If I were to think of a historical era that can shed a lot of light on what is going on in the world today, WW1 is the one that instantly comes to mind. There are a number of interesting direct parallels to talk about. But it’s also true that the world in which we live was very largely created by WW1. Some people think we are in an inflection point that could signify the unwinding of the system that was largely created by that war. Others think we might be moving into a more extreme version of the post-war world (think 1984 and Brave New World). In any case, it’s a useful time to talk about the changes that the Great War brought into being.
What got me thinking about this recently was a story that overseas readers will probably not have heard about but which is rather important to those of us living on the east coast of Australia. Australia is the third largest exporter of natural gas in the world. Nevertheless, the state government where I live, Victoria, recently announced it was banning the installation of gas in new homes. Meanwhile, the price of gas has been steadily climbing in recent years and there’s been talk of gas shortfalls just around the corner.
How does that work? How can a country be a huge exporter of a commodity while not being able to provide its own citizens with that commodity? Well, it turns out Australia has been in this position at least once before and that takes us back to WW1.
For most of the 19th and early 20th centuries, Australia’s economy was predicated on being a commodity exporter to Britain. Wool, wheat and meat were at the top of the list of money earners. Even though Australia became nominally an independent nation in 1901, the reality was that Britain continued to exert significant control over Australian foreign policy. Thus, when WW1 broke out, Australia placed itself more or less at the disposal of British war policy.
Like all combatant nations in that war, Britain’s tactics were as much about what was happening off the battlefield as on it. To fight modern wars on an industrial scale requires resources as inputs into your economy. If you can prevent the enemy from obtaining those inputs, you can prevent them from fighting. Thus, the blockading of shipping routes became a major tactic for all combatants in WW1. Since a lot of food was also getting shipped, this tactic amounted to cutting the food supplies of entire nations.
The result was varying degrees of famine depending on which nation you lived in. The Russian revolution, the German revolution of 1918, the rise of Ataturk in Turkey and a number of other important political events of the time were in very large part triggered by the starvation of populations caused by the supply disruptions of the war.
Because of Britain’s geographical location and its network of foreign allies such as Australia, it was far better placed than the continental powers to ensure its food supply. Nevertheless, the German U-Boats were highly effective at disrupting supply lines and managed to take out thousands of ships. Still, the Germans ended up losing the supply battle and Germany suffered much more from food shortages than Britain. A big part of Germany’s decision to invade the USSR in WW2 was because they feared that the same food shortages would occur if Stalin decided to join the war on the allied side.
In line with British policy about cutting off the supply of food, Australia agreed to stop exporting foodstuffs to neutral countries to prevent those countries from on-selling to the axis powers. This would have resulted in a loss of revenue for Australian exporters and so the Australian government convinced the British to agree to buy whatever food Australia produced. However, Britain also had access to foodstuffs from Canada and the US. Since it was cheaper to ship from those locations, Britain preferred to get its food from the Americas.
The result of all this was that Britain technically owned the food it had agreed to purchase from Australia, but it decided not to ship that food. Huge amounts of wheat sat in Australian silos rotting away or being eaten by mice. Meanwhile, the domestic market for meat was severely disrupted. Europeans were starving due to having their actual food supply cut. Australians were going without even though the food was physically in the country. Naturally, this was not a popular policy and it gave an easy propaganda victory to socialist agitators.
The parallels with the current situation with Australian gas are quite obvious. Here we have another commodity which Australia has ample supplies of. Once again it is being denied to Australians in favour of overseas interests. Once again, you would think there is an easy common sense solution to the problem and yet the Australian government refuses to do anything about it, instead citing “sovereign risk” as an excuse. Apparently governments taking the interests of their citizens into account is now a sovereign risk, a novel extension of a concept that originally only related to currency defaults.
Of course, the gas restrictions are not being sold to the public in Australia as fulfilling some abstract economic principle. Rather, the move away from gas is being justified on the grounds that it is addressing climate change. This brings us to another parallel between our time and WW1 which is the extensive deployment of propaganda to convince the public to accept a policy it would not otherwise support.
It has to be said that one of the weird things about WW1 was the spontaneous and almost universal support there was for it in the early days. It was, in fact, almost identical to the beginning of corona in that something that had been unthinkable just weeks and months earlier (war, lockdowns) was quickly treated as if it was completely normal.
