How we achieve economic, social and environment value through a resilient regional strategies: Sustainable Development for Resilient Regions
Edited text of address to the Australian Regional Development Conference, Commercial Club, Albury, Wednesday 15 October 2014.
Thank you and good morning all. Let me start by first acknowledging the traditional owners of the lands on which we meet, the Wiradjuri, and pay my respects to their elders past and present.
Today I am going to talk about resilience and regions, starting with an outline of the Institute for Resilient Regions (IRR) at USQ. I will then address the following items:
- Perceptions and history – how we see ourselves and how others see regional Australia;
- Regions as complex systems – the various types of regions and their essential systems character;
- Resilience and probability – what it is and how it applies in a social and economic context;
- System failure – what’s happened in much of rural regional Australia;
- Challenge the BAU model – are there alternatives to existing models and patterns of investment, development and organisation.
- Resolving the future dilemma – answering the right questions and starting on the best pathways is most important when planning future directions.
Institute for Resilient Regions
The Institute for Resilient Regions was launched in Brisbane in late August by the Queensland Minister for Local Government, Community Recovery and Resilience, the Hon David Crisafalli. The Institute encompasses the work of approximately 40 academic researchers at the University of Southern Queensland working in the humanities and social sciences with focus on communities outside the capital cities.
My personal philosophy derives much from the principles of Jeffersonian democracy. That is, each generation holds the planet “in trust” and has an obligation to pass it on to the next generation in as good a state as they inherited it. Government is essential and a vital component of modern society, but in organising ourselves to achieve progressive outcomes I also see it as ‘the last resort’ of civilised humankind’.
Government should not do for us what we can do ourselves – individually or by working together cooperatively and collaboratively. In Australia we should do much more than we do without always looking to government. Government should only be involved in those things we cannot do for ourselves and its core policies at all levels should be to encourage individual responsibility, private sector initiative and innovation and civically-minded communities.
The mission of the Institute for Resilient Regions is to deliver excellent applied research that enables regional communities to be more self-sufficient and capable of building their own futures. Our research aims to assist communities be more resilient and adapt successfully to change, to prosper by building sustainable businesses and quality development, to maintain good health and well-being , and also to stay relevant and competitive in the broader changing world by exploiting technology and infrastructure creatively.
Our research is very much applied research aimed at achieving early impact. Over 80% of our research income at USQ comes in the form of industry, government and community grants wanting a tangible outcome in a specific commercial, industry or community context. It follows that our research capabilities are being aligned with the needs of our regions.
The work being undertaken by IRR focuses not just on the economic dimensions of regions but importantly also on the social and personal aspects of living in regional communities.
Our approach aligns closely to work like that of the OECD’s regional well-being program which starts with a focus on “individuals and on place-based factors” recognising also that “people’s well-being” is “shaped by a combination of individual and places’ characteristics influenced by citizenship, institutions and governance”.
As the OECD has suggested, a coherent policy and programmatic approach to enhancing regional communities will be one that is:
- “multi-dimensional and includes material and non-material dimensions
- looks at synergies and trade-offs among the different dimensions
- considers well-being distribution in the population and in places, alongside the average outcomes
- concentrates on results that provide direct information on people’s lives rather than inputs or outputs
- looks at the sustainability of well-being over time and at the resilience of different regions”.
“Well-being” as a concept is difficult to get away from in regional development work and it is not just the personal character of the notion but the shared sense of well-being at the community level that is important in developing strategy for our regions. Because when we are talking about well-being we are talking about people’s lives and their improvement and that only happens by making “where they live a better place.”
Indicative leading questions which will frame such an approach includes basic posers like these taken from the OECD web site on regional well-being:
- “What do people perceive and value about their local conditions?
- How do they behave when they are not satisfied with one aspect or more of their life?
- Do local inequalities in the accessibility of services matter in shaping citizens’ choices?
- Do they have an impact on national well-being?
- How much does the place where we live predict our future well-being?”
And the mix of “different well-being dimensions” will be “unique to each community where people live, study, work and connect”.
At the Institute for Resilient Regions, we have dis-aggregated the system in which regions operate into three core theme areas:
- Business and Enterprise – the capabilities of the private sector, overwhelmingly small-medium enterprises debt rather than equity funded are fundamental to the organisation and development of regional economies;
- Health and Well-being – psychology, sociology and epidemiology as well as a smattering of economics unpacks the complexities of the health of regional populations and communities potentially informing policy and program development by governments and NGOs;
- Learning and Development – history, anthropology, psychology and sociology focussing on the role of culture and social systems in shaping how communities learn and develop, achieve new capabilities and adapt.
We are also planning to develop a focus on governance arrangements for regional development and well-being. Equity and accessibility are issues fundamentally important in shaping life beyond the metropolitan centres. Under Australia’s existing federal arrangement we do not have enough states on this vast continent to ensure active democratic representation and close accountability of government for those citizens living in the outback and in western and northern Australia.
