Flat White

The war front is closer than you might like

15 March 2022

12:00 PM

15 March 2022

12:00 PM

Trouble at home, trouble abroad. Australia is being challenged at a number of levels, but there are some common themes.

Floods, war, and pestilence are all historical inevitabilities, yet every time one of these occurs, for many people it feels as though it is the first time. While their occurrence is inevitable, the difficulty remains in predicting where, when, and the size of the problem.

The Ukraine-Russia war was more predictable than most conflicts. Putin has been beating his chest for quite a while, and the ascent of Joe Biden made it likely that he would see how far he could push the USA.

I’ve always thought we would need to pay a higher defence premium under Biden as America became a less reliable and capable friend, and that Putin and Xi would put Biden to the test.

As I said in November 2020:

With a self-obsessed US ruled by a near-senile gerontocracy driven by barely post-pubescent revolutionaries like Alexandria Ocasio-Cortez, it’s natural that the two great, nuclear-armed mercantilist nations would push against it to see whether they can both achieve long-cherished aims of regaining territory they feel is theirs.

Despite the fatalist air of this conflict, it appears to have caught the West napping. Now, the West is hastily changing the conversation about energy and international trade to cope. The bad thing about ‘good times’ is that they lure political regimes into forgetting how bad the ‘bad times’ can be – tempting leaders to luxuriate in a Lotus land of impossible fantasies like The Green New Deal.

The West has had almost 80 years of ‘good times’ since the second world war. Yes, there have been wars, and economic collapses, but the arc of human advancement has been trending upwards.

This has accelerated in the last 40 years because of the longest-ever bull market in interest rates which has driven assets to historically high prices, encouraged innovation by lowering the cost of speculation, and allowed governments and households (not so much companies) to borrow unprecedented amounts. The result has been an increase in living standards, and turbo-charged perceptions of wealth due to asset price inflation.

The West has also benefited by the outsourcing of manufacturing to low-cost developing countries who have been happy to wear the social cost of lower wages in exchange for the benefits of urbanisation. This, in turn, contributed to deflation in the price of goods, counteracting to some extent stagnate wages in the West.

As a result, we’ve been able to indulge ourselves with luxury goods and luxury ideas. Some of these ideas involve are; climate change hysteria; Critical Race Theory, intersectionality (and victimology generally); equality of outcome as opposed to equality of opportunity; safetyism; replacing a guilt culture with a shame culture, and empiricism with relativism.

These domestic obsessions are partly responsible for the Ukraine-Russia war. Imagine you are Putin looking at the West and you see a spoilt generation frittering away the wealth of its parents on vanity projects that make it materially, emotionally, and spiritually weaker. Obviously, you would capitalise on this.

If we want to prevent more wars, then we need to walk these ideas back.

The West has become delusional, incapable of understanding the political needs of other nations. When White House Press Secretary Jen Psaki attempted to haul in the Taliban’s campaign of rape and pillage in Afghanistan by saying, ‘The Taliban also has to make an assessment about what they want their role to be in the international community,’ you know the American administration has lost its mind.

And if you know it, so do Vladimir Putin and Xi Jinping.

Putin’s reasons for invading Ukraine are a put-up job.

It’s not to do with having another Nato country on his borders. Putin already shares borders with five Nato countries. By making Ukraine part of Russia, he guarantees Nato missiles on his borders by moving the border.

It’s also not to do with Ukraine being ‘Russian’. Some Ukrainians are ethnically Russian, but most of them are Ukrainian, and while Ukraine was part of the Russian Federation at some stages, it has a long history of being independent, as well as being conquered and administered by several other countries and empires, including Poland, Lithuania, the Austro-Hungarians, and the Ottomans. Ukraine was even ruled by the Vikings at one stage. Playing by Putin’s rules, does that mean Sweden has a territorial claim?

In Putin’s case, he is invading because he can. He’s a warlord running a modern(ish) mercantilist oligopoly. He’s about raw power and self-aggrandisement – just like the Varangian (Viking) rulers of Ukraine were.

