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Introduction Before entering any field of study, it is wise to
first take stock of the field as a whole. Without such an overview, it is too
easy to seize upon one aspect of the field and to misinterpret all other data
in the light of that aspect. Green economics (a term which I hold to encompass
: Ecological, Environmental, Steady State, Balanced, New, or Sustainable Economics
- all of which I regard as being subsets of the term Green, which throws its net
most widely) is a relatively new discipline and so this is an important moment
in which to try to establish an orientation and to produce a sketch map of the
field. This paper is a modest attempt to provide a provisional plan. Its aim is
to place the various elements of green economics into relationship with each other
rather than to provide a detailed exposition or argument for each point. An excellent
technical and detailed exposition is available in Steady State Economics. Daly
(1991) .
The Ecological Foundation of Economics
Ecology
and economics are closely related both etymologically and philosophically. Eco-
signifies home or habitat, -logy refers to study, and -nomy relates to management.
Philosophically, they are therefore sister disciplines: understanding must underpin
management: therefore ecology must underpin economics. In this way, green economics
is simply bringing economics back to its rightful intellectual grounding.
Ecology
Ecology is the branch of science that studies the distribution and abundance of
living organisms, and the interactions or interrelationship between organisms
and their environment. Ecology describes the world in terms of systems - assemblages
of inter-related elements comprising a unified whole - rather than in terms of
single, linear or isolated events.
Economics
"Economics
is the study of how society decides what and how and for whom to produce"
(Begg Fischer and Dornbusch 2003) Economics strives to be a science whereas the
subject matter places economics within the social sciences that study and explain
human behaviour. It describes how scarce resources are allocated between competing
claims on their use.
Economics' status as a science is debatable. Soros
(1998) argues that as the subject matter of economics is thought, the thinking
applied to the subject matter may affect the outturn of the process which is being
considered. Therefore it cannot be classified alongside the more hard edged sciences
of chemistry or physics, where (aside from Heisenberg's Principle) the subject
matter is not much affected by the presence of the observer. Ecological
economics Ecological economics can be defined as the social science
of the interaction between the production, consumption and transfer of goods and
services by humans, taken in relationship to the physical and processes of the
ecosystems that support all life.
Economic science can be subdivided into
the positive - descriptive of what flows from given assumptions - and the normative,
when it prescribes that a certain action should be taken. Sustainable economics,
it is argued here, is decidedly normative. It is sobering to consider that
non-sustainable economics by definition implies a breakdown of the current system
at some point in the future. It is perhaps because of this that there has been
a tendency by some economists writers to degrade the meaning of the term "sustainable".
See definitions of sustainable
development. The Axiomatic Basis Of Green Economics
I propose that Green Economics is based on three axioms : 1. It is impossible
to expand forever into a finite space 2. It is impossible to take forever
from a finite resource. 3. Everything is interconnected.
The effect
of applying these axioms to economics should be to harmonise human activities
with the processes of nature. Harmonise would mean that the human economic system
will be able to nest comfortably within the living ecosystem that surrounds and
supports it, with a benign, dynamic, continuous, two-way interaction between one
and the other. The Structure of the Economy
The foundations
of any economy are natural resources. These are wrongly regarded as "inputs"
by conventional economics and as an infinite resource to be used and discarded
at will with no cost, price or value above that of the current market transaction.
Green Economics turns this whole structure upside down.
For the purposes
of comprehension in this essay the economy will be divided into four ranks to
emphasise the relative positions of the natural world an human economic institutions.
The first rank of the economy
The first rank of
the economy relates to producing from our environment the necessities of life,
namely: 1. water 2. food 3. energy 4. shelter 5. safe
management of waste products. This production is the universal basis of all
economies, from Robinson Crusoe to New York City. In advanced economies, these
processes are hidden and simply assumed to exist; but closer examination shows
that the economic basics are everywhere compromised, both in developing and in
advanced economies. The water distribution system in the UK is deteriorating;
food production is highly demanding in terms of energy and pesticides, while it
also erodes the soil which is the substrate of food production; we are excessively
dependent on animal protein, which is inefficient in land use terms, and involves
much abuse of animals. Our energy use is simply unsustainable, and is also disrupting
the climate; and finally we are poisoning the oceans with waste products that
ought properly to be returned to the land as fertiliser.
