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Seismic events in Christchurch, food & fuel

Written By: - Date published: 10:37 am, February 28th, 2011 - 19 comments
Categories: disaster, energy, food - Tags: , ,

So there was a devastating earthquake in Christchurch this last week that wrecked buildings and the lives of many people. The entire nation feels for the people who went through the quake and are trying to pick up their lives as best they can. Amidst the aftermath John Key announced that the city will be rebuilt. The rebuilding will be billions of dollars and take probably years to fully complete. Each and every time we see pictures on television or read a newspaper report we get glimpses of what effort will be required – roads, water and waste water services, power and telephones, homes and commercial properties all need to be repaired and reconstructed. Yet, the country seems prepared to make that effort.

There are a couple of other seemingly seismic events playing out as well, ones that were getting news attention before last Tuesday but have temporarily been sidelined. These relate to the global price of food and fuel and how the rising prices of both threaten to bring down governments throughout the Middle East. Food prices are rising quickly, some may say spiking. The first effects are being felt by those on the margins of society and globalised markets, the surplus populations of the world. Someone I know today described this phenomena in local terms, a significant proportion (he didn’t define an exact figure) of kiwis are finding they can no longer afford to buy milk.

Fuel prices are threatening to do the same. They were hovering around $90 a barrel, near $2 NZ a litre at the pump, even as the western world staggered through a recession. Events of the past month in the Middle East has rocketed the price over $100 a barrel and the prices at the pump past $2 with more to come probably if the NZ dollar falls in value. The riots and revolutions in the Middle East have a number of elements to them. One is the price the affordability of food. Exactly how certain we can be of the link between food and fuel prices is still not totally clear for me. There have certainly been natural disasters and crop failures around the globe which have pushed prices up, along with financial speculators. There is a plethora of analysis on the net regarding the reasons for the price increases, and links between, food and fuel so I will not attempt to rehearse them in any great depth here. All I will say is that I do think the link is becoming clearer, I am giving more credence to the idea that we are entering into a period of stagnating oil production (a peak oil type event) which is flowing through to food prices.

The Christchurch earthquake and food/fuel prices are not directly linked of course. For me, the link lies in how as a country we deal with them over the next few months and the next few years. So then how do we cope with Christchurch rebuilding whilst also taking cognizance of food and fuel prices. I noted that Fran O’Sullivan made an attempt in the Saturday edition of the NZ Herald.

“The brutal reality is that the February 22 earthquake will exhaust the Government sector’s financial ability to deal with any other major unforeseen incidents. Just 10 weeks ago Finance Minister Bill English said the Government’s accounts were stretched…Key should not hesitate to ask other New Zealanders to play their part towards financing the rebuilding of Christchurch.

Major levy increases will be needed to restore the Earthquake Commission’s fund in case it is called on by other New Zealanders before it can be replenished over time. Key should do the same. This is the opportune time for him to review the extent of his Government’s tax-cuts, which are being funded through borrowing and not healthy surpluses, and the extent of the interest-free student loans and Working for Families tax credits bequeathed by the previous Government…Put frankly, Auckland can no longer be the priority for the national infrastructure spend. It has had lots of Government cash spent there for the Rugby World Cup.”

To paraphrase O’Sullivan, we should all play our part to rebuild Christchurch so Key will need to review things like his tax cuts and other government spending including infrastructure plans. Some of what she says I can agree with however I am interested in joining the dots a little further than O’Sullivan attempts to encompass food and fuel prices. The dots do link back to the spending areas she has identified.

The matter of tax should be obvious to most. The recent round of cuts was not “fiscally neutral” and was not a “tax switch” for a good portion of low income earners. The first reservoir of finance Key needs to dip into to fund the Christchurch rebuild is tax. I myself doubt he has the courage to reverse the cuts of May last year. A rebuilding tax can certainly be levied however. Australia has introduced one for the Queensland flood starting at incomes over $50,000 and increasing again at incomes over $100,000. Key could also introduce a levy on top of company. Beyond that simple task the opportunity may be right to roll out some long sighted tax changes such as a capital gains tax or financial speculation taxes. That will help fund the immediate Christchurch reconstruction efforts but also help lay a solid foundation for future national economic development.

