Living within our means

Issue: 

We’ve been living beyond our means for a long time and now it’s blown up in our faces. The shock to the system from the near-collapse of our global banking industry has been traumatic. Even so, it will be nothing compared to the near-imminent collapse of the ecological systems on which we depend. And the two are intimately connected. But in all the intense coverage of the economic recession, there’s been surprisingly little reference to environmental issues.

There will be little chance of reengineering any kind of meaningful response to either crisis unless we understand the ‘living beyond our means’ that has been going on for decades, has led both to massively over-leveraged balance sheets and to a massively over-leveraged use of the natural world. Yet it seems to have become received wisdom that environmental issues should now be put on the back burner, given the ferocity of the economic recession. However, I believe the convergence of these two crises should be seen both as the perfect storm warning that it is, and as an astonishing opportunity to confront and resolve both crises without further delay. It seems strange to say this, but maybe we’ll all look back on the collapse in the global economy and recognize it as precisely the shock to the system we so desperately needed.

There are two powerful reasons to see things in this counter-intuitive way. First, instead of treating each crisis as a stand-alone phenomenon, even the most cursory examination of the underlying causes reveals the same inherent dysfuntionalities within this model of capitalism. Second, in the same way that our capital markets imploded for lack of proper regulation, our carbon-intensive economies are about to implode - socially and environmentally - for lack of proper regulation of emissions of greenhouse gases. Which means, quite simply that the only available global solution to our economic crisis lies in addressing our sustainability crisis through what is rapidly becoming known as the ‘Green New Deal for the 21st century’.

If our politicians could focus on this extraordinary opportunity, especially at a time when the reputation and standing of the United States have been so powerfully enhanced by the election of Barack Obama as President, we would have a unique chance of securing a genuinely sustainable future for ourselves and all those who come after us. But economic paradigms do not die easily and this particular paradigm has taken a very firm hold on the collective psyche of the human species. It will be defended ferociously by the self-serving elite of massively powerful beneficiaries.

Many commentators have arrived at the conclusion that the role of America as the principal driver of global economy is to all intents and purposes finished. And with it will go the particular variant of capitalism that reigned supreme over the last thirty years. For those concerned about both society and the state of environment, this is a cause for celebration tempered by the deepest concern for those worst affected by the recession. Capitalism’s dramatic collapse offers at least some chance of a belated reconciliation between the pursuit of economic prosperity on the one hand and the protection of life-support systems on which we all depend on
the other.

We now know the economic boom time of the last fifteen years or so were built on a vortex of artifice. During that time our self-deception knew no bounds. Just as house prices do not (and never will) go on rising indefinitely over time, so our use of finite resources cannot go on expanding indefinitely over time. The so-called laws of the market never have and never will take precedence over the laws of thermodynamics. Like all outlaws, we are now being punished for our transgressions - and climate change is just the scariest of retributions that may be visited upon us if we don’t change our ways very profoundly and very quickly.

In the face of such persistent acts of self-deception, it’s clear that changing our ways is proving difficult for human kind. Paradoxically, however, I am more optimistic about the prospects of us doing this now than I was at this time last year, for three reasons:

1) The sheer intensity and depth of collapse has blown away years of ideological fantasizing about the superiority of de-regulated, debt-driven, finance-based capitalism.

2) The overhwhelming evidence about climate change and its rapidly accelerating impacts leaves our politicians with less and less space
to hide.

3) The rebirth of America as witnessed in the election of President Obama is absolutely fundamental. There was no solution to the world’s converging crises with George Bush in the White House. That doesn’t mean that Obama will deliver, and it is extremely unwise to heap such expectations on any one person. But at least the potential is there, on climate change, on security issues, on nuclear disarmament, on Palestine, on a transformed global economy and it just wasn’t there before.

Even before the uplifts in people’s spirits that the election of Obama seemed to bring, there was no shortage of ambitious plans starting to emerge to address the so-called triple crunch: the credit crunch, the oil crunch and the climate crunch. Perhaps the most impactful of these has been the Green New Deal, published in June 2008 by a group of progressive UK NGOs. But there is as yet no over-arching consensus that what is needed is a root-and-branch transformation of capitalism. Most of the strategies and specific policy proposals fall into the category of fixing what has gone wrong and getting back to some of the certainties obtained prior to the credit crunch.

