Growthiness, growthiness, the grossest gift that I possess

We are in a very tricky situation, economically speaking. Not just globally but also here in Jersey. The foreseeable and inevitable clamp down of the UK on LVCR will shortly lead to more job losses locally. Today’s UK budget may also clamp down on those who hold their properties etc in companies to avoid personal taxation, the administering of which is one of the legs of our finance industry stool.

Globally, we have probably arrived at the point where further economic growth as prescribed by Finance Minister Ozouf, Economic development Minister Maclean, Osborne, Obama etc is not just unlikely but should be recognised as very undesirable.

Economies are limited by the availability of cheap, easily and economically available energy. Here’s a graph of oil prices in “real” dollar equivalents (click image for a larger version).



As you can see, adjusting for inflation, we are at round about the same real price that oil got to during the peak of the 1970's oil shock. Clearly it shows that we are at or beyond a similar situation to the 1970s when the oil price shock first manifested which was regarded as the first event since the Great Depression to have a persistent economic effect. It was associated with (coming soon after) the stock market crash of 73-74.

Some measures of well-being reckon that, at least in the developed world, human well-being peaked in the 1970s and has been declining more or less ever since. This was one of the themes behind Life on Mars where Sam Tyler finally chose to go back to the 70s rather than stay in the here and now.

Study the graph and what it shows about the world and why future growth is so unlikely that those who blindly continue to prescribe and work towards trying to engender it, should just get real and tell everybody that they are trying to chase a mirage.

We are at, or past, peak oil. New reserves being found are not keeping up with the demand. The giant oil fields (such as those in Saudi Arabia) found in the past are declining fast already and it now takes more and more energy to get each barrel up from the depths. EROEI (Energy Returned On Energy Invested) is the reason.

From Wikipedia (although there is naturally some argument about the figures):

"when oil was originally discovered, it took on average one barrel of oil to find, extract, and process about 100 barrels of oil. That ratio has declined steadily over the last century to about three barrels gained for one barrel used up in the U.S. (and about ten for one in Saudi Arabia)"

Some people believe that there will always be more to find if we just drill deeper or go further out to sea - they are sort of correct, but the view is not sensible. There is no point. As the EROEI falls to approach one barrel of oil needed to extract one barrel of oil, the benefit approaches zero and the carbon footprint of net usable extracted energy approaches infinity!

Things are going to go rapidly downhill unless you all start ignoring the Geoff Cook's and the Ozouf's and the Osborne's and their functionally insane belief that "growth" will be our saviour - start paying more attention to those talking about a genuinely sustainable strategy.

At the root of all the problems we have, and those problems yet to manifest fully, is one word -  growth. The superstar of the ecological economics movement, Herman Daly, has pointed out that economies have an optimum size. When they are small and the world is empty and the resources available to them are large compared with the demand, then growth has really beneficial effects at making people better off by generating wealth and employment etc. When an economy continues growing, however, a point is reached when the available space to expand into and the availability of economically extractable resources starts to peak, then plateau and eventually starts to decline. This peaking is the moment when the graph of benefits versus further growth starts to decline too – further economic growth leads to decreasing benefits. Daly himself somewhat clumsily calls this increasing “illth”.

We are at this point now. Further conventional economic growth, of the type which has worked well for us in the past, will not achieve the same results as all the conventionally educated experts and economists still expect – in fact it would achieve exactly the opposite. The more “they” try to restart growth in the global economy, the worse will be the eventual effects. One of the problems with conventional economics is it does not discriminate between desirable outcomes, such as increasing health and contentment and undesirable outcomes, when it measures the overall success or growth in an economy. Anything that generates money is counted as “good”.

An economy that has to spend a lot on the military because they are fighting a war or preparing for one as an eventuality, or has to expand spending on medicine and health care because the population is increasingly unhealthy can appear, by conventional measures, to be economically healthy whereas the economy of a peaceful, healthy, contented population not so wedded to ever increasing purchases of material goods to provide consumer satisfaction could appear as if it was flat-lining. Which society would you prefer to live in, though?

People may think these ideas are a recent invention but they have actually been part of the evolution of economic thought almost since the beginning. Even that darling of hard line right wingers Adam Smith - who wrote “The Wealth of Nations” – was aware of the ultimate limits to growth, but his ideas have been cherry picked for centuries. He theorised and observed that people trading in free markets leads to production of the right quantities of commodities, division of labour, increasing wages, and an upward spiral of economic growth. But he also recognized a limit to economic growth. He predicted that in the long run, population growth would push wages down, natural resources would become increasingly scarce, and division of labour would approach the limits of its effectiveness.

Other famous economic names were aware of the limits to growth too:

John Maynard Keynes, one of the most influential economists of the twentieth century, currently enjoying  a bit more popularity, after the Milton Friedman type policies of the past few decades start to look a bit "tired" now as the economic system faces collapse,  also considered the day when society could focus on ends (happiness and wellbeing, for example) rather than means (economic growth and individual pursuit of profit).
He wrote:

...that avarice is a vice, that the exaction of usury is a misdemeanour, and the love of money is detestable… We shall once more value ends above means and prefer the good to the useful.

and

The day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems - the problems of life and of human relations, of creation and behaviour and religion.

John Stuart Mill, pioneer of economics and one of the most gifted philosophers and scholars of the 19th century, also anticipated the transition from economic growth to a "stationary state." In his Principles of Political Economy, he wrote:

...the increase of wealth is not boundless. The end of growth leads to a stationary state. The stationary state of capital and wealth… would be a very considerable improvement on our present condition.

and

...a stationary condition of capital and population implies no stationary state of human improvement. There would be as much scope as ever for all kinds of mental culture, and moral and social progress; as much room for improving the art of living, and much more likelihood of it being improved, when minds ceased to be engrossed by the art of getting on."

The problem is that the cherry picking of the great economists’ thoughts has had the effect of only publicising that part of their work that supports unrestrained expansionism. It has been promoted by those who seek to accumulate ever greater wealth and personal power – in short, greed – without them seeming to understand the inherent limits to that way of being. As Simon and Garfunkle, in “The Boxer”, sung –

“a man hears what he wants to hear and disregards the rest”

 
More recently than those old time economists I mentioned, Bobby Kennedy expressed the basic ideas behind sustainable or ecological economics ideas on 18 March 1968, in an address to the University of Kansas at the height of the Vietnam war. This speech has just resurfaced, thanks to Youtube.   



So, why did I call this post “growthiness, growthiness”? It’s a reference to the Ken Dodd song “happiness”. In it he never once mentions getting a new IPad or the FTSE hitting 10,000!



We’ve all led ourselves to believe that happiness and contentment is largely achievable with continued economic growth. The idea is hard wired into the minds of most politicians, businessmen, civil servants, classical economists. It permeates the very fabric of human society. People who question it are sidelined or ignored by the powers that be, as if the vast majority are all operating under post hypnotic suggestions to avoid considering the very obvious and exponentiating flaws in the dream.

The advertising and P.R. industries that first mushroomed in the 1950s, as psychologists inspired by Edward Bernays started to consolidate how to really influence people by exploiting their inner unconscious fears and desires, are largely responsible for the hypnotic suggestions we have been swamped with that make unending growth and the consumer lifestyle it promises seem desirable, indeed “the way”.

It’s time to wake up.

Prince Charles tells it like it is

Here is the whole of Prince Charles’ recent address to the Chartered Institution of Water and Environment Management (CIWEM). He mainly focuses on water, but brings in ecological economics and the necessity of putting a real value on the “services” which the ecosystem provides for us for free so that the market would work in favour of sustainable approaches in future as opposed to today where  the market mostly discriminates against sensible ways because ecosystem services do not appear on the accountant’s “bottom line”. _____________________________________________________

 

ROYAL REFLECTIONS

Marking the 25^th anniversary of becoming an Honorary Fellow of CIWEM, HRH the Prince of Wales considers the changes that have taken place in the environment sector and the challenges ahead

It hardly seems possible that I have been an Honorary Fellow of the Chartered Institution of Water and Environment Management (CIWEM) for 25 years.  I remember accepting the invitation because I wanted to encourage the wider world to see the crucial importance of environmental management as a profession.  Believe it or not, environmental management was then still seen by many as something to be added to the job description of health and safety managers.   At about the same time I found myself in distinctly hot water for venturing to suggest that we should no longer use the North Sea as 'a bottomless pit for our waste,' so an alternative view is that I was looking for safety in numbers.  Either way, those days are long gone.  The Institution has played a remarkable leadership role in establishing and guiding the profession, and long may that continue.

The problem, of course, is that over the same period the range and severity of the environmental problems we face has grown exponentially.  The challenges are no longer just about 'cleaning up after ourselves;' they are about taking action to ensure the survival of our own species, against the clock of climate change and natural resource depletion. 

Water is at the heart of many environmental challenges, as it is of life itself.  The availability of water has shaped both human existence and geography, defining where and how we live, and constraining our ambitions.  It remains the essential natural resource, on which all else depends.  Yet, perhaps because wherever there is life there is water, we take it for granted.  As Rachel Carson, author of  Silent Spring, put it:  'In an age when Man has forgotten his origins and is blind even to his most essential needs for survival, water along with other resources has become the victim of his indifference.'

That indifference, coupled with a view that we can engineer our way out of any conceivable difficulty, may yet be our undoing.  Sometimes achieving sustainability may require what appear to be backward steps.  I remember seeing a vivid example of this in Rajasthan.  Traditional, village-based systems of harvesting the monsoon rains, developed over thousands of years, fell into disrepair in the 1950s when powerful pumps allowed groundwater to be extracted instead.  But this turned out to be an unsustainable, short-term solution because the groundwater was not being replenished.  Levels eventually dropped below the reach of the pumps, irrigation became impossible and the villages began to decline as people drifted away to look for work in the cities.  The breakthrough came from a remarkable man called Rajendra Singh.  He encouraged a local self-help approach to rebuilding the ancient system of dams and ponds and started harvesting the monsoon once again.  Groundwater levels crept back up, previously dried-up rivers started flowing again and, 20 years later, more than half a million people in Rajasthan are feeling the benefit.

Closer to home, water harvesting is just as important.  Yet we still need to identify the best strategies and it is clear that there are no easy answers, especially when energy use and ensuring public health are added to the equation.  With the wisdom of hindsight it would, of course, have been better if our domestic water supply systems had been developed with separate potable and non-potable networks.  That may be one way ahead but, in the meantime, we need to identify the best strategies for the systems we have.  Building large scale reservoirs and filling them at times of peak river flow is one approach to rainwater harvesting.  At the other end of the scale it is clear that much more can be done to harvest rainwater and grey water for non-potable uses, though I note some important caveats in the Institution's position paper on that subject.  Equally, it seems there may be a role for greater reuse of sewage effluent, at least for non-potable uses.

Similarly, there have been problems ever since urban man first began to requisition rivers and streams to take away his wastes.  As early as 1388, it became illegal to dump animal waste, dung or litter into England's rivers.  Environment Agency employees might like to note that the penalties for offenders then included hanging!  As with clean water, managing wastewater brings network issues.  In particular, the legacy of combined sewers taking both human waste and surface water run-off causes capacity problems, leading to damaging overflows to rivers, which have in all other respects been cleaned up.  Once again there are no easy answers, especially in large conurbations where space is at a premium.

I know that these are the issues with which many members of the Institution will be grappling on a daily basis, so the last thing I am going to do is offer any advice.  What I would like to encourage is closer involvement by water and environmental management professionals in what, to me, seems to be the most important development in a wider field of interest.

As the economist Herman Daly pointed out, the environment is, 'the envelope that contains, sustains and provisions the economy,' - not the other way round.  Yet in a world where economics has, rightly or wrongly, the greatest possible influence on decision-making, the environment is always in danger of being discounted.  The answer, surely, is to find ways of measuring the economic benefits provided to mankind by the environment - in the form of biodiversity and ecosystems. 

The concept of 'ecosystem services' has been discussed for a number of years, but the debate has moved on considerably with an initiative known as The Economics of Ecosystems and Biodiversity, or TEEB for short.  There is now a series of  TEEB reports setting out not only the benefits of taking into account the value of ecosystem services and biodiversity in making decisions and choices, but also explaining how this can be done, with some excellent case studies.  There are reports addressed to policy-makers, to business, to regional and local government and to citizens. 

TEEB's reports also reiterate something I have long tried to encourage businesses to recognise - that we should not regard this type of valuation and pricing as a tax. We should see it as an incentive for powerful investment for the future; something to be achieved not through imposition and dictum, but through reassessment and realignment of thinking and exchange and discussion.

In this regard, it is perhaps worth noting that looking forward to 2030, research by McKinsey & Co. for the Water Resources Group indicates that global water requirements will be 40 per cent greater than the current sustainable supply, assuming current rates of economic growth.  This is because agricultural demand is expected to grow substantially, while urban and industrial use will also grow strongly.  At the same time the need to maintain environmental flow requirements to prevent the collapse of important riparian ecosystems will place additional limits on water availability. 

Most of our natural capital has not been properly valued and charged for, because assets like fish in the oceans, water in rivers, rainfall, a clean and temperate atmosphere and communities, have always been thought of as limitless and freely available. It is also, of course, because valuing these things and charging for natural capital can be difficult when the assets do not necessarily belong to a particular individual, organisation or country. In short, providing quantitative figures for qualitative values has proved a somewhat elusive science.

Measuring the contribution to the economy made by ecosystems and biodiversity could be an important step towards maintaining the productivity of the natural resource base on which we all depend.  It could also help to quantify the risks of both action and inaction, thereby helping to drive good decision-making. 

This is not just a job for economists, or for policy-makers, or even for scientists and practitioners.  It is a role for the whole of society and I do hope that the Institution will build on its commendably concise and readable position papers by identifying the distinctive contribution it could make to the discussion on valuing ecosystem services.  There is no time to lose.

The profession of environmental management has come a long way in 25 years, but the decisions you take, encourage and inform in the next few years will have a cumulative effect upon humanity's ability to survive in the long-term.  So I will continue to watch your progress with the greatest of interest.

The answer!

Ever since I saw the original information passed on in my recent post – we’re ***’ed – I’ve been  a bit subdued in an “it’s too late already” sort of way.  Just to attempt to show willing by spreading some worthwhile ideas further, I am posting a copy of an essay by Rob Dietz about the potential a “steady state” economy has to fix just about all the current problems we have. Its basic thesis is that unending growth is no longer desirable, probably disastrous, despite virtually all mainstream economists taking it as a article of faith that growth must continue to grow…

As a consequence of the century old obsession with unending growth by the top level advisers to governments, we now have a situation where virtually all the people with power over our lives accept, and are being fooled by, a system that is long past its use by date. The 7 billion innocent bystanders, who hope that governments will get things right, have an unjustified faith that, because the system appears to have worked so well for more than their lifetimes, that it will continue to work indefinitely. Familiarity bred confidence. Pride goeth before a fall.

Newton’s laws of motion etc needed to be added to by the theories of Einstein to explain why the motion of objects at extreme speeds (nearing light speed) differed from that predicted by basic Newtonian mechanics. In an interesting parallel, the standard theories of “growth economics” work OK in what can be described as an empty world – one in which there is a relatively slow economy with apparently endless space to expand into and pollute and endless resources to exploit, such as when there were far fewer than 2 billion people around (who also had a modest environmental footprint).

Nowadays our economy, our demands and the numbers of us have expanded exponentially and we are bumping up against the environmental and resource availability limits of the planet. We are metaphorically approaching the speed of light economically where the well worn ordinary laws of economics clearly start to break down. Using Newton’s laws to plot a high speed course amongst the planets would lead to failure to get where one wanted. So too if standard economic theory and advisers are used to cope with economic meltdowns, climate change etc. We need the equivalent of a theory of relativity to light the way. Ecological economics is it. Developed by Herman Daly almost 40 years ago, it is “the answer”.

The following article was posted on the Post Growth blog which reposted it from the original source on the ”The Daly News”, which is part of the CASSE (Center for the advancement of the Steady State Economy.

_____________________________________________________________________

Economics of the Story of Stuff

by Rob Dietz on May 15, 2010

We’re pleased to introduce our first guest contributor, Rob Dietz, Executive Director of the Center for the Advancement of the Steady State Economy. This is a cross-posting of his most recent work on The Daly News, CASSE’s blog.

Annie Leonard’s The Story of Stuff, the explosive online video (now also expanded into a book), provides an entertaining explanation of a glaring economic flaw.  The Story of Stuff takes a look at the economy’s linear system that runs from extraction to production to distribution to consumption to disposal. As Annie says, “… you cannot run a linear system on a finite planet indefinitely.” You especially can’t grow the size of that linear system indefinitely. But that’s the misguided aim of current economic goals and policies. Misguided as it is, however, we know why politicians and economists push economic growth and consumer spending. As soon as we slow down our shopping and buy less stuff, the economy spirals into a recession. That’s when we start hearing about and experiencing real problems – problems like people losing their jobs, their homes, and even their ability to take care of basic needs.

