“Snap back” in post viral cities needs a total reassessment of our goals (if we’re being economically responsible)

Art by Anat Ronen via @StreetArtDream on Twitter.

Many see the current pandemic crisis – coming on the heels of the bushfire crisis and its parent, the climate crisis – in optimistic terms; as providing opportunity in recovery for economic environmental and social policy rethinks. We have a poor history of seizing opportunities, preferring the easy life even as its underpinnings steadily dissolve. It’s therefore useful to ask if useful recovery perspectives can be drawn from a lazy and pessimistic frame of mind?

Against the still shaky assumption of a vaccine cure, or at least successful treatments, conversations are turning to what should happen once COVID-19 is vanquished.

Perhaps in an attempt to sustain a reputation for discipline once this mad Marxian frolic is over, the Prime Minister foreshadowed a “snap back” to fiscal rectitude.

It’s a great phrase!

Slyly evoking the saucy interaction of underwear elastic against wayward flesh, “snap back” aptly conveys an intention for the current leftie aberration to end and business-as-usual to return – starting with sensible undies. The paused past will resume.

Yet, as with transformative body shocks, our collective social and economic flesh looks set to resist returning to its former shape.

These events have demonstrated that despite decades of nudging cajolery about the naughtiness of collective endeavour in any form, a society configured as a mass of independent self interested economic units operating within unfettered markets is simply incapable of establishing and sustaining economic stability in the face of the conditions that we, as simple humans, regularly confront.

The pandemic has demonstrated that Homo Economicus depends as much on strong state institutions as do welfare recipients, though each in different ways.

We await considered economic analysis, but at first blush it seems that long-pressed neoliberal ideologies have been shattering against crises of equivalent existential scale as those that led to centrally planned economies unravelling in the early 90s.

Of course, this does not mean that everyone has become a socialist overnight and markets are now passé, but the realisation is dawning that economies are our servants, not our masters.

A pervasive sensation of rupture is now provoking a lot of speculation, some of it optimistic, concerning how a post-pandemic future might be shaped.

Milne, Hendricks and Mehanty point out that the experience of rupture is a feature of many dramatic environmental changes. “As we grapple with uncertainty and upheaval, it’s clear that our old “normal” will never be recovered”.

They identify three features that we can recognise in current events: rupture doesn’t come from nowhere; it changes the dynamics of government, and; it asks us to rethink our relationship with nature.

They conclude with a challenge; how can we seize opportunities from this disruption? Their suggestions range from adopting in the longer term a “no growth” model following the forced slow-down we are currently experiencing, through to a realignment of our relationship with nature and each other.

Theirs is an optimistic appeal to the better natures we have rediscovered in ourselves over the last few months.

Sadly, as a nation accustomed to flogging excavated stuff to others – so that we can get back to working on our tans – we have never been very good at seizing opportunities merely because they exist. Far better, we seem to have said, to let others exploit them so that we can buy the products back with the money we’ve made from digging stuff up.

Indeed, the idea of a “snap back” foreshadows a return to these lazy habits.

Given our current analytical and speculative mood, might it therefore be more realistic to assume a pessimistic outlook in order to identify what we cannot avoid attending to post-COVID-19 – before we return to 20-minutes-back-and-front?

There are good grounds for this glum perspective. Writing in Foreign Affairs, Richard Haas throws cold water on the idea that this crisis will amount to an historical turning point.

“The world following the pandemic is unlikely to be radically different from the one that preceded it. COVID-19 will not so much change the basic direction of world history as accelerate it”.

This gloomy view is informed by global challenges of health, governance, human rights, environmental degradation, and economic catastrophes that are growing unmet by transnational institutional capacity or the sustained and selfless interest of nations.

Many of these perspectives existed in the current government, notwithstanding its current widely lauded yet pragmatic socialist frolic.

Therefore, if we are headed for a “snap back” that emphasises economic wellbeing above all others what can this government not avoid attending to? What does a pessimistic perspective of opportunity leave us with?

Here are a few observations.