The suggestion that Working for Families should be scraped should also be obvious to most. Obviously a silly idea that is. At a time where wages are low and stagnating, unemployment is high and living costs are increasing the last thing the government needs to do is remove some of the financial props that are helping families get bye. The state of our economy dictates they need to be retained. Future possible events of structural high food and fuel prices, along with unemployment and uncertain economic recovery may very well necessitate Working for Families type programmes on a wider scale. That is, structural problems of high food & fuel prices along with faltering employment and growth will require a much greater effort to distribute resources and wealth on a far more equitable basis throughout our (and even global) political economy.

Finally there is infrastructure. This is where I once again find myself agreeing with O’Sullivan. Key and Steven Joyce need to urgently reconsider the infrastructure plans they have set in place. The major need must lie with Christchurch. There is some low hanging fruit Key is easily able to pluck for this. There is the 1.7 billion dollar Puhoi to Wellsford Holiday Highway for starters. This road has a Benefit-Cost ratio (BCR) of somewhere between 0.4 to 0.8 (the optimistic view Joyce found somewhere). If Joyce wants to improve the road he can do so for around $300 million and bypass Warkworth. The 2 billion dollars Waikato Express Way has a BCR of somewhere between 0.5 and 1.1 (again optimistic figures found somewhere by Joyce). That project can no doubt be scaled back with th3e resulting saving on both projects likely to be, at a guess, $2.5 billion. That’s a decent contribution toward the Christchurch effort. Then there is the Wellington Northern Corridor with a BCR of 0.6 to 0.9 to consider as well.

Should Key and Joyce want to spend money improving our transport infrastructure, and I understand there are arguments for doing so, then the priority must be public transport. In a few years, or maybe even a few months, if oil prices rise back toward $150 a barrel then the focus for affordable public transport will intensify. There are existing bus and rail projects that urgently require government funding to get completed. In 2020, when Christchurch is rebuilt, people are requiring road upgrades on which to drive their electric vehicles then Keys successors can consider it then.

As the reconstruction effort in Christchurch takes place we are all going to be required to help out. Government revenue and government spending, including infrastructure, will have to be carefully considered. New taxes will be required and there are scheduled government ‘think big’ roading projects that can be downscaled or cancelled. Such deliberations also need to take account of a future that requires, I think, income/wealth equality and structural programmes to cope with higher food and fuel prices.

-george.com

19 comments on “Seismic events in Christchurch, food & fuel”

  1. Lanthanide 1

    This seems like a good post to point out that with Key apparently ruling out a one-off tax to help rebuild CHCH and instead “permanently increasing” the EQC levy and possibly raising the payout level, he’s really doing a bait and switch.

    A tax-rise to help pay for CHCH’s rebuild would be money that directly goes into building things within CHCH, right now.

    Raising the EQC levy permanently means we are putting money away for the future, not increasing revenue to spend it right now. As I commented here http://thestandard.org.nz/some-personal-reflections-on-the-quake/#comment-302758 EQC is not actually in hugely dire need of funds right now.

    It seems that rather than tax our own populace to help re-build CHCH, Key’s plan is to go out begging cap-in-hand to the rest of the world for money to do it, using his pals Letterman and Oprah (that sounds like a joke, doesn’t it?): http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10709224

    Also, S&P and Moody’s have both come out and said that despite the new quakes taking a toll on the government’s balance sheet, NZ once again has much lower public debt than many other western countries, and so they are not concerned. Further puts paid to their desperate need to sell off state assets (the forth-coming spin to be that it is now required to help re-build CHCH?)

