Can Covid-19 and KiwiSaver help with global warming?
OPINION: Governments dont often have a clear mandate for funding basic science. But in a crisis they can, because necessity is the mother, and funder, of invention. And history shows that government-funded innovations in science can be the foundation for spectacular innovation by business. Examples are everywhere. Spurred on by the crisis of the Cold War, the National Science Foundation in America funded research into semiconductors. It laid the foundation for massive practical applications from companies like IBM and HP, and countless others since. The internet is another example. It is very unlikely that private industry would have invented something as esoteric as packet switching technology. But in the crisis of the Cold War, a US Government agency, ARPA, did just that. And private industry grasped the commercial potential of it. Look where we are now. There is an irony in this. Apple, Google and other technology multinationals can minimise the tax they pay globally, but they should remember their profits owe an awful lot to taxpayer-funded research. READ MORE: * Budget 2020: trading coronavirus for the climate crisis * Coronavirus: Private investors call for climate-friendly stimulus * Green energy could drive Covid-19 recovery with $165 trillion boost * Russel Norman: Covid-19 is easier to see and visualise than climate change, but no less dangerous And in New Zealand the foundation of the Department of Scientific and Industrial Research (DSIR) in 1926, and its rapid expansion post the great depression, was a catalyst for innovation and productivity, especially by farmers. It wasnt all number eight wire innovation in New Zealand, we had science to thank too. To understand why China is challenging the US in business now, look no further than its large Government incentives in basic science, well funded public universities, and companies keen to profit. This all began in response to Maos failed economic policies. The Covid-19 pandemic has ushered in a new tolerance for governments thinking big. Out of sheer necessity, they have stepped in to prevent global economic meltdown. No one else could have borrowed and spent so much. We are all Keynesians now. And well need this attitude for more funding of science, because an even bigger crisis is just round the corner - climate change . Addressing climate change needs massive long term spending in research, development and implementation, across both the public and private sectors. We have to fundamentally reset how we make, grow and consume things. Bill Gates new book on the subject left me humbled by the size of the challenge, and how expensive it will be to fix - over US$5 trillion annually. Much of this will have to come from the public purse, and getting the policy settings right will require sweeping new legislation. We are in a rare moment in history, with Governments mandated to roll out big reforms. So lets hope Covid will kickstart a climate new deal too. The signs are promising. For US President Biden to announce massive infrastructure spending, and a target of halving of US carbon emissions by 2030 , shows just how much the political landscape has shifted with Covid. These lofty goals would have been unthinkable even a year ago. Our Government is thinking big too, with higher personal and property related taxes , wholesale health reform and large infrastructure spending . None of this is tinkering at the edges, and might not have happened without the crisis of Covid-19 . But so far its just been words. And as our Government has found out with KiwiBuild, grand ambition, without delivery, can hurt at the polls. The latest Climate Commission report has thrown down the gauntlet for the Government, recommending it have a cohesive long term strategy, and that it pick up the pace. So how will the tackle global warming, and actually achieve change? Just as technology and innovation helped reduce disease and poverty, its key to tackling climate change. History shows that where private industry gets clear policy directives from Government, with reliable long term incentives and infrastructure, big things happen. Strong waves of innovation, led by technology, have lifted the welfare of many. Railroads, electricity, cars, medicines and computers are all examples. They all needed government policy, private innovation and capital. Neither governments, nor business, could do it alone. And at the time, few foresaw how revolutionary each of these innovations would be, with everyone forgetting the failures along the way. Does anyone remember the steam powered automobile? This doesnt mean we sit and hope, but it does mean that governments picking winners in green tech is dangerous. But if they get the policy, incentives and infrastructure right, they will lay the foundations for success. There is plenty of private capital available to fund innovation, and profit. In New Zealand, it includes $76 billion of KiwiSaver savings available right now. Ironically, money is not the issue here, policy and innovation is. Im optimistic that we will make great strides in tackling climate change. But like the waves of innovation from the past, business and Government need to work in relative harmony, with neither treading on each others toes. When there's too much Government in business, you get the inefficiencies of state dominated socialism. And when business runs unfettered, you get the excesses of the 1980s and the Global Financial Crisis. Let Government set the key targets, align the incentives, provide the infrastructures, do that business can get on with it. To that end, long term policies and funding of basic science is Government money very well spent. But when it comes to finding the next Rocket Lab, leave that to business . We are entering a period where global Governments have the stomach for a new green deal. They can afford to get the laws and incentives right, and lay the foundations for private industry to innovate and profit. History says we can all win. We must, because our very survival depends on it. Sam Stubbs is the founder of KiwiSaver scheme Simplicity.