Towards a new sustainable economy

31 03 2009

Robert Costanza comments on the failure of capitalism to provide for human well-being and protect the environment in the Real-World Economics Review.

The current financial meltdown is the result of under-regulated markets built on an ideology of free market capitalism and unlimited economic growth. The fundamental problem is that the underlying assumptions of this ideology are not consistent with what we now know about the real state of the world. The financial world is, in essence, a set of markers for goods, services, and risks in the real world and when those markers are allowed to deviate too far from reality, “adjustments” must ultimately follow and crisis and panic can ensue.

To solve this and future financial crisis requires that we reconnect the markers with reality. What are our real assets and how valuable are they? To do this requires both a new vision of what the economy is and what it is for, proper and comprehensive accounting of real assets, and new institutions that use the market in its proper role of servant rather than master.

The mainstream vision of the economy is based on a number of assumptions that were created during a period when the world was still relatively empty of humans and their built infrastructure. In this “empty world” context, built capital was the limiting factor, while natural capital and social capital were abundant. It made sense, in that context, not to worry too much about environmental and social “externalities” since they could be assumed to be relatively small and ultimately solvable.

It made sense to focus on the growth of the market economy, as measured by GDP, as a primary means to improve human welfare. It made sense, in that context, to think of the economy as only marketed goods and services and to think of the goal as increasing the amount of these goods and services produced and consumed.

But the world has changed dramatically. We now live in a world relatively full of humans and their built capital infrastructure. In this new context, we have to first remember that the goal of the economy is to sustainably improve human well-being and quality of life.

We have to remember that material consumption and GDP are merely means to that end, not ends in themselves. We have to recognize, as both ancient wisdom and new psychological research tell us, that material consumption beyond real need can actually reduce well-being. We have to better understand what really does contribute to sustainable human well-being, and recognize the substantial contributions of natural and social capital, which are now the limiting factors in many countries. We have to be able to distinguish between real poverty in terms of low quality of life, and merely low monetary income.

Ultimately we have to create a new model of the economy and development that acknowledges this new full world context and vision.

This new model of development would be based clearly on the goal of sustainable human well-being. It would use measures of progress that clearly acknowledge this goal. It would acknowledge the importance of ecological sustainability, social fairness, and real economic efficiency. Ecological sustainability implies recognizing that natural and social capital are not infinitely substitutable for built and human capital, and that real biophysical limits exist to the expansion of the market economy.

Social fairness implies recognizing that the distribution of wealth is an important determinant of social capital and quality of life. The conventional model has bought into the assumption that the best way to improve welfare is through growth in marketed consumption as measured by GDP. This focus on growth has not improved overall societal welfare and explicit attention to distribution issues is sorely needed.

As Robert Frank has argued in his latest book: Falling Behind: How Rising Inequality Harms the Middle Class, economic growth beyond a certain point sets up a “positional arms race” that changes the consumption context and forces everyone to consume too much of positional goods (like houses and cars) at the expense of non-marketed, non-positional goods and services from natural and social capital.

For example, this drive to consume more positional goods leads people to reach beyond their means to purchase ever larger and more expensive houses, fueling the housing bubble. It also fuels increasing inequality of income which actually reduces overall societal well-being, not just for the poor, but across the income spectrum.

Real economic efficiency implies including all resources that affect sustainable human well-being in the allocation system, not just marketed goods and services. Our current market allocation system excludes most non-marketed natural and social capital assets and services that are critical contributors to human well-being. The current economic model ignores this and therefore does not achieve real economic efficiency. A new, sustainable ecological economic model would measure and include the contributions of natural and social capital and could better approximate real economic efficiency.

The new model would also acknowledge that a complex range of property rights regimes are necessary to adequately manage the full range of resources that contribute to human well-being. For example, most natural and social capital assets are public goods. Making them private property does not work well. On the other hand, leaving them as open access resources (with no property rights) does not work well either. What is needed is a third way to propertize these resources without privatizing them. Several new (and old) common property rights systems have been proposed to achieve this goal, including various forms of common property trusts.