Economic recovery equals intergenerational equity

Writing in the Sydney Morning Herald, Shane Wright observes that payment of debt, run up to keep the economy afloat, will take generations to repay, meaning that the burden will fall to them.

Michelle Grattan agrees. She observes that the immediate debt burden will fall more heavily on the young if pre-pandemic policy settings persist.

This cohort must feel cursed. They already face a parlous and fickle jobs market; many are saddled with education debt; they are left to deal with the long-term costs of a climate crisis they strongly objected to; housing in major employment centres is unaffordable and insecure; and their comparatively wealthy forbears are now retiring with the expectation that ongoing economic prosperity will support their longer life spans into unwell dotage.

These are not favourable conditions upon which to found a multi-generational recovery.

In essence, our next generations are expected to run a marathon in bare feet carrying a backpack full of rocks. Hence, the two unavoidable bi-partisan policy tasks are firstly, to remove those rocks and, secondly, to provide running shoes.

As to “rock removal”, obvious recovery objectives would include relieving the education debt burden, growing job markets that draw on acquired high-level skills, and increase access to affordable and stable housing.

Many commentators have observed that the necessary immediate and tough political decisions will likely offend influential interest groups and pre-pandemic ideologies. However, giving in to those influences would amount to a recovery fail.

Concerning “running shoes”, dramatic productivity improvement could include reorienting our knowledge industries from the simple mining-like export model (overseas students) into more onshore value-add, like the development of new industries associated with environmental leadership as suggested in The Fifth Estate.

The importance of cities

Though agricultural resilience is essential to national survival the entire sector comprises just 2-3 per cent of our national GDP and employment.

Shane Wright observes that getting Sydney and Melbourne back to normal is the end game: “one thing that was true pre-virus remains true post-virus is that the Australian economy is utterly dependent on our two largest states and their two capital cities”.

To illustrate, inner Sydney – the small area governed by the Sydney City Council – hosts an economy that contributes more than 7 per cent of national GDP, some three times larger than the nation’s entire agricultural sector. An unlikely doubling of agricultural output across the nation would equal a mere 33 per cent improvement just within inner Sydney.

Therefore, economic recovery efforts must first focus on repairing the myriad unproductive pathologies in our cities. Let’s consider just one – housing.

The most obvious pathology is the world-wide treatment of housing as a preferred investment class

The most obvious pathology is the world-wide treatment of housing as a preferred investment class. This has led to spiralling housing costs, has favoured persistent scarcity to support value of that asset class, and diverted investment from other more productive enterprises.

It has also led to a concentration of wealth, mostly among older individuals. Persistence of these conditions will hamper the very generations now being relied upon for post-pandemic recovery.

Hence, obvious early policy reforms include those that continue to sustain that unequally distributed wealth, such as those around franking credits, capital gains tax concessions, negative gearing of residential property, and state land transfer stamp duties.

Some have claimed that likely ongoing social distancing requirements favour an urban form return to lower density suburbs rather than dense inner cities. This is plainly nonsense; a 1.5 metre separation distance is compatible with very high-density cities as was demonstrated by the success of many Asian cities in combatting COVID-19.

our key workers are the real indispensable heroes in this crisis

The Australian experience has, however, profoundly demonstrated what has long been pressed and ignored; that our key workers are the real indispensible heroes in this crisis. A city whose housing costs continue to inhibit essential key workers from ready access to their jobs is plainly not resilient.

The type of post-pandemic development must also be re-jigged.

Were it not for COVID-19 the growing scandal concerning residential flat development would be screaming from the headlines. In Sydney, the 132 owners of the still new Mascot Towers are contemplating a total repair cost of more than $50 million and the loss of life savings.

This kind of failure was predicted only a few years ago when legislation relaxed rectification requirements for this class of development. It is little wonder that the entire residential flat development industry has experienced a credibility crisis that saw sales slump and calls for radical reform, which thankfully is currently on foot.

Recovery of confidence is likely to be slow, regardless of the pandemic, which means that housing provision reliant on this sector will be limited and construction capacity under-utilised just when it needs to ramp-up.

These events also call into question the long-standing national model of housing provision for profit.

