Monthly articles (English and French) on the theme "Querying economic orthodoxy"

No. 5 - May 2006

Market and environment


Growth is limited, development is potentially unlimited. Growth is physically constrained by the availability of non-renewable natural resources needed for production.....Development is not subject to the same natural limits; its progress depends largely on cultural, social and political advancement, which consumes only infinitely reproducible resources: words, time, reflection, the quality of human relations etc.
Jacques Généreux, Les vraies lois de l'économie (Editions du Seuil, Paris 2005) p 248

Is Château Bel-Air really so much worse than Jacob's Creek?

Excessive deficits

The "ecological footprint" is a concept devised by those who study questions of ecology to measure the impact of human activities on natural resources. The footprint is an estimate of the area of productive land (and sea) needed to sustain a population, calculated by accounting its use of energy, water, food, minerals etc. Comparing this with estimates of the productive areas actually available on the whole planet leads to worrying conclusions.

For example, a recent report (1) by the World Wildlife Fund, endorsed and prefaced by José Manuel Barroso, president of the European Commission, gives a remarkably detailed analysis covering practically every country in the world. This shows that the ecological footprint (in 2001) of the entire human race was 21% greater than the total productive area of the world, which is reckoned at 1.8 hectares (nearly four and a half acres) per person. For the time being, we are getting away with this imbalance by running down the earth's productive potential. We are consuming our capital, tolerating what Europe, in another context, calls an "excessive deficit". According to the treaty of Maastricht, a fiscal deficit of anything over 3% is excessive. Europe's natural resources deficit, I regret to tell you, makes that 3% look trivial indeed.

If the human race wants to survive, it can hardly allow a 21% resources deficit to continue indefinitely. But, at present, the problem is growing worse rather than better, for two main reasons.

The demographic challenge

Firstly, worldwide population is still increasing. Arch-conservatives may fulminate over low birth rates and the "threat" of population decline in Europe; but in many other regions, notably Africa and parts of Asia, birth rates remain high and population is rising. We are currently around 6.5 billion human beings in aggregate; United Nations forecasts (2) suggest a peak of more than 9 billion around 2075. But that is merely an extrapolation, with adjustments, of current trends. As they say in the stock market, a trend goes on till it stops.

I have no view on when this particular trend will stop. But it seems clear that if the human race does not voluntarily restrain its own growth, then "mother Nature" will take matters into her own hands; and her methods will not be motherly. She could indeed reverse the upward trend rather than merely stop it. A rerun of the Black Death (3), or the Irish potato famine, on a global scale? Not impossible.

Secondly, as we all know, the present worldwide distribution of consumption is extremely uneven. According to the WWF estimates, a few countries, such as the USA and the United Arab Emirates, are consuming resources at more than five times the break-even per capita rate. In other words, if we all lived as they do, we would need the resources of more than five planets like ours to sustain us in the long term. We Europeans cannot be complacent; the European Union is consuming at around two and a half times the sustainable level.

But the biggest country in the world, China, is still below the sustainable rate. And the Chinese, not surprisingly, would like to catch up with the advanced world. A good many of them, in fact, have already done so; the more or less affluent population of China is said (4) to be over 200 million. The other 1,100 million do not want to languish too far behind; and why should they? But what if they do catch up? And the 1,100 million Indians, and so on? The deficit could quickly become intolerable.

It must be obvious that the human race needs urgently to adopt less extravagant and wasteful habits, both to conserve the planet's resources and, equally, to ensure that pollution does not cause irreparable damage.

Approaches to conservation

The Chinese are often criticized as ranking among the world's worst polluters, because they burn huge and rising tonnages of coal. However, they are making a truly impressive effort to develop a sustainable form of urban life. Their new city of Dongtan, near Shanghai, will house initially some 50,000 people and in the long term 500,000. Its first phase is due for completion in time for the Shanghai Universal Exhibition in 2010. Electricity supplies will come from wind generators, solar cells and combustion of garbage; vehicles will be powered by electricity or hydrogen. It is hoped that this city will have a "footprint" of only 2.2 hectares per person, little more than the available global average, whereas cities such as London and Paris are closer to six.

This fine example might seem hard to follow in places with cooler climates and less solar energy; Shanghai is at latitude 31 degrees north, in line with Marrakech. Yet it is possible to design buildings which are self-sufficient in energy, even in the not especially sunny climates of southern England and northern France. At Beddington, between Wimbledon and Croydon, is a new group of 100 houses and apartments named BedZED (Beddington Zero Energy Development). It claims to generate all its energy needs from solar panels and by burning locally produced firewood. It can even, in hot weather, "export" electricity to the national grid.