The role of government also needs to be reinvented. In addition to government’s role in regulating and policing the private market economy, it has a significant role to play in expanding the “commons sector”, that can propertize and manage non-marketed natural and social capital assets. It also has a major role as facilitator of societal development of a shared vision of what a sustainable and desirable future would look like. As Tom Prugh, myself, and Herman Daly have argued in our book “The Local Politics of Global Sustainability,” strong democracy based on developing a shared vision is an essential prerequisite to building a sustainable and desirable future.

The long term solution to the financial crisis is therefore to move beyond the “growth at all costs” economic model to a model that recognizes the real costs and benefits of growth. We can break our addiction to fossil fuels, over-consumption, and the current economic model and create a more sustainable and desirable future that focuses on quality of life rather than merely quantity of consumption.

It will not be easy; it will require a new vision, new measures, and new institutions. It will require a redesign of our entire society. But it is not a sacrifice of quality of life to break this addiction. Quite the contrary, it is a sacrifice not to.

Also see my previous post on Herman Daily’s “Steady-State Economics”.





Chaos is a vacant space

31 03 2009

A world in flux

The world is changing. It always has been changing and always will be changing. But the distinctions between the changes that have occurred during past human existence and those of this century are their complexity, scale and rate. Human societies are highly dependent on the living environment to sustain development (1, 2, 3). Our ingenuity has enabled us to become highly effective at exploiting resources. These levels of resource use – mediated by the highly connected and efficient global capitalist economy – are destroying ecosystems and changing the climate (4, 5, 6). Added to this is exponential population growth that is generating serious pressure for water and arable land, and depleting ocean fisheries. The enormous scale of current human induced transformations has led scientists to describe the period since the late eighteenth century as the anthropocene. On the present trajectory, the likely direction of the world-system is one of major social, ecological, economic and political collapse.

The mainstream media is frequently bombarding us with stories about how the earth is irrevocably changing, but often fail to provide us with grounded solutions as how to successfully avoid this change. According to recent theoretical advances, a group of scientists are telling us to concentrate our resources on finding solutions that create adaptable systems, be it social, ecological or economic, capable of absorbing shocks.

Answers in the forest

This group is called The Resilience Alliance. An international network of social and natural scientists who are bringing new ideas on sustainability to policy- and decision-makers. Their work is guided by the concept of social and ecological resilience that was pioneered by a man called Buzz Holling. It emerged from experiments in boreal forest ecosystems, which allowed him to notice that healthy forests go through an adaptive cycle of growth, collapse and regeneration.

As a forest develops from shrubland to maturity, the number of species and abundance of individual plants and animals rises, allowing the ecosystem to accumulate nutrients and information in the form of genes. Decay allows these nutrients to form richer soil, supporting more trees and reproduction allows mutated genes to be inherited, potentially being of value for an organism in the future. For Buzz Holling these forest accumulations represent an increased “potential”, essentially its wealth that allow for unique and surprise situations to arise (7). As the forest grows, various components like the soil and its organisms become more closely linked. For example, bacteria, beetles and worms begin to decompose the organic molecules of plants to form useful nutrients for tree growth. The theory calls this link between micro-organisms and trees “connectedness”, which also represents the forest’s sensitivity to a change in circumstances. When the forest reaches the pinnacle stages of maturity, species evolve to become more adept and efficient at controlling energy and nutrients to produce biomass, in turn preventing external competitors from utilising them. An analogy of a highly connected system would be the human body, in which the brain controls the internal environment through homeostasis.

In the forest, efficiency ends up replacing redundancy, a gradual loss of diversity occurs as all ecological niches are occupied and new species are unable to find the necessary resources to sustain themselves. Growth is not infinite and with rising potential for novelty, increasing self-regulation and falling resilience, the ecosystem “becomes an accident waiting to happen”. Any surprise event like a fire, disease outbreak or drought can easily wreck havoc and destroy the forest. A collapse is known as “creative destruction” and can be beneficial for the forest – freeing up the ecosystem’s potential for creativity and allowing for a reorganisation of its many parts. For instance, a fire will release nutrients and open up spaces in which new species are able to establish themselves. At this point the forest is at its most resilient – capable of absorbing a shock without fundamentally changing its arrangement. When resilience is high the forest’s plants and animals are able to test certain behaviours and relationships, for example a bee might try collecting nectar from a different flower species. So this collapse essentially allows for innovation and the cycle of growth, destruction and reorganisation enables the forest to adapt to a changing environment.