Perceptions and history
I have tabled this information about the IRR and our approach because it will help contextualise later assertions and suggestions in this presentation as we explore some of the base dilemmas that shape attitudes and expectations and which define the national vision for our regions.
Aboriginal Australians proved that it was quite possible to live in communities right across the vast continent, including in some of the most arid and unyielding landscapes. While the aborigines found a way to live within the carrying capacity of the country and endure as a functional complex society for eons, the coming of the Europeans showed aboriginal culture to be vulnerable in the face of the overwhelming rush of modern industrial society.
We took the land from the aboriginals and in its place imposed a colonial mercantilist system from which we have not yet wholly evolved. Australians’ view of the land has been dominated by an ‘extractive psychology’ that started with coastal settlement and then spread inland in search of farming and mining opportunities. For the past 200 years immigrants from all over their world have gone into the regions and exploited Australia’s natural resources largely for the benefit of people living outside the regions. Geoffrey Blainey in The Tyranny of Distance reminded us that Australia’s transport system facilitated this transference of resources from the bush to the cities and beyond and it was only later that the main ports were connected by rail – almost as an afterthought.
Bernard Salt pictured this history graphically in his map of the Great Australia Divide which shows a line bisecting the Great Australian Bight and running north east to just north of Port Douglas in FNQ. East of the line is the settled Australia of 19 million people, while to the west and north there are just 3 million Australians, most of them living in Perth. This is the world of the FIFO mining camps, vast often drought stricken grazing stations and remote aboriginal communities (For the map see here). It is a way of life most Australians will never see and usually don’t think much about.
In fact I would go so far as to say that Australians as a people have never fully associated with the land in which they live. David Malouf writes about this in some of his works, pondering how it might have been different had the Russians or the Poles (continental peoples) settled Australia instead of the maritime Brits. Post immigration, Australians have inevitably settled in particular places for a number of reasons starting with personal histories, but including also key determinants like resources and the environment, technology and the prevailing socio-economic context.
As the Commonwealth’s Department of Infrastructure and Regional Development reported in it’s “The evolution of Australian towns” (2013), “economic activity tends to concentrate spatially.” People go where the jobs are and when there are no jobs they go somewhere else – mostly to the coastal regional cities or capital cities. The Australian Bureau of Statistics (ABS) tells us that “as at June 2012, 70% of the population resided in Australia’s major cities. In comparison, just 2.3% lived in remote or very remote Australia”.
Between 1911 and 2006 the percentage of Australians living in rural and small town Australia declined from just under 60% to around 16%. In recent times, the growth outside the metropolitan areas has been in larger coastal centres, particularly in Queensland. The regions that have done best are the ‘tree change’ and ‘sea change’ areas within a 200 kilometre radius of the capital cities.
It should come as no surprise then that most Australians have little real understanding of life in regional Australia, especially life in rural and remote areas. If they have a view, I’d venture it will be a romantic or nostalgic view of struggling farmers and down to earth old fashioned people – not a particularly useful motif to weave into a national vision for such an important part of the country.
Regions as complex systems
The message I take from all that for regional Australians is that the cities will not be the main source of ideas when it comes to dreaming, planning and realising a resilient and sustainable future for the regions, particularly those away from the south east of the continent. Indeed, the needs of regional Australia have not changed much over recent decades. A shopping list of priority topics might include:
- Foresight and vision beyond 20 years – beyond the boom
- Strategies for regions to be climate adaptive and competitive
- Strategies for reduced carbon exposure and risk
- Knowledge based, diverse economic development
- Investment in core essential industries and infrastructure
- Much bigger reinvestment of royalties in the regions
- Rent resources tax and sovereign investment future fund
- Growth to pay for itself with corporates paying their way
- Approvals conditioning in a regional systems context
- Enabled local communities with a stronger role for local government
- An informed educated population up to debating the issues and grasping the opportunities
- Input and collaboration with peer regions around the world
Most of these needs cannot be resolved without the committed engagement of our state and national leadership as well as the broader national community, but their resolution starts with the people of regional Australia itself. And at the local level, the answers will always be local.
Indeed realising a vision is about making choices and positioning to be able to make choices is about self organisation – a core function of resilience. If the future is to be characterised by pathways, I believe we can schematise that indicatively into a future of two extremes:
- An exhausted environmentally degraded region evidencing a social and economic monoculture, working greatly diminished natural resources, with communities in decline and politically marginalised? – A failed colony? or
- A strong region with complex community that is healthy, socially resilient, economically competitive and adaptable in a world of change?
