The Aviation Industry and the Global Economy
The deadline for a response to the government's Consultation Document on the future of Aviation recently passed. The scope of debate was established in advance by the inclusion of questions within the document. These were predictably narrow, evading some of the more fundamental, broader issues. Our response addresses these issues.
The overarching issue left unaddressed is whether the growth of the aviation industry is actually necessary. The government appears to take this for granted and has adopted the industry's arguments to justify its position. These arguments, of benefits to the domestic economy, as well as of the forecasted growth in demand, have been critically addressed in other assessments (SASIG, Does Aviation Matter?; van der Pol, The Myths of Flying).
Ostensibly, the forecasted growth is calculated by prevailing trends, ignoring distortions within the domestic and international economy that contribute to this tendency. Recognising these distortions is clearly out of the question for it means acknowledging the artificial stimulus on which the demand for aviation is based. This is illustrated by dividing the source of demand into three general categories: 1) freight, 2) tourism and 3) domestic/international business travel. Aviation facilitates transportation methods that are unnecessary for each category, in that there are viable alternatives. Yet this is only part of the problem, there is the wider issue of the circumstances and conditions in which the demand occurs, and this is due in large part to the structure of the global economy.
The international trade system as it currently exists is based on a high turnover of products in a continuous bid to improve performance (i.e. sales) in order to 'stay in the game' (i.e. maintain and/or increase market share). This leads to cost-cutting and the use of cheap raw materials and resources to maintain increasing rates of profitability. So a country will import from thousands of miles away what it could produce domestically, and the evidence indicates that this does not result in the kind of efficiency gains that Ricardo's theory of comparative advantage suggests. This is because trade is not motivated by efficiency and mutual gain, but by profits, and when it is cheaper to import a product than to produce it domestically, it will be imported. Enter the aviation industry and our first category - freight.
1) Freight:
The trends in the international economy leading to greater centralisation of production is facilitated by the aviation industry to a significant extent, because it enables goods to be produced in the cheapest possible location en masse and exported speedily to the market where the goods are to be distributed. The tendencies within the production and export process create a demand for fast cheap transport that the aviation industry is in a position to supply. The reason why aviation is cheap in the first place is due to subsidies that the industry receives and external costs charged to the tax payer. That aside, even if subsidies ceased and the industry "internalised externalities", the demand would still be there to be met.
So even if the industry carried all its costs, it does not mean that the industry would not grow due to the structure of the international economy. If costs increase in one area they are likely to be cut in another, possibly in safety and employment. One of the most effective ways for an industry to cut its costs is to concentrate itself through mergers and acquisitions, and regulations preventing concentration are being dismantled and undermined. The result could be that the number of companies would decrease culminating in oligopoly (cartels), but the industry itself would not contract but would continue to grow. Therefore the demand for air freight needs to be tackled at its source and this requires that the very structure of international economy be brought into question. The wisdom and logic of 'globalised' production and export-led development models should be exposed for what they are, a highly inefficient and ecologically destructive system where costs are socialised and profits pri vatised.
2) Tourism
Tourism has become a major source of foreign currency for many developing countries. The need for this foreign currency is in no small way related to the heavy debt burden that these countries have been forced to endure. This has led to the development of unsightly tourist resorts on previously unspoilt land often of high ecological value. Such land has to be privatised and made available to foreign investors and developers as a condition for financial aid from the very countries where the creditors are based. These developments are sold as packaged holidays, and it is the growth of this industry on the back of the desperation of the southern hemisphere, as well as its internal competition, that has produced affordable holiday destinations for working people in the wealthier industrialised countries. The availability of credit to finance packaged holidays has expanded the market even further to people who could not normally afford such luxuries. This has provided a considerable boon to the avi ation industry and cost the domestic tourist industry an estimated a33bn per annum.
The increased liberalisation and competition within the aviation sector supported by the government in the White Paper (p. 14, section 27), ensures that prices will be distorted further and so air fares will continue to evade social and environmental costs. Instead, those costs incurred by the industry will be once again met by the taxpayer, while air fares fluctuate in accordance with market forces. It is interesting that while the government supports liberalisation in the aviation sector and a reliance on the market mechanism to regulate growth or contraction of the industry, it is fully prepared to socialise the industry's costs. That the industry should be "free to set fares according to their commercial judgement" (p. 28, section 93) ensures that social and environmental 'externalities' will not be taken into account.
3) Domestic/International Business Travel:
Long/short distance business travel is apparently an integral aspect of the global economy. Yet this is almost entirely unnecessary, even within the current structures of the international economy, as there is technology such as email and video conferencing that enables conduction of co-ordination, discussion and decision making, eliminating the need for face to face contact. Often in the time it takes to travel from A to B for a meeting, the reasons for the business trip could have been dealt with using technology. The government's position on this, set forth in the consultation document (p.20, section 53), is highly speculative: where the possibility of technology and e-commerce affecting demand for air travel is raised, the commentary lacks any concrete proposal for how this could be encouraged. Despite a professed commitment on the part of the government to make Britain the centre of e- commerce, this clearly does not apply to situations such as this, which could constitute a form of 'marke t intervention' unacceptable to government allegiance to free-market ideals.
So why is the government is so committed to the growth of this particular industry and not socially and environmentally beneficial alternatives, such as information technology as a tool to mitigate demand for air travel? There is an admission within the consultation document (p. 27, section 88.) that industry lobbyists are involved in formulating government policy, in this case with regard to consumer interests and support for "the voluntary industry initiative" which is no doubt designed to restrict regulations that would otherwise demand the industry meet its responsibilities. Examples of this can be found elsewhere, for example in section 89. where a plan to "introduce a voluntary code of practise" for "passengers with disabilities" is mentioned. There is no reason to believe that this kind of influence does not permeate throughout government aviation policy. This is perhaps most blatantly evidenced by the government's use of an industry-funded study (p. 32, section 107-110) which is likel y to skew its analysis in favour of the publication's benefactor, and to influence government policy accordingly. Why not take SASIG's advice to "develop and implement a national aviation policy strategy based upon credible and fully independent research and analysis" ("Does Aviation Matter?")?
Vic Milinkovic