Nevertheless, as the war dragged on, public support began to wane, especially once the food shortages kicked in. Governments turned increasingly to propaganda as a way to keep the public on side. This propaganda was not just needed in its own right but also as a counterforce to the propaganda being generated by the union movement and their political affiliates. This included much of the feminist movement. Here in Australia, the largest riot over food shortages occurred in Melbourne and came after a mass protest that had been organised by feminist groups.
Capitalists get things done by forming companies. Civilians get things done by forming associations and unions. Governments get things done by creating bureaucracies. If the government was going to get into the propaganda game, it needed to create a bureaucracy for that purpose. In the US, it was Woodrow Wilson who created the harmless-sounding Committee on Public Information. No coincidence that this bureaucracy was formed immediately after Wilson announced the US was joining the war.
But government bureaucracies don’t just pay for themselves. Alongside all the other expenses of the war, the propaganda departments needed to be funded via increased taxation. Here is yet another parallel between our time and WW1.
It is currently the time of year here in Australia when we all need to file our income tax returns. Some people might be surprised to know that federal income tax is just under 110 years old. It was introduced in 1915 to – you guessed it – pay for the war.
If we look at the size of the tax take in Australia during the 20th century, (it’s the same story for all other western nations) there are two big jumps that occur at the start of both WW1 and WW2. Prior to WW1, the tax-to-GDP ratio was about 5%. It rose sharply during the war before the really big jump up to 25% at the start of WW2. It has remained that high ever since and currently sits at around 30%. A fair share of that 30% still goes towards government propaganda (aka advertising and public relations).
So, we can see that many of the things we take for granted nowadays came into being during WW1. The historically huge tax take by government used to fund an equally enormous public bureaucracy is one thing. The use of government propaganda is a second. There is a third thing which brings us back to the starting point of this essay.
During WW1, Australians were denied access to food that was rotting away in storage because of the geopolitical requirement to uphold international agreements. That’s exactly what’s going on with the current gas situation. These days, it is not the British government which owns the resource but multi-national corporations. The rules of the game have changed but the form is the same. Australia was a Dominion nation during WW1, meaning much of our foreign and economic policy was set in London. We are now a member of the “liberal world order” or whatever else you want to call it, whose policy is set from Washington, D.C.
The propaganda has also changed to reflect these new realities. With the fall of the USSR, there is no longer a direct enemy to propagandise against and so we now have a string of new, invisible “enemies” such a climate change, global warming, viruses and the like. It is not a coincidence that these are all “global threats” to which there can only be “global solutions”, a neat trick that gives governments the excuse to sacrifice national interest for the greater good, just as the Australian government had to sacrifice for the interests of the British Empire during WW1.
It’s curious to think that the reason for all this might just be because of the inertia of the system itself. Decommissioning armies is a challenging exercise. Dismantling systems might be even more difficult. Maybe the reason we are stuck with the old war system is because nobody knows how to replace it.
Of course, in the aftermath of WW2, there was justification to keep the system going as a counter to the Soviet threat. This then morphed into the Cold War, which was largely a fight between bureaucratic behemoths. There were other reasons to keep it in place, too, not the least of which was to ward off the persistent unemployment that had been a feature of the years prior to WW2.
Still, with the collapse of the USSR in the 90s, the system really did cease to have a reason to exist. This could actually be a surprisingly large driver of why things have become increasingly crazy in the decades since the collapse of the Soviets. We continue along with a system that was born to fight two enormous global conflicts. The world has changed but the system remains.
It is perhaps not surprising, therefore, that a system built during war continues to find “enemies” to fight against. As it has run out of real enemies, it has started to create more esoteric enemies to do battle with: the war on drugs, the war on AIDS, the wartime measures for “covid”. This is perhaps also a big part of the reason for the continued obsession with Hitler and the Nazis. It was the last time the system had a real enemy to fight.
The biggest user of gas in Australia is the gas industry itself. The gas industry uses more gas for liquefaction than the (entirety) of Australian manufacturing put together.