The first pathway is of a region that was not proactive, unable to make a compelling case for continuing investment, commitment and settlement. The other is one is encapsulated in that Wiradjuri phrase quoted this morning by Charles Sturt University Vice Chancellor , Professor Andrew Vann: ‘yindyamarra winhanga-nha’ (‘the wisdom of respectfully knowing how to live well in a world worth living in’). That region will have the complexity, diversity and resilience to be thriving in 50 years as a regional system.
Most futures will be somewhere in between and while all will aspire to the second pathway, it is the four capitals – natural, human, technological and financial – and their investment, development, management and re-organisation that will determine the nature of the regional system in 50 years.
Indeed it is this notion of regions as complex systems that is fundamental to building a strategy aligned with resilience. There is no “silver bullet” strategy for the future of Australia’s regions. When planning for the future of our regions, we must be mindful of the overlaying contexts – climatic, geological, demographic, sociological, economic, political administrative, infrastructural and so on. This is the ‘triple bottom line’ view that attempts to at the very least balance and at the very best integrate the ecological, social and economic benefits that will flow from a particular activity.
These are the components of the regional system and they all interact and it is the nature of their interactions (or lack thereof) that determines the essential function and viability of the region. Regions are multidimensional, comprised of elements which are inter-related and it is not possible to deal with any core component in isolation from the others. There is not an economic development pathway, for example, that can ignore the social and community development pathway.
FIFO represents an attempt to decouple the economic and social pathways but even this strategy has had to concede social offset payments and community investments particularly in the coal seam gas-lands of Queensland or in the Royalties for Regions in WA.
The distortionary impact on development that political boundaries can have, especially when they do not accurately reflect the systems realities of regions can be seen quite visibly in Australia. Among the most developed countries Australia actually boasts the greatest disparity in household income from one region (ACT) at the highest income to Tasmania at the lowest income. No surprises there; leaving one to question the utility of state and provincial political boundaries serving as regional denominators. Arguably there is little socially or economically equivalent about the ACT and Tasmania, other than to be viable they both rely on government-mandated economic transfers from other states and territories.
How regions are seen from the outside is also crucially determinant in shaping their possibilities as was shown just last week in the Weekend Australian in a great article by Barry Traill, director of the Pew Foundation’s Outback to Oceans Program. As a region the Australian outback spans parts of four mainland states, encompassing 73% of the continent and just 5% of the population.
Traill argued for a broader more ambitious investment in skills and people to manage this great natural landscape and the things that threaten it (like feral animals and weeds), particularly in creating opportunities for indigenous peoples and remote communities.
Pastoralism and mining have their place but without a vision that looks beyond the “mythology of the outback” as the great open space its intrinsic possibilities will remain unexplored. In resilience terms there is as much danger to the outback in having too few people as there is in having too many. We are reminded in Traill’s report on the status of the outback that regional systems have to be seen and mapped in all their complexity if they are to be understood and optimal development pathways for a resilient future plotted.
Resilience and probability
Indeed the Pew Foundation’s report on the outback, by implication, reminds us of the shortcomings in the orthodox view of resilience as being about kicking back from catastrophe or disaster. This is a concept peddled commonly by politicians and it is applied to individuals as much as communities. In many respects the view is perfectly understandable given the trying circumstances in which many Australian regional centres have found themselves over recent years.
Insurance Australia Group CEO Mike Wilkins advised recently that “Natural disasters [in Australia] cost [insurers] an average of $6.3 billion per year. That’s expected to increase to $23 billion by 2050. Pre-disaster investment could reduce the bill to taxpayers by more than 50 per cent and save lives and property”. Not surprisingly, in much of the country there has been a splurge of investment in culverts and levee banks and fire breaks and new building standards as we attempt to strengthen our infrastructure against the impacts of cyclones, floods and bushfires.
Now while all this investment makes for strengthened and safer infrastructure, it is not necessarily delivering regional resilience. Those very safeguards in themselves, for example, could lead to settlement and development decisions which might “take for granted” the protective capacities inherent in the improved infrastructure. A false sense of security can subvert the resilience of a small town, farm or individual. Wilkins is right from the prudential perspective of an insurer – better infrastructure means lower insurance premiums for regional Australians and that has a cost of living and a multiplier place specific benefit.
Escaping from the actuarial and fiduciary perspectives that have confined corporate and political views of resilience we get to a clearer sense of resilience as a process when we use frameworks first developed by ecologists, starting with the so-called Hollings Adaptive Cycle.
All natural systems begin and progresisvely develop achieve greater connectivity and specialisation to a point where having succeeded in growth, they attempt to deny competition and organise resources to their advantage. Specialisation in systems – natural, economic, social – brings with it complementary diversities all of which have their own threats and opportunities.
Feedback loops exist within feedback loops and the great cycle of the system will proceed until a major disruption (or innovation) which breaks up or alters the various dependencies that characterise the system. As systems succeed they move from a growth to a preservation mentality or focus and arguably much of regional Australia has been in that frame for much of the past 50 years.
Resilience is about how systems identify the really important things that make the system function and how then the system protects and preserves through adaptation those core functions. A system overwhelmed might well not be able to exercise these options, and it will wither and die. Others will accommodate, absorb, adapt, innovate and renew and go on. That is the adaptive cycle.
The framework applies to all natural systems (including human and socio-economic systems) and holds that complex adaptive systems are in a constant dynamic context. In a monograph published in 2012 titled Resilience and Sustainable Development: Theory of resilience, systems thinking and adaptive governance Umberto Pisano reminded us that complex systems “do not change in a predictable, linear, incremental fashion [and] have the potential to exist in more than one kind of regime.” See his ESDN report here. This means that if we are to properly encompass resilience in our thinking, we have to approach the future with a proactive and flexible disposition.
CSIRO’s Brian Walker and David Salt in their book Resilience thinking: Sustaining ecosystems and people in a changing world (Island Press: 2006) give a great introduction and overview to resilience thinking and make the point that its about “self-organisation”. This to me is the crucial point. Resilience is about self organising to take care of the things that really matter. A system, a regional community is not resilient if it is unable to self-organise.
Walker and Salter assert that “The way you maintain the resilience of a system is by allowing it to probe its boundaries.” This is a likely future for many regional communities, challenging themselves, exploring possibilities not previously countenanced, looking for ways to innovate to renew and relaunch on a growth pathway.
A CSIRO team in Queensland has dis-aggregated the community ingredients of resilience in a landmark study of districts around Chinchilla on the Darling Downs as they have dealt with the massive investment of the coal seam gas industry in a just a few short years. Andrea Walton, Rod McCrea and others have shown that regional resilience starts with individuals in their values, beliefs and skills and conflates through community processes and resources to draw on wider systems level attributes like trust and leadership and shared knowledge. Ultimately at the regional level, socio-cultural resilience factors are articulating as leadership, self organisation, broadly shared dispositions and perspectives, engagement and governance frameworks. In shorthand, it’s all about people, networks, linkages and their interactions. See the CSIRO study here.
Organised at the social and community levels this all feeds into the nature and quality of local relationships, perspectives on outsiders, time and resource management capacities, the degrees of connectedness and information sharing, learning, visioning and planning and development of future steps. In simple distillation, it means the structures, systems and strategies that will shape a community’s overall resilience are also reflective of that community’s core values and capacities. As we have seen on the Darling Downs in recent years, the various qualities of the people and their communities, the character of the interactions within the social system, these will play a large part in determining the developmental pathways presented.
There is a continuum of factors in play that reflect differently at the individual, enterprise, community and regional levels – right through to the global level. And this is particularly the case now as the digital age enables people and communities far removed from major population centres to play creative and diverse roles in a globally connected economic system.
Acknowledging earlier that thinking for resilience requires a proactive posture on the part of stakeholders, it follows the relevant players have to be actively engaged with the future as something dynamic where planning and implementation in always ongoing because change is always happening. For those talking structural adjustment packages in threatened sectors, to cite a current topic for example, it means looking beyond the short term to the longer term implications of proposals being considered.
In regional Australia this applies to everything from drought policy to strategies for ensuring the viability of regional universities. The core questions when we are thinking about resilience and regions start with elementary posers like:
- What are the key elements of a resilient region?
- Are we on track to being resilient?
- How would things be different to the way they are now?
- What are the things we have to do/change to get there?
- What will be the crucial factors shaping the transition in getting there?
Against the backdrop of unending change, data, information, and knowledge should inform the answers to these questions and the other core processes of ‘self organisation’.
Self organisation means measuring and managing and generating feedback to inform future decisions. As the Regional Australia Institute (RAI) has shown through its [In]sight series focused on understanding the potential of Australia’s regional cities, it is possible to analysis Australian regions on all sorts of bases – from social functionality to economic competitiveness, depending on the data in play.
Any region planning to integrate resilience as a core performance feature of its future development is well advised to be data rich, undertake research and analysis at the micro and in broad context to understand networks and connections and supply and value chains. Context is everything. Look to yourselves and elsewhere for insight and inspiration, but make decisions and build strategy on the basis of real data occurring in your region. In particular, don’t forget that self organisation for regional resilience means “time” and “place” become discrete ingredients in your risk management process and strategy. Ask yourselves:
- How did the past present as risk?
- How does now present as risk?
- How does the future present as risk?
- What is different between the three?
- How will we adapt?
- What are our key options?
Importantly, what is different about risk as it applies to the past, present and future in your community or region? How have the risks changed and what has changed about the way your organisation or community is managing the change in those risks? These are the questions each Australian region should be thinking about as it casts a view of itself in the broad context of globalisation, the rise of Asia, climate change, changing productivity expectations, digital communications innovation and demographic change.
