiting the sale of almost all existing cars and even banning advertising for consumer products (you would think the French in particular would be wary of citizens' assemblies, but apparently not).

They are right in the sense that the Covid-19 lockdowns closely model the impact of zero carbon policies. If you imagine that zero carbon policies mean you're just going to swap your car for a Tesla and that will be it, then you are mistaken. You will be much poorer, just as those who have already lost their jobs and businesses from the Covid-19 lockdowns are today. You won't have a private car. You won't be able to buy all of the food you currently consume and you certainly won't be dining out much. You won't be able to keep your house warm in the winter or cool in the summer. You won't have access to many of the drugs and medical treatment you may need to stay alive. And forget about being able to travel overseas - that privilege will only be for the ruling elite. So get used to it people, if you're in one of the many countries that have legislated for zero carbon you're going to be in permanent lockdown.

On the positive side, the much more immediate threat of Covid-19 has stymied efforts to create a new world order based on carbon zero policies. It also provides the opportunity for some real world climate change experiments - for example, the reduced air pollution may allow scientists to better understand the impact of atmospheric aerosols on climate change. In an even more interesting development, the lockdown may enable scientists to test one of the central hypotheses of anthropogenic global warming - that mankind's carbon emissions are responsible for almost all of the increase in atmospheric CO2 since pre-industrial times. If the hypothesis is true, the reduction in fossil fuel emissions during the lockdown should result in a corresponding reduction in the rate of increase in atmospheric CO2. Climate scientist Dr Roy Spencer is examining this impact in the atmospheric carbon levels recorded at the Mauna Loa observatory in Hawaii. If there is no corresponding flattening of the CO2 curve, then it follows that factors other than mankind's carbon emissions are significant drivers of the increase in atmospheric CO2. That would mean all our efforts and policies to reduce carbon emissions from fossil fuels will be for nought.

[Hat-tip: Breaking Views @NZCPR for many of the above links]

Covid-19 and the totalitarian instinct

Those who would give up essential liberty to purchase a little temporary safety, deserve neither liberty nor safety ~ Benjamin Franklin

I am concerned, but not surprised, by the reaction of many people to the Covid-19 lockdown - those who relish the fact that we are being confined to our homes by the government. For some, the New Zealand Government's comparatively low key enforcement of the lockdown is not enough, like this supposedly centre-right political commentator who wants it good and hard:

The mainstream media have rejoiced in the lockdown and seem to be promoting its extension through dubious surveys that say a majority of New Zealanders are happy for it to be extended. Of course, such survey results depend on the question - if people were asked whether they are happy for the lockdown to be extended if it cost more lives than it saved, it would produce the opposite result.

That is not a silly question. A British study by Bristol University Professor of Risk Management Philip Thomas concluded that if GDP per capita drops by more than about 6.5 percent for a significant period, more lives will be lost as a consequence of the lockdown than would be saved from Covid-19. This is unsurprising because the biggest factor in improved life expectancy in the modern world is economic prosperity. Reduce national income and more people die.

The response to Covid-19 in New Zealand, according to the Government's own estimates, is expected to reduce GDP by between 13% and 30% in the year to March 2021 in the absence of further economic stimulus. Therefore, we are well into the territory of the cost in lives lost from the lockdown being greater than those saved, even disregarding the negative impact on quality of life.

I used to be surprised by the collective self-loathing of many people in the Western world. Life is better in Western countries than anywhere else at any time in human existence by any measure, yet we are subject to a constant barrage of doom and gloom. In recent years this pessimism has been driven primarily by the narrative around climate change. The neo-Malthusian beliefs of the likes of Paul Ehrlich have become mainstream, with the dire prognostications of famine and disease due to overpopulation being replaced by equally alarming and unfounded predictions of calamity from global warming. On the positive side, Covid-19 has sidelined the constant scaremongering about climate change in the mainstream media. However, it has given those who pine for totalitarian solutions to every human problem a much more immediate threat to justify their misanthropic views.

At the heart of the totalitarian instinct is envy. It is the same instinct as H L Mencken identified when he was discussing Puritans: the haunting fear that someone, somewhere, may be happy - the same instinct that prompted a Radio New Zealand journalist to write this article about a lone surfer in Wellington's Lyall Bay. Such people would rather everyone is miserable than some be happier than others.

New Zealand's Covid-19 active and total cases - April 16, 2020

New Zealand should get out of its current level of lockdown mid-next-week.   Certainly, going by our current Covid-19 infection rates there is no reason to continue the current universal house arrest. But people aren't rational and political decisions are often a reflection of the worst instincts of the population rather than the best. Let's hope that is not the case here.