Shocking vulnerability

What does all this abstract science mean to people with a desire to deal with environmental and social crises? Well the first is that no domain – ecological, social or economic – can be considered in isolation from another. We rely on healthy natural systems like wetlands, soils and forests, to produce clean water, grow nutritious food and absorb our wastes. But policy makers in rich countries continually prioritise economic growth, which increases resource use, pollution, instability (as seen by the current recession) and global inequality and fundamentally clashes with the priority of protecting ecosystems. This clash can be slightly alleviated through new technologies that enable more to be produced with less and improve efficiencies. But there is currently no indication that we are going to successfully disconnect economic production from resource consumption; essentially dematerialising the economy, while maintaining such high living-standards. For years ecological economist Herman Daly has presented his ‘Steady-State Economy‘ as a solution, but still those in power are not taking heed. So just like in the forest ecosystem, we are moving up through the growth stage of the adaptive cycle. Gathering potential in the form of a skilful populace and a wealthy economy. And becoming more connected through global economic flows and regulatory controls. Unfortunately, this also means that we are becoming more vulnerable to shock events.

This presents us with a serious challenge because we are driving earth’s natural systems to the edge of their resilience tipping points. Take the climate system, until now forests, bogs and oceans have had the capacity to absorb the slow shock of our rising CO2 emissions. But it is becoming apparent that if the climate warms by 2°C, between 20 and 40 percent of the Amazon rainforest could die off (8). This then adds the dimension of feedback effects, forests store huge amounts of carbon and if they were to collapse our atmosphere would be filled with even more CO2, in turn exacerbating global warming. Once these tipping points are passed it will be very difficult, more likely impossible, to push the climate system back to how it has been for millions of years.

Diverse adventures in living

Holling believes that the changes the world is now experiencing represent “a state of vulnerability that could trigger a rare and major ‘pulse’ of social transformation” (9). Humans have experienced similar stages in their development before: agricultural settlement, the industrial revolution and the global communications age. He tells us that “the immense destruction that a new pulse signals is both frightening and creative” and “the only way to approach such a period, in which uncertainty is very large and one cannot predict what the future holds, is not to predict, but to experiment and act inventively and exuberantly via diverse adventures in living”.

Adjoining much of the work on making ecosystems and societies more resilient is the field of ‘futurology’. Futures practitioners use scenarios, imaginative visions of the future, to explore possible and alternative pathways of human endeavours. These narratives can be used as templates upon which to spur visionary activity and design new experiments in life that are sustainable and adaptable. It is an approach that sits in stark contrast with the myopic policies adopted by many of the world’s governments.

What shape might these experiments take? Well many already exist, in the form of different political arrangements that engage more people and their ideas, networks that allow for the exchange of these ideas, open-source cultures that bring people together to solve problems collaboratively, low-impact developments that are independent of fossil fuels and urban gardens that stimulate food self-sufficiency through permaculture.

The resilience concept is by no means a panacea and conflicts over values and concentrations of power are undoubtedly formidable barriers to a sustainable reorganisation of society. Nonetheless, the essential ingredient needed for a sustainable future might well be the cultivation of a shared vision and desire for action that challenges the growth paradigm and transfers small-scale experiments in to a large-scale reality.

Read the rest of this entry »





BOMB IT – street art is revolution

26 03 2009

Some of humankind’s first artistic expressions were on walls and they still continue to this very day. After its birth in Philadelphia, the explosion of graffiti writing in New York between 1969 and 1974 immersed the city’s streets and subways with a wave of creative energy.  Empowered young people were able to occupy their own space in public space, emerging from the shadows of marginalisation and challenging authority. It was not long before this artform captured the imagination of people around the world and soon spread to become a global culture. Quickly criminalised and treated as mere vandalism by the state and property owners who saught to suppress freedom, hide protest and maintain sanitised “clean” streets.