Keeping resilience front of mind, some of the key findings on the topic seem almost counter-intuitive – like for example, “managing for stability has the unexpected outcome of reducing a system’s resilience.” Trying to hold the line in the face of a broad front of change can be quite counter-productive. Also some systems can be highly unstable but still be very resilient and at another extreme instability in itself may create highly resilient systems such as happens with fires in grasslands. These are the findings of pioneering environmental scientists like Buzz Hollings and Lance Gunderson in Foundations of Ecological Resilience – an expert compendium published in 2012. They almost run in the face of the political view of resilience which is promotes equilibrium and stability as the outcome. Trouble is the simplistic view of systems fails to take account of their non-linear and unpredictability.
In canvassing the potential futures of regional Australia in our strategic planning, it is important too that regions not end their process with the “possibilities”. Instead it is essential to start our thinking and analysis with the possibilities, work through what is plausible, likely and achievable and then focus on what is preferable for your part of the work.
That there is a need for this fundamental level of reflection and consideration of all the possibilities for regional Australia was brought home directly to me recently when I received a letter from the Salvation Army asking for money to help struggling farmers. In a first world country like Australia such a letter to me represents system failure.
Notwithstanding all the good things we can talk about in regional Australia more generally there is a view afoot that our country beyond the cities is not working properly – remembering that for most city people their sense of regional Australia is one of rural Australia, a place where some of their food comes from.
Australia it seems has failed to organise and structure one of its major industries crucial to the national future and instead see we see it presented as a charity case. In some respects regional Australia finds itself in a quandary where in the telling words of Stafford Beer “Acceptable ideas are competent no more and competent ideas are not yet acceptable” – that is the thinking we use to make sense of the world and manage our affairs needs to change to be relevant to the challenges at hand.
To be in the future game with innovation, by definition we need in our various capacities and contexts to be challenging the business as usual model. The future is not rocket science and building resilient regions cannot be the subject of some blackboard formula – rather it will be the modes of organisation and relationship which will determine mostly the degree to which we will be resilient – through cooperation and collaboration and better understanding of value chains.
We should be wary of what British philosopher Alfred North Whitehead called the “fallacy of misplaced concreteness”, that is of confusing thinking with planning and both with implementation – and of confusing opinion with empirical fact.
Indeed in working to engineer resilient robust social and economic systems in Australia’s regions we are well advised to acknowledge what Nassim Taleb told us in his book The Black Swan that what we don’t know is the most important factor affecting our future, because it is the one thing we cannot manage. As to the things we know, we can account for and manage them or manage around them.
Taleb also pointed out that history shows humankind to be not all that good at learning – with most of us having a built in default mechanism when making decisions to err strongly on the side of comfortable knowledge. It follows, as Nassim Taleb shows, that much of what based on past experience we consider unlikely to occur in future, might well not be improbable at all. Such dissonance at the very foundation of decision-making means that many poor decisions will clutter the future just as much as they have in the past. And irrespective of the outcome, the one thing we cannot promise, any of us, is certainty.
Indeed the modern rise of skepticism about the validity of science, as reflected in the current debate about climate change, reminds us that political denial of an empirical reality does not amount to truth or fact viz Joe Hockey’s recent denial of Australia’s per capita greenhouse gas emissions performance relative to other countries. Instead of arguing about what is known, we would be better served on focussing on those things we don’t know about and encourage a learning disposition all round. For that to happen, I’d suggest, requires a remake of our political leadership culture in Australia which purports to be all-knowing and all providing.
Anything less than absolute assertion in politics leads to doubt and uncertainty and as US Defense Secretary Donald Rumsfeld found out back in 2002 when explaining the US strategic position in Afghanistan, that can get you pilloried by the media and your opponents. All he said was:
“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know”.
I call it “Rumsfeld’s Dilemma” that is, in offering a view of the future that is predicated on a recognition that the most important things are unknown, we expose ourselves to ridicule. And yet that is actually the case.
Borrowing from the discipline of psychology, we can adapt something called the Johari Window of self-awareness into a “knowledge quadrant” matrix applicable to framing the strategic posture of planning for regional development.
In reviewing our region and the future we start with the “known knows” which inevitably are things reflected in regional marketing and brochures, these are things we know and like about ourselves and the things we find it easiest to promote.
In problem-solving and planning sessions we tend to move straight down the column into the “Known Unknowns” which encompasses usually where individuals, companies and regions (even nations) seek competitive advantage by honing up their skills and getting better at what they already do – they seek to build on their knowledge by augmenting existing capacities with more of the same through investment and skills. This reflects in distinctive “black box” technologies, unique competitive capacities and things like commercially confidential strategies known to ourselves but to no one else.
Often lost in the matrix review of status and opportunities is the top right hand quadrant which is known in psychology as the “blind spot”. In personal awareness terms this is the field we can only know by seeking feedback and input from others.
In organisational and regional development terms it is the knowledge that has always existed, someone else knows about it, but we simply have not made the connection or seen it ourselves. It is the knowledge that can build quickly through networking and or recruitment. New members of organisations see things that others who have long worked there no longer see or could never anticipate.
In fact, in organisations and regions the “unknown knowns” can also be knowledge that is parked or lost simply because it was in a report that was shelved or reflected in capabilities that were retired or superseded but which might still be retrievable. From a regional resilience perspective this is a field to explore to find latent capacities and understated or “taken for granted” individuals, firms and abilities. As a region go and ask investors and visitors what they see and find out whether local views concur.
As Rumsfeld was at pains to show the most troubling field is the “unknown unknown”, the field that could be anything or anyone or any possibility but which cannot be encompassed within the existing parameters of our system of knowledge. This is the most interesting field of possibility because its resolution holds the promise of invention and reflects the inevitability of time and innovation. This is the regional Australia of tomorrow not yet known but which, in addition to its history, people, and global context, will be shaped by factors also not yet known.
Realising the “unknown unknown” into a “known known” is a transformative process that can only be accelerated by robust strategic analysis and intelligence gathering, ever expanding networks and enhanced communications, research and development, plus an organisational and cultural disposition to seek new frontiers and be entrepreneurial about the future and that might mean taking a completely new direction. Above all else, it invokes a requirement for creativity and invention.
Take this tool and apply it to your regional planning. Use it also to test prevalent orthodoxies (or heresies) as I will explore now.
Challenging the BAU
Scenario analysis can help translate the abstractions of the “knowledge quadrant” into plausible pathways. Political debate tends however to focus the possibilities straight onto the preferred pathways, inclining generally to more business as usual. This disposition for a future like the past gives rise to paradigm orthodoxies that breed vulnerability and weaken resilience in our approach to the future.
The dominant thought in Australia right now is that our future is inextricably linked to the economic rise of Asian nations in what is being termed the Asian Century. There is not a region in the country which is not wondering about how to build a future that somehow will take a piece of the opportunity that will come from growth in Asian markets, investment and trade. A population the size of India will come to live on planet Earth in the next 20 years many in neighbouring Asia.
The big selling point on Asia, however, is the rise of its middle class and its buying power. By 2030 the Asian middle class is projected to number more than 3.2 billion, increasing at the rate of more than 75 million a year. And it is expected they will want to purchase clean, green safe food. Central to the Asian prospect is the further development of China whose economic transcendence these past 25 years has been nothing short of miraculous. China is now Australia’s most important trading partner, but as I heard Deputy Prime Minister Warren Truss tell a conference recently, “We are not alone, 123 other countries have China as their No 1 trading partner”.
Future projections of economic growth based on the Asian opportunity presume “more of the same”, that the region will be essentially stable geo-politically, that China will manage the systemic issues threatening it from within, that India will somehow overcome its sclerotic system of government and burdensome cultural inhibitions to openness and innovation, that technological development is unlikely to deliver transformative dividends in energy, that climate change impact will be manageable.
In other words it all looks like a bigger 21st century version of the late 20th century. I don’t believe the Asian Century, however, will be so straightforward in its roll-out.
What are the implications for our national and regional resilience if we build economic dependence on markets and partners unable to deliver or sustain their side of the bargain in the longer term – or who will seek to rewrite the deal when circumstances in Asia change dramatically – as would be the case with an implosion of communist rule in China, a Sino-Japanese conflict, an upsurge of Islamic extremism in parts of south east Asia, or even a Sino-American pact on substantial action on climate change which saw the termination of Australian coal exports.
In its “Building the Lucky Country – Positioning for prosperity? Catching the next wave” Deloitte argues that Australia must better organise and leverage its economic strengths to intersect optimally with the major drivers of global demand for our goods and services. They see agribusiness, tourism, gas, international education and wealth management as the “fantastic five” major business areas in the next wave of Australian opportunity which if we play our cards right could deliver upwards of an additional $250 billion to the Australian economy over the next 20 years.
The impetus generated by activity in these industries is already evident in the $45 billion LNG investment in Gladstone and the premium prices being secured in China by food producers like Northern Districts Dairy Cooperative (Norco). Australian farmers are already looking beyond the Coles-Woolworths duopoly for new markets and the consumer competition likely from Asia will likely impact substantially on the future cost of food in Australia. In the regional universities our international students are part of a activity that provides Australia with at least $15 billion in export income annually. An international student will spend usually around $51,000 a year in this country.
Deloitte’s identification of wealth management as one of the top five industries in the next wave of opportunity I think is more a reflection of the more than $2 trillion now under management in our superannuation funds that it might be of some vain hope of making Sydney an international finance centre. In regional Australia it also reminds us of the impending retirement of the largest Australian demographic cohort, the baby boomers – and how to realise economic and social benefits from that transition.
