Jeffrey Sachs has a outstanding new book out called The Price of Civilization. The title of the book refers to remarks made by US Supreme Court justice Oliver Wendell Holmes, who spoke of the need for citizens of a country, who enjoyed the benefits of living in that country, to pay the price to support that civilization.
Sachs provides a thoughtful, cogent analysis of challenges facing America, and how to address those challenges. The book has a clean straightforward jargon-free narrative that is balanced and has elements that will appeal to conservatives, independents and progressives alike – though each group will find things to disagree with, there is much that will be embraced.
Sachs looks at the nature of America, through the lens of democracy, fairness, civic virtue, compassion, and happiness, and asks the question “What is our role in the 21st century?”
Sachs is the Director of The Earth Institute, Quetelet Professor of Sustainable Development, and Professor of Health Policy and Management at Columbia University.
Here’s Sachs being interviewed by Charlie Rose, about The Price of Civilization.
Here’s Sachs in the middle of the Occupy Wall Street demonstrations, taking questions from reporters. Sachs is articulate, plain speaking and clearly frustrated with the faltering state of the nation and the cozy monied relationship between government and big business.
On a related note, Charles M. Blow had an excellent graphic from the Bertelsmann Stiftung foundation report “Social Justice in the OECD — How Do the Member States Compare?” It helps give some context to issues driving the Occupy Wall Street demonstrations and challenges facing America.
The world’s farmers need a pay rise – or, come the mid-century, the other 8 billion of us may well find we do not have enough to eat.
True, this assertion flies in the face of half a century of agricultural economics orthodoxy – but please bear with me as I explain.
Globally and especially in developed countries, food has become too cheap. This is having a wide range of unfortunate – and potentially dangerous – effects which include:
Negative economic signals to farmers everywhere, telling them not to grow more food
Increasing degradation of the world’s agricultural resource base
A downturn in the global rate of agricultural productivity gains
An ‘investment gap’ which is militating against the adoption by farmers of modern sustainable farming and other new technologies
A deterrent to external investment because agriculture is less profitable than alternatives.
The decline and extinction of many local food-producing industries worldwide
A disincentive to young people (and young scientists) to work in agriculture.
Loss of agricultural skills, rural community dislocation and increased rural and urban poverty affecting tens of millions
Reduced national and international investment in agricultural research and extension
Lack of investment in water, roads, storage and other essential rural infrastructure
The waste of up to half of the food which is now produced
A pandemic of obesity and degenerative disease that sickens and kills up to half of consumers of the ‘modern diet’, resulting in
Soaring health costs causing the largest budget item blowout in all western democracies
The failure of many developing countries to lay the essential foundation for economic development – a secure food and agriculture base – imposing direct and indirect costs on the rest of the world through poverty, war and refugeeism.
From this list it can be seen that low farm incomes have far wider consequences for humanity in general than is commonly supposed.
Indeed, in a context in which all of the basic resources for food production are likely to become much scarcer, it may be argued that, indirectly, they imperil every one of us.
A Market Failure
This aspect of future global food security is primarily about a market failure.
At its ‘How to Feed the World’ meeting in October 2009 the UN Food and Agriculture Organisation stated that investment of the order of $83 billion a year was needed in the developing world alone, to meet the requirement for a 70 per cent increase in food production by 2050. (source: ii) However, almost in the same breath, it noted “Farmers and prospective farmers will invest in agriculture only if their investments are profitable.” (My emphasis).
The logic is unassailable. Today most of the world’s farmers have little incentive to invest in agriculture because the returns are so low. This applies as much to farmers in developed countries , as it does to smallholders in Asia or Africa.
Reasons for the low returns are not hard to find: farmers are weak sellers, trapped between muscular globalised food firms who drive down the price of their produce, and muscular industrial firms who drive up the cost of their inputs. This pincer movement not only discourages ‘developed’ agriculture but also prevents undeveloped agriculture from developing.
Nothing new here, you may say. So what has changed? The growing imbalance in power between farmers and those who dominate the food supply chain is what has changed.
Two decades ago most farm produce was largely sourced from local farmers by local buyers for local markets and consumers, as it was through all of history. In the 21st century there has been a massive concentration of market power in the hands of a tiny number of food corporations and supermarkets sourcing food worldwide. These are – quite naturally – doing all they can to reduce their input costs (farm prices) as they compete with one another. This is not a rant about globalisation: it’s a simple observation about one of the facts of global economic life.
The power of the farmer to resist downward price pressure has not increased. Indeed it has weakened, as the average producer now competes against some struggling farmer in a far away country, rich or poor, who is also simply trying to survive by selling at the lowest price.
The power of the global input suppliers – of fuel, machinery, fertilizer, chemicals, seeds and other farm requirements, has also grown as they concentrate and globalise. This makes it easier for them to raise the cost of their products than it is for farmers to obtain more for their wheat, rice, livestock or vegetables or to withstand input price hikes.
As a consequence of this growing market failure, the economic signal now reaching most of the world’s farmers from the market is “don’t grow more food”.
Its effect is apparent in the fact that world food output is now increasing at only about half the rate necessary to meet rising global demand, and that yield gains for major crops have stagnated.
While some will argue such cost/price pressures make for greater economic ‘efficiency’, the logical outcome of unrestrained global market power will eventually displace around 1.5 billion smallholders out of agriculture, with devastating consequences for the landscapes they manