Monday, April 27, 2020

Covid-19, globalisation and Australia's vulnerability

As children, David and I loved our spinning top. Made of tin, it had a plunger that you pressed down sending it spinning wildly across the floor. It's long gone now, finally breaking from over-use.

Just at the moment, I feel like that top, spinning around in response to events. It makes we wonder what the longer term effects of covid-19 might be. Will there be basic change, or will the top having spun simply fall over a little distance from where it began its journey?

I think that a few things are reasonably clear.

At global level, the epidemic has continued the process of US withdrawal from world leadership. Like most countries, US politics is inward looking, focused on domestic issues and responses. The sheer size of the US has made this focus particularly strong, although you only have to look at the Australian media response on particular issues to know that it applies here too.

I have to be very careful in my comments on the US for, like most of us, my views are coloured by my reactions to President Trump. The US decision to withdraw at least temporarily from the WHO at a time of crisis forms part of a pattern of retreat. Whatever the WHO's weaknesses may be, it is the only global body capable of providing a degree of global coordination at a time when many countries are turning inwards, focused on domestic threats.

I would like to think that the US withdrawal will force other countries collectively to step up, but I think that's naive, at least in the short term. A fair bit of the discussion has centered on a US v China trope, including suggestions that China will use the opportunity to try to extend its international reach. Maybe, but I suspect that this is a second order issue. The real issue is the overall impact of the virus including government responses.

At this point we simply don't know how far the virus will spread globally with countries at different stages in the outbreak. We don't know what the final human and economic impact will beyond the fact that it is and will continue to be enormous. We have never had a shutdown like this before.

Comparisons have been made with the Great Depression. That's fair enough in providing a rough measuring block in terms of unemployment and resultant social misery. It's fair, too, in that policies adopted for national purposes fed on each other to create a downward spiral, replacing a previously globalised trading system with national autarky. There is also an uncomfortable similarity in that US actions based on something very similar to the Make America Great Again rhetoric played a major role in worsening the Depression.  All this said, there is one key difference.

The Great Depression was a result of economic forces whose impact was accentuated by conflicting national trade and economic policies. This economic shutdown results from conscious decisions made on health grounds. The immediate economic effects may be somewhat similar, but the causes are different, as are the economic responses, with governments seeking as best they can to cushion at domestic level some of the more dire economic and social impacts.

While this domestic focus is understandable, I think that the most important issue is the decline and potential collapse of the global economic order that has underpinned growth since the Second World War, in so doing lifting hundreds of millions of people out of poverty.

There has been considerable debate about the virtues of globalisation and freer trade and investment. Globalisation has been in retreat for some time, attacked from left and right. Now covid-19 has turned retreat into at least short term rout.

We can see the impact if we take the Australian trade data as an entry point. The data comes from a DFAT (Department of Foreign Affairs and Trade) publication Trade and Investment at a Glance, 2019

Starting with services exports, our top two exports are:
  • education-related travel services: $32,434 million, third ranking in total exports at 8% of total exports
  • Personal travel (excl education services): $21,580 million, fifth ranking in total exports at 5.4% of total exports. 
These exports have been effectively stopped in their tracks.

Australians are great travellers. This is reflected in the import figures with personal travel (excl education services) totalling $42,496 million, Australia's largest import category at 10.7% of total imports.

In terms of very crude arithmetic, we spend $42.496 billion on international travel including accommodation etc, get back $32.434 billion. In the short to medium term, some of the spend on international travel will go to the domestic market as distancing rules are relaxed, although from two years out international travel is likely to expand again. In the meantime, the tourist destinations especially reliant on Australian tourists will be hurting.

While personal travel spend will re-balance to some degree, the damage to our education exports is likely to be much longer lasting. We are not alone here. In the UK, 2020 education exports are expected to be down between 80 and 100%. Our ability to rebuild our education exports are not being helped by Mr Morrison's domestic focus which effectively treat international students as collateral damage.

Turning now to merchandise exports, our top merchandise exports are:   
  • iron ores & concentrates: $61,357 million, first ranking in total exports at 15.2% of total exports
  • coal: $60,356 million, second ranking in total exports at 15% of total exports
  • natural gas: $30,907 million, fourth ranking at 7.7% of total exports
  • gold: $19,393 million, sixth ranking at 4.8% of total exports
  • aluminium ore & concentrates (incl alumina): $9,448 million, seventh ranking at 2.3% of total exports
  • beef: $7,963 million, eight ranking at 2.0% of total exports.
These top merchandise exports are dominated by minerals dependent upon industrial activity elsewhere in the world.