In running with the Deloitte vision of “catching the next wave” we are running with assumptions that generally support an upside view of the future. The IMF by contrast warned recently that the global economy faces at least another five years of stagflation, and that while global growth next year could reach 3.8% there were still too many countries dealing with systemic investment, public debt, and employment issues to be too optimistic.
And beyond the hangover of the post global financial crisis, there remain those tectonic stress or conflict points – all planetary in dimension that a decade ago Professor Thomas Homer Dixon summarised in his book The Upside of Down: Catastrophe, creativity and the renewal of civilisation. They are:
- Population stresses arising from differences in the population growth rates between rich and poor societies
- Energy stress – above all from increasing scarcity of conventional oil
- Environmental stresses from worsening damage to our land, water, forests and fisheries
- Climate stress from changes in the makeup of our atmosphere
- Economic stress resulting from instabilities in the global economic system and ever-widening income gaps between rich and poor people
While shale oil and shale gas might have disrupted the ‘scarce oil’ energy scenario, there have not been enough other disruptive technologies to provide much ledger upside on any of these stresses. When planning for the future we damage everyone’s interests when we pretend the stresses don’t exist. The Prime Minister Mr Abbott might call coal “good for humanity” but its time is waning and the negatives of pollution and global warming outweigh the benefits of cheap energy and poverty alleviation. Perversely, climate change is also the greatest enemy of the poor and most impoverished people on Earth.
Putting our heads in the sand about climate change will not make it go away. There is no greater existential threat to much of regional Australia than climate change. It is an issue that goes to the nub of building resilience or adaptive capacity. Highly credible IPCC climate projections show that the ‘business-as-usual model of continuing or even escalating energy dependence on fossil fuels, especially thermal coal, will deliver climate change in excess of 2°C by the end of the century. In many parts of the world including regional Australia such a scenario would likely deliver in excess of 4°C average warming, making the land unproductive and the country uninhabitable. In northern Australia the cyclones may diminish in frequency but their severity is likely to increase. Those who saw what Cyclone Yasi did to north Queensland attest to the destructiveness of severe cyclones on regional systems going well beyond the built infrastructure to include long term impacts on people and nature as well.
Finally, in building our strategies for resilience regions we should make decisions while we can make them. This means avoiding critical path dependence, something that Daron Acemoglu and Jameds Robinson observed in their book, The origins of power, prosperity and poverty: Why nations fail. Self-organisation in resilience terms involves a degree of self-determination that is lost when producers become too dependent on any one product or market. Australia’s buoyant view of the long term viability of its coal producing regions is predicated on the assumption that China and India and other countries will want to continue polluting into the longer term through to the middle of the century. That’s not going to happen.
In many respects, the greatest threat we face is that our energy markets will begin exiting our products before we have diversified our economy into alternatives. That remains a real strategic risk for Australia, vehemently denied by the mining and energy lobby and its promoters – but no less real nonetheless. To make our future safer and more competitive, we have to challenge the business as usual model at every corner and look creatively for new ways of creating value.
Resolving the future dilemma
Options will only occur through innovation. A key question for regional leaders is: “What is the level of innovation in my region? Have we the incremental innovation capacities at hand to be more productive and competitive in what we already do? With agri- engineering and improved infrastructure can we boost productivity 10-20%? If disruptive technologies are in play, do we have the capital bases and resources to employ strategies that reflect new game rules, for example, opportunities arising from the digital economy or affordable dis-aggregated renewable energy infrastructure? And in a fast changing world where transformative innovation means not only new rules and a new playing field, it also means a new game – what does that mean in our regional context? New industries? In a global economy where more than 87% of GDP growth is in services what are the core elements of our local regional system we should take care of even with all that change?
In the rural regions of regional Australia at least we would do well to take on the recommendations of the 2014 OECD report on “Innovation and Modernising the Rural Economy”.
Let’s not lend voice to the pessimistic Hanrahans and the “We’ll all be rooned” view of regional life – because it resonates in the city and results inevitably in a stereotyping of regional Australians that is not real and quite unhelpful to advancing national policy discussions. Instead let’s promote all the positive, pro-active, creative and innovative examples of regional initiative as well-known Western Australian farming leader, Sue Middleton, did at the recent Toowoomba Surat Basin Enterprise (TSBE) Ag in the Asian Century conference at Toowoomba.
This highly experienced rural development practitioner offered a model of “whole of region” engagement that started with the capital bases of a region and through progressive capacity building, especially adaptive capacity building, constructed a platform of cooperative partnerships aimed at ensuring the well-being and sustainability of the region and its stakeholders. Walking the talk, Sue and her husband have built a robust diversified resilient farm enterprise that is embracing new opportunities including export.
