The rents of paradise -what to do with Island economies Presentation to The 1st South East Queensland Island Forum held on North Stradbroke Island February 2014

Howard Guille

2/24/2014

Howard Guille, SE Qld Island Forum, February 2014 Page 2

The rents of paradise -what to do with Island economies

Islands are paradises and hell-holes; for example Hiva Oa and Dunk Island against Devil's Island (île du Diable) and St Helena Island1. Islands are places that people get rich from and also where the rich go to avoid taxes. Islands are colonised but the people of small islands are rarely colonisers. The natural environment is fragile and vulnerable to climate change yet islands are natural refuges for endangered flora and fauna. My subject is how to understand who on small islands gets what. I have no sophisticated definition of what is a 'small island' except that size is about population -probably less than six figures and that the islands are such distance from 'mainland(s)' to require ferry or air transport. The range of economic activities is unlikely to be comprehensive and will often be dominated by a single activity such as mining, tourism or finance or a single government facility like a prison or military base. In general, outward and inward movement of people and investment are presumed though these may be subject to factors like customary land ownership, family lineage or, in some of the tax havens, a minimum down payment. The political status of small islands is very mixed; some are the Small Island Developing States (SIDS) of which UNCTAD has an 'unofficial' list of 292 with all but six in the Caribbean and the Pacific. All the SIDS are members of the Alliance of Small Island States which has 39 members plus five observers.3 The Alliance has a remit to represent the interests of small and low lying island states on global issues of climate change. Another group of small islands are not states but have a high level of autonomy; these include Greenland and the Faroe Islands, British Crown dependencies like the Channel Islands; the Canary Islands, the Aland Islands and, more recently, the Autonomous Region of Bougainville. Finally, and the largest group by number if not influence are part of a bigger nation state. Some have their own local government or provincial/state status; examples from Australia and other countries include - New Ireland, Manus, Petite Martinique, Norfolk Island, Kangaroo Island, Palm Island and the Tiwi Islands. Others are part of a local government area such as the South Moreton Bay Islands and North Stradbroke Island. The rent in the phrase 'rents of paradise' is about who gets what. It comes from the classical political economic idea of rent as claims and rewards arising from the 'the original and indestructible properties of land'.4 These ideas form an important part of the writings of among others Adam Smith and David Ricardo and critiques of them by Karl Marx.5 In brief, some property (land, locations, and now intellectual property) are more desirable than others (at the simplest because of soil fertility or proximity). Those who own or control the more ‘desirable’ property can extract a premium, or 'economic rent', for use of that property. These rents are ‘unearned’ because the land owner has not had to do anything such as advancing capital or providing labour for production. In turn, the economic rent is actually a charge against the wages and profits of those producing on the land or place.6

1 Hiva Oaa, the island 'home of the gods' in the Marquesas Islands (and for a while home of Gaughin); Dunk Island or Coonanglebah - the isle of 'peace and plenty'. Devil's Island the French New Guinea penal institution; St Helena the prison island in Moreton Bay and the South Atlantic prison of Napoleon 2 United Nations Conference on Trade and Development, UNCTAD´s unofficial list of SIDS,

http://unctad.org/en/pages/aldc/Small%20Island%20Developing%20States/UNCTAD%C2%B4s-unofficial-list-of-SIDS.aspx 3Alliance of Small Island States, http://aosis.org/members/. 4 This was the wording of David Ricardo, On the Principles of Political Economy and Taxation, 1817 5 In turn this stimulated Henry George and the demands of the Land Leagues that influenced the closer settlement movements in Australasia and the continuing campaign to replace all taxes with a 'single tax' on unimproved land values. 6 A simple but telling current example is that reduction of penalty rates for workers in shopping centres will

Howard Guille, SE Qld Island Forum, February 2014 Page 3

Box 1

My questions

What would economy and community be like where equality and the environment matter?

A balance between growth and material standards, reducing inequality, and ensuring environmental, cultural, social

conservation

What would Islands be like if we took Friday’s part not Crusoe’s? An economy to serve people dialogue not ‘consultation

13 Howard Guille SE Qld Island Forum Feb 2014

Economic rents come from control of property not from taking risks in production; rentiers can increase their rents by tightening control over the property. Owners of physical places control who can get in and owners of virtual property control who can download it. More frequently, though, rent is increased by making the qualities more desirable or at least getting people to believe they are more desirable which is where marketing and public relations come into play. In essence, economic rents go to those who can exert power to extract them. My central or organising question is what would islands be like if equality and environment were taken seriously. This is a radical question because it is about redistribution of rents. It is a subversive question because it presumes that choices exist about the kind of 'economy' - that is the manner in which material and other needs are met and about the ways and means of making and effecting the choice of economy. This makes the matter one of political economy rather than mechanical

economics. The central question is expanded in box 1. Currently, the pursuit of economic growth and material well-being is privileged over protection of the environment and conserving cultures. The criterion of a strong economy is the maximisation of total growth and not how the proceeds are shared even though some of the proceeds may be applied to alleviate environmental damage or to ameliorate the situation of the poor. Indeed, the adoption of market-based policies over the last three decades has resulted in large increases in economic

and social inequality. The alternative envisaged in the organising question is that equality and the environment will be treated as primary objectives along with the economy. I stress equality and environment because my approach requires explicit attention to the current situation where the rich enjoy better natural and human-made environments than the poor. This is very germane to islands since some are homes to the poor while others are becoming playgrounds for the rich. Not surprisingly, perhaps, the islands of the poor are often the more environmentally degraded; moreover, the rich are very ready and able to take over any more pristine island occupied by the poor. Perhaps this can be understood by asking what an island might be like from the position of Friday rather than Crusoe.7 The fictional Crusoe is explicit about his authority; he says

