The world economy is depleting the earth’s natural resources, and economists cling to models that make no reference whatsoever to the biophysical basis that underpins the economy. That’s why ecological economics is needed, says William Rees in this INET interview.
Standard economics portrays the economy as a circular flow: households pay money to firms in exchange for goods and services, and firms pay wages to households in exchange for labor. Textbooks describe this circular flow as self-perpetuating, capable of infinite expansion. William Rees argues that the textbooks get it wrong; he says the production of our goods and services depends on the extraction of material from ecosystems, causing resource depletion on the one hand, and excess pollution on the other.
William Rees, best known in ecological economics as the originator and co-developer of ‘ecological footprint analysis’, says the United States is using four or five times its fair share of the world's total bio-capacity. In order to bring just the present world population up to the material standards enjoyed by North Americans, we would need the biophysical equivalent of about three additional planet earths.
There has been no time in history where income growth hasn't been accompanied by increased material and energy consumption, Rees cautions. He says technologies exist that would enable us to enjoy our current lifestyles with perhaps as little as 20 percent of our current energy and material consumption, but we do not have the incentives in place to force that decoupling to take place.
Rees is as pessimistic on current culture and politics as he is optimistic on the technology. The global culture remains in denial, and people with vested interests in the status quo wield enormous power.
Comments
Thank you for Professor Rees's informed and thoughtful views on resource depletion and ecological denial.
Politicians focus on winning the next election and will try and kick long term structural issues into the long grass. Witness for example the political bickering in the United States over the balooning and potentially lethal fiscal gap; and Eurozone denial over insolvency in failed economies instead of addressing essential and inevitable restructuring.
Professor Rees makes a persuasive case for a political leader to seek global cohesion on reversing ecological denial and resource depletion. But reflecting on his talk I am left with a question:
Assuming a charsmatic and courageous national leader went on a crusade now what could he tell other leaders they don't already know? Perhaps your readers who have considered the same question will share their views with us.
Brilliant!
This coalesces a number of concepts that I’ve wished could have been better expressed.
But – so what? Without that extension into the practical, the political, the human, it stays as little more than academically interesting thesis-fodder. (Sorry.)
In a federal election that we held about 20 years ago, I was involved in a new party as one of about 170 candidates. Our environmental platform was written by David Suzuki, our cultural platform was written by an eminent writer, Pierre Berton, our financial platform by a (conservative) former head of our Wage-and-Price Controls Commission, plus we had many other leading lights in our group. We had the best political platform that intelligent people could devise. And we lost miserably.
It was like herding cats. Each one of us knew, without a doubt, in area of expertise, exactly what needed to be done. Which usually conflicted with at least a quarter of the other strong-willed members of our intelligencia.
And it conflicted with the day-to-day lives of everybody else.
Now that’s the real problem to solve!
A charismatic leader – whether an Athenian tyrant, or a one of our current benevolent dictators – is a problematic solution.
Do we solve it through process, through education, genetic mutation, or what?
The answer to that will either make us or break us.
Good and necessary discussion. Unfortunately, with humans, inertia is a stronger force than change. People will change when they are forced to, which suggests that ecological crises will force the economics to find technological solutions. A large-scale communal solution driven by a benevolent, charismatic leader is a pipedream. His conception of democracy is unnecessarily idealistic in that it is only required for an unrealistic utopian solution. That's not going to happen - we need to manage ourselves as we are, not as we wish to be.
Yes, we do need to adopt the right sort of public policies as incentives for people to make far better use of natural resources than is now the case. What is ironic is that the poliical economists of the 17th and 18th centuries provided us with the solution in their treatment of rent theory (i.e., the theory of how land -- or nature -- comes to have an exchange value) and whether the rent of nature is and ought to be treated as a public asset rather than permitted to be treated as private property. Calls for the public collection of rent came from such diverse voices as Francois Quesnay, Adam Smith, Thomas Paine, Pierre-Joseph Proudhon, John Stuart Mill, Karl Marx, Henry George, Winston Churchill, Sun Yat-Sen and Leo Tolstoi.
The political game was unwinnable once large corporate enterprises became major owners of land not only where natural resources were to be extracted but in the financial and commerce centers of cities, where urban land valuves were measured by the square foot rather than by the acre.
What the political economists understood and tried to teach others was that every parcel of land has some potential rental value. This rental value comes from locational advantage created by aggregate public and private investment and by population size and density. Thus, location rental values are societally-created rather than produced by any individual or entity. The failure of societies to collect this rent to pay for public goods and services has serious consequences.
The net imputed or actual rent (i.e., rent net of any annual tax actually imposed on a landowner) is capitalized by market forces into a selling price for control over the location. The low effective rate of taxation rewards holding land off the market for speculative gain. The more land held idle the higher the price demanded by landowners for those who desire to use land to produce goods and provide services to others. Land hoarding also leads to sprawling development patterns, to displacement of agriculture by housing subdivisions, and the increased reliance on trucks and automobiles to move people and goods over greater distances, with all the negative environmental consequences this delivers.
The full public collection of rental values from those who have control over natural-resource-laden lands would require that extraction of resources be accomplished without the negative environmental side-effects. Companies would bid for access (i.e., make a bid equal to the market rental value) based on their cost of extration as well as full compliance with environmental protections. The rental income generated to the public would provide sufficient revenue to ensure effective enforcement of environmental protections and also create a level playing field for those companies that desire to engage in these business lines.
Systems analysis enables me to demonstrate "on the back of an envelope" how the economy currently works (and so where it is failing to work and what can be done about it).
Professor Rees is about right, for this reveals us "renewing the face of the earth" insofar as dad assists Nature in regenerating what mum uses and the kids consume - with a few bright sparks trying to do that better, traders organising distribution and a few ignorant money printers allocating credit for trade in this real economy on the basis of nepotism and movements (often generated by sleight-of-hand) in a Platonic "shadow" economy recycling second-hand stocks and shares.
However, getting adults interested in anything they don't already understand (like systems analysis and unfamiliar maths and logic) seems to get more problematic the higher their status and the more "face" (or income) they seem to think they have to lose. Are INET's eminent contributors going to be any different?
[The real problem being conflicting views on what needed to be done]
"Do we solve it through process, through education, genetic mutation, or what?"
By education of the educators and their students in information systems analysis, so their students are not blinded with science and ideology but started from a logically complete understanding of the system as a whole on which they can begin to hang and evaluate detailed knowledge as they acquire it. That, incidentally, is true not only for economists and their political and business students but for the logic, mathematics, linguistic communication and understanding of human nature on which these and other specialisms are built.
While I largely agree with this analysis, the last paragraph misses the point that environmental side-effects are inevitable and so enforcement of protections isn't enough: responsibility for putting things right and ability to do so must be built into the system. To that extent Mrs Thatcher's "those who dig holes should fill them" was right. What she didn't understand was that her opening of local tasks to international competition meant the local concern and expertise necessary for timely maintenance - previously developed in municipal works departments - was lost, while the diggers and temporary infillers of holes were thereafter nowhere to be seen.
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