He’s also about legacy – for himself and his country. As with Peter the Great, a man who he apparently idolises, Putin is not too concerned about how many dead bodies he has to climb over to secure that legacy.

In another parallel to Peter the Great, Putin believes he has a right to rule Russia, and that in some fundamental way he owns Russia and Russians. As Louis XIV said, ‘L’etat, c’est moi!’ – that’s the basic monarchical mindset.

That is an entirely different way to how a Western ruler would see themselves.

If Putin gets his way in Ukraine, it will be the triumph of the past over both the present and the future. It would see a rolling back of the rules-based order that Europe has enjoyed with relative calm. Putin would have his imitators, starting with Xi Jinping.

What are the consequences of this war for Australia?

If we are going to win the arm wrestle with the past we need to muscle up. That means spending more on arms and munitions than we do at the moment, and possibly expanding our numbers of men and women under arms.

It also means making our economy more resilient.

The sinews of war are economic. We need to ensure we have a strong economy, with multiple redundancies. If a low carbon economy is the goal, then we have to recognise that wind and solar will not achieve that, and we need to embrace nuclear power.

Fourth generation small modular reactors provide us with an opportunity that is cost-competitive, can be plugged into the existing network, and can be decentralised so they are harder to disable than a conventional coal-fired system.

There are many impediments to nuclear power, not least legislation passed by John Howard banning it. We need to start now to address these issues.

Nuclear should also allow us to be cost-competitive in manufacturing as Small Modular Reactors (SMRs) appear to produce as cheaply as coal-fired power. But this is an idea with a 10-year horizon at least before it could be instituted to any degree.

The current scramble in the USA, UK, and Germany to replace supplies of Russian gas with domestic, or other sources, reminds us how important energy self-sufficiency is. It also demonstrates the role that Australia could play by making the world less reliant on potential bad actors for their energy.

That is something we can do something about almost straight away.

We need to take away impediments to oil and gas production. One of those is the Environment Protection and Biodiversity Conservation Act 1999 which has been weaponised to allow green activists to delay, or prevent, necessary development.

I’m not against the environment, but there has to be a cost-benefit trade-off between human life, and say, the black-throated finch.

The government also needs to look at the role of corporate regulators, corporations, and the ASX in punishing companies who produce fossil fuels by strangling their access to finance. Governments should determine emissions policy, not outsource it to would-be corporate oligarchs.

Of course the market has a role to play, but this should be on the basis of economics, and there are many uses for which there is no alternative to oil and gas, such as plastics, fertiliser, transportation, steel production, and firming and backing-up unreliable renewables.

There is a green-left fantasy that there is somewhere you can go to buy all the renewables you need, and that you can and should therefore junk all your current assets. It’s not true. There is an economic cost to closing, say, a power station well before its end of life. And there is just no economic alternative to, say, natural gas, to manufacture plastics.

Even if there were, the physical resources are not there to replace them all at the same time. Acting as though there is will lead to increased commodity prices (as we are seeing at the moment), and a rise in poverty and misery (which we are about to see in Europe) as well as excess deaths.

It’s ironic that the same people who say ‘one life lost to Covid is one life too many’, and we should ‘spend all we have to protect that life’, are so cavalier when it comes to the deaths that occur through lack of access to affordable energy and goods.

We also need gas to firm-up unreliable electricity generation in the network. The batteries aren’t available, and neither is the pumped-hydro. So, while we persist with the solar and wind fantasies, we’ll need open-cycle gas power generation.

Of course we need to significantly increase gas exports. Our allies, even those like Germany and the UK, which the Greens would have you believe are far ahead of us in decarbonising, need gas because there is no alternative.

This means releasing much more land for exploration in NSW and Victoria, as well as expediting the building of new gas pipelines to bring already existing reserves closer to market and lowering the cost.

The Deep Greens are already piling in spreading the furphy that the Ukrainian war proves the need for ‘cheap renewables’. We need to meet them with facts, figures, and emotion. Many of them are funded in part by Russian and Chinese organisations. The war front is not as far away as you might like.

Graham Young is executive director of the Australian Institute for Progress and founder and editor of On Line Opinion.

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