We can get a further feel for this if we look at the graphic which shows the broad sectoral composition of Australian exports in 2017-2018.

You can see the dominance of minerals and fuels.  The services exports which form the second largest component are heavily influenced by education and tourism Without having analysed the remainder in detail, I think that they depend in large part on travel and the movement of people to service international market places are have therefore also been heavily affected by covid-19 restrictions.

Australia has benefited greatly from globalisation including the rise first of Japan and then the Asian tigers followed by China. Now with globalisation in reverse we are exposed. If you take coal out, we are very badly exposed. Those sectors of the economy that depend upon taking in each other's washing, the consumption expenditure that forms such an important part of GDP calculations, are all vulnerable.

I think that it pays us all to think about how we actually preserve global trade, investment flows and indeed the movement of people as we come though this to the mutual benefit of all.

Thursday, April 16, 2020

Covid-19: the immediate and longer term effects - a note

When the major covid-19 social limitations were announced I wrote to a friend that Australia would add between 1.8 and 2 million unemployed within six weeks. There was nothing especially magical about those numbers. They were based on a simple back of the envelope calculation of the sectors most likely to be quickly affected.

Since then we have had the support mechanisms announced by the Australian and State governments. Their sheer size has had a major cushioning effect. However, there is a clear downwards cycle as contraction feeds into contraction. Prime Minister Morrison said that the Commonwealth Government's aim was to put the economy into short term hibernation from which it could bounce back. The difficulty is that the longer the shut down continues the harder it is to bounce back.

My next door neighbour is a case in point. Two months ago he got a short term contract with an environmental science firm The contract was expected to lead to permanent employment. The firm really needed the position filled and had been struggling to find someone, so they grabbed for my friend. The short term contract was intended to compensate for the rushed recruitment. His work involved travel to different sites, itself an interesting experience when things were shutting down. Now with the work collapse, he has been laid off.

My friend is not eligible for any support payments, The shortness of his employment means that the firm cannot receive the job keeper payments. While he studied in Australia, has lived here for a number of years and is married to an Australian, he is not eligible for job seeker payments because, it seems, he is not classified as an Australian resident. Over nine months ago he applied for permanent residence, met all the requirements and was told that it would take six months to finalise his application. That decision has yet to be made with no certainty as to when it might be made. Meantime, he has a work permit but no certainty about work of any type.

I have told this little story for two reasons. The first is to illustrate the ricochet effect of the restrictions on economic activity. The second illustrates the way bureaucratic rules and processing procedures have on-ground impacts.

Like many, my focus has now shifted from the immediate impacts of the covid-19 emergency to trying to understand what the long term effects will be. While I have ideas here based on my social and economic  analysis, there are obviously many uncertainties involved. What can be said with a degree of certainty is that the longer the lock downs here and elsewhere last, the greater the long term effects.

I recognise that this is almost a truism, lacking meaning beyond the very obvious. However, I have been monitoring multiple websites where discussion on longer term issues has been taking place from local level to national or global levels. I wonder whether or not it may be worthwhile spread sheeting them and then looking at time and structural issues to make some more sensible form of analytical judgement. 

The John Clease lines outlined above were originally developed in a different context, playing to popular British stereotypes. I wonder whether or not it someone might try their hand at an Australian equivalent.       

Wednesday, April 15, 2020

Armidale Diaries 6 - Living with social isolation: Autumn and the Armidale Creeklands

Autumn’s final burst of colour, photo Gordon Smith, UNE campus, 2015 

It's full autumn now in this little university city.

As I write, I'm looking out the window across the back yard past the neighbouring block to Queen Elizabeth Drive aka the Mad Mile, a main drag to the University. It acquired the Mad Mile title many years ago when the longish straight stretch then just outside the city boundaries encouraged foot to the floor acceleration. The autumn colours are not as spectacular this year because of the drought. You can see the impact on the trees with straggly leaves and some dead branches.

It's been beautiful weather over the last few days, classic Armidale autumn weather, with warm days and cool nights. It's the type of weather that encourages people to get out, to meet and wander. That's more difficult now, but it's still happening within social distance rules.