My island was now peopled, and I thought myself very rich in subjects; and it was a merry reflection, which I frequently made, how like a king I looked. First of all, the whole country was my mere property, so that I had an undoubted right of dominion. Secondly, my people were perfectly subjected; I was absolutely lord and

lead to increase in the rents paid to the shopping centre owners and not to the profits of the shop keepers. 7 This is also subversive of other orthodoxies in various behavioural 'sciences' including sociology and neo-classical economics given the prevalence of 'Robinsonades'. These, for example, use the metaphor of Crusoe and Friday to justify things like the division of labour, indifference curves between eating and growing coconuts and free trade. For once see https://en.wikipedia.org/wiki/Robinson_Crusoe_economy

Howard Guille, SE Qld Island Forum, February 2014 Page 4

Box 2 Economic characteristics of small islands

Businesses are generally price takers not makers and in volatile markets (eg mining, tourism)

Sectors that ‘export’ from Island are ‘enclaves’ with low multipliers (eg tourism buys in food; mining buys in fuel and equipment)

Enclaves very susceptible to external changes in demand, exchange rates, technology, corporate ownership

Minor forms of dutch disease from enclaves limit possibilities of diversification by increasing property and other prices

Dependence on transport links which are frequently monopolies with limited price regulation

lawgiver....8

The 'undoubted right of dominion' goes to who holds power and, as already described, rents are the product of political, military, social, economic and cultural power. An economy from Friday's part would be one that was orientated to serve the people not the power-holders. Likewise it would be one with decisions based on dialogue - that is exchange of views and negotiation rather than consultation in which the powerful often still speak for the subordinates. A corporation or government institution in a dominant position is often very active in maintaining their power. In recent years this is more likely to involve 'soft' power rather than overt force. The shift is very evident in the mining industry - Lihir Gold, for example, is much more deliberate in soliciting community support than was the Rio subsidiary Bougainville Copper at Panguna. Even so, conflicts and complaints continue about how much the companies take and about social and environmental impacts.9 Locally, the mining company Sibelco has been prominently proclaiming its community ethos and contribution to North Stradbroke Island. Sibelco's public relations campaign undertaken by Rowland against the Queensland ALP Government can be admired for the highly effective and successful campaign of 'Sustainable Stradbroke' and its invocation of 'community' let alone the 'Straddie Mothers' letters to Ashgrove voters. It has won national awards for its persuasive skills. Even so, such campaigns need to be understood as ways of gaining or keeping the economic rent that goes with exerting dominion. However, they do set the markers for those who would like to explore alternatives.

Economic characteristics of small islands

Small islands have distinct economic vulnerabilities precisely because they have small and isolated economies; these are summarised in box 2.10 The characteristics are phrased in the language of orthodox economics and are quite straightforward; one is that Island production is sold into national

or world markets at competitive prices but the transport to the island is frequently a monopoly or oligopoly able to control prices and availability.

8 Daniel Defoe, The Life and Adventures of Robinson Crusoe, ChXIV, 1719 available at

http://www.gutenberg.org/ebooks/521 9 For example Sir Julius Chan, Governor of New Ireland said in December 2013, “Newcrest had a profit of over K3 billion in 2012 and again most of this came from Lihir. “But what have the people got? Very little,” Sir Julius blasts companies, The National http://www.thenational.com.pg/?q=node/61662 10

These are drawn from Clem Tisdell, 'Economic Challenges Faced by Small Island Economies: An Overview', Economic Theory, Applications And Issues Working Paper No. 58, University of Queensland, September 2009

Howard Guille, SE Qld Island Forum, February 2014 Page 5

As Clem Tisdall puts it with particular attention to North Cyprus and small Pacific island economies,

The sustainability of their economic performance is highly vulnerable to changed economic or environmental forces over which they have limited control. As well, they usually have little capacity and few options to cope with the difficulties caused by such changes.11

Riaz Shareef makes similar points about what he terms Small Island Tourist Economies (SITEs),

A large proportion of what is being earned through tourism leaves the economy, almost instantaneously to finance imports to sustain the tourism industry. and

the volatility of GDP growth rate tends to be very high and

when it (one dominant economic activity) starts to decline, another dominant economic activity replaces it rather than the economy becoming more diversified.12

The vulnerability extends to wealthy islands; for example, Tony Gallienne comments on the tax haven of Guernsey which is listed by the World Bank as having the ninth highest gross national income per capita in 2012,13

notwithstanding their separateness and individuality, islands share many challenges and vulnerabilities. Even for the wealthier, like Guernsey in the Channel Islands .... those vulnerabilities are lurking just below the surface, if not exposed and causing trouble. 14

Some of the economic vulnerability is from internal tensions and is well documented in mining and tourism; for example at Panguna and Freeport mines or in tourism on French Caribbean Islands.15 Tensions are also present in tax havens and a comment on the situation in the Isle of Man, another British crown dependency, is apposite;

The island is a beautiful place but sadly over populated with nasty, shady, on the make, people and politicians. As a native it’s my dearest wish to witness our tax haven activities cease.16 -

