Where do we go from here: 3

Economics

This is post number 3 in my little series; you need to read the first two for the background to this one.

Turning to economics, I made the comment that, at least in the so-called advanced western countries, continuous economic growth is assumed to be the normal and necessary condition for modern societies if they are to thrive. There are some incipient problems in terms of the stability of financial systems because of trade imbalances and of the stability of our economic system because of its dependence on oil, which is starting to run short and will get progressively more expensive.

Whether the financial market system is stable is arguable. I said (going boldly where angels fear to tread!) that there has to be a high probability that it’s not. There are innumerable articles, and a number of erudite and economically sophisticated books about the 2008 market crash, and I have no intention of getting into any detail about all that, except to say that the point that emerges most strongly is that the crash was caused by the greed and hubris of Wall Street traders and bankers, and the lack of any effective regulation of the market. All that is still there, but my assertion is based on general considerations, like the increasing prices of oil and food, the trade imbalances between China and the United States and the fundamentally fragile nature of our economic systems dependent, as they are, on continual growth, fuelled by the manufacture and marketing of endless junk and by service industries that, in many cases, depend heavily on tourism. (What happens to them when the oil runs out?)

At the level of the economics of individual countries, the principle of non-interference that I mentioned earlier can be extended to the use of economic as well as military power by strong nations or large multinational companies. Economic power could, conceptually, be used by powerful countries or companies to the benefit of the weak, rather than as a tool of exploitation. There is a history of commercial exploitation of weak or undeveloped nations by such companies, for example exploitation of oilfields in Nigeria and (until their nationalisation by President Chávez), Venezuela. Demand by rich countries causes distortions in the production patterns and economies of small ones which, desperate to earn foreign exchange, may focus their agriculture on cash crops, often produced by foreign companies using extensive production methods so that the benefits to local societies are minimal. We may also see the destruction of ecosystems brought about, for example, by destructive logging of tropical forests for hardwoods by countries like Japan and South Korea, with no interest in the forests themselves, or the conversion of large tracts of tropical forest into soy-bean (in the Amazon) or oil palm (in Indonesia) production.

Not the kind of house most of us want? A 'hotel' in Ecuadorian cloud forest

Both diplomacy and business should be guided by principles analogous to the philosophical idea of utilitarianism: every action must be assessed in terms of its impact on those affected by it. So, in an ideal world, countries should negotiate not only to maximize their own benefits, but also those of others involved. Business should take account of the well-being of anyone affected by its activities, and organize itself to optimize that well-being, as far as possible, taking into account the capacity of the people concerned to benefit from the projected actions. The principles that should be followed are obvious and could clearly be developed at length. The problem is implementation of those principles.

It’s easy to make disparaging remarks about economics and the boring focus on it that we have to endure in the news media and from the commentariat. But even the greenest, ‘back-to-nature’ ideology has to accept that economics are very important. They reflect, and provide a measure of, our material well-being so we’re bound to be interested in them. The problem is partly one of emphasis: the news media – certainly in Australia, which is notorious for this – focus obsessively on economic news, so that almost every event is interpreted in terms of what it will cost, or be worth. Our obsession with economics has the result that decisions are frequently made, or at least assessed, in economic terms, which can distort real values. For example, state governments will, almost invariably, yield to pressure from miners and developers to allow things like open cut coal mining, or underground gas  extraction in agricultural areas, regardless of the environmental damage that may result; they put resources into ever-more roads – with ever-more big trucks – and shut down rail routes that are ‘uneconomic’; they bow to the wishes of the off-shore fishing industry not to declare ‘no catch’ zones in the sea to allow fish populations to recover.  Current attempts to solve the urgent and serious problems afflicting Australia’s major water catchments – the Murray-Darling Basin – are being undermined by hysterical assertions that reduction in water allocations for irrigation will destroy communities. They won’t, but rational, science-based debate isn’t getting much of a hearing. And the idea of a (federal) tax on carbon to ensure that the polluter pays generates such screams of protest that you would think the businesses affected were going to be destroyed. All anyone has to do is cry ‘jobs’ and/or ‘the bottom line’ and the pollies fall over themselves to implement the short-term fixes, generally ignoring long-term  environmental implications. Of course people need jobs, and of course human societies are not going to tolerate focus on the environment to their own detriment and disadvantage, but we need some balance. In the long term, if humans are going to survive and live decent, pleasant lives, we have to do better than we are now.