“Bomb It” is a documentary on global graffiti culture, from the streets of Barcelona to the sewers of Sao Paulo. The filmmakers create a narrative that explores the motivations of these artists and delve a little deeper into what graffiti really means in modern society and its relationship to public space. It really is worth checking out.


Check their site here.

Graffiti writing started at the birth of human consciousness” – KRS-One





Peak phosphorus

24 03 2009

You have no doubt heard of peak oil. The point at which the rate of oil production begins to decline. Well there’s another peak you should be concerned about if you like to eat food grown in fertilised soil, like much of the world’s population does. Phosphate is a non-renewable resource and is therefore not created on a timescale meaningful to people. This presents us with a bit of a problem because we are using a lot of it and it could potentially run out within the next 50-100 years, having enormous consequences for global food supply and geopolitics. But, its demise could improve the condition of our rivers, lakes, seas and oceans.

A recent paper published in the journal Global Environmental Change titled “The story of phosphorus: Global food security and food for thought” has explored the phosphate dilemma. Here are some of its main points.

Food production is fundamental to our existence, yet we are using up the world’s supply of phosphorus, a critical ingredient in growing food.

Phosphate rock reserves are in the control of only a handful of countries (mainly Morocco, China and the US), and thus subject to international political influence. Morocco has a near monopoly on Western Sahara’s reserves, China is drastically reducing exports to secure domestic supply, US has less than 30 years left of supplies, while Western Europe and India are totally dependent on imports.

Existing rock phosphate reserves could be exhausted in the next 50–100 years.

The demand for phosphorus is predicted to increase by 50– 100% by 2050 with increased global demand for food and changing diets.

The need to address the issue of limited phosphorus availability has not been widely recognized.

As well as the problem of eutrophication due to the leakage of excess phosphorus into waterways, the production of fertilizers from rock phosphate involves significant carbon emissions, radioactive by-products and heavy metal pollutants.

The peak in global phosphorus production could occur by 2033.

Phosphorus can be recovered from the food production and consumption system and reused as a fertilizer either directly or after intermediate processing. These recovery measures include: ploughing crop residues back into the soil; composting food waste from households, food processing plants and food retailers; and using human and animal excreta. Such sources are renewable and are typically available locally.

Fertilizing urban agriculture with phosphorus recovered from organic urban waste could be a significant step towards reaching the Millennium Development Goals on eradicating hunger and poverty, and providing access to safe sanitation.

Shifting to a vegetarian diet, combined with reducing over-consumption, would be one of the most cost-effective measures to reduce agricultural resource inputs (including water, energy, land and fertilizers) and would also minimize greenhouse gas emissions and other forms of pollution.

+ organic farming, permaculture and ending capitalism (an unlikely suggestion in a mainstream academic journal).






Baghdad in a time of cholera

24 03 2009




A solution to the horror of the global trade in drugs?

22 03 2009

Anti-drugs policy is an absolute disaster. For decades governments have struggled to control the international trade in drugs. Prohibition has had consequences that are the polar opposite of its intentions. Policy-makers are hellbent on a regressive and ineffective approach that has done nothing to stem escalating violence in underdeveloped countries, the creation of a narco-state in Africa and rising drug consumption in western countries. The 52nd session of the United Nations Commission on Narcotic Drugs in Vienna has just agreed to maintain this approach. The Economist, regardless of its ideological positions, has published four articles on “illegal” drugs. Here’s one of them.

A hundred years ago a group of foreign diplomats gathered in Shanghai for the first-ever international effort to ban trade in a narcotic drug. On February 26th 1909 they agreed to set up the International Opium Commission—just a few decades after Britain had fought a war with China to assert its right to peddle the stuff. Many other bans of mood-altering drugs have followed. In 1998 the UN General Assembly committed member countries to achieving a “drug-free world” and to “eliminating or significantly reducing” the production of opium, cocaine and cannabis by 2008.

That is the kind of promise politicians love to make. It assuages the sense of moral panic that has been the handmaiden of prohibition for a century. It is intended to reassure the parents of teenagers across the world. Yet it is a hugely irresponsible promise, because it cannot be fulfilled.