These arguments about economic exposure and vulnerability are not confined to islands but the effects are more intense because small island economies are narrow. Moreover, changes happen very quickly -such as the almost immediate loss of very large tomato industry from Guernsey when

11 Clem Tisdell, 'Economic Challenges Faced by Small Island Economies: An Overview', Economic Theory, Applications And Issues Working Paper No. 58, University of Queensland, September 2009 12 Riaz Shareef, Country Risk Ratings of Small Island Tourism Economies, The Fondazione Eni Enrico Mattei Note di Lavoro Series, Nota Di Lavoro 25.2004 13 See World Bank, Gross national income per capita 2012, Atlas method and PPP. 5 of the top 10 are tax havens. The Channel Islands gni/capita is higher than Australia although the actual figure is not published by the World Bank! It is more than 30 times higher than that in Papua New Guinea. http://databank.worldbank.org/data/download/GNIPC.pdf . 14

Tony Gallienne, Review of The Case for Non-Sovereignty: Lessons from Sub-National Island Jurisdictions by Godfrey Baldacchino and David Milne (editors), Island Studies Journal, Vol. 4, No. 1, 2009, pp. 101-118 15 On the latter see AFP, Race, class fuel social conflict on French Caribbean islands, 17 June 2009, http://www.google.com/hostednews/afp/article/ALeqM5gk4fdgdkSoLI7uwcWr8DPvufQdAg 16 Jim Kewley comment at Tax Research Blog 23rd October 2013 http://www.taxresearch.org.uk/Blog/2013/10/24/the-isle-of-man-is-amongst-the-wealthiest-nations-in-the-world-but-theyre-so-secretive-the-data-isnt-available-to-prove-it/#sthash.ZM4rZKJE.dpuf

Howard Guille, SE Qld Island Forum, February 2014 Page 6

the United Kingdom joined what was then the European Common Market in the 1970s or the almost overnight defenestration of Dunwich when the Benevolent Asylum was closed in 1946.

Environmental characteristics of small islands

Islands often have delicate eco-systems with endemic flora and fauna. Islands are under threat

More than 70 percent of SIDS analyzed for a UN-sponsored study were categorized as Highly Vulnerable or Extremely Vulnerable in environmental terms. This compares to only 41 percent for all countries. When it comes to water availability, the health of their biodiversity, and their susceptibility to the problems of climate change, islands get hit first.17

In the United States and Mexico there is considerable concern about 'Barrier islands' which are offshore sand islands. They reduce the extent of storm damage on mainland coasts and are wildlife refuge habitat. They are also popular and accessible holiday places. As the United States National Oceanic and Atmospheric Administration says

The term barrier islands might conjure images of beaches, boardwalks, and vacation homes for some, but barrier islands function as more than just areas for tourism and recreation. As the first line of defence during storms that threaten coastal communities, barrier islands are very important for reducing the devastating effects of wind and waves and for absorbing storm energy. They are also important marine habitat that supports commercially important fish species, as well as birds, sea turtles and other wildlife species.18

North Stradbroke and Moreton Islands are two of the largest high sand volume barrier islands in the world. 19 Islands are vulnerable to natural disasters, especially cyclones, storm surges, tsunamis and flooding. These are natural occurrences more frequent on islands than mainlands. The vulnerability to natural disasters is heightened by the predicted impact of climate change on islands. The Asian Development Bank (ADB) has reported on "The Economics of Climate Change in the Pacific" with climate scenarios for Fiji, Papua New Guinea (PNG), Samoa, Solomon Islands, Timor-Leste and Vanuatu, including predictions on temperature change, the El Niño Southern Oscillation (ENSO), rainfall, extreme weather events, cyclone risk and sea level rise. It says that the Pacific Islands are highly vulnerable to the predicted effects of climate change, including higher sea levels, intense storm surges and cyclones, erratic rainfall patterns, and major temperature fluctuations. The ADB is an orthodox and mainstream organisation; it estimates 'the total climate change cost in the Pacific to range from 2.9% to 12.7% of annual GDP by 2100'.20 Clem Tisdall drew on the Inter Governmental Panel on Climate Change (IPCC) to say

By mid-century, climate change is expected to reduce water resources in many small islands, e.g. in the Caribbean and Pacific, to the point where they become

17 Alan Atkisson, Island Economies in a Globalized World, 27 February 2009, http://www.worldchanging.com/archives/009502.html

18

NOAA, Barrier Islands -Habitat of the Month http://www.habitat.noaa.gov/abouthabitat/barrierislands.html

See also John McDaris, Barrier Islands, SERC Portal, http://serc.carleton.edu/hazards/hurricanes/barrier_islands.html 19 For discussion of the termnology see Dirk Frankenberg, Large Sand Volume Barrier Islands, Carolina Environmental Diversity Explorations http://www.learnnc.org/lp/editions/cede_lgsandvol/327 20

Asian Development Bank, The Economics of Climate Change in the Pacific, November 2013 available at http://www.adb.org/publications/economics-climate-change-pacific

Howard Guille, SE Qld Island Forum, February 2014 Page 7

Box 3 Simple Local environmental measures

Planning to maximise habitat retention

Control of invasive plant species

Enforcement of controls on feral and domestic animals

Restrictions and control of plastic bags, bottles and containers

Requiring use of bio-degradable chemicals

Highest level waste water and sewage treatment and minimum discharge systems

insufficient to meet demand during low-rainfall periods; and with higher temperatures increased invasion by non-native species is expected to occur, particularly on mid-and high-latitude islands.21

These and other studies argue that climate change will intensify both the economic vulnerability of small islands and their environmental fragility. In addition, islands are more exposed by virtue of being islands and 'on average small island nations can expect to have a higher proportion of their land mass eradicated by rising sea levels than large countries'.22

An island economy where the environment counts

There are a many sources of advice on what authorities as a whole can do to be 'pro-environment'. Box 3 sets out a straightforward list - it is hardly contentious. The surprise is how little is done. It is not for want of advice and programmes which indicates either that the cost of environmental protection is unacceptable or that special interests are effective. The latter is more likely.

