A previous blog on “Future of Birds in the Coorong” generated some interesting discussion between scientists, someone living upstream, and a resident of the Lower Lakes. It got me thinking about the fundamental problem of the management of the River Murray.
Imagine that Kevin Rudd announced that rather than report his budget in terms of how much income he receives and how much he spends, and rather than setting a target for surpluses, he is going to change the way he manages the budget. Instead of reporting how much is left and whether the budget balanced, he is simply going to report how much each of his departments is going to receive and report on how well they spent their money. He wasn’t going to be all that fussed about measuring how much each department spends, but is going to give rough estimates instead. He is going to disband the Reserve Bank, and the states and the Commonwealth governments will get together regularly to set monetary policy.
Now imagine that times get tough. The economy slows down and there is much less money available in the Australian economy. Kevin’s response will be to start borrowing heavily from overseas to keep cash flowing into his departments. After all, they are doing a good job, and people expect to continue to receive their services and handouts. Pretty soon, credit starts drying up, so departments don’t have the cashflow they need to maintain their spending, so they have to start cutting back. There is no Reserve Bank to dry up the supply of credit, but because of the angst and political heat for the governments of Australia, they continue to borrow wherever they can. Eventually, there is almost no credit available anywhere in the world. Cash reserves are drying up, so Kevin announces that South Australia will receive no further funding. Any money that is generated in the economy will be spent in Queensland, NSW and Victoria first, and South Australia will have to wait until the economy improves much more before it receives Commonwealth funding again.
Of course, if this was the economy, Kevin Rudd would have been removed from office through a popular revolt, an election or a dismissal well before the final horrible scenario. And if it really did get as bad as I described, the IMF and World Bank would declare a failed state and jump in with offers of financial assistance, as long as we changed our wicked ways.
In the Murray Darling System, there is no balanced budget. We are not measuring how much water is being taken out along the river. We do not measure how much water flows into South Australia. We have been borrowing heavily from our storages to maintain our current activities despite the current drought, and despite the fact that we were not leaving enough water in the system to maintain the health of wetlands and the Coorong BEOFRE the drought started. We have run the storages down to nearly empty. When there are flows upstream, the current Murray Darling Agreement says that upstream states can use it all up to a point where they have sufficient and only then is South Australia able to share in the flows. This despite the fact that the Coorong is on its last legs, the Lower Lakes are below sea level and at risk of developing acid sulphate soils, and Adelaide being 18 months away from being unable to drink water from the River Murray if there are no further flows.
If this were the economy, we would be a failed state. In fact, the states of Australia have failed, and badly. The Murray Darling Basin Agreement doesn’t work effectively and needs to be replaced with a new system that does four things:
1. Budget flows from the mouth backwards. That is, just like Kevin Rudd is setting a target for budget surpluses of 1.5% of GDP, flows of water out of the Mouth of the River should be budgeted for first, before any other use from the River.
2. Water inflows and water use should be measured along the length of the Murray Darling system, including tributaries, groundwater flows and farm dams. Measuring only some of the budget is the same as not having a budget
3. There must be an independent arbiter that sets the amount of water that can be taken from the River every year, just like we have a Reserve Bank. Like the Reserve Bank, the independent authority should be truly independent, and not have its decisions modified by a frightened government that doesn’t like the consequences of the decision. This is unlike Penny Wong’s current proposal, which gives the Commonwealth Government the ability to change the decision of the new “independent” Murray Darling Basin Authority if it disagrees with the decision.
4. Establishes real consequences for over-extracting water from the Basin. Currently, there is no punishment for any state over-extracting water from their system. This sets a perverse incentive to do the wrong thing. There must be painful financial disincentives for individual states to “steal” water from their counterparts. National Competition Policy sets such measures for economic matters, and the principles should be extended to managing a shared water resource.
These ideas were informed and stimulated by Peter Cullen and Mike Young. Some of their talks can be downloaded from:
Written by Paul Dalby, 2 May 2008
that those political parties in the UK who hand over power to the people will be successful in the 21st Century. He argues that in the 19th Century state power quite rightly grew to “guarantee clean water, safe streets and legal rights”, but in the second half of the 20th Century, state power began to wind back and power was handed to corporations and non-government or semi-autonomous institutions. Alan argues that we will evolve this process further in the 21st Century. New technologies such as the internet and universal education means that representative democracy from the past can evolve into a more participatory democracy. Modern challenges such as the environment, he argues, cannot be solved by government alone, and I would add, perhaps not by markets alone. Alan writes, “the modern state should not just enable. It should empower people…”. I would argue that Barrack Obama has read this mood change and by using social networks (including on the internet) is creating the huge support base he has in the US.