What a dilemma! The planet can’t sustain our pattern of consumption, but people get steamrolled in the economy when consumption slows down. The solution is to figure out how to structure the economy so that people can meet their needs without trashing the planet. But restructuring the economy is no simple task. Even gathering the will to take a shot at it is difficult.

The main reason is that economics is a subject most of us avoid. The majority of people understand that it’s good to have money in their pockets, but they don’t necessarily want to get involved in the policies of the Federal Reserve, the inner workings of the Treasury Department, or banking regulations. That’s the job of economists, right? But 99% of economists are entrenched in the old way of thinking. Their training and their methods are aimed at growing the unsustainable linear system. Economists are always talking about growth. Growth, growth, growth. They seem to believe that getting bigger is the only recipe for getting better. It’s worked for them in the past and it’s what they know. And they mostly haven’t studied ecology or physics or other fields that would help inform them about the effects of their policies on the planet.

As a result, economists are doing what they can to prop up the old system, and politicians and the public are inclined to listen to them. Politicians are especially susceptible to the spin. They don’t usually know much at all about economics, but they do know they’ll be thrown out of office if people are losing their jobs and their sense of security.

Why do we grant so much latitude to economists, especially when they have proven time and time again that they can’t predict momentous economic events? With few exceptions, they didn’t know the financial and economic crisis of 2008 was coming. We’ve pursued and achieved economic growth for several centuries, and through official policy for over 50 years. If their prescription of continuous economic growth is the answer, why are we facing so many profound environmental and economic problems? Why should we be worried about global warming and losing our jobs at the same time?

It will take a lot of effort to get the ball rolling on changing our economic structure. On the positive side, ecological economists have already developed the foundation for a new economy. A steady state economy provides a real potential for sustainability that simply cannot derive from continuous pursuit of economic growth. A steady state economy respects limits and strives for stability in population, consumption, and overall use of energy and materials. To get a feel for how this works, think of a healthy mature forest. It does not grow in size, but it is a living system with a complex web of parts. Remarkably diverse groups of species cooperate and compete within the forest, and there are opportunities for new species and ecosystem functions to develop over time.

Just like in the forest, stability in a steady state economy is very different from stagnation. Ecological economists actually call this kind of stability a dynamic equilibrium. This fancy term simply means that a steady state economy is dynamic – it changes and develops over time – but it balances with the natural environment. The idea is to right-size the economy, to find that Goldilocks size that’s not too small and not too big, but just right.

The old economy has one major rule: grow or die. Unfortunately, we’re getting to the point where that rule is changing to grow AND die. In contrast, the new steady state economy lives by four main rules described below. It’s very hard to argue against any of these four rules. In fact, as a test, let’s consider the opposite of each rule as well…

Rule 1

Maintain healthy ecosystems. Healthy ecosystems provide the life-support services for the planet. Ecosystems tend to be resilient, so they can handle quite a bit of disturbance. But if economic activities grow too large, they can disrupt the ability of those ecosystems to do their job.

The opposite of Rule 1 is that we destroy healthy ecosystems or maintain unhealthy ecosystems, clearly not a good idea (assuming we want to maintain life on the planet).

Rule 2

Extract renewable resources at a rate no faster than they can be regenerated. Renewable resources, like forests and stocks of fish, provide goods for the economy. The amazing part about them is that they can go on providing goods year after year, so long as we don’t overdo it. If we take only the number of trees and fish that can be regenerated (economists call this sustainable yield), we can keep consuming timber and fish for generations to come.

The opposite of Rule 2 is that we extract renewable resources at a rate faster than they can be regenerated. Following such a course of action would wipe out the forest and drive the fish population to extinction. It would be like killing the goose that lays golden eggs.

Rule 3

Use non-renewable resources at a rate no faster than we can find renewable substitutes. To use a non-renewable resource, like a fossil fuel or mineral, really means to use it up. There will be less of it available for future generations. This condition doesn’t mean that we have to leave all non-renewable resources untouched. But it does mean that there is a clear limit to their exploitation, and we should be working toward replacing them with renewable substitutes as we use them up.