Next week ministers from around the world gather in Vienna to set international drug policy for the next decade. Like first-world-war generals, many will claim that all that is needed is more of the same. In fact the war on drugs has been a disaster, creating failed states in the developing world even as addiction has flourished in the rich world. By any sensible measure, this 100-year struggle has been illiberal, murderous and pointless. That is why The Economist continues to believe that the least bad policy is to legalise drugs.

“Least bad” does not mean good. Legalisation, though clearly better for producer countries, would bring (different) risks to consumer countries. As we outline below, many vulnerable drug-takers would suffer. But in our view, more would gain.

The evidence of failure

Nowadays the UN Office on Drugs and Crime no longer talks about a drug-free world. Its boast is that the drug market has “stabilised”, meaning that more than 200m people, or almost 5% of the world’s adult population, still take illegal drugs—roughly the same proportion as a decade ago. (Like most purported drug facts, this one is just an educated guess: evidential rigour is another casualty of illegality.) The production of cocaine and opium is probably about the same as it was a decade ago; that of cannabis is higher. Consumption of cocaine has declined gradually in the United States from its peak in the early 1980s, but the path is uneven (it remains higher than in the mid-1990s), and it is rising in many places, including Europe.

This is not for want of effort. The United States alone spends some $40 billion each year on trying to eliminate the supply of drugs. It arrests 1.5m of its citizens each year for drug offences, locking up half a million of them; tougher drug laws are the main reason why one in five black American men spend some time behind bars. In the developing world blood is being shed at an astonishing rate. In Mexico more than 800 policemen and soldiers have been killed since December 2006 (and the annual overall death toll is running at over 6,000). This week yet another leader of a troubled drug-ridden country—Guinea Bissau—was assassinated.

Yet prohibition itself vitiates the efforts of the drug warriors. The price of an illegal substance is determined more by the cost of distribution than of production. Take cocaine: the mark-up between coca field and consumer is more than a hundredfold. Even if dumping weedkiller on the crops of peasant farmers quadruples the local price of coca leaves, this tends to have little impact on the street price, which is set mainly by the risk of getting cocaine into Europe or the United States.

Nowadays the drug warriors claim to seize close to half of all the cocaine that is produced. The street price in the United States does seem to have risen, and the purity seems to have fallen, over the past year. But it is not clear that drug demand drops when prices rise. On the other hand, there is plenty of evidence that the drug business quickly adapts to market disruption. At best, effective repression merely forces it to shift production sites. Thus opium has moved from Turkey and Thailand to Myanmar and southern Afghanistan, where it undermines the West’s efforts to defeat the Taliban.

Al Capone, but on a global scale

Indeed, far from reducing crime, prohibition has fostered gangsterism on a scale that the world has never seen before. According to the UN’s perhaps inflated estimate, the illegal drug industry is worth some $320 billion a year. In the West it makes criminals of otherwise law-abiding citizens (the current American president could easily have ended up in prison for his youthful experiments with “blow”). It also makes drugs more dangerous: addicts buy heavily adulterated cocaine and heroin; many use dirty needles to inject themselves, spreading HIV; the wretches who succumb to “crack” or “meth” are outside the law, with only their pushers to “treat” them. But it is countries in the emerging world that pay most of the price. Even a relatively developed democracy such as Mexico now finds itself in a life-or-death struggle against gangsters. American officials, including a former drug tsar, have publicly worried about having a “narco state” as their neighbour.

The failure of the drug war has led a few of its braver generals, especially from Europe and Latin America, to suggest shifting the focus from locking up people to public health and “harm reduction” (such as encouraging addicts to use clean needles). This approach would put more emphasis on public education and the treatment of addicts, and less on the harassment of peasants who grow coca and the punishment of consumers of “soft” drugs for personal use. That would be a step in the right direction. But it is unlikely to be adequately funded, and it does nothing to take organised crime out of the picture.