The 'Local Governments for Sustainability' (ICLEI) is a global organisation with over 1,000 member cities in 86 countries which gives detailed advice on the likes of ecobudgeting and sustainable procurement .23 The ICLEI's discussion paper " Green Urban Economy" sets an overall way -

(cities) can influence the market through sustainable

procurement. They can both show green performance and set an example by greening municipal operations; using low-carbon, low-risk energy; achieving green buildings; operating green fleets; maintaining their parks and gardens ecologically; greening fairs and events. They can attract green businesses. They can regulate through statutory planning and local by-laws. They can lead through partnerships with businesses and stakeholders and by educating their community and supporting an inclusive economy with reduced inequalities.

The same notions can be applied to islands. The emphasis on 'an inclusive economy with reduced inequalities" is consistent with my argument. Conservation and remedial actions are a necessary but not sufficient part of 'making the environment count'. It also means choosing economic activities and methods that either benefit the environment or that have the lowest impacts. This requires quantification and evaluation of both the ecological and carbon footprint of specific islands. At the very least, communities need to have the equivalent of the efficiency ratings used on fridges and washing machines.24 Imagine being able to

21 Clem Tisdell, 'Global warming and the future of Pacific Island countries', International Journal of Social Economics 35, 2008, 889-903 22 Tisdell 'Economic Challenges Faced by Small Island Economies' op cit. He also shows the mathematics of this. 23 ICLEI: Local Governments for Sustainability http://www.iclei.org/. Note Brisbane, Cairns, Ipswich, Sunshine Coast and Townsville Councils are members. 24

The E3 Program – improving our energy efficiency, http://www.energyrating.gov.au/

Howard Guille, SE Qld Island Forum, February 2014 Page 8

Beach Activity Centre, Ameland

compare between a two star ecologically efficient island and a five star one. Tourist marketeers would drool!

The ecological footprint of an island

A range of methodologies for assessing ecological footprint are available from quite macro estimates such as the National Footprint Accounts25 to the Ecological Footprint calculator for islands26. As the latter says,

The calculation of the Ecological Footprint is based on the idea of measuring human consumption of resources and the according land area needed for production. The general consumption categories are nourishment, shelter, transport and waste. For these categories, land use of cropland, grazing land, forest and built-up land are calculated.27

The Northern European Cradle to Cradle Islands Project on ten islands in the North Sea Region illustrates a sophisticated and comprehensive approach. It applied the design principles of William McDonough and Michael Braungart28 to promote a more resource efficient, greener and more competitive economy while boosting sustainable growth at regional and local level.29 Perhaps the most directly relevant individual item is the Beach Activity Centre at Ameland made with reuse of steel sea containers and wood from the island’s forest.

While I am nervous about super cures and architects bearing gifts, the standards for cradle to cradle certification seem relevant to the discussion here30. They are summarised in box 3. The inclusion of social fairness is

commendable especially given the exploitation of workers in global supply chains. However, the evaluation should be extended to the social and environmental impact of the use of the products.

25 Global Footprint Network, The National Footprint Accounts, 2012 edition. Global Footprint Network, 2013. Oakland, CA, USA http://www.footprintnetwork.org/images/article_uploads/National_Footprint_Accounts_2012_Edition_Report.pdf 26 Prof. Dr. Ratter and Jan Petzold, 'The Ecological Footprint – A standardised tool for small island sustainability' Institute of Geography, Hamburg University available at Ecological Footprint of Islands at http://www.islands-footprint.com/ 27

ibid 28

William McDonough and Michael Braungart, Cradle to Cradle, North Point Press, 2002. For the cradle to cradle principles see Cradle to Cradle Products Innovation Institute and the Cradle to Cradle Certified

CM

Products Standard http://www.c2ccertified.org/product_certification/c2ccertified_product_standard 29 Cradle to Cradle Islands, Final Report 2013 available at http://c2cislands.org/sjablonen/1/infotype/news/item/view.asp?objectID=2021 30

http://www.c2ccertified.org/product_certification/c2ccertified_product_standard

Howard Guille, SE Qld Island Forum, February 2014 Page 9

Box 3 Cradle to Cradle Certification standards Material Health -Products are made with materials that are safe and healthy for humans and the environment Material Reutilization-Products are designed so all ingredients can be reused safely by nature or industry Renewable Energy and Carbon Management-Products are assembled and manufactured with renewable, non polluting energy Water Stewardship-Products are made in ways that protect and enrich water supplies Social Fairness-Products are made in ways that advance social and environmental justice

. A study of a green economy in Martinique by the United Nations Department of Economic and Social

Affairs is also instructive. The objective is

to define the major changes needed to induce the transformation of the economy of Carriacou and Petite Martinique towards a greener economy that would facilitate sustainable development and enhance the well-being of the population.31.