The opposite of Rule 3 is to use non-renewable resources without finding renewable substitutes.

Following this course of action would deplete the bounty of planetary resources in short order. It would be like winning a million dollar lottery, leaving behind a job, and throwing a million dollars’ worth of lavish parties for one year. It might have been one heck of a year, but at the end of it, the money would be all gone, and future prospects wouldn’t be so bright.

Rule 4

Dump wastes into the environment no faster than they can be safely assimilated. Depositing wastes faster than they can break down means that we have to live in our own piles of refuse. It makes for unpleasant and unhealthy living conditions.

The opposite of Rule 4 is to dump wastes as fast as we please. We don’t have to imagine the consequences of this course of action. We’ve seen them in the past – remember when it wasn’t all that uncommon for a river to catch on fire? And we see them today in the form of climate change and rising cancer rates.

Before we can go about building an economy based on these rules, we need to tell our economists and politicians that enough is enough (signing the CASSE position is a good start). We need to stop avoiding the thorny subject of economics and demand a new economic framework — preferably a steady state economy that provides a happy ending to The Story of Stuff.

Image credit: Flickr.com/Adam Crowe. Creative Commons license.

Sustainability and stuff (at last)

Breaking the expectation of exponential growth being the solution to all problems will not be easy – it is hard wired into the very basis of classical economic theory and even how fiat money is created by such as the US Federal Reserve. Most people who have career type employment have accepted the status quo as the way to get ahead and, no matter how they may originally have been capable of understanding the inherent drastic flaws in the system, when they were still at college, life somehow clouds their minds – they end up so occupied with squirrelling away the excess amount of nuts for the winter that their insecurities force them too, that they lose sight of the fact that their actions may actually be generating one helluva winter that wouldn’t otherwise have occurred.

Last night I went to a presentation, by Peter Taylor, to the CIGPE (Channel Islands Group of Professional Engineers).

It was called "Making sense of carbon foot printing in the built environment"

Mr Taylor is a founding partner of CarbonPlan, a London based sustainability consultancy that specialises in work related to the built environment.

I’m bringing this up as an example of the difficulty we may face ahead which will be caused by the old problem of the “good being the enemy of the best”. The situation reminds me of the late 80's/early 90's when I was patronised by Pierre Horsfall, the then President of the Finance and Economics committee. I had been trying to point out the errors in the "unending growth is good" argument when he metaphorically patted me on the head in an avuncular fashion and metaphorically said "don't you realise, naive little green person, that we must have more economic growth to pay for the environmental clean up that you say we need?" I then went on to introduce him to the concept of ecological economics, which he had the grace to admit looked interesting.

Early on in his talk, Mr Taylor - professional sustainability consultant from London - said something along these lines “although there are many who are criticising the idea of further economic growth, I do not share this idea”. This sort of dangerous complacency unfortunately goes down well here in Jersey, which is full of financiers etc schooled in the dogma of conventional economics. If even sustainability consultants haven’t all “got it” yet, I think there is still a lot of work left to do.

He then went on to do a population analysis by suggesting that the only way that global population will stabilise is by female education in the third world combined with economic growth. He conveniently left it for the audience to miss that he was backing economic growth generally (i.e. in the rich nations too) but was justifying it by reference to the needs of the third world – a bit of a magic trick…

I don’t think that any of us would dispute that economic growth, in areas which have very little economy to start with, is not a good idea, if we assume that it will be achieved using a different model from that which the West has used up to date – ever increasing amounts of non-renewable energy and ever increasing amounts of material resources extracted and not recycled.

The problem with the “vanilla” economic growth juggernaut is that it requires increasing amounts of energy and materials throughput to achieve ever higher levels of “stuff”, which it believes is essential to keep the whole shooting match going. Its advertisers and marketers have been brainwashing us for decades that it is our patriotic duty to use more stuff – they play on our psychological weaknesses (you gotta save more nuts!) to make us think that more stuff is the answer because they believe it!

Economic development can achieve higher levels of sustainably desirable “stuff” for those undeveloped nations, who currently don’t have enough, without increasing demands for energy or materials – indeed it can, and must, lead to decreasing demands for energy and materials.

A cute example of growth versus development is personal music systems. In the seventies, they were carried on your shoulder – conventional economic growth principles applied to stereos would have meant that personal stereos would be the size of a house by now. Instead they “developed” and now they are incredibly “Ipod” small. I know this is not a bulletproof example, as it’s possible that the extreme technology involved in creating Ipod’s may use more energy and toxic materials than the 70’s beat box but what the hey!