Land use,
carrying capacity - and population
All of these first rank activities
assume access to, and use of, a certain area of land. This is known as the ecological
footprint, although the term as used here must include surface area needed to
absorb waste products, which is sometimes left out of consideration. In a free
and democratic society this access should be seen as a birthright for every human
being. Each human has a notional right to a proportion of the earth's surface.
Therefore, anyone holding an area of land should pay a rent to the community in
recognition of their being allowed special enjoyment of that land. This consideration
is the basis of the Land (or Site) Value Tax which is a core green tax, and it
also forms the philosophical basis for the Citizen's Income (see below) where
the productivity of the land is symbolised by an unconditional income for every
citizen.
The corollary of this right of access is the duty to be sure that
we do not overburden the land, in accordance with the first and second axioms.
Any area of land has a finite carrying capacity - defined as the ability to sustain
a certain population of any species. The finite nature of carrying capacity is
an incontrovertible ecological fact. The ecological footprint is the land and
water area that is required to the material standard of living of a given human
population, using prevailing technology. It can be understood as the product of
population numbers and consumption patterns, so that one hundred people with a
more sustainable consumption pattern might have a smaller footprint than fifty
people with a careless lifestyle but even if the entire human population had the
most frugal and ecologically sound consumption patterns possible, it would still
be the case that there is a limit to the capacity of the planet to carry a human
population. The appropriated carrying capacity is another name for ecological
footprint, appropriated signifying that it is claimed captured or occupied. It
reminds us that we appropriate ecological capacity for food, energy, waste absorption
etc. In industrial regions a large part of these first rank goods are imported.
(Chambers, Simmons and Wackernagel., 2000) Unfortunately when these facts
are considered in a human context, there is a clash with the human right for any
couple to have as many babies as they wish. This clash between libertarian ideals
and ecological imperatives belongs more to the realm of politics than economics,
but it should be noted that the Green position is that the issue must be resolved
through education rather than compulsion, and that a thorough understanding of
the realities of population growth needs be taught in schools. The second
rank of the economy The second rank of the economy covers the activities
of distribution, trade and the manufacture of tools. They imply a societal formation,
(rather than a single individual in a subsistence situation), and a certain amount
of division of labour.
The tertiary rank
The tertiary
rank evolves in a more complex society, comprising administration and public services.
Public services ensure that adequate amounts of the first rank items are available
to all, in addition to health, education, and welfare. It should be noted that
human beings are social animals, and that therefore public services are a necessary
and natural part of an economy.
The quaternary rank
The quaternary rank, consisting of financial or monetary services is useful in
the most complex economies.
It can be seen from this approach that green
economics turns the approach to the subject on its head. Money is the fourth rank
of the economy in green terms, although it is always taken as the starting point
of macroeconomics in conventional discussions. This difference underpins the difference
between green and conventional economics. To adapt an old saying, food will get
you through times of no money better than money will get you through times of
no food. This is not to deny the importance of money in economic theory, but it
is simply to assert that money is a servant of economic functioning, not the master.
Money, Wealth and Resources
IndicesThe way in which we gather
data to measure the health of an economy is an important determinant of whether
money or reality is the basis of economics. Gross Domestic Product is a measure
based on finance, which conflates costs, benefits and changes in capital stock
Daly (1992) , argues that this is a highly dubious accounting procedure. In preference,
green economics would use metrics such as the Index of Sustainable Economic Welfare
which measures, among other things, environmental conditions, loss of natural
capital and social conditions Ekins (1992) to reflect more accurately the state
of affairs in the real economy. It is noteworthy that in a period when the UK
GNP showed steady growth, the ISEW shows a recession. Money
Money
is a symbol of value, a symbol that represents the power to obtain real goods
and services. Money has no intrinsic value. Its purpose is to serve the smooth
running of the economy, and should not be to dominate or dictate the way the economy
functions. The huge international trade in money is intrinsically irrational
as it is trade in a symbol, not a commodity or a service. The proposed Tobin Tax
on this trade, set at a fraction of one percent of transactions to be hypothecated
to the poorest regions of the earth, would help to stabilise this trade and would
inhibit divergence between rich and poor at the same time. Theories and
practices that treat money as an entity are not sustainable in the long term as
they allow financial value to drift away from the ecological and social realities
of life - things which are classed as "externalities" in conventional
economics. Green economics internalises these realities into monetary or market
values at every opportunity and uses concepts of fairness and ethics to try to
reallocate them more constructively to where they might be usefully originate.