At Limeil-Brévannes, in the suburbs of Paris, a large new school is planned which will be self-sufficient in energy thanks to thick insulation, solar cells and a heat pump: a machine which transfers heat from the ground into the building, just as a refrigerator transfers heat from its interior into the surrounding atmosphere, via the hot tubes at the back. The school will have to buy in electricity during cold weather, but it hopes to sell more in summer than it buys in winter.

We should not let ourselves be depressed by the enormity of the task of bringing our demand for resources into line with natural supplies. The examples of Dongtan and other projects show how dramatically we can cut the energy needs of our buildings and cities. We shall need far-reaching changes in our transport systems and trading habits, for transport is a huge user of energy and source of pollution.

Discard the culture of the dustbin!

We shall also need to abandon our current obsession with discarding and replacing everything at frequent intervals. Relying on renewable resources rather than on petroleum products suggests using good old-fashioned wood rather than less distinguished plastics. But wood itself is under pressure; many forests are being cut down faster than they can be regrown. So we must relearn the art of constructing wooden things of lasting quality, and then making them last. It is fortunate that a certain snob-value attaches to owning and using inherited antique furniture. Let's all be snobs, for Earth's sake!

Those who promote environmentally-friendly habits sometimes seem to call for a drab hair-shirt existence. Yet I suspect that the good habits we need are more agreeable than we may think. It is said that if the Chinese and the Indians were to consume paper on the same scale as Europeans and Americans, all the forests in the world would not meet their needs. But would our lives be less pleasant if we were flooded with less paper? Surely not.

Would it be painful to refrain from importing so many things from remote sources? The British today drink around 350 million bottles a year of Australian wine, carried nearly 12,000 miles in oil-burning ships; meanwhile, French vignerons are struggling with falling demand and having to cut back production. Is Chateau Bel-Air really so much worse than Jacob's Creek?

Free traders argue that "healthy competition" from Australia is desirable, since it jolts French winemakers into changing their tradition-bound ways and promotes higher quality; or, at least, it promotes a style and presentation more attractive to novice British wine-drinkers. Does all this justify so much long-distance freightage, consuming oil reserves, polluting the atmosphere and handing revenue to radioactive ayatollahs?

Market inadequacy

Of course it does, say the libertarians; the outcomes dictated by the market are always right. But the free market will not, of itself, solve our pressing environmental problems. It fails to provide the necessary incentives. If we leave oil to the market, prices will continue to rise as supplies from currently known sources dwindle; but higher prices will stimulate the discovery and exploitation of new reserves. Growing demand, therefore, will simply accelerate the depletion of total world reserves and further aggravate pollution. We should remember that the consequent global warming and climatic change may not only be troublesome; it could, in the foreseeable future, become catastrophic (5).

Given our present market-driven obsession with competition and productivity, we are obliged to pursue (6) endless growth in production and consumption, without which we would be condemned to ever-rising unemployment. But we in the developed world do not need more and more consumption; we need investment to build economies that use scarce natural resources prudently instead of profligately. If the world were to go seriously to work on this huge task, it seems likely that unemployment problems would disappear for a long time.

But the market, with its short-term horizons and its contempt for public investment, does not encourage such ventures. None of the three energy-saving projects described here has been undertaken by a purely commercial enterprise. Dongtan is being developed by the city of Shanghai; BedZED by the Peabody Trust, a leading UK charity; the school at Limeil-Brévannes by the town council. Energy conservation on the drastic and global scale we need will call for long-term, internationally-coordinated planning by governments. The libertarians and free-market ideologues will hate it; but that is their problem.

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1 See pages 6 and 7 of the WWF report

2 World ¨Population to 2300 (United Nations Dept. of Economic and Social Affairs, 2004), p 179

3 I cannot even exclude the long-term hypothesis that an unknown infection could appear that would eliminate the human race: Martin McKee, professor at the London School of Hygiene and Tropical Medicine, reported in Le Monde, 20 April 2004

4 Today, the number of consumers with substantial incomes is estimated at 250 million: Anne Faure Bouteiller, La Chine: clés pour s'implanter sur le dernier grand marché (Vuibert, Paris 2005)

5 A difference of 5 degrees [Centigrade, in global average temperature] is all that separates us from the Ice Age....it appears more and more clearly that we are en route for an increase of that order: Jean-Marc Jancovici and Alain Grandjean, Le plein, s'il vous plaît! ["Fill her up, please!"], Editions du Seuil, Paris 2006

6 See my comments in Knights of the Productivity Grail (February 2006)