The study covers energy, transport, water resources, erosion, education and jobs and tourism. Although the study was perhaps over-egged with experts it could be a model for community based assessment and action in other islands.

The carbon footprint of an island

Assessment of carbon footprint is a well rehearsed area from individual travel footprints through food miles to regional and national footprints with numerous techniques, manuals and reports. The Renewable and Appropriate Energy Laboratory (RAEL) at the University of California, Berkeley has developed a carbon footprint calculator for islands as part of a world-wide project on sustainable islands. The latter includes studies of housing in French Polynesia (Logements durables en Polynésie française) and an energy feasibility study in Sarawak.32 One sidenote is that conventional ferries for marine transport have a very high carbon footprint. The UNDESA summarises this

In general, contributions from ferry travel to climate change have received less scrutiny than land and air transport and vary considerably according to factors like speed and the number of passengers carried. Although ferries are effective and widely used in island countries, they have relatively high greenhouse gas (GHG) emissions and low fuel efficiency when compared to various forms of land

31

Division for Sustainable Development of the United Nations Department of Economic and Social Affairs, Road Map on Building a Green Economy for Sustainable Development in Carriacou and Petite Martinique, Grenada 2012 https://rael.berkeley.edu/sites/default/files/June%202012%20Road%20Map.pdf 32

The Renewable and Appropriate Energy Laboratory, University of California at Berkeley https://rael.berkeley.edu/sustainableislands

Howard Guille, SE Qld Island Forum, February 2014 Page 10

transportation33

The Berkley figures estimate that energy use and carbon dioxide emissions of ferry boats is 3.4 times that of domestic air travel and 2.2 times driver-only car travel. It is 14.6 times the most efficient and least polluting transport of 'motor coaches' and 8.1 times that of motor vans.34 The road map

suggests a number of ways of making ferry transport more environmentally benign including the use of hybrid propulsion systems such as those illustrated. If, as claimed, ferries have a high carbon footprint this will flow through to all passengers and goods So will the higher costs of low fuel efficiency. The latter

is akin to imposing a flat rate tax and is regressive since it puts the largest proportionate costs on people with the lowest incomes. This is a very germane example of what needs to be considered in an economy where environment and equality matter. An economy where the environment matters will minimise degradation and maximise active remediation. Information on the ecological and carbon footprints is vital to efforts in putting the environment on the same footing as the economy. Local authorities could feasibly and usefully finance island community projects to measure their ecological and carbon footprints. Benefits of such projects include including capacity building in both research techniques and those of community governance and participation. The burgeoning academic literature on 'sustainability' and 'governance' complete with its own argot should also be plumbed. 35

Economy and equality

The issues of making equality matter are more specific to actual places than the environmental matters discussed above and I will discuss them through a case study of post-sand mining North Stradbroke Island. The background is that mineral sand mining has been operated since the late 1940s with dredge mining beginning in the 1960s. This involves progressively clearing a land area, processing the entire sand dune to separate out the mineral at the rate of 1 tonne of mineral per 100 tonnes of sand and then reforming and revegetating the dunes. There have been long and deep seated conflicts about the environmental impact of mining. In 2011 the then ALP Queensland Government inaugurated the Naree Budjong Djara National Park to eventually cover 80 per cent of the Island and legislated for mineral sand mining to cease in 2019. The Government argued that tourism would replace mining as the main industry on the Island with the Premier talking of 400 new jobs and saying

We expect over time, frankly, to see more jobs on North Stradbroke Island....We will see more people working in the national park, we will see new opportunities for

33 UNDESA, Road Map opcit 34 The full table is at UNDESA Road Map p80 35 See for example Denbeigh Armstrong & Elaine Stratford, 'Partnerships for local sustainability and local governance in a Tasmanian settlement', Local Environment: The International Journal of Justice and Sustainability, 9, 2004, 541-560, and Michael Lockwood , Julie Davidson , Allan Curtis , Elaine Stratford & Rod Griffith, 'Governance Principles for Natural Resource Management', Society & Natural Resources: An International Journal, 23, 2010, 986-1001.

Howard Guille, SE Qld Island Forum, February 2014 Page 11

Box 4

Four scenarios

Mining Mineral mining continues at current levelsexpansion of construction sand shipments .

Tourism Tourism expanded to provide equivalent net income as mining. Will involve resorts as well as camping & rental houses

Niche Lower aggregate net income via current tourism and high value arts, education, culture and perhaps sports activities,

Self Sufficiency Existing resources including retirement &, welfare incomes augmented by local production and services.

21 Howard Guille SE Qld Island Forum Feb 2014

eco-tourism resorts, the sort of things that we've seen at Fraser Island.36

In 2013, the LNP Government amended the legislated mining regime so that mineral mining can continue until 2035. It has not repeated a commitment to extend the national park to 80 per cent of the Island.37 The first objective of the legislation is to

..enable the mining company, Sibelco Australia Limited, to seek a renewal of mining leases in 2019 at the Enterprise Mine until 2035, thereby providing a realistic timeframe in which North Stradbroke Island (NSI) can transition to other industries such as nature based recreation, tourism and education 38