Conventional economics makes society as a whole pay for these hidden costs. Conventionally,
money can be created from nothing through debt, on the basis of risk assessment
by private banks . Debt and interest are one of the drivers of economic growth
(Hoogendijk, 1991) , through the cycle of borrowing to increase productivity,
followed by increased productivity to pay for the loan. Green economics
will move towards greater provision of money creation by the community on the
basis of ecological or social need together with the resources and person power
available to fulfil that need. Huber and Robertson (Creating
New Money) present a lucid argument and blueprint for this reform.
Money has become the greatest source of power in the world. In theory, ultimate
power in democracies should lie with the people, but in practice, state power
lies with the wealthy, who can buy public opinion by owning newspapers and broadcasting
industries. (Palast 2003) . This political system is more accurately described
as a plutocracy or monetocracy than democracy. Green politics would limit the
power of individuals and corporations to monopolise the media as part of a healthy
economy. There is a wiki set up for Green Party members to discuss financial
reform here. Dealing
with DownturnsFar from being the self equilibrating system that its devotees
assume, the free-market economy is inherently unstable, as evidenced by the boom-bust
cycles. Given the mismatch between the cornucopian assumptions of market economists
and the finite nature of real resources, the parlous state of the American economy
in 2006, the fact that Iran is selling its oil in euros rather than the dollar,and
especially the imminent arrival of Peak
Oil, green economists should plan for how to manage in the event of a Great
Depression of the kind that occurred in the 1930's. One instrument
that should be considered in the event of another Great Depression should be the
system of money proposed by Sylvio Gesell and (Blanc used in the Austrian town
of Worgl in the 1930s. The municipality issued (against an identical amount held
by the municipality) 14,000 schillings of currency which the holder had to have
stamped for a small fee each month in order to maintain its validity. Money holding
in Worgl became a game of pass the dangerous parcel: people were only too keen
to pay their bills, and to have people do work for them, in order to get the money
off their hands. The result was that Worgl flourished while neighbouring towns
languished in economic depression, until an unholy alliance of Banks and Trade
Unions compelled the experiment to stop.
Wealth
Wealth is created from natural resources by work. We take a resource from the
environment and act (or work) upon it to increase its utility or value for humans
or the environment.
Resources
At its most simple, the
resource may be an apple, and the action is that of grasping and eating it. At
its most complex, it may involve the many operations involved in making a computer,
involving science, theory, innovation, design, planning, mining, refining, moulding,
assembly, marketing, distribution, support and recycling.
Resources
are either finite or renewable.
Finite resources
Schumacher
(1989) pointed out that at least some of the wealth generated by using finite
resources must be devoted to helping us to become independent of those finite
resources. Resource taxes internalise the costs of depleting primary resources,
and make recycling more economic both through increasing the cost of primary resources,
and if necessary through tax breaks for recycling industries. In the case
of finite fuels ( coal, oil, gas, uranium) the resource taxes should be hypothecated
to energy conservation and the development of renewable energy.
Renewable
resources
It is one thing to deplete a finite resource, but to destroy
renewable resources such as fish stocks, forests and soil is in an entirely different
league of thoughtless irrationality - yet conventional economics and politics
is providing an environment which allows this to happen with almost no thought
or discussion. Green economics carefully regulates their use to ensure that their
capacity is maintained and improved.
Throughput of Resources and
Economic Growth
Physically, a sustainable economy that aims to comply
with the three axioms will minimise throughput of materials and maximise reuse
and recycling of materials. This means moving the model of production from the
current linear mode (mine-manufacture-use-dispose) to a new cyclical mode (recover-manufacture-use-reuse-recycle).
Both forms require throughput, but in the case of cyclical production the throughput
is enormously reduced. No releases should be permitted that could overwhelm
the capability of the biosphere to absorb them, and any persistent toxins must
be either not produced, or must be sequestered and/or neutralised. Direct regulation
rather than taxation, applies in this case. Durability must be in-built
into products, instead of the current tendency towards failure and disposability,
("planned obsolescence") in order to reduce throughput. The
first and second axioms invalidate the prevailing shibboleth of unconditional
economic growth as a measure of the health of an economy, because all economic
activity, no matter how cyclical in mode, must involve some throughput (Douthwaite
1992) . It is important however to realise that it is the growth of throughput
- that is, the linear process - that makes indefinite economic growth physically
impossible, and not necessarily the growth in activity or services per se.
A period of expansion in the green sector of the economy is actually desirable
at the present time, as growth could take place in activities connected with the
healing, maintenance and development of environmental and social well-being. This
green growth would reduce unemployment significantly, at least until the steady
- state economy is attained.
Taxation : Internalising costs
Conventional economics disregards any values that do not lie in the financial
sphere. Profit is all; damage to society or environment is regarded as an "externality",
something which the economist can disregard. Green economics on the other hand
demands that these costs are internalised into the product or process by applying
a financial value to represent the ecological or social costs of the damage done.
The following instruments will be used:
Resource Taxes
In order to reduce throughput and enable recycling to become truly economic, a
resource tax will be placed on any process that takes finite resources from the
environment. This will include fossil fuels, water, or minerals.
The Polluter Pays Principle
In a Green economy, a product has an impact
on health or on the environment, and if the impact is not sufficiently severe
to warrant banning the product, a tax or levy is built into the price to cure
the problem that has been caused. This principle applies not only to products
and processes with an environmental impact, but also to those with an impact on
human health Lawson (1996) .
Producer Responsibility
This simple principle, which underlies the whole juridical process as a matter
of course when applied to individual behaviour, is a revolutionary idea to economics.
It is assented to in principle by successive UK Governments, but they draw back
from implementing it, because they fear it would be too difficult.(Personal communication).
Producer responsibility involves placing a levy on all processes and products
sufficient to pay for (a) the cost of researching any effects the products
may have, e.g. on the health of environment or humans, and then, if such effects
are found, (b) the cost of neutralising these effects. It is easy to see
where the Government's difficulty lies: it is not a technical problem, but the
worry is over the impact on competitiveness, since if not applied simultaneously,
the country that applied this measure would find itself at a disadvantage in the
market place. This problem has now been elegantly sidestepped by the Simultaneous
Policy proposal Bunzl (2001) . Under this mechanism, political leaders are asked
to make pledges to act when an agreed number of competitor leaders have made the
same pledge.
Hypothecation of taxes
Since green taxes are often
applied for a set purpose, it is appropriate that they should, insofar as is practical,
be applied to remedy the problem that they were applied for in the first place.
The logic of this process aids in making the tax acceptable to the taxpayer. For
instance, some of the tax on cars and fuel should go to support public transport;
a tax on sugar should go to re-create a free NHS dental service: a tax on saturated
fats should help to pay the NHS for the cost of preventing and treating heart
disease, and so on. Positive Inducements
While levies
and taxes will be placed on products and processes which harm health or the environment,
socially and environmentally beneficial products and processes can be encouraged
with tax breaks and other financial advantages.
Tradeable Credits
One
of the disadvantages of the tax instrument is that the rich can continue to pollute
and take while the poor simply have to do without. For this reason Tradeable Credits,
a form of rationing, could be used. In the case of carbon credits, each citizen
will be offered credits for carbon dioxide emissions which they can either use,
or place on the market. This is a more equitable and convergent method which can
complement the tax instrument. The total amount of credits in circulation can
be managed reduced and modified according to society's needs and balanced with
resource issues and ecological health. Work
Work and resources
create value. Work can be seen as a way of reducing the entropy of (increasing
the order in) a system. The work of the home maker/parent involves a huge amount
of re-ordering. The young child is an entropy engine, creating disorder wherever
it goes. Parenting involves teaching to distinguish between delight and danger,
toy and tool, food and faeces.
In first rank terms, order is the placing
of food and water in the stomach of a person who is hungry and thirsty; creating
a distinction between a cold wet environment and a warm dry home; and the positioning
of waste matter where it will benefit the vegetable kingdom without contaminating
the water supply. Viewed in this way, work is an intrinsic part of our lives.
Good work (that is, work that benefits society and environment) can be
stimulated in the absence of money, as evidenced by the Local Exchange Trading
Systems (LETs) or Time Bank schemes that are growing in scope and number. In these
schemes, money is replaced by credits that are exchanged within the participating
community for goods or services Tibbett (1997) . Work has been shown
to have a beneficial impact on the health of individuals and also of society (Lawson
1996). Surprisingly, work has been rated close to the top of the list of activities
which bring happiness. This is associated with self esteem, financial reward,
time structure and the socialisation associated with work. However, some kinds
of work, for instance excessive hours, or undemocratic management structures,
may have an adverse effect on health. Green economics affirms the value of
good work , although we hope with the increase in ability of machines to relieve
us of routine work, work time will decrease and leisure time will increase.
It can be argued that work in manufacture of armaments and explosives should be
redefined as a species of anti-work, since their end effect is to increase, not
decrease the entropy in the environment.
Unemployment is intrinsically
divergent (see below) in its effects. The present benefit system, which applies
100% marginal taxation onto benefits at the point when a claimant finds work,
acts to perpetuate unemployment. It is irrational to trap people in unemployment
and poverty when there is more than enough work that needs to be done in serving,
healing and protecting both society and environment.
A sustainable
society would provide benefits to those unable to work, help the able bodied to
find good work, and would not withdraw those benefits at the time that the person
moves into socially and environmentally useful work. This amounts to a green
wage subsidy which could be implemented by allowing companies whose product
is certified to be socially and environmentally beneficial to take on new workers,
who could retain their benefits. This gradualist approach to the Citizen's Income
scheme is set out in Bills of Health (Lawson 1996) . The Citizen's Income is the
provision of basic necessities for all from a common fund. Lord (2003) .
The
green economy will be more labour intensive, partly because fuels will be more
expensive as demand outstrips failing supplies with the onset of Peak Oil. If
a job can be done either through burning fossil fuel or through paying a labourer,
it is the job of the Chancellor of the Exchequer or the Fiance Minister to make
sure that it is economical to employ the labourer. One of the virtues
of the Citizen's Income is that it acknowledges the economic contribution of the
unwaged - parents, home makers and carers.
Localisation Green
economics emphasises the importance of the local economy, since it minimises transport
impacts, fosters a sense of community and self reliance, empowers people and enhances
awareness of our rootedness in our immediate environment. It is not the case that
Green economists oppose all trade - only inappropriate and wasteful trade.
Equity, Capitalism and Divergence
A sustainable society maximises
equity and justice. It aims for optimal distribution of resources within any nation,
between nations, and between the present and future generations.
Intra-national
equity
Capitalism has an intrinsic property of increasing the income
differential between rich and poor. Green economics seeks ways of minimising this
tendency (see below).
International equity
Sustainability
requires convergence between the fortunes of rich and poor countries. "Third
World" Debt Retirement and the Tobin Tax are available instruments. It should
be noted that solar energy will make tropical countries energy rich, and that
this, taken with water conservation measures and reafforestation will help produce
economic convergence between developed and less developed countries.
Intergenerational equity
Sharing our wealth with succeeding generations
involves the gradual decrease in the discount rate, which is defined in
Wikipedia (http://en.wikipedia.org/wiki) as follows: The interest rate used in
accounting procedures to determine the present value of future cash flows, i.e.
the discounted value of an amount of cash at some future date. The concept of
a discount rate is an old one - the future is uncertain, and having something
now is worth more than (maybe) having it later. This is reflected in the saying
"A bird in the hand is worth two in the bush."
However,
the discount principle is also covered by another saying, "Blow you Jack,
I'm all right" since the costs that future generations will have to bear,
for instance in correcting problems caused by global warming caused by our own
use of fossil fuels, has been discounted by economists. Green economics gradually
changes this discount rate to reflect costs to future generations of present activities,
which is another incentive to develop sustainability.