The times are dynamic and innovation is happening right now that changes the challenges and opportunities for your region. We often think that innovation is all about the future, when in fact the time dimension to innovation has already past or is irrelevant. Right now in this week the price of a barrel of oil has slumped by 20% to $92 because of slowing demand in places like China, but equally and more importantly because of the glut of oil that the American shale industry is delivering. This is disruptive innovation shaping this week and most likely the world a decade hence but which was conceived and developed in earlier decades by coal miners for quite different purposes.
All the compelling examples of innovation, notwithstanding, in this country there remains the conundrum of how to secure finance for nation building developments that promise greater resilience. What a writer in the Australia Financial Review called “Australia’s dividend obsessed investment culture” with its short-term low-risk focus means that we are not investing enough of our earnings in the new capital and infrastructure needed for a genuinely national economic system that is the synergistic outcome of its regional economies. One thing governments should do is to make it easier for the private sector to provide the necessary infrastructure.
Right now rural leaders like Don McGauchie are calling out for enabling infrastructure in regional Australia, pointing out how crazy it is to be building a grains export industry using road transport. Rail would be so much more efficient for bulk commodities, eliminating also the enormous damage done to commuter roads in cities and arterials in regions. In Toowoomba the Wagner family have privately built Australia’s first new major airport in 50 years at Wellcamp west of the city. This crucial piece of infrastructure will serve as a disruptive innovation to change the geospatial dimensions of the southern Queensland economy.
Almost overnight Toowoomba will change from being a key regional centre poorly serviced by transport infrastructure to having its own international level airport, a new highway bypass of the city and eventually within the decade a new rail link to Melbourne and Brisbane. Arguably, this scenario became a whole lot more compelling the moment the Wagner family proved they were serious about building a facility which will be a transhipment point for high value exports to Asia. It has also prompted a completely different view of the region, particularly by potential international investors.
The Wagners have shown just how infrastructure can be provided speedily and affordably when there is a shared will to achieve a strong regional outcome. The cumulative impacts of that investment will be transformative for the region. More generally, it is time that governments acknowledge that the tyranny of distance is a domestic problem of our own making, caused by decades of underspending in physical infrastructure and a cultural distrust of the nation-building role of the private sector. We need private sector and foreign investment to nation build Australia in the 21s century.
In fact Australia, particularly regional Australia has to get over its cultural sometimes neo-xenophobic inhibition about foreign investment. Much of the rural economy has to move away from debt to equity funding if it is to have any chance of success in realising the opportunities of the Asian century.
And as the OECD Regional Outlook for 2014 showed recently, Australia is one of those countries with high de-centralisation and low public spending on infrastructure. Moreover as mentioned earlier, our private finance sector is short dividends fascinated and is not inclined to patient strategic investment. To maintain or extend existing levels of de-centralisation, the source of funding for regional infrastructure and economic development has to involve a more complex mix beyond government. For that to happen, regional Australia will have to be creative in making the most of its assets by seeking out international partnerships, attracting foreign capital, and re-picturing its future vision.
Regions can do that by learning from the private corporate sector about how to build a project proposition, develop a brand, cultivate investors and consummate collaborations. A savvier less bureaucratic more businesslike approach to regional development is essential. Sector specialisation might work in European manufacturing but in an economy dominated by the primary and tertiary sectors, diversification, counter-cyclical and counter-intuitive development strategies will all have a place.
Look to the example of Margaret and Mick Jones near Adelaide who are reaping record harvests for their almonds after resisting the trend toward grapes in the 1980s. Now we have an oversupply of grapes and a global shortage of almonds. Crowd-think has its place, but entrepreneurs will also build opportunity and regions by doing their own thing and sometimes swimming alone against the current.
Not far from here the folks in Dookie in Victoria got on the front cover of the Weekend Australian Magazine by doing their own thing – by leveraging an investment in local arts to diversify their economy beyond canola – creating an arts and crafts festival, and attracting tourism and entertainment events to their small town.
We need dreamers with imagination to challenge the BAU model, who also have the enterprise, energy and ingenuity to be innovative and in the process transform the futures of their part of the world. The women of Dookie did exactly that. Lastly, we should not forget the promise of science and the sage advice of our chief scientist Professor Ian Chubb: “Our national strengths, our future needs, our comparative advantages and our shared ambitions must connect. That requires us to improve the way we go about our science: our basic support for science and what it needs to flourish, along with the connections between government, research organisations, universities and business.”
The challenges facing regional Australia are varied and great, necessitating all the investment we can draw upon them – but above all else, we will only build the resilient regions about which we speak, if we creatively weave the dreaming, and enterprise, the personal commitment and responsibility with civic value and government, the engineer and the scientist with the artist and the farmer, the people and the planet – into one integrated proposition that will sustain our respective regions into the future.