  2. Colonial Viper 2

    I hope calls are being made to city planners around NZ (and around the world), starting to look at options for what a renewed, vibrant, future resilient Christchurch might look like.

    Nervous that the temporary mass exodus from Christchurch risks becoming more permanent as the months go by.

    • Shane Gallagher 2.1

      On the topic of resilience – it has become very apparent how bad it is for resilience to have centralised distribution networks. Most of the south island had centralised networks for milk and bread based in Chch and now getting bread and milk to people is a bit of an issue. All our local supermarket has is white bread and they had problems with having enough milk for everyone. Also other food lines are short as well. Now this is nothing compared to what has happened in Chch but the point is that if there were distributed systems then we would be much more able to cope with disasters and Dunedin could have been a major supply point for Chch for example.

      Also if there were distributed power generation systems (eg. solar and local CHP systems etc.) then supplying people with power would be a lot less of a problem – as each local area could supply at least some power for places like GP surgeries, pharmacies and clinics.

      Anyway, just a thought…

      • Colonial Viper 2.1.1

        Multiple redundant systems, highly localised and designed to fail gradually is a very important aspect of resilient systems engineering and preparing for the unexpected.

        But from the capitalist’s way of thinking, having increased safety margins, more stock on hand and keeping backup facilities ready but which are not normally used is inefficient and lowers profits.

        Nature is actually much smarter. It costs the human body a lot two build and maintain two kidneys, but nature has decided that its worth having a backup. Of course you might choose to asset sell one but then…

        • Peter 2.1.1.1

          Nice analogy. Nature has evolved resilience over eons, but as industrial capitalism is a relatively new phenomenon it is still highly R-selected (placing value on growth over stability). Time will tell if it can easily transition to a more K-selected approach.

          • ZeeBop 2.1.1.1.1

            DPB solo mums have much easier lives thanks to technology, like washing machines, where women needed to partner up and reach pragmatic solutions they can now go it alone. Transition may solve some of our social crisis-es but return us to some of the social problems of yesteryear we thought long gone. Overcrowding, disease. Bedbugs? A transition phenomena? But luckily our elites and chattering classes are not working the problem so we won’t know until its too late, well no money in it.

  3. Bored 3

    Nice article George. I saw the devastation first hand, and it is grim. When I got back I had a read of Middle East news, then checked the Brent Crude price (US$110). Hard times await.

    Thinking back on the last week we all have a head full of ideas that we all need to express. We mourn our lost city, but our lost people we must mourn more. If one thing happens out of this tragedy it is that we don’t allow anybody to build a building that can trap and kill people. No more steel and concrete tombs. No more landlords renting out crappy unsafe buildings when it should have been obvious that they are death traps. Enough said.

    On the economics of the rebuild we have some sterling examples of how it is done. Europe post war, Kobe etc. Argentina post default. All of these had massive capital injections. We may not be so lucky so referring to the national development efforts heralded in by the First Labour government may be more appropriate. We are a nation rich in raw materials and land to grow resources; we need to add our own value to these resources to rebuild our cities, starting with Christchurch in a safe sustainable fashion. Now we face the dire consequences of dismantling the Ministry of Works and Development, selling off the state forests etc. Remember capital is the accumulated value added by labour: we have the labour and raw materials; we can create capital by using what we have. It is time for the people to decide what they want , and to plan it rather than leave it to the mythical “market”.

  4. oscar 4

    The business roundtable reptile mouthpiece, Roger Kerr, has suggested christchurch could sell off the airport, lyttelton port, and orion energy to pay for rebuilding.
    I mean, seriously? Does anyone take him seriously anymore?
    If they do, the denizens of christchurch need to be ready to say no. It’s the income stream from these companies that help CCC pay for long term infrastructure.

    • Lanthanide 4.1

      Yeah, completely ridiculous. I was going to mention it in my comment above but it was getting a bit long and varied already.