Although most of the
legacies that we leave to our descendants are unwelcome, we can leave three positive
legacies to future generations: knowledge, culture and trees. Reafforestation
acts as a carbon sink and carries many other positive benefits. Financial incentives
can therefore be extended to ecologically sound, community based reafforestation
schemes. In tropical countries, reafforestation should be commenced in coastal
areas and gradually extended inland, and must always be carried out on a community,
not an industrial basis. Capitalism and the Market
"Capitalism"
is a word in need of definition, as it comes with strong political and emotional
overtones. Wikipaedia
gives the following definition:
Capitalism has not one universally
accepted definition, although there are many different definitions of capitalism,
but generally refers to one or more of the following:
- a system
based on one or more of the following economic practices, most of which became
institutionalized in Europe between the 16th and 19th centuries, involving the
right of individuals and groups of individuals acting as "artificial legal
persons" (corporations) to own and trade private property, especially capital
goods such as land and labor, in a relatively free market with the price determined
by supply and demand, for profit, and relying on the protection by the state of
private property rights and the adjudication by the state or contractually specified
third parties of explicit and implicit contractual obligations rather than on
feudal protection and obligations.
- competing theories often meant to
justify the private ownership of capital, to explain the operation of such markets,
to guide the application or elimination of government regulation of property and
markets, to advocate a "free market", and in some cases meant to advocate
elimination of the state itself (the last almost always referred to as anarcho-capitalism
rather than capitalism).
- a belief in, and arguments for, the advantages
of such practices and/or theories.
Neither free market capitalism
(termed "market fundamentalism" by Soros ), nor the command economies
of the communist countries have managed to achieve sustainability. They have failed
to produce real human happiness and equity. A sustainable system of economic activity
should avoid both free market capitalism and the command economy. A useful
distinction may be made between micro-capitalism, or entrepreneurialism, and mega-capitalism
of the giant corporations, where their sheer scale and overweening influence tends
to work against human and environmental values. Of course, some micro-capital
enterprises change into mega-capital enterprises, and this process can be met
with corporation taxes. Ironically, mega-capital (trans national corporations)
often pay less taxes, by means of complex and sophisticated tax avoidance schemes.
Lang and Hines (1993) propose a "Site Here To Sell Here" policy to overcome
this tendency. As we have seen earlier, social and environmental impacts
of economic activities which are currently classed as externalities will be brought
into the price equation through a variety of economic instruments such as taxes
and levies. I propose that this system might be termed a guided market.
The guided market values entrepreneurialism, which is an analogue of the tendency
of biological species to find and adapt themselves to ecological niches, but subjects
the entrepreneur to ecological cost internalisations together with regulations
designed to ensure the health of society and environment.
The Green economy
will be a mixed economy, containing both private and public sectors. Consumption
and DesireThe conventional economy depends on artificially stimulating
demand for goods by means of advertising. Through the ages, wise persons, spiritual
leaders and religions have stressed that this is not the way to happiness. We
need to learn to desire less things, not more things, not just for the sake of
our planet, but for the sake of our happiness. CorporationsBusiness
corporations have set themselves up as entities with legal rights, but their responsibilities
are not nearly so clear. One of the salient characteristics of a corporation is
the fact that its members have limited liability, that is, they cannot lose more
than they put in. Their sole raison d'etre is to make money. The only inhibitions
on this process is the possibility that antisocial actions, once they become known,
might damage the brand image of the corporation. Clearly, there is a need
for intrinsic corporate rights to be balanced with intrinsic corporate responsibilities.
- They must be made accountable not just to shareholders but also to
stakeholders - that is, all those persons that are affected by their operations.
- They
must report on, and be accountable for, the environmental impacts of their operations.
- If
people are harmed in overseas operations of a company, those people must be able
to take action in the country in which the company is based.
- Corporate
Social Responsibility could be scored and ranked into a league table of corporate
environmental and social responsibility, allowing people to judge at a glance
the standing of any firm. If this standing came to be reflected in the stock markets,
an intrinsic connection between duty to shareholders and stakeholders would be
established.
- Directors' salaries and bonuses should be reduced if the
company is found guilty of breaches of regulations.
These reforms need
to be implemented on an international basis, and to do this the Government should
employ Simultaneous Policy
- the tactic of laying down a pledge to act when a set number of other governments
have also laid down a pledge. Economic Divergence and Convergence
There is a tendency in any capitalist economy, especially in Anglo-Saxon capitalist
systems for the rich to get richer and the poor to get poorer. This tendency might
be called divergence and its opposite, convergence. Divergence is intrinsic in
capitalism, as capital can grow by being loaned at interest, whereas lack of capital
compels people to take out loans which deplete their wealth by requiring interest
payments over time. The creditor/debtor relationship is an unequal power relationship.