To actually fix things in our societies we have to accept some short-term pain: we have to pay for the research needed to bring alternative energy sources on-line;  we have to pay to reduce greenhouse gas emissions; we have to walk away from our love affair with petrol or diesel-driven cars, and move over to electric vehicles or vehicles powered by fuel cells (still electricity, but different from batteries); we have to subsidise solar panels on roofs to provide some part of household power requirements, and legislate to ensure power savings and efficiency in buildings. We have to develop efficient water distribution infrastructure and accept the need to use water more efficiently. In Australia we have to get over our irrational paranoia about nuclear power, and get started building the reactors. We also have to cut back enormously on our profligate waste of resources and energy, and massively increase recycling and re-use of paper, plastics, glass, domestic waste and water (there was all sorts of hysterical nonsense about that a few years ago, and we don’t do much of it). All this – and all the other stuff of the same type that I haven’t mentioned – might cost in the short-term, but in the long term it will contribute to a more sustainable life style and reduced resource use. And, heresy of heresies, we will have to reduce our standards of living. That doesn’t mean we all revert to the level that millions of poor people have to tolerate because they have no option, but it does mean some quite radical changes.

We have to do something about the paradox caused by increasing automation of all sorts of activities and processes. Technical developments increasingly reduce the need for labour, but we have increasing numbers of people who need jobs to provide the money they need to live. So it’s difficult to see that things can go on as they are now. People in developed countries are addicted to stuff, things – a huge range of goods of every description, most of which are of limited use or real value. But the manufacture and marketing of all that stuff keeps people in jobs and provides them with incomes; those activities keep economies growing, and without growth the system grinds to a halt. We frequently hear the health of the economy assessed in terms of consumer spending. This is bizarre, but what’s the answer? If we all buy less stuff, the economy slows, businesses close, people lose their jobs, and the whole process triggers a downward (in economic terms) cycle. But that’s what is going to happen. Somewhere along the line the economic structure of societies has to change, but how this will happen, and what form it will take, is impossible (for me anyway) to say.

One thing seems certain: the blind irrational faith in untrammeled free markets as the solution to all problems has to be abandoned. Markets fail, as the recent financial crisis demonstrated, and will continue to fail in the absence of regulation to control greed and the exploitation of the weak and vulnerable. The consequences of this can be seen in the large and growing disparity between the incomes of bankers and financiers, successful stock market speculators and the CEOs of big business, and most of the rest of the population. These disparities are particularly marked in the US but are developing in rapidly in Britain, Australia and (although I have not seen data), probably Canada. The solution to the problem must lie, at least conceptually, with more regulation, although this is anathema to the free market fundamentalists. In America free markets are equated to individual freedom: government intervention is totally unacceptable. But we need regulation by enlightened governments to control the greed, exploitation of people and the environment and all the other excesses of capitalism. We need, dare I say it, more socialistic systems.

I can hear the screams of protest and abuse: this is back to communism (which failed); it will inhibit initiative, and (guess what) financial growth. And so on. There’s no point here in digressing into details of how it might work, or drafting answers to the arguments and protests that would follow if this idea was taken up by anyone in a position of influence. The point is that change is necessary. It may not take the form of systems that have been used in the past but it could, in principle, be achieved by enlightened political leadership and government, coupled to good will in the community. There’s no way the whole system could be changed immediately; change would have to be a step-by-step evolutionary process aimed at optimising the lives of people AND outcomes for the environment. Optimisation in terms of the well-being of people and the environment will mean having evaluation systems in place to assess how policies are working, and being prepared to change when necessary. Economic change can’t be divorced from political change; politicians would have to be driven less by ideology and more by pragmatism. The guiding principle would have to be the need to get the system right in terms of the well-being of people and the environment. Unfortunately, at the present time, the whole world is  hooked on western life-styles and economic paradigms there doesn’t seem to be much chance that radical changes are likely to happen any time soon.

There’s not much point in going on about all this. None of it’s new; people like David Suzuki have been saying these things, eloquently and in detail, for years. Books have been written, impassioned speeches made. But the human race has a high inertia and a strong tendency to self-indulgence. We also have, in most countries (I’m tempted to say ‘all countries’, but hopefully that would not be true), pretty low-grade politicians, which matters because a lot of what needs to happen has to happen at the political level. We need visionary, open-minded leadership and constructive legislation.