The Story of Cap and Trade

I posted a long comment (comment #4) on this article on triplepundit.com, so I thought I would re-use it here, with a little editing.

The article linked to above was a critique of Annie Leonard’s new video “The Story of Cap and Trade” which is a very harsh criticism of carbon “cap and trade” - it basically suggests that it would all be too corrupt and useless to be worth it. This particular market mechanism is seen by many as a way of getting the “free” market to take action to avoid the worst of the problems that climate change will bring.

Annie was responsible for the wildly successful viral video “The Story of Stuff” which held our ever increasing consumer society up to the light for examination – consumerism was found seriously wanting (wordplay intended!).

I am a great fan of "The Story of Stuff" and have linked to it several times here to enhance a point I was making. The film was clear and made extremely good points. It deservedly became very popular.
I did not like the "Story of Cap and Trade", although Annie is still loveable in it. It seemed as if Annie was letting an ideology blind her to the potentially overwhelming usefulness of the concept - the baby was thrown out with the bathwater - worse, she constantly suggested that either there was no baby or it would grow up to be an evil adult.

Her point about how the virtually unregulated simple market has forced us towards our current dire predicament is, of course, accurate. She goes from this point, in a pseudo-logical fashion, rather like this: markets have brought us to this point - this point is bad - therefore any further market based solution will also be bad - therefore she must then exploit the credibility and warm fuzzy feelings that people remember from "Story of Stuff" to show them that market based "cap and trade" will inevitably be a bad thing.

The problem with markets (up to date) is that their bottom line only contains measurements of money in versus money out and unfortunately the processes that make the money do not take "externalities" into account such as carbon emissions, volume of waste generated, general non-sustainable damage to the environment, reduction in bio-diversity, public health, social well being etc. etc.

The damage that economic activity/growth inflicts on these "externalities" can be (if we're lucky) controlled and moderated by legislation and voluntary codes of practice but the problems are systemic and huge and legislation is a very slow and blunt weapon - sadly, the legislators also tend to be high up members of the same society, with the same set of values, that created the situation in the first place by not valuing the environment or social values enough. Expecting them to lift themselves up by their own bootstraps (by re-evaluating everything that is familiar and comfortable to them) is optimistic to say the least.

Concerted campaigning and citizen action can generate enough pressure to compel some companies to adopt a greener, more sustainable, outlook but it's not enough. The company that continues to maintain a cavalier approach will mostly tend to be more profitable; that is the problem with markets-to-date. Putting the full costs, financial, environmental and social onto the accountants' bottom line will have an extremely powerful, almost automatic, effect that will drive companies and economies to "do the right thing" because, if they don't, they will become less profitable or go out of business altogether.

Markets have historically been bad for sustainable ways. Putting a cost/value on carbon emissions (and all the other externalities too - but that's for later...) that will direct greedy people to be keen to take the green option - purely to save money - will be a great start - it may just solve the whole shooting match.

Annie's basic premise is to suggest that any market will end up being totally corrupt. Well, it's up to us to keep them straight - she can't just point to teething problems or far-fetched theoretical dangers to reject the whole idea. The bad possibilities she enumerates are there because we have had a whole generation of enthusiastic "yuppies", with their selfish short term outlook, driving the market mechanisms to Madoff like breaking points. It was in their financial (short to medium term) interests to do so! Change the financial interests of people like that - make it (not) so!

Monetise the externalities - put considerate, wise, prudent, sensible environmentally and socially sound economic drivers onto the bottom line and watch society transform itself far faster and more efficiently than even the most draconian legislation could do. Watch people's personalities and the world zeitgeist change too.

Nothing big ever worked right first time - it will take a lot of effort, tuning and tweaking and monitoring to hack it into shape but imagining that markets, that were predisposed to generate corrupt selfish greedy types, who don't care about anything apart from their own "bottom line", must always do that is truly throwing the fantastic baby out with the murky water.

A market which uses full cost (or ecological or environmental) accounting would be transformative and constructive, not destructive. It all depends what you measure when you tot up the bottom line. Make the bad guys, environmentally and socially, less profitable. Make the good guys more profitable. Make it so!