If you keep scrolling on this article it shows a chart to the above.
https://www.macrobusiness.com.au/2024/07/greens-cut-gas-gordion-knot/
Whenever I read any unlocked articles from macro business or listen to Leith Van Onselen talk to Martin North, I’m always left thinking, We (Oz) are so screwed. 😕
Anecdotally, my Niece’s husband’s footy club has had three gas bottles replaced in the past few weeks, despite trying to secure each new bottle.
No showers!
I believe they are now considering putting it within a building.
They are up in the Adelaide Hills, not sure if it’s locals or from we plebs on the plains, but it appears to be “(semi)
professional”
Regards,
Helen in Oz
Ti clarify,
Replaced because they have been Stolen…
I’ve grown exasperated from trying to explain to people that the reason for a lot of the current unpopular policies is that Australia has precisely zero control over its own resources or foreign policy, and is basically an occupied country. All the so called ‘free trade’ agreements amount often to naked imperialism.
But as you point out here, it’s always been thus. Our low population is all that has kept the banana republic status from being far more obvious. We are quite similar in many regards to Brazil or Argentina (which was equal wealthiest with us at the start of the 20th century), just a bit more luckier in terms of resource wealth and more obedient so we haven’t got the full overthrow and prostration treatment yet. (Outside of the Whitlam coup).
Helen – when the Greens have the sanest policy, you know we’re in trouble :P.
But, actually, this is why climate change works so well as a political wedge. The Greens grew out of the old labor movement, which had a nationalist focus. By convincing the environmentalists not to worry about saving local environments but about saving the entire globe, the Greens were turned into useful idiots for corporate interests, which is why they’re on board for every other wacky idea that big corporations trot out these days. You have to have a grudging respect for the political nous required to pull that off.
Skip – yep, it’s called the “imperialism of free trade”. The British were the first to try it in the 19th century. The neoliberal agenda is the same old trick. I suppose we had a nice few decades after the war where we could actually pursue policies in the national interest.
You have to wonder about Australian politicians, though. Is it really not possible to implement a sane gas policy? You think it’d be in politicians’ interests to make it happen just to take the pressure off locally. Either we really are under the thumb much more than we appear to be or Australian politicians are incredibly servile/stupid.
I worked in the NT in my younger days, and from what I gathered it’s that we are really that under the thumb. Conoco Phillips and other big companies get to pump all the gas and might leave a little bit for us if they choose, but it’s completely up to them. Our government just functions as a sort of rubber stamping board, not much else.
The fact that most of the important resources are located far from Australia’s population centres doesn’t help, the north of Australia barely feels like it’s under any sort of resource oversight at times.
We have this myopic, naive tendency to focus on domestic issues while not realising that they are completely irrelevant a lot of the time. Take interest rates. I would put money that the RBA will simply do whatever the Fed does as our monetary policy is tied to how much currency traders could sink the Aus dollar if we tried to break away. They will cut of the Fed cuts and raise if the Fed raises.
> Either we really are under the thumb much more than we appear to be or Australian politicians are incredibly servile/stupid.
I vote for servile and stupid, at least if our (NZ) equivalents are anything to go by.
It’s and well known trope that we pay ‘international’ prices for our own beef/lamb/milk/timber, and yet the British can buy our meat and butter in their supermarkets for significantly less than we pay locally. And the Chinese sell us back manufactured timber products made with NZ logs at a price less than I (working for a large national manufacturer) can buy the raw materials locally. It is nuts.
From my occasional dealings with mid and higher level government they truly believe the ‘free trade’ rhetoric – I find it is quite unbelievable to witness first hand. They’ll honestly pat each other on the back signing deals that are so obviously poisonous to our national interest one wonders if they have a subconscious death wish. You try to point it out and just get the ‘blank stare’ you saw with Covidians (and no further invites to meetings – a positive bonus from my perspective if not my employers).
If you’ve ever seen the 100% positive-with-message-pure-synergy things that get posted on LinkedIn, those are not an exaggeration; they’re a clear window into the world of modern governance (corporate too). I don’t see it changing without an overwhelming external shock.
Skip – interesting. Still, we found out how powerful the mining giants are back when Gillard tried to tax them a bit more. That was quite the show. I agree about the irrelevance of many domestic issues but I still think that went into overdrive with the neoliberal agenda of the 90s. These days, politicians are not afraid to openly state that there’s nothing they can do whereas they at least had to pretend to do something formerly.
