PRINCIPLES OF GREEN ECONOMICS

Note: there is a longer, referenced version of this article here

The foundation

1.1 Ecology (understanding our habitat) and economics (managing our habitat) are closely related disciplines: understanding must underpin management: therefore ecology must underpin economics.

1.2 Green Economics is based on three axioms (self evident truths):

  • It is impossible to expand forever into a finite space
  • It is impossible to take forever from a finite resource.
  • Everything is interconnected.

1.3 Green economics is about harmonising human activities with the processes of nature in line with these axioms.


The structure


2.1 The first rank of the economy
relates to obtaining from our environment the necessities of life, namely

  • water
  • food
  • energy
  • housing
  • safe management of our waste products.

    All of these activities assume access to, and use of, a certain area of land. In non-slave societies, this access should be seen as a birthright for every person. It follows that each human has a notional right to a proportion of the Earth's surface. Therefore, anyone holding a plot of land is renting that plot from the rest of society. This is the basis of the Land (or Site) Value tax which is a core green tax.


2.2 Second rank activities of distribution, trade and manufacture of tools occur in any society, (as opposed to a single individual in a subsistence situation).

2.3 A tertiary rank evolves in a complex society, comprising administration and public services.

2.4 Finally, a quarternary rank consisting of financial services is useful in complex economies.

Finance (money) is a symbol of value, a symbol that represents the power to obtain real goods and services. Money has no value in and of itself. Its purpose is to serve the smooth running of the economy, not to dominate it. Theories and practices that treat money as an entity are not sustainable in the long term as financial value drifts away from the ecological and social realities of life. So money is the fourth rank of the economy in green terms, although it is always ranked first in conventional terms.

This difference underpins the difference between green and conventional economics.

3 Work


Good work (that is, work that benefits society and environment) can be stimulated in the absence of money, as evidenced by the LETs or Time Bank schemes that are growing in scope and number.

We emphasise the importance of the local economy, since it minimises transport impacts, and fosters a sense of community.

We emphasise co-operation as an economic value that is at least as important as, if not more important than, competition.

 

4 Wealth and Resources


Wealth is created when we take a resource from the environment and act upon it in certain ways.

At its most simple, the resource may be an apple, and the action is no more grasping and eating it. At its most complex, it may involve operation like uranium mining with all the disease, death, fear and lies that is involved.

Resources may be finite or renewable

4.1 Finite resources

E.F. Schumacher pointed out that at least some of the wealth generated by using finite resources should be devoted to helping us to become independent of those finite resources.

4.1.1 Resource taxes will internalise the costs of depleting primary resources, and will make recycling more economic. In the case of finite fuels (coal, oil, gas, uranium) they should be hypothecated to energy conservation and the development of renewable energy.

4.2 Renewable resources

It is illogical to destroy renewable resources such as fish stocks, forests and soil. Their use must be carefully managed to ensure that their capacity is maintained and improved.


4.3 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 and "externality". Green economics requires that these costs are internalised using the following instruments:.

4.3.1 The Polluter Pays Principle: If 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 levy will be built into the price to cure the problem that has been caused.

4.3.2 Producer Responsibility is assented to in principle by Government, but they draw back from implementing it. It would involve 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
(b) the cost of cleaning up these effects.

4.4 Throughput

Physically, a sustainable economy that complies with the three axioms above will minimise throughput of materials and maximise reuse and recycling of materials. No releases will be permitted that could overwhelm the capability of the biosphere to absorb them, and any persistent toxins must be sequestered and/or neutralised. Durability must be in-built into products, instead of the current tendency towards disposability.

Throughput is a function of population numbers x consumption patterns.

Population Growth on an indefinite basis is incompatible with the first axiom, but the problem must be dealt with by education, not compulsion.

5 Equity


A sustainable society will maximise equity and justice. It will aim for optimal equity in distribution of resources within any society, between societies, and between the present and future generations.

 

6 The Market: capitalism and divergence

The free market economic system violates the three axioms and must therefore be radically changed. The command economies of the communist countries also signally failed to achieve sustainability.


Both have failed to produce true human happiness and equity. A sustainable system of economic activity must avoid both free market capitalism and the command economy. 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. Such a system might be called a guided market.

There is a tendency in any economy, especially in Anglo-Saxon capitalist systems, for the rich to get richer and the poor to get poorer. This tendency can be called "divergence", and its opposite, "convergence". Divergence, apart from being unethical, is not ecologically sustainable in the long term, as it leads to oppression, and oppression leads to war, which is always environmentally and socially destructive. The sustainable economy must 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.

Green Keynsianism will 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.

 

The Green economy will be a mixed economy, containing both private and public sectors.


7 Unemployment

Unemployment is intrinsically divergent 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 to be done in serving, healing and protecting both society and environment. A sustainable society will provide benefits to those unable to work and will help the able bodied to find good work, and will not withdraw those benefits at the time that the person moves into socially and environmentally useful work. This Green wage subsidy 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.

8 Globalisation

The globalisation of trade spearheaded by the WTO, and resulting in the Global Agreement on Trade and services is an attempt to free trade from all environmental, social and moral considerations. As presently set up, globalisation is incompatible with green economics. It is also incompatible with the Index of Governance.

 
 
© 2001 R. Lawson This page was last updated on 24.12..04