Both governments have a similar and quite conventional view of 'economy' as jobs, growth and full resource use.. There is little space in such viewpoints to compare what the economy would be like where equality and environment matter. I have made an initial attempt at this with the four scenarios shown box 4. The four scenarios are respectively mining, tourism, niche and self-sufficiency. In attachment A, I have undertaken a preliminary evaluation of the economic, social and environmental features of the four scenarios. In this paper, I am more concerned how they relate to the existing inequalities on the Island. The first two scenarios of mining and tourism are the conventional approaches of unfettered economic

activity through a dominant industry 'exporting' from the island. In the first scenario, mineral mining is assumed to continue at Enterprise Mine and, in line with the Sibelco vision, a further activity of shipping up to 500,000 tonnes of construction sand per year.39 A economic modelling exercise undertaken for Sibelco in 2010 estimated total revenue from mining as around $125 million annually, of which $77.5 million is value added.40 The 2011 Census reports 112 island residents employed in the mining industry though Sibeclo claims a figure 29 per cent higher. Considerable numbers travel to work from the mainland and the consultant's report gives a total employment of 275 people.41 Quite clearly, the value added of $77.5 million arises on the island but does not accrue to the island. 42

36

Quote from Sydney Morning Herald 20 June 2010 <http://www.smh.com.au/environment/green-jobs-to-replace-

mining-work-on-stradbroke-bligh-20100620-yozf.html>. 37

Queensland Parliamentary Committees, Agriculture, Resources and Environment Committee North Stradbroke Island Protection and Sustainability and Another Act Amendment Bill 2013 Report No. 31, http://www.parliament.qld.gov.au/Documents/TableOffice/TabledPapers/2013/5413T3997.pdf 38 See p12 Parliamentary Committee Report 39

http://www.sustainablestradbroke.com.au/Documents/100730_%20Sustainable%20Stradbroke%20Vision%20FINAL.pdf 40

Synergies Economic Consulting, Impact on North Stradbroke Island from ceasing sand mining; A report for Unimin, June 2010 available at http://sustainablestradbroke.com/community-sibelco.html. Ths was updated in 2013 to $180.4 million in revenue and approximately $114.05 million value added. See Sibelco Submission to the Parliamentary Committee Inquiry http://www.parliament.qld.gov.au/documents/committees/AREC/2013/16-NorthStradrokeIsland/submissions/017-Sibelco.pdf 41 Synergies 2010 at p17 42 This is not a criticism of Synergies. The study is an orthodox input-output model and the authors are technically first rate and enjoy high credibility. However, it is a warning about statements such as that on the Sibelco website under the name of Campbell Jones, that 'Sand miners contribute $70 million a year to North Stradbroke Island'. My assessment of the contribution of mining to the Island is Attachment A to Submission to the Committee on the North Stradbroke Island Protection and Sustainability and Another Act Amendment Bill

Howard Guille, SE Qld Island Forum, February 2014 Page 12

The tourism scenario is based on 400 new jobs in tourism as promised by the ALP Government.43 A straightforward calculation with conservative assumption that wages are one-third of revenue in tourism (about one-half of all costs including capital) indicates that 400 jobs would require 2000 visitors a day throughout the year with a daily spend per person of $100. This is additional to the estimated 30,000 visitors in the current New Year and Easter peaks. It would require extra facilities - probably resorts, plus virtually full use of existing facilities across the entire year including the camping grounds which are now part of the Quandamooka estate. The private dwelling stock especially at Point Lookout can be used for holiday rentals, holiday homes or normal residences. There is no spatial separation between uses, the rates and local charges are irrespective of use and no special planning or other regulations apply to holiday rental. The choice of use is with the owner. There are tax incentives including negative gearing to have a holiday home listed as a rental property. The combination of holiday rentals and holiday homes makes NSI tourism a curious hybrid of 'leisure industry' and part of the 'development industry'. This has also exposed at least Point Lookout to the speculative finance and property sector. There has been considerable gentrification especially at Point Lookout and the modest and fibro is being replaced by the grand, if not ostentatious, and even copper cladding. Almost all the discussion on the economic future of Stradbroke has been about mining and tourism. My third and fourth scenarios of niche activities and self-sufficiency both involve a conscious drawing back from conventional approaches and envision the possibility of a lower rate of increase in gross aggregate income for the island and possibly a smaller population.44. Note though, that even if there is a lower total island income, the level of individual and household incomes depends upon the distribution which is to return to questions of economic rent. Both scenarios have a greater reliance on local circulation of goods and services and provision of more specialist products to visitors. The self-sufficiency scenario owes a lot to the ideas of Jon Altman about a 'hybrid economy' with three interlinked spheres: the state, the market, and the customary.45 These two scenarios can be attractive precisely because they increase security and can be achieved with a better natural environment. However, they will only be acceptable, and one should say will only be ethically justifiable, if they increase equality. The rich, as previously discussed, have better natural and human environments and get psychic rewards by reducing their ecological and carbon footprints. This is not so for the poor - for example, they are not many Prius or other hybrid motor cars in low income areas.

2013 by Quandamooka Yoolooburrabee Aboriginal Corporation available at http://www.parliament.qld.gov.au/documents/committees/AREC/2013/16-NorthStradrokeIsland/submissions/116-QYAC.pdf 43

This figure was also maintained in deliberations of the 2011-12 NSI Transition Taskforce. Senior Departmental Officers specified the 400 as equivalent full time jobs. 44

Predicting the population is complicated because the Aboriginal population is increasing and is likely to do so as people return to country but the non-Aboriginal population has over the last three censuses. 45 See Susie Russell, The hybrid Economy Topic Guide, Centre for Aboriginal Economic Policy Research May 2011, http://caepr.anu.edu.au/sites/default/files/cck_misc_documents/2011/06/Hybrid%20Economy%20Topic%20Guide_2.pdf

Howard Guille, SE Qld Island Forum, February 2014 Page 13

Table 1 Basic information - Census 2011

Amity Dunwich Pt Lookout

Russell Island

Australia

Median income/wk

$518 $454 $535 $347 $577

Employment participation

51.8% 60.8% 65.4% 37.4% 65.0%

Part-time working

38.9% 36.4% 44.7% 43.4% 31.1%

Unemployed 6.1% 7.2% 5.7% 19.0% 5.6% Source; Either original data from Census 2011 or calculations from census 2011 data

518

347

454

535

577

0 100 200 300 400 500 600 700

Amity

Russell

Dunwich

Point Lookout

Australia

Chart 1 Median Individual Income $ per week 2011

The current situation

Table 1 shows some basic economic data for North Stradbroke townships and Russell Island with a comparison of Australia as a whole. The median individual incomes in Dunwich and on Russell Island in 2011 were respectively 60 per cent and 78 per cent of the figure for Australia as a whole. Employment participation on Russell was only 58 per cent of the Australian level and unemployment was 3.4 times higher. The participation and unemployment rates at the three NSI townships were closer to the national figure except for Amity which has an older population. Median income and the unemployment rate are shown in chart 1 and chart 2. A further important factor is that the level of part-time working is considerably higher on the islands than in Australia as a whole. Part-time working is highest at Point Lookout where almost 45 percent of those working are part-time. Part-time working is lowest at Dunwich and the difference between there and Point Lookout is significant as the tourist industry is the largest single employer at this township but is only third largest after mining and health care at Dunwich.

Howard Guille, SE Qld Island Forum, February 2014 Page 14

Table 2 Income Distribution -ratio of top and bottom weekly incomes

decile 1 decile 9 ratio

North Stradbroke 190.8 1879.1 9.8

Russell 215.6 1818.1 8.4

Australia 226.6 1944.3 8.6

Source: calculated from Census 2011

6.1

19.0

7.2

5.7

5.6

0 5 10 15 20

Amity

Russell

Dunwich

Point Lookout

Australia

Chart 2 Unemployment Rate 2011 Calculated from Census 2011

Measuring inequality

Income distribution is the most direct assessment of inequality. The simplest and probably the commonest measure is the ratio of the income of those in the top ten per cent (the ninth decile) with the income of those in the lowest ten per cent (the first decile).46 Table 2 shows income distribution for North Stradbroke Island and Russell Island with the comparison for Australia as a whole.47

There are two important features of this data. The first is the very considerable absolute inequality - the difference between the top and the bottom varies from 8.4 in Russell to 9.8 in Stradbroke with the ratio for Australia as a whole at 8.6. The second is the comparison between North Stradbroke Island and Russell Island. Russell has a lower median income of $347 per week compared

with $486 on Stradbroke. Nonetheless inequality is greater on Stradbroke. This is because the lowest income earners are worse off and the higher income earners better off. In other words, there is something wrong in paradise. Aboriginal people are 21 per cent of the population of NSI and 40 per cent of Dunwich. Aboriginal people on North Stradbroke Island (as elsewhere) have lower incomes on average than non-Aboriginal people. My estimates for NSI in 2011 are that the median personal Income for Aboriginal people over 15 years was $414 compared with and $537 for non-Indigenous people. In previous analysis, I have examined the level of poverty in Stradbroke applying the Melbourne

46

See for example, Word Bank Introduction To Poverty Analysis (Poverty Manual) 2005 http://siteresources.worldbank.org/PGLP/Resources/PovertyManual.pdf. The United Nations Development Programme (UNDP) annual Human Development Report provides national comparisons. See http://www.undp.org/content/undp/en/home/librarypage/hdr.htm 47

The data is insufficient to do an income distribution for the individual townships.

Howard Guille, SE Qld Island Forum, February 2014 Page 15

University Poverty line which is applied according to household income and household size. The estimate is that in 2006 about 18 per cent of non-Aboriginal households and up to 45 per cent of Aboriginal households in NSI were living below the poverty line. In the 2011 Census, the ABS has not published detailed information for Aboriginal and non-Aboriginal populations below the level of Redland City as a whole except for an initial and partial report. For the Redland Bay Islands (including NSI), the Census 2011 reports

Of the 306 households with Indigenous person(s), 17.3% had an equivalised total household weekly income of $1–$299, compared with 12.1% of other households48

For the Redland Bay Islands (including NSI) 39.5 per cent of Indigenous households and 38.0 per cent of other households had a weekly income under $400. Almost all of these are existing below the poverty level.

What is to be done

The Lenin phrase is apt as the situation is genuinely complex. Poverty and inequality are different phenomena requiring different remedies. Poverty is fundamentally about improving the lot of the poor. Dealing with inequality requires redistribution. This is shown by the difficulties of relying on growth to help the poor - the adage that a rising tide floats all boats. The problem is that a five per cent increase for someone on S190 per week is $9.50; for someone on $1880 it is $94.00. The result is that inequality has widened. Increases in the prices of essentials has similar effect - for example an increase in water transport fares of say of $10 is a much bigger impost on poorer than richer people. Poverty and inequality can be targeted together. One quite fundamental change is to adopt the notion of an economy as a series of flows in which everyone is a user one day, a provider the next. Put another way, people participate in local economies in a range of ways - as producers, consumers, working for others, working for themselves and working for the community. This idea does not fit well with the atomised markets of 'homo economicus'. However, it does fit very well with many actual places including Pacific Island economies of customary land ownership, group wantok obligations and where working or trading for cash is a second level activity. The approach also fits with the Keynesian idea that one person's wage is the demand that ensures another person's employment. In other words, and slightly more technically, the critical issues for a local economy are the extent and rate of circulation of goods and services between people who make up the economy. It will be critical to reduce the leakage of spending from the island economy and maximise the benefits from the spending of visitors. These are both part of maximising local value adding. The contrast is with mining and large scale tourism which import most of their inputs. There are simple steps - one is to have a 'local audit' - an economy version of the ecological footprint; another is for local community organisations and local authorities to commit to local procurement - a twist on the' procurement for sustainability' listed earlier. Finally some or all of the following deserve attention in turning from theory to action.

48

Queensland Treasury, Office of Economic and Social Research, Census 2011 Indigenous Regional Profiles (ASGC Version, Release 1)

Howard Guille, SE Qld Island Forum, February 2014 Page 16

Adopt an island wide guaranteed basic level of living to be met from a combination of cash income, income transfers and improved access to services and community provisions. This is akin to how Brazil is using an increased minimum wage as an explicit effort to reduce poverty and the living wage ordinances in the City of London and in 80 major US cities.49

Increase community provision of health, child and aged care and social welfare services

Low cost high quality housing as a social right provided through cooperative and community associations

Training and education linked to community service provision for example training organisations that also undertakes paid contract work for house maintenance or parks and street maintenance

There is also the need for what can be called an active pursuit of equality. This means reducing the spread of levels of living by improving the position of those at the bottom and constraining those at the top. It also requires measures that transfer resources from the well endowed to those who are less so. Some measures worth contemplating are

Choosing economic activities that (a) maximise share of economic rents going to the island community and (b) spread wage and profit incomes

Cross-subsidisation of critical goods and services; water transport is a vital area to ensure that everyone has adequate and affordable access. The SMBI-Translink arrangement for the ferries seems a promising example. Cross subsidisation could also extend to internet and renewable energy.

Group schemes that allow the shared provision of utilities such as renewable energy, internet and even television reception. This should be backed by community based arrangements ensuring access to household and other equipment including computers. These arrangements should extend to training, maintenance and support services.

Private benefits from public goods are redirected back to community use - for example tourist operators should be charged for using national parks, windfall increases in land and holiday rentals to be regained through community charge or betterment levy.

Taxes and charges on holiday rental homes that recoup the infrastructure and other costs of meeting peak season usage for water, sewerage and other services.

Measures through planning schemes and development controls that discourage opportunities for high income behaviour. These could include limits on house sizes and uses and also discourage speculative activity by tying planning approvals and other regulatory requirements to requiring a minimum duration of investment.

Ensuring that low income people have enhanced access to low carbon emission equipment and low ecological footprint - this is an important way of building up trust and awareness that lowering the ecological footprint can be beneficial for all.

The final word

I started out with Crusoe's self-appointment as the king of paradise. I end with Guy Standing formerly of the International Labour Organisation who argues that a 'politics of paradise' is urgently needed to handle the tensions arising from labour market inequality.50 It also applies to islands.

49

For discussion see Jeff Chapman and Jeff Thompson The economic impact of local living wages, Economic Policy Institute, Feb 2006 at http://www.epi.org/publication/bp170/. Also, The Jus Semper Global Alliance, The Living Wages North and South Initiative http://www.jussemper.org/TLWNSI/Resources/TLWNSI_WDRAFT_2011.pdf 50

Guy Standing, The Precariat: The New Dangerous Class, London,Bloomsbury, 2011

Howard Guille, SE Qld Island Forum, February 2014 Page 17

Attachment A Evaluation of four scenarios for NSI

Main industry Economic Social Environment

Mining North Sibelco Island

Very limited links between mining activity and the local Island economy since few mining inputs are able to be produced on the Island

Limited and declining population directly involved in mining. Income & social gap between mining work force and residents

Large scale disruption and expenditure on rehabilitation

Resort Tourism North Sunshine Island

Tourism can use more Island inputs and has a higher labour intensity but offset by lower wages and part-time work. Current tourism is low value with low daily spend and highly seasonal

Tourist numbers strain housing and other facilities and infrastructure and price locals out of housing especially in 'prime' areas. Issues of social & cultural impact of large tourist numbers

Environmental impact (erosion, vehicle damage, rubbish, animals etc) can be severe especially at most used tourist sites. Management of sites is critical

Niche industries (culture, education, small group tourism New Specialised Island

Can have high level of Island inputs and can sustain higher incomes but for a smaller workforce.

Important source of support for Aboriginal population as could include Aboriginal managed, owned and staffed enterprises. This would reduce some of gap between Aboriginal and non-Aboriginal populations.

Environmentally benign and would facilitate environmental rehabilitation. Probably incompatible with long-run mining.

Self-sufficiency New Sense Island

Economy based on existing resources including retirement incomes & superannuation, welfare incomes & remittances augmented by local food, art and craft production and providing services.

Requires acceptance (a) that total population will fall and some loss in property values Limited careers for young people and difficult to remedy existing income gaps

Environmentally benign -public support needed to restore and maintain environment