Dichotomies of Green Capitalism: Feeding the poor with rising prices?
The Green Economy – a means of improving human livelihood while taking into consideration environmental impacts – is the most viable way of tackling the problem at hand.
- UNEP.org / The Case for a Green Economy: Global Population Growth and Limited Resources.
On the agenda of Rio+20 is the initiation of a green economy. But in times of failing markets is it not counter-intuitive to look for Adam Smith’s 18th century invisible hand solutions to unsolved ecological problems? If we are to believe some of the most highly regarded and outspoken economists the patient may die even if the operation succeeds: Successful implementation of a green economy is no guarantee to the welfare of earth’s population. And if you think that’s troubling just wait until you see the objections from NGOs and developing nations…
The market knows best, right?
There is no doubt: Capitalism rules. But sometimes the market innovates to challenge people’s morals. Do you know what a viatical is? Viaticals became popular with the HIV epidemic of the 1980s: The patients sold their life insurances in return for monthly payments. Now the company offering this service had a financial interest in the death of their customer – is that morally right? Or how about stranger originated life insurances? Companies insuring the lives of their employees to cash out hundreds of thousands of dollars in the case of working hour deaths – does that soothe work place safety concerns?
So, even if a free market economy has beat other economic theories so far, it cannot claim to be free of ethical values. Or rather: it must admit to a lack of moral constraint. In short, so argues Michael Sandel, US political philosopher and professor at Harvard University. A third example is perhaps more troubling: In China as well as in USA, poor people are now paid to – literally – wait in line for rich people. The poor person earns a little money, the rich get to show up just before the event or deadline. The built-in justice of something as simple as the everyday trouble of waiting in line – something that virtually everyone in the world has to do every now and then – is gone and the poor person’s value to society is being degraded to a marketized time slot. Isn’t the same mechanism – metaphorically – in place when CO2 quotas are bought and sold?
Sandel shows how marketization can destroy morals too. When an Israeli daycare center introduced fines to discourage parents from picking their children up too late, the situation instead worsened and parents increasingly picked up their children too late. Because the mechanism of parental embarrassment had been replaced with a simple fine. When the fines were canceled, the parents kept showing up late because the moral mechanism had already been destroyed. Could marketization of ecology similarly destroy environmentalism?
(Michael Sandel’s arguments seen in The Guadian / What Money Can’t Buy by Michael Sandel – review and The Guardian / Michael Sandel: ‘We need to reason about how to value our bodies, human dignity, teaching and learning’.)
What would Barbie do?
Ecologists fear we’ll run out of nature in the not too distant future. What if Barbie managers realized they would be running out of plastic in a few years? How would Barbie handle scarcity? Perhaps, there are things Capitalism cannot do?
We have listened to the likes of professor Sachs talk about the impossibility of infinite growth on a finite planet, but how about taking advise from a guy whose customers have trusted him with 190 billion US dollars, a market kingpin? Jeremy Grantham, British investor and co-founder of a successful asset management firm, argues that there are some areas in which free markets are about to fail catastrophically.
Specifically, predicted future costs of exploitation of the ecosystem is hard to integrate with our present financial concerns. Future costs always seem small in the light of current investments under the assumption of continual growth. When many people struggle to grasp concepts of loan types, interest rates and mortgages how are possible expenses – not even certain expenses – that are ten or twenty election periods away – to be taken seriously from a political stand-point?
Damage to the “commons,” known as “externalities,” has been discussed for decades, although the most threatening one—loss of our collective ability to feed ourselves, through erosion and fertilizer depletion—has received little or no attention. [..."] To leave it to capitalism to get us out of this fix by maximizing its short-term profits is dangerously naïve and misses the point: capitalism and corporations have absolutely no mechanism for dealing with these problems, and seen through a corporate discount rate lens, our grandchildren really do have no value. [...] a corporation’s outlook on potential future damage might be a painful mismatch with that of ordinary individuals and society at large.
Capitalism, by ignoring the finite nature of resources and by neglecting the long-term well-being of the planet and its potentially crucial biodiversity, threatens our existence. Fifty and one-hundred-year horizons are important despite the “tyranny of the discount rate,” and grandchildren do have value. My conclusion is that capitalism does admittedly do a thousand things better than other systems: it only currently fails in two or three. Unfortunately for us all, even a single one of these failings may bring capitalism down and us with it.
Just eager for the investment advise? OK:
As resource prices rise, the entire system loses in overall well-being, but the world is not without winners. Good land, in short supply, will rise in price, to the benefit of land owners. Technological progress in agriculture will add to the value of land holdings. Fertilizer resources – potash and potassium – will become particularly precious. Hydrocarbon reserves will, of course, also increase in value. In general, owners or controllers of all limited resources, certainly including water, will benefit. But everyone else will be worse off, and a constrained-resource world will increase in affluence per capita more slowly than it would have otherwise, and more slowly than in the past.
(Jeremy Grantham publishes a newsletter at his company website. March 2012 Bloomberg summarized his critique in Shortcomings of Capitalism: ‘Our Grandchildren Have No Value’, his popular Q1 2011 article Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever is available on Thinkprogress.org.)
Perhaps Barbie would try to save the future with a 1 US dollar bank deposit. Because with indefinite growth this dollar will be worth a fortune when resources run out.
Can rising prices save the world?
Only when the last tree has been cut down; Only when the last river has been poisoned; Only when the last fish has been caught; Only then will you find that money cannot be eaten.
- Cree prophecy
Cliche, right? We have all heard it enough times to find it annoyingly hippie sacrosanct. But if Capitalism will save us before the Cree prophesy comes true, answer this: What will the price of the last tree be? The price of the last clean water? The last fish? While we are at it: What will be the price of that specific CO2 quota which will tip the scales and bring about catastrophe?
According to the UN Resolution 64/292 clean water is a human right. Considering the increasingly scarce water resources, the ongoing waste and pollution of existing water resources and the increasing demand for water this is certainly a well chosen topic for Rio+20. Are the solutions to be discussed in Rio based on the assumption that expensive water will clench the thirsts of the poor? Or rather, belief in, as the OECD put it: “incentives in water management to promote green growth”, and UNW-DPC: “the contribution of water technology to job creation and development of enterprises”.
In Denmark, you have the world’s most expensive water. And that’s good because it means that you invest in the necessary infrastructure, that you save water, and that you recycle it. If the rest of the world acted the same way, we would not have any problems. [...] The way we deliver water to poor areas today, [by truck] to Delhi’s slums for example, is not particularly cheap [...] It can be far more worthwhile to invest in the infrastructure and then charge actual costs.
- Christopher Gasson according to Information.dk (in Danish).
Others are less optimistic about free water markets.
States currently have responsibility for providing clean drinking water for everyone, but if you do it commercially, how do you ensure water to places where it is not profitable for businesses to operate? And who owns the water and how much should it cost? Large companies tend to have great influence on how much their concessions will cost and how much they should pay in taxes. I have great concerns about the narrow focus on commercialization. Basically you just continue the exploitation of natural resources and the large calculations for the Earth’s consumption of resources, to be done at Rio +20, doesn’t account for the fact that they are very unevenly distributed.
- Barbara Adams according to Information.dk (in Danish).
An economy greenwashed at Rio+20?
The green economy discussions at Rio+20 will be about much more than water. Already, carbon quotas, not just food demands, inspire land grabbing. Soon enough corporations could be seen taking decisions between good or even better business with life and death consequences to ordinary people around the world.
“The co-option of the term green economy to mean commodifying and marketising nature is made worse because it is in danger of dominating the Rio+20 summit at the expense of some of the really positive policies being proposed. These include ending massive subsidies for fossil fuels and other dirty industries, supporting greener industries instead, and moving away from taxing social goods (such as labour) towards taxing social bads (such as pollution).”
- writes Hannah Griffiths, World Development Movement in The Guardian.
Besides the overall concerns about the ability of unrestrained Capitalism to solve the problems of the world and the skepticism towards marketization of nature in general we can only scratch the surface of the choir of objections to the more specific green economy initiatives to be discussed at Rio+20. For example, on New Internationalist Danny Chivers describe the pledges from Rio twenty years ago as a “row of well-meaning policy sandcastles [that] have spent the past 20 years being eaten away by a rising tide of fundamentalist free-market economics, unfettered financial speculation, and consolidated corporate power” and view the idea of the “large polluting industries, business lobby groups and financial institutions” brought in twenty years later “like mafia bosses invited to a meeting on reducing gang violence.” Quite the metaphor. He backs up his point of view with several quotes:
“Systems such as ‘payment for ecological services’ and using forests in carbon offset markets do nothing but make Mother Earth into the World Trade Organization of nature.”
- Tom Goldtooth, Indigenous Environmental Network.
“Collapsing financial markets in Northern countries mean that banks and other investors are now looking desperately for new areas of expansion and speculation. We can see these desires leaving their mark on the Rio+20 process. The “Green Economy” now under discussion would unleash a wave of risky but lucrative new technologies such as synthetic biology, nanotechnology and climate technofixes. This isn’t about finding the best environmental solutions: it’s about creating profitable new investments.”
- Silvia Ribeiro, ETC Mexico.
But it’s not just activists that are critical on a systemic basis. Developing world government negotiators walked out of a pre-summit green economy meeting. “We cannot be held hostage to the retraction resulting from financial crises in rich countries. We are here to think about the long term and not about crises that may be overcome in one or two years,” Luiz Alberto Figueiredo of the Brazilian foreign ministry told The Guardian, referring to unresolved promises of technology transfer and assistance given at climate negotiations.
Want even more angry NGO and developing world comments in response to the green economy? Try How the Green Economy Has Been Hijacked by the Greed Economy by Pablo Solón, Workers World / At Rio+20 U.N. Summit, oppressed vs. oppressor or DECCAN Chronicle / ‘No restrictive trade practices’. Also, Greenpeace has published a scathing criticism.
It used to be the lack of progress and slow pace of delivery of promises that annoyed and disappointed developing countries and NGOs of all sorts. In Rio 2012 it may end up being the purpose of the summit itself that angers and frustrates people.
Let us hope Rio+20 succeeds in greening the economy. And let us cross our fingers that it will fail to marketize nature. Unfortunately, it looks like all we can hope for is an ugly quarrel.
(More information about the green economy ambitions of Rio+20 at uncsd2012.org/rio20.)