At its heart, what we need is genuinely sustainable development, which comes right down to one all-important challenge: is it possible to conceptualise and then operationalise an alternative model of capitalism – one that allows for the sustainable management of all the different capital assets on which we rely, so that the yield from those different assets sustains us now, as well as in the future?

But who really cares about alternative models of capitalism? As we’ve seen “just fix it” appears to be the dominant mood. The problem is that without an alternative framework we might just be fixing the wrong bits for the wrong reasons, thus guaranteeing the wrong outcomes. President Obama has already indicated his determination to put in place a US $ 150 billion ‘green jobs’ package, with the emphasis on enhancing energy security within the US through renewables and energy efficiency. UK Prime Minister Gordon Brown is talking about a somewhat more modest set of interventions in a new stimulus package, some of which will be geared to today’s low-carbon imperative. But most ‘recovery spending’ will make things worse from a sustainability perspective, rather
than better.

Our goal should not be to just come out the other side of recession as fast as possible with as little damage done as possible, but to build the foundations for a system of wealth creation that simultaneously addresses both the climate crunch and oil crunch . Though this is not the place for any kind of manifesto, here in brief, are some key areas where political interventions now need to be prioritized to bring about a new, sustainable capitalism.

Recapitalization Strategy

Governments are already discussing how to recapitalize financial institutions, but we need a radically different kind of recapitalization programme that puts the foundations of our economies (namely, the life support systems that underpin all economic activity) on to a genuinely sustainable footing. All the devastating problems now associated with this particular model of de-regulated, debt-ridden, capitalism have also been at work in our chronic mismanagement of national capital. We have aggressively drawn down on Nature’s capital assets liquidating national capital to generate current income. In the process, Nature’s balance sheet is now over-leveraged to an astonishing extent, creating a burden of debt that there is little prospect of paying back in this generation. We have not only been living beyond our own means, but well beyond the means of future generations as well.

The only appropriate response to this is a massive recapitalization programme to restore Nature’s balance sheets. One such programme is REDD- Reducing Emissions from Deforestation and Degradation. The basic idea is a simple one: the countries that have forests are poor, and cannot afford (it is argued) not to develop them. Their full value as carbon stores and climate regulators is not properly reflected in the market price for the timber from them. But now that we have come to recognize the full value of those all-important services, all we need to do is, agree on a price for those services and make over to the ‘owners’ of those forests an equivalent per hectare payment to compensate for the “profits foregone” for keeping their forests intact.

A real head of steam is now building up around this REDD approach- as is the criticism! NGOs are not persuaded that setting up a scheme based on carbon trading or the profit motive will ever really work. They have raised compelling concerns regarding land rights, poor governance in the countries concerned, corruption, the interests of indigenous people and illegal logging.

This is just one of the planet–scale interventions that need to be brought forward to address the increasingly urgent challenge of climate change and recaptilization of Nature’s balance sheet. For years, experts like Lester Brown have been urging countries to think about recapitalization in different ways, via Earth Restoration Budgets, where we stop building up unsustainable levels of ‘natural debt’ and start restoring natural capital and ecosystem services in ways that simultaneously protect the livelihood of some of the world’s poorest people.

A Green New Deal

At the heart of the Green New deal lies the assumption that governments find themselves with an unparalleled opportunity to start implementing the kind of practical, low carbon programs that have proved so elusive to date. Whatever else a Green New Deal may include, it certainly entails massively and urgently ramping up our investments both in energy efficiency (in our homes, schools, hospitals, offices, factories, shopping malls, and all forms of transportation) and in renewable (both large-scale - particularly onshore and offshore wind and micro generation). This means executing a bold new vision for a low carbon energy system that will include making every building a ‘power station’. The energy efficiency of tens of millions of properties will be maximized, as will the use of renewable energy to generate electricity. It also means creating and training a ‘carbon army’ of workers to provide human resources for a vast environmental reconstruction program.

So, the positive spinoff from the Green New Deal will be the creation of hundreds of thousands of sustainable green jobs - the “double–dividend” – and, as such the low carbon economy is an essential component of economic recovery. Gordon Brown himself is talking of 4,000 new jobs in this area.