      Orion in particular seem to be doing a stellar job. I’ve been very impressed with the guy fronting up to the media – he seems to know exactly what’s happening, authoritative and clear.

      • Peter 4.1.1

        Yes, Roger Sutton from Orion has been doing an excellent job. There was mention of the Ministry of Works and Development before, and in my short experience of working with local government, I view the local lines companies (most of which remain publicly owned) as having much of the public service ethos that was inherent at the old PWD. We called it nation-building once upon a time.

        Might be time for Labour to reclaim that phrase.

        Captcha is on fire: intervention

  5. Afewknowthetruth 5

    The decline in global oil extraction that will occur over the next few years will make the events in Christchurch look like a Sunday afternnon picnic in the park. Best evidence indicates we will be at below 1970s levels of oil availability by 2020.

    Meanwhile the clowns and criminals in government continue to promote policies predicated on increasing availability of oil at ridiculously low prices. It is quite surreal.

    We are in the early stages of a reversal of the Industrial Revolution. Most people are totally blind to it.

    As for rebuilding Christchurch -nice joke! Of course the notion will give the proles a bit of false hope as the ship goes under.

    P.S. The time to implement strategies for a soft landing was 5 years ago, when ‘nobody’ was listening. Most are still not listening

    • Colonial Viper 5.1

      Time to finish with the doomsday rhetoric and start debating constructive and detailed courses of action for NZ eh?

      • Peter 5.1.1

        Yep, no time for doomsday rhetoric. Collapses are slow affairs at best, and there is plenty of time to make strategic decisions knowing the likely outcome of the future.

  6. Afewknowthetruth 6

    I spent from 2001 till 2009 promoting appropriate courses of action. ‘Nobody’ was interested. Only about 1% of the populace seem to ‘get it’.

    Anyway, it’s too late now. All the wondows of opportunity have closed.

    The other thing to consider is that governments and local bodies are ideologically opposed to approptiate strategies and do their best to block them. Their ‘job’ is to facilitate the agendas of multinational corporations. I didn’t fully realise that until I tried every door and found it formly bolted. 🙂

    So, we’re off the cliff and in Wily E Coyote land; the whirring of the legs is somehow preventing an immediate fall …. but the moment we [collectively] look down it’s all over.

    Sadly, most people are going to learn the hard way.

    • Lanthanide 6.1

      If the future you are envisioning unfolds as you think it might, at some point it will be 99% of the people that “get it”. What are you going to do then? Be pro-active and constructive and try and improve the situation as much as possible, or just say “it’s too late, don’t bother”?

      • ZeeBop 6.1.1

        Solution # move to a country that cannot be invaded, has low population and is exporting its young people, grow a vegie garden. Watch the stars pass by. Not bothering is a good stance if you find the right place for it. North Coast of the South Island, a plot of land with a high gorge to dam for power and lots of wood. – now to win the lottery.

  7. Draco T Bastard 7

    The suggestion that Working for Families should be scraped should also be obvious to most. Obviously a silly idea that is. At a time where wages are low and stagnating, unemployment is high and living costs are increasing the last thing the government needs to do is remove some of the financial props that are helping families get bye.

    WfF and most benefits should be replaced by a Universal Income. This does two things:
    1.) Ensures that nobody is living in poverty
    2.) Shows the minimum that our economy needs to produce to maintain a high living standard for everyone

    • ZeeBop 7.1

      One odd consequence of inequality is it become harder to redistribute as more people are spread across a range of unhealthy situations, from the extremes of people owning leaky homes, to long term generational beneficiaries (even creating its own forms of poverty trap).

  8. ropata 8

    Time for a boost in state housing stocks (with tenants given assistance to purchase). A lot of our skilled tradesmen are in Aus profiting from their ongoing housing bubble. But maybe we shouldn’t require certified builders for everything, but strict standards and inspectors as the job progresses. There are a lot of of handy guys out there with CPIT diplomas in building.

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