Daniel – it doesn’t make a lot of sense until you understand that the goal of the system is to increase the number of transactions that take place. The more times money changes hands, the more “GDP” is created. I think government is a lot like large corporations in that there is a small number of people at the top (usually behind the scenes) who understand the game and a whole lot of clueless people who parrot whatever the approved message is.
Its very much the same as the old give the natives trinkets for land tactic. Australia gets things like solar panels, turbines, nuclear subs (all at cost) whereas everyone else gets gas, coal, and now increasingly our farmland too. From the mining companies perspective, they invest all the time and money into getting the resources out of the ground, so why shouldn’t they have control?
When a country sets it up so all its value adding and manufacturing is gone, you can’t really complain about digging yourself into the resources trap. It would probably take something as extreme as siding with Russia and China militarily (for protection) to actually get out of the current situation, for better or worse.
There is some logic to it in terms of an overall plan, though. Australia could easily cruise along with cheap electricity powered by coal and gas. Instead, we are essentially subsidising the global market for renewables. It also makes us dependent on the continuing market for renewables rather than self-sufficient on our own resources. Since China and Japan are dependent on our fossil fuels, they’re on the hook too. The problem is we’re now seeing wartime levels of wealth reduction even though we’re not at war. Thus, the whole plan requires thermonuclear levels of propaganda.
Hi Simon,
I’ve not understood the gas story for a couple of years now. What surprises me is that the supply and demand imbalance has been known about for a few years. It’s not like it was any great secret – it was in the news years ago, and here we are today. I do believe that the state government has granted a new license for drilling for gas. Gas extraction licence approved for project on Victoria’s Great Ocean Road.
The really funny thing about gas shortages is that it impacts upon the stable supply of electricity. There’s a bit of irony there for sure. Someone mentioned to me a few weeks ago that a gas turbine plant in Tasmania had been running continuously for five weeks. They weren’t made for that.
It’s worth noting, that as a country, we import 90% of our oil. In order to pay for that energy product which we don’t have (and not to mention all the other stuff we do import), we have to sell things (i.e. gas, coal, iron ore and other minerals) to the rest of the world in order to earn the required US dollars to pay for stuff. Given the currency the transactions are conducted in, it is very possible that those are the same folks who dictate the terms of the game. 😉 Kind of what you said!
Lot’s of interesting things have been occurring in the financial world since Japan lifted its interest rates a mere 0.25%. Who knew such strange shenanigans were going on?
As a side story, we are busily learning how to reduce our gas usage to minuscule amounts. It’s a project which comes with its challenges… 🙂 Far out.
Cheers
Chris
Chris – yes, all the redundancy in the grid has been used up. We’re now walking on a tightrope just to keep the thing going. Completely unnecessary but it did make an awful lot of money for some multi-national corporations.
Hi Simon,
It did make an awful lot of money. Did you see the weird report that Queensland is considering establishing state run petrol (and diesel + recharging stations) as an election policy?
The energy policies also kept prices low for consumers and business. Off grid I pay about 10x per kWh for electricity that people pay on the grid. It’s a problem for sure, and I went this path because it was a hobby, concern and interest, so the system here doesn’t have to pay its way. Although there are limits…
The thing is, if society uses this renewable energy technology, I can’t see how the result could be cheaper like the promises promise. Hmm. A whole bunch of lies, me thinks. 🙂 Interestingly, there was an article in the news recently pointing this very situation out. Certainly the calls for subsidies at every level suggests the underlying reality.
You’d think that a test system would be established to find out if all this renewable technology is cost effective. All I hear spoken about in relation to this technology stuff are statements of belief. And what does that tell you? Crazy days!
Cheers
Chris
The Victorian government did something similar prior to the last election with promises to bring back the SEC. I think there’s probably a faction within Labor that this kind of thing resonates with i.e. the old-fashioned Labor party that put the interests of the nation first.
As for the lies, that is the part that is somewhat baffling. Telling little white lies to get some specific bill through is part of politics. But these are huge lies and I don’t see what the end game is except more lies to prop up the old lies.