Legalisation would not only drive away the gangsters; it would transform drugs from a law-and-order problem into a public-health problem, which is how they ought to be treated. Governments would tax and regulate the drug trade, and use the funds raised (and the billions saved on law-enforcement) to educate the public about the risks of drug-taking and to treat addiction. The sale of drugs to minors should remain banned. Different drugs would command different levels of taxation and regulation. This system would be fiddly and imperfect, requiring constant monitoring and hard-to-measure trade-offs. Post-tax prices should be set at a level that would strike a balance between damping down use on the one hand, and discouraging a black market and the desperate acts of theft and prostitution to which addicts now resort to feed their habits.

Selling even this flawed system to people in producer countries, where organised crime is the central political issue, is fairly easy. The tough part comes in the consumer countries, where addiction is the main political battle. Plenty of American parents might accept that legalisation would be the right answer for the people of Latin America, Asia and Africa; they might even see its usefulness in the fight against terrorism. But their immediate fear would be for their own children.

That fear is based in large part on the presumption that more people would take drugs under a legal regime. That presumption may be wrong. There is no correlation between the harshness of drug laws and the incidence of drug-taking: citizens living under tough regimes (notably America but also Britain) take more drugs, not fewer. Embarrassed drug warriors blame this on alleged cultural differences, but even in fairly similar countries tough rules make little difference to the number of addicts: harsh Sweden and more liberal Norway have precisely the same addiction rates. Legalisation might reduce both supply (pushers by definition push) and demand (part of that dangerous thrill would go). Nobody knows for certain. But it is hard to argue that sales of any product that is made cheaper, safer and more widely available would fall. Any honest proponent of legalisation would be wise to assume that drug-taking as a whole would rise.

There are two main reasons for arguing that prohibition should be scrapped all the same. The first is one of liberal principle. Although some illegal drugs are extremely dangerous to some people, most are not especially harmful. (Tobacco is more addictive than virtually all of them.) Most consumers of illegal drugs, including cocaine and even heroin, take them only occasionally. They do so because they derive enjoyment from them (as they do from whisky or a Marlboro Light). It is not the state’s job to stop them from doing so.

What about addiction? That is partly covered by this first argument, as the harm involved is primarily visited upon the user. But addiction can also inflict misery on the families and especially the children of any addict, and involves wider social costs. That is why discouraging and treating addiction should be the priority for drug policy. Hence the second argument: legalisation offers the opportunity to deal with addiction properly.

By providing honest information about the health risks of different drugs, and pricing them accordingly, governments could steer consumers towards the least harmful ones. Prohibition has failed to prevent the proliferation of designer drugs, dreamed up in laboratories. Legalisation might encourage legitimate drug companies to try to improve the stuff that people take. The resources gained from tax and saved on repression would allow governments to guarantee treatment to addicts—a way of making legalisation more politically palatable. The success of developed countries in stopping people smoking tobacco, which is similarly subject to tax and regulation, provides grounds for hope.

A calculated gamble, or another century of failure?

This newspaper first argued for legalisation 20 years ago (see article). Reviewing the evidence again (see article), prohibition seems even more harmful, especially for the poor and weak of the world. Legalisation would not drive gangsters completely out of drugs; as with alcohol and cigarettes, there would be taxes to avoid and rules to subvert. Nor would it automatically cure failed states like Afghanistan. Our solution is a messy one; but a century of manifest failure argues for trying it.

This article can found here, while one on the Mexican drug issue can be found here.

Check out the Transform Drug Policy Foundation, they are working to create a more humane drug control system.





Propagandhi – Supporting Caste

17 03 2009

Propagandhi, a punk band from Winnipeg in Canada have just released a new album ‘Supporting Caste’.

propagandhi_supporting_caste_3x3

From their last.fm page:

The band members are known for championing various political causes. They have taken an active stance against human rights violations, racism, homophobia, imperialism, fascism, capitalism and organised religion. The band supports vegan lifestyles, animal rights campaigns and feminism, and have described themselves as “gay positive”.

Propagandhi – Incalculable Effects (download)

Good review of the record here.

Support the band and buy the record here.

They are touring the UK in April.

propagandhi.com

myspace.com/propagandhi

g7welcomingcommittee.com