The large University campus with its trees and tracks lies just up the road. From the campus, a combined bike and walking track runs along Dumaresq Creek to the city centre and beyond. I'm not quite sure what the total distance is, perhaps 8k?

I bless the city elders who were responsible for that track. When it first opened back in (I think) the 1970s, it was seen as something of  a waste of money. Certainly for the first part of its history it was seen as something of a waste of money and indeed it did become something of a no-go area. How things change!

The start of the track lies just up Elm Avenue, the traditional drive leading into the University. This is a beautiful road with its elm trees and open space. From Elm Avenue you turn right and start walking. The track winds as the creek winds, leaving the creek and then coming back. I haven't attempted a full return walk yet. I need to get fitter and allow several hours for the return walk. I suppose I could get a bus back, our local bus service is still working, but I want to walk the whole distance. For the present, I start out, walk a certain distance and then come back by a different route.

The thing I most notice is the people. As I came onto the track a day or so ago, there was a man running with his young child sitting on his shoulders. I smiled as we said hello. it reminded me of when my girls were young and I could play with them.

Yesterday there were dozens of people on the track, mothers pushing their children in prams, family groups out walking or riding bikes. Noticeably, everybody said hello or good morning. Sometimes when you meet singles walking with their heads down, alone with their thoughts, you hesitate. But when you say good morning or afternoon, they look up with shy smiles and respond.

We can't really talk, but it provides a human connection.

As I walked, I thought that without covid-19 I might never have known this track as well as I do now. Of course, I have walked and enjoyed bit of it. Down near Stevens Bridge in the center of town is the BBQ area where we used to take the girls and Aunt Kay for a BBQ lunch. Here the girls and I ran along the creek bank trying to get kites airborne. But this is very different from seeing the Creeklands and the track as a whole entity,

It would be nice to think that when this is all over, we might promote the Creeklands' track as a route in its own right, something to enjoy as an entity. It's taken covid-19 to make me really realise its unique value. 

Thursday, April 09, 2020

Reflections on life, Armidale and Covid-19

Armidale Street scene. Photo Gordon Smith

I am sitting here listening to classical music. I have the fire on and have just opened doors so that the heat can reach the bedroom.

Unlike marcellous, I am not especially musical. It will be no secret that I grew up in an academic bookish house, but it wasn't an especially musical house. Mum could play the piano and knew music notation and showed this to David and I, but there was very little music around in a day to day sense. It might have been different if I could hold a tune, but I quickly learnt that I could not. Well, more accurately I suppose, I formed the view I could not. Once that view was set, it became self-fulfilling.

I did like classical music, although I got bored with the compulsory attendance at symphony orchestra visits. The chairs in the town hall were bloody uncomfortable and I wiled away the time studying the performers rather than listening to the music. i have been listening to classical music for quite a while, but now that I am back in Armidale YouTube, I and classical music are constant companions.

I don't know, perhaps its the influence of English TV programs such as Morse - I have Wagner playing as I write - but I do think that it suits Armidale with its many classic buildings and academic tone.

Coming home has not been a disappointment.  I feared that it might, but it has proved the opposite. I had not realised how much the sterility of Sydney had been draining me until I arrived home.

Don't get me wrong. In many ways Sydney is a wonderful place, but for someone like me who is not a beach person, has intellectual interests, but also likes mixing with a wide variety of people it can be a bit difficult. I also think that to do things in Sydney you need time and money. By contrast, in Armidale the total field may be smaller in absolute terms, but it's much more concentrated and almost as varied.

One thing I have to watch is the need to avoid parochialism. It's very easy to narrow your horizons when your immediate world is intensely interesting.

In this context, my old friend Neil Whitfield contacted me today to find out how I was travelling, noting that my posting here had almost collapsed.

Covid-19 has a lot to answer for.

I have found the withdrawal of social contact and the cessation of things such as the course I was running difficult to manage, going from limited social contact in Sydney to lots of social contact in Armidale to no direct social contact at all. It's disrupted my routine. And then, too, I have been putting a lot of time into Facebook groups directly connected with my interests and area since this is now the best way that I can contribute. I think that I am playing a useful role here, but it is time consuming. There has also been a lot of email traffic that I am still catching up with.

Covid-19 will pass in one way or another. I'm not especially worried about myself even though I fall in the age danger bracket. I am more frustrated about my present inability to manage the isolation in an effective and productive way.