Wellington voters choose economic decline

The New Zealand local body election results are in, and here in Wellington we now have a slew of Green Party councillors on the city and regional councils as well as our Green mayor re-elected.  This is not entirely surprising. Wellington is the capital and many of its workforce are public servants.  They tend to hold left-wing political views and unsurprising support more government in the lives of citizens, not less.  The Green Party is, like most similar political groups worldwide, hard-left on economic matters.

Wellington as an economic centre is dying.  Even our Prime Minister, John Key, a man you would think would be sensitive to making such criticism of his seat of government, recently said so.  Wellington's problems started in the 1980s with the decline of its manufacturing base due to the (much-needed) reforms of the Lange-Douglas Government including the removal of protectionist trade policies.  The trend was exacerbated with a significant migration of corporate head offices and supporting service businesses to Auckland.   

The economic decline of the capital was disguised throughout the term of the Clark Labour Government in the 2000s because of the vast expansion of the public service with core employees increasing by about 40%. The majority of the increase was in Wellington and the spending of these public sector employees in the region drove up economic activity (and most notably property prices) during the nine years Labour was in power.  The Key National Government has stopped the expansion by limiting departmental budget increases and has even required some retrenchment of numbers.  This has meant Wellington's non-public-sector decline cannot be disguised any longer.

The Greens' policies, which are about socialistic redistribution of wealth and increasing compliance costs for development in pursuit of their environment agenda, are not likely to help matters.  Wellington can't afford the profligate, anti-growth economic policies of the Greens.  The city needs new businesses to generate employment and wealth to stem the decline of the past three decades.  The Greens offer only offer more economic blood-letting at a time when the patient needs vitamins.

If you want an example of what can happen at a local level after years of ill-advised policies you only need look at Detroit - a city that, like Wellington, once had the highest per capita income of any in the country, which has now filed for bankruptcy.  If Wellington is to avoid becoming another Detroit, its voters are going to have to choose politicians who value economic growth over fanciful socialist and environmental aims. Unfortunately I hold out little prospect of the capital's large public employee electorate making such a choice.

New Zealand's Precarious Economic Position

The New Zealand Government has announced in its Budget statement for the last two years that it expects to balance its books by 2014.  This seems increasingly unlikely.  Like a sunny weather forecast that is corrected as the storm approaches, the Government has been revising its numbers as 2014 approaches.  Last year the Government spent nearly 1/3 more than it took in revenue.  This year it is projecting still to spend more than 20% more than it takes in revenue and the numbers are still getting worse.

The main problem with the Government's financial outlook is that it is dependent on economic growth.  Last year the Minister of Finance was saying GDP growth would reach around 4% by 2014.  This seems increasingly optimistic.  Our current GDP growth is around 1% and even that is dependent on the highest commodity prices New Zealand has ever experienced.  Commodity prices are starting to decline and the trend is likely to accelerate.  Add to this the fact that Europe and the United States are still in the grips of economic stagnation in spite of a very tentative recovery in consumer spending and jobs and you have a very risky economic scenario for New Zealand.

The Government has proclaimed that it expects the Christchurch earthquake to add 1.25% to economic growth every year from 2012 to 2016, which is based on a economic misunserstanding known as the broken window fallacy.  Rebuilding Christchurch only diverts investment from other potentially more productive areas of the economy and adds costs to everyone (look at the rise in your insurance premiums this year, if you don't believe me).

I am normally an optimistic person but I am more pessimistic about New Zealand's immediate economic prospects than I have been since the late 1980s.  If everything goes our way, we may have a modest economic recovery over the next few years, but it won't see the 4% economic growth by 2014 the Government hopes for.  And if the world economy does not recover strongly and if commodity prices continue to fall, we will see a significant worsening of our terms of trade with a consequential negative impact on every area of our economy.

New Zealanders need to prepare for very tough economic times ahead.

This Country is Poked

So, we now have an emissions trading scheme that will cost the country over $100B. We have residual ACC claims of $24B. We have leaky homes liability that ratepayers will have to pick up of tens of billions of dollars. We have rapidly rising health and welfare costs. And we have a Government that was elected on a platform of economic growth whose flagship project is a cycleway. Does anyone else see the pattern here? This country is facing huge increases in Government spending in years to come to support all these profligate schemes and that spending will not be supported by increased growth and earnings.

I am already planning my early retirement to some warm and peaceful tax haven. I intend to make damned sure I'm not around to foot the bill for all this foolishness.