In their bestselling book Abundance American journalists Ezra Klein and Derek Thompson argue that rich countries can be much richer. Their citizens can be healthier, their environment more salubrious, their working hours shorter, their homes cheaper. Their fruit and vegetables could be grown in vertical skyscraper farms, their protein manufactured in factories, their energy supplied cheaply from vast fields of wind turbines and solar arrays. Artificial intelligence powered by cheap energy could relieve them of dull repetitive tasks that encumber their lives. Travelling in silent bullet trains or at ease in self-driving electric vehicles they could enjoy wandering in parks and forests, once given over to wheat and cattle but now free for people’s enjoyment.
All this is attainable with contemporary technology, say Klein and Thompson — but only if we remove the barriers we have placed in our way.
Championed in recent speeches by treasurer Jim Chalmers and assistant treasurer Andrew Leigh, cited favourably by several Australian Financial Review columnists, Abundance is being presented as a manual for increased prosperity not only in America but in Australia as well. Its central message is that left-leaning legislators have created a framework of rules and regulations that impede the very programs they supported, notably environment protection, affordable housing and public infrastructure.
The “fascinating thing I found about Abundance,” Chalmers told Sydney Morning Herald economics writer Shane Wright last week, “was basically, even if you have quite a progressive outlook, we’ve got to stop getting in our own way.”
In the American case, those rules are mostly land-use restrictions. According to Klein and Thompson they impede more housing for the poor, the building of wind farms and solar panel arrays to replace fossil fuels, high-speed trains and other transport investments, and public infrastructure of all types. Land-use restrictions are an important cause of high house prices and falling construction productivity, of slow progress in cutting carbon energy, of homelessness and much else that blights America.
Laws designed to reduce pollution, preserve the natural environment, separate industry from residential communities and enforce higher standards in construction are now holding America back from this bright future of clean energy, plentiful and cheaper housing, better public transport and public infrastructure. This is the “abundance” now blocked.
Beyond the argument about the impact of land-use restrictions, however, Abundance begins to meander. The authors claim “a new theory of supply is emerging,” but it is not at all clear what it might be. Though the book is credited (by Financial Review columnist Steven Hamilton) with the proposition that “economically rational, supply-side policy platform need not work against progressive goals but rather for them,” the actual argument in the book is mostly about these land-use rules.
It is not, as one might suppose from Hamilton’s accolade, an argument for a change in the tax mix that might stimulate business investment, or better workforce training that might increase productivity, or more support for basic science or new technologies that might stimulate innovation, or new competition rules to break down entry barriers, or the other usual elements in the supply-side canon.
While nodding to Abundance, Chalmers finds surer ground in instancing liberal economist Janet Yellen, the former Federal Reserve chair, and her view that “our side of politics needs to own supply-side economics.” This is, after all, what Bob Hawke and Paul Keating were about in office, many decades ago.
Beyond the land-use story, one topic in Abundance elides into another. A leading scientist was ignored until investors saw the potential for new drugs. American businesses stopped making computer chips. European governments negotiate prices with pharmaceutical companies, but the United States does not. The US federal government has the same number of employees it had decades ago, but spends five times as much. If there is a link between these topics it escapes me. The genius of Klein and Thompson is that they have produced a very readable 272 pages in elaborating a thesis lesser writers might struggle to extend beyond a chapter.
Assistant treasurer Andrew Leigh seized on Abundance for a typically thoughtful and well-researched speech in early June. Citing the book as the inspiration for his talk, Leigh called for reform of Australian land-zoning restrictions to reduce housing costs and facilitate alternative energy supplies, policies to create new products from Australian inventions, and — close to his heart — better administration of universities.
Worthy as they are, these proposals don’t reflect the central idea of Abundance that left-wing legislation now threatens left-wing objectives. Zoning restrictions in Australian cities may be cumbersome but they are not left-wing. Nor does Jim Chalmers’s instruction to his regulatory agencies to slim down the number of rules and regulations reflect the message of Abundance, such as it is. Most of these rules have emerged out of ugly experiences of business and financial excess, of inattention to risk, not from left-leaning legislators. It would certainly be good to rationalise the rules, an exercise attempted repeatedly by governments and regulatory agencies over many decades.
While evidently admiring the book, Leigh acknowledges that what is relevant to the US may not be relevant to Australia. It’s true we share with California high home prices, falling house construction productivity and many zoning restrictions, but it has long been the case that state governments can override municipal restrictions, and often do.
The Minns government’s push in New South Wales for more housing along transport nodes is a case in point. Nor does Australia have extensive private communities able to impose their own zoning rules. At the federal level, as Leigh points out, housing minister Clare O’Neil is pushing the implementation of a new federal–state housing agreement. We have a multitude of objections to new developments, both those intended to help the environment, such as coastal wind farms, and those that will certainly degrade it, such as extending the Woodside gas project. More often than not, the proponents get their way. Stopping development is the unusual exception in Australia, not the rule.
Nor are transport problems insuperable in Australia. In recent years Sydney transport, for example, has been remade with tunnels and expressways, new train lines and now a light-rail network. And while zoning is no doubt part of the story, there is much more behind high home prices in Australia. High immigration, a service economy organised in cities, a marked preference for living on or near the coast, rising incomes — all contribute to high land prices, which are the basic element in high home prices.
I am convinced by Klein and Thompson that land-use restrictions in the United States do indeed make it harder to supply housing where people want to live, that wind farms and solar arrays are harder to build when landowners and local authorities object, and that California’s failure to construct a useful bullet train after decades of trying is at least partly because state and federal laws empower objectors over proponents. I am convinced that many of the laws and legal precedents on which objectors rely were progressive in their intent and over the years have been commandeered by interests opposed to green energy, public housing, and public transport.
But I am also convinced — as Klein and Thompson are — that many of those same progressive laws and rulings achieved useful purposes. Legislation on car safety and lead-petrol pollution inspired by Ralph Nader, for example, or legislation to improve air and water quality or better protect forests and parklands. Town zoning was used for the laudable purpose of separating industrial areas from residential areas.
All have since been turned to additional and unintended purposes. The political and policy problem is surely how to retain the good outcomes while minimising the bad outcomes. Klein and Thompson’s solution is not a policy proposal but a set of questions. What is scarce that should be abundant? What is difficult to build that should be easy? What inventions do we need that we do not have? Good questions, and ones that suggest their own answers. “It is a lens not a list,” say Klein and Thompson, I think evasively. But there is surely another book, not much fun to write or to read, in outlining how to get good outcomes without surrendering the benefits land-use restrictions provide.
And not only land use, but the whole array of environmental controls. That won’t be easy. Donald Trump shares the agenda of rolling back restrictions, but not with a progressive outcome in mind. As the New York Times recently reminded us, he promised to “rip up” a rule that permits California to impose higher fuel standards than other states “as part of his broader battle to destroy policies intended to combat climate change.” In mid June the US Supreme Court permitted fuel producers to challenge the California law. Petrol exhaust from motor vehicles is the “largest source of carbon dioxide pollution,” the Times bleakly comments. •
Abundance: How We Build a Better Future
By Ezra Klein and Derek Thompson | Profile | $36.99 | 304 pages