Many alternative models have long existed, particularly in the not-for-profit sector, but currently operate at a relatively small scale in Australia.

For this to expand would require simple legislative change from all tiers of government. However, expansion would enable early employment of building trades that would otherwise be out of work while reform slowly rebuilds confidence in the apartments-for-profit sector.

Similar employment recovery benefits would seem to adhere to the state’s “missing middle” initiative. Consider this; by how much would building activity increase if 10 per cent of existing low-density single dwelling suburban allotments were permitted to add another dwelling unit?

Prudent appraisal – and reappraisal – is essential

 The bushfire crisis and COVID-19 pandemic are legacy events and recovery efforts will be viewed in similar terms.

Thus, it will be a legacy tragedy if recovery entailed the acceleration of pre-disaster projects and policies that proved unsuited to the changed conditions generated by the disaster, merely on the grounds that new economic activity was needed.

For example, the future of air travel is now uncertain. Any recovery will need to confront the twin challenges of accelerating climate change management, likely to impact on fuel costs, and uncertain demand compared with pre-pandemic levels of travel and freight.

Already the future of one of Australia’s two international airlines is in the balance.

This means that our existing and proposed airport infrastructure, along with their links to the metropolises they serve, is likewise uncertain.

Is the future of Sydney’s Mascot facility, which is already constrained by curfews and increasing urban conflicts, in doubt against a less restricted rival at Badgerys Creek?

What is the future of this rival if increasing environmental challenges favour a shift from air travel to electrified rapid surface travel within our landmass?

Should we further encourage development of city edge land now that the vulnerabilities of widely dispersed food supply and distribution are now being so vividly revealed?

What does all this mean for the Aerotropolis, the third city centre proposed by the Greater Sydney Commission?

Another example concerns car travel. A recent Schumpeter column in The Economist noted that during a recent public transport strike in London, some 5 per cent of travel pattern adaptations persisted after the strike ended.

Transurban reported that traffic on its toll roads almost halved in the first two weeks of April as more workers self isolate or work from home. What would be the effect on company productivity if the Schumpeter account were repeated on existing toll roads?

Furthermore, if these new work patterns prove to be productive, sufficient to warrant workplace restructures, what would be the impact on the economic assumptions underpinning tollway construction and operation by governments?

Sunk costs are infirm grounds to continue with paused projects.

Recommencement of tollways currently under construction may thereby deliver a legacy of wasted expenditure at the very time when more productive investment is most needed.

Any economically responsible “snap back” must include a thorough re-appraisal of all projects – proposed, planned and commenced – against likely post-pandemic conditions.

The point in all of this as that any economically responsible “snap back” must include a thorough re-appraisal of all projects – proposed, planned and commenced – against likely post-pandemic conditions. Does Australia really need these to proceed? Are there more productive ways to spend our money?

Infrastructure Australia, please step up!

Policy and project appraisals have been gamed in the past and post-pandemic reappraisals would not be immune, particularly where policies and projects are cherished politically or have commenced.

We are already seeing pet-projects emerging afresh with a coat of post-pandemic-recovery paint. More are likely; expect a renewed campaign by nuclear power enthusiasts any day soon.

Hence, guards against “decision based policy making” should be rigid and exposed to public scrutiny. Doing so would be a refreshing post-pandemic change for government.

“Snap back” may not be to the same pre-pandemic national body shape but if it conformed to a new leaner fitter body would that be a bad thing?

Mike Brown has worked in NSW local and state government in planning, urban design, and strategic roles for 15 years. He is also a graduate of the Masters of Urban Policy and Strategy program at the University of NSW.

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Comments

2 Responses to ““Snap back” in post viral cities needs a total reassessment of our goals (if we’re being economically responsible)”

  • Caitlin McGee says:

    This is a great analysis. Totally agree we have an opportunity to re-think the longstanding model of housing for profit and better enable alternative models, including collaborative housing. There are so many reasons govt should look at this, including to support younger generations who, as you point out, will shoulder the brunt of the debt.

  • Kirsty Mate says:

    Excellent appraisal thanks for this article Mike – lots to think about here.

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