Redistributive taxation attempts to rectify this, but is usually too weak to offset
the divergent power of capitalism itself. The Citizen's Income helps to provide
a floor for those without capital resources, but green economics faces a challenge
in making sure that resource taxes do not put those on low incomes at a disadvantage.
Tradeable credits have intrinsically convergent properties.
Divergence,
apart from being unethical, is not ecologically sustainable in the long term,
as it leads to tensions between social classes, which in turn leads to conflict,
which is always environmentally and socially destructive. Recent studies of the
causes of human happiness have found that people were happiest in societies where
the highest paid individuals received no more than five times the lowest paid
. A truly sustainable economy will therefore be convergent.
The debt/interest
system is intrinsically divergent in its effects, and must be corrected. Any correction
must be gradual and careful, since the income of many vulnerable people, particularly
pensioners, is dependent on interest. Reform of the financial system should begin
with taxes and levies on financial transactions that are calculated to make money
out of money - the Tobin tax.
Green Keynesianism
Green
Keynesianism could smooth out the amplitude of the variations on the economic
cycle by using money raised by the state (or community, where appropriate) to
stimulate good work during times of economic recession. Good work is work that
is of benefit to society or the environment.
Far from being the self
equilibrating system that its devotees assume, the free-market economy is inherently
unstable, as evidenced by the boom-bust cycles. Given the mismatch between the
cornucopian assumptions of market economists and the finite nature of real resources,
and especially the imminent arrival of Peak Oil, when demand for oil begins to
exceed supply, Green economists should develop plans for managing a Great Depression
of the kind that occurred in the 1930's.
One instrument that should
be considered in the event of another Great Depression should be the system of
money proposed by Sylvio Gesell (Blanc J, 1998) and used in the Austrian town
of Worgl in the 1930s. The municipality issued (against an identical amount held
by the municipality) 14,000 schillings of currency which the holder had to have
stamped for a small fee each month in order to maintain its validity. Money holding
in Worgl became a game of pass the parcel: people were only too keen to pay their
bills, and to have people do work for them, in order to get the money off their
hands. The result was that Worgl flourished while neighbouring towns languished
in economic depression, until an unholy alliance of Banks and Trade Unions compelled
the experiment to stop.
In the 1930's the economic stimulation provided
by war put an end to the Depression. The danger is that any 21st century Depression
could likewise lead to war - over resources. The opportunity for wise leadership
is in correcting an any economic downturn by major programmes of work in environmental
and social restitution - that is, Green Keynesianism. Globalisation
The globalisation of trade spearheaded by the World Trade Organisation (WTO),
and resulting in the Global Agreement on Trade in Services is an attempt to free
commercial enterprises from all environmental, social, and moral constraints.
Peter Sutherland, former Director General of the GATT opined that "Government
should interfere with the conduct of trade as little as possible , Martin Khor,
director of the Third World Network, states that globalisation is driven by a
set of values that directly contradicts and undermines the "sustainable development
paradigm" . As presently set up, globalisation is incompatible with green
economics, and large corporations need to be subject to environmental and social
legislation. Ultimately, globalisation represents the victory of business over
policy, since the corporations have more wealth and power than many governments.
The power of the corporations must be limited by new policies designed for that
purpose (Lang and Hines1993) . They also have unconscionable power over politicians
since political parties are to a significant extent funded by business. For this
reason, political parties ought to be funded by the state on the basis of votes
received, and donations by business interests must be made illegal. New trade
globalisation treaties are needed (Woodin and Lucas 2004) that will reflect the
ecological imperatives that should condition economics.
Militarism and
sustainabilityTo change the world economy from its present unsustainable
form to a truly sustainable system is possible, but is a huge undertaking, requiring
the mobilisation of enormous resources of finance and human energy. These mobilisations
are routinely realised by nations in times of war. Sustainability is achievable,
but only if the disproportionate spending on arms by governments around the world
is brought under rational and reasonable control, and resources diverted to the
military are diverted to sustainability. Conclusion
To create a sustainable economy is not technically difficult. Indeed,
it is far easier than coping with the social and environmental difficulties that
will flow from continuing conventional economics. The problem arises in summoning
the political will to enable meaningful changes to be made in time to prevent
irreversible damage to society and environment.
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