Archive for December 2009

Sane Economics After Obama

December 29, 2009

Between now and Obama’s departure, progressive economists, environmentalists and political radicals need to get their act together.

There are many books and papers that provide the basis for developing a shared understanding of why today’s dominant free-market paradigm is lethally inadequate in the face of the challenges we face in the coming decades.

Nature’s role in sustaining economic development by Partha Dasgupta is a useful summary of  the kind of economic thinking we will need to use if we – and Gaia – are to come through the 21st century in reasonable shape.

The full paper is available for free download from the Royal Society and I warmly recommend it. As the Guardian says, this lucid and authoritative work shows how

“In nearly all their earlier calculations and prescriptions, economists have taken the earth for granted.”

Professor Dasgupta ranges widely in his argument, covering the importance of natural capital in issues such as de-forestation, PES ( Payment for Ecologicial Services),  social well-being,, property rights, and comprehensive wealth.

Just a few quotes give the flavour:

… most economists would appear to be convinced that scientific and technological advances, the accumulation of reproducible capital (machinery, equipments, buildings and roads), growth in human capital (health, education and skills) and improvements in the economy’s institutions (which are also capital assets) can overcome diminutions in natural capital.

Otherwise, it is hard to explain why twentieth-century economics has been so detached from the environmental sciences. Judging by the profession’s writings, we economists see nature, when we see it at all, as a backdrop from which resources and services can be drawn in isolation.

A lack of property rights to natural capital

Why do not market prices reflect nature’s scarcity value? If natural capital really is becoming scarcer, would not their prices have risen, signalling that all is not well?

The problem is that if prices are to reveal social scarcities, markets must function well. For many types of natural capital, though, most especially ecological resources, markets not only do not function well, often they do not even exist. In some cases, they do not exist because relevant economic interactions take place over large distances, making the costs of negotiation too high (e.g. the effects of upland deforestation on downstream farming and fishing activities; §4); in other cases, they do not exist because the interactions are separated by large temporal distances (e.g. the effect of carbon emission on climate in the distant future, in a world where forward markets do not exist because future generations are not present today to negotiate with us). Then there are cases (the atmosphere, aquifers, the open seas) where the migratory nature of the resource keeps markets from existing—they are called ‘open-access resources’, and they experience the tragedy of the commons.

Whenever economists have probed the matter, they have found that all economies subsidize large numbers of economic transactions with nature. Some of those transactions are large  (construction of large dams that alter ecosystems), but mostly they are small. How do those subsidies affect overall economic performance? More fundamentally, how should economic  performance be measured?

Most methods that are currently deployed to estimate the shadow prices of  ecosystem services are crude, but deploying them is a lot better than doing nothing to value them.

Professor Dasgupta ends his paper by saying that the overarching moral that emerges from (the admittedly rough and ready data) is salutary:

Development policies that ignore our reliance on natural capital are seriously harmful—they do not pass the mildest test for equity among contemporaries, nor among people separated by time and uncertain contingencies.

Its not going to be easy to take all this into account in preparing for when Obama cashes in, but now’s the time to start to develop the profound multi-disciplinary understanding out of which comes the confidence to act in the way  that the hugely-complex challenges require.


David Harvey and the Big Questions

December 26, 2009

From Amy Goodman’s interview with David Harvey,  Democracy Now March 2009

Capitalism historically has grown at a 2.5 percent compound rate of growth since 1750. OK. And in good years, it’s growing at three percent.

Obama, the other day, said, “Well, in a couple of years, we’ll be back to three percent growth.” Gordon Brown says, “Well, actually, the economy will double in the next few years.”

Now, when capitalism was constituted by everything going on around Manchester and a few other hot spots in 1750, three percent compound growth rate was no problem. You’re now looking at a situation where you’re going to say three percent compound rate of growth on everything that’s going on in East and Southeast Asia, Europe, North America and everywhere in the world. We’re looking at a different kind of world.

The total economy back in, say, 1750 was about $135 billion. It was $4 trillion by the time you get to 1950. It’s $40 trillion by the time you get to 2000. It’s now $56 trillion. If it doubles (again) we’re talking about $100trillion. And by 2030, you’re going to have to find three trillion .. profitable opportunities for capital to operate at that point.

Now, there are limits .. and I think we’re hitting those limits environmentally, socially, politically. And I think it’s time we started really thinking about an alternative. In other words, we have to think about a zero-growth economy.

This is a very useful way of putting the current crisis in perspective and he goes on to say that these stark statistics and trends mean that …

DAVID HARVEY: … In effect, you’re going to have to have a nonprofit economy. And how you do that, of course, is a big, big question. I’m not—I don’t have the blueprint for it. But I think that this is one of the key questions we should be thinking about right now.

And what disturbs me is we’re going through this crisis right now, and we’re not asking those kinds of big questions that we should be asking.

Gaian Democracies was written to ask  those big questions – and many more – within the context of co-creating democracies that could live in symbiosis with the Gaian systems  on which all life depends.

Moreover, it tried to offer ways in which our societies could think, act and learn to be ever-more completely democratic by adopting a soft-systems approach to tackling  those big and complex questions.

Critics  of neo-liberalism and capitalism  like David Harvey, and many of the quasi-anarchists in the anti-globalisation movement,  ignored or rejected all the questions we asked, the new vocabulary we used and the new ideas we offered.

And, as far as I know, they  still do.  Yet, as Harvey says,

In effect, you’re going to have to have a nonprofit economy. And how you do that, of course, is a big, big question. I’m not—I don’t have the blueprint for it.

Note:  The wholly wrong-headed idea that somewhere there could be  “the Blueprint” for tackling ‘the big questions ‘.  This is a typically Command and Control way of thinking: “Here’s my plan. Now you go and implement it.”

It also  illustrates the distance that those who say they want our societies to tackle the big questions have to go before they can begin to work out how to think, act and learn systemically so as to re-configure today’s lethally obsolete  political, economic, governmental and security systems.

Note:  Tackling the big questions will require us to “RE-CONFIGURE today’s …  SYSTEMS’

Together those systems and their many components  form “The Global Monetocracy”.

We coined this term to enable readers of “Gaian Democracies’ to see  all those big  questions as ‘emergent properties’ of a profoundly anti-gaian and anti-human system.

Thinking in terms of blueprints, or policy proposals or grass-roots protests and projects will do nothing to change the fundamental purposes and values of  The Global Monetocracy. Still less will they take the reins of global government from its greedy grasp.

What kind of global system of democratic governance is needed for the human family to come through the next couple of centuries in good shape?  That is the really big question and one that all  the  progressive, anti-capitalist, anti-globalisation movements need to start to work on today rather than just talk about  in terms of their obsolete ways of thinking.

If they put their minds to it, they might just do the bulk of the work in time to make a real  impact ‘After Obama’.