Sustainable Economies

For the last forty years, a distin-guished but largely ignored cohort of economists have sought to demonstrate to politicians that “the pursuit of material progress through exponential economic growth” was an unattainable goal even when it was first adopted back in the 1950s, and that it remains as unattainable as ever today. In a new report from Sustainable Development Commission (Prosperity without Growth?) Professor Tim Jackson (Economics Commissioner on the SDC) has refreshed this debate in an extraordinarily compelling and challenging way. One really has to ask just how much longer politicians can remain in total denial about the literal impossibility of continuing with economic growth as we know it today. The contours of an economy freed from dependence on exponential economic growth need to be debated much more vigorously. Personally, I believe we must retain a commitment to market-based economics, but those capital markets must be subjugated – in other words, made servant to the kind of economy that we now need – rather than be allowed to dominate the economy. I would also advocate strict limits of leverage ratios, the ‘de-merging’ of financial conglomerates, the outlawing of speculative practices and other strategic measures. Many would go even further than this. There is a growing campaign to strip banks of their rights to create credit (and then charge interest on it) and to return that right to central banks.

This must also be the best possible time for the UK government to renew its erstwhile commitment to Ecological Tax Reform - shifting the burden of taxation away from jobs, value addition and wealth creation and onto waste, inefficiency and emissions of CO2. It is also time to think even more radically about non-fiscal mechanisms for reducing wealth disparities. Having sorted out a minimum wage entitlement for the poorest in the UK, there are now a number of Labour MPs who want the party to explore some kind of maximum wage.

As well as personal taxation, this is surely the time to re-think the whole question of corporate taxes, and in particular, the use of tax havens. This has increased over the last few years, with ‘capital mobility’ now largely unfettered, and some estimates tell us that more than half of global trade is routed through tax havens. This requires unflinching government leadership.

So, will we do what needs to be done to avoid what I’ve called ‘The Ultimate Recession’? These few months are going to be precious beyond belief. If we neglect that opportunity, and revert back to ‘business as usual, growth at all costs’, then it seems clear that our path to a sustainable future will be infinitely more troubled than peaceful. We have a unique opportunity to deconstruct the illusions that underpinned the boom and bust of recent times; to understand that these are the self-same illusions that have precipitated today’s near-terminal environmental breakdown; and to use that knowledge to construct the foundations for a global economy that will have at least a reasonable prospect of steering us through to a secure and sustainable future.

Since I wrote ‘Capitalism as if the World Matters’, I’ve been asked endlessly whether I still believe that any capitalist system could bear the weight of radical decarbonisation, a deep and lasting redistribution of wealth, and a dramatic rebalancing of our relationship with the natural world, as well as a new-found determination to get on top of the problem of continuing population growth. My answer is still “Yes”, because I can see how that particular variant of strictly sustainable capitalism could work. But my optimism on that score diminishes by the year. Short-termism and outright denial remain dominant.

As far as the UK government is concerned, there is no serious indicator that it is using the current crisis to rethink the way we live and the way we create wealth - unless it be in the oblique commentaries of both Ed and David Miliband. There is as yet no sense of relief that it has in effect, been liberated from its servitude to the amoral imperatives of free-market economics. All that seems to matter is getting back to the same old consumption-driven, debt-burdened ‘growthism’ that got us into the current mess. However absurd this may be, ‘living beyond our means’ still seems to have become the central tenet of recovery for a government that has simply lost its way.

I believe it is no exaggeration to say that the destiny of people in the UK will be shaped for many years to come by decisions taken over the course of the next two years. Unless we put the imperative of living within our means absolutely at the heart of everything we do to dig ourselves out of this particular recession, then any economic reprieve will be short-lived and the ultimate recession will be upon us.

Printed with permission from Forum for the Future.

Jonanthon Porritt is one of Britain’s well known environmentalists and the Founder-Director of Forum for the Future. ‘Living within our Means’ is available from www.forumforthefuture.org.

Photograph of Easter Island from www.z.about.com
easter_island5.tif

“How much longer can politicians remain in total denial about the literal impossibility of continuing with economic growth as we know it today?”

The Easter Island tragedy is of a people who did not survive and Easter Islanders are often talked of as people who ‘lived beyond the means of their environment’.

Although this story is disputed today - these giant Moai (statues) on the island still stand as symbols of a society that was wiped out, through eco-cide.
Mountain patterns enroute to Leh..tif

Mountain patterns enroute to Leh.

“We have been living not only beyond our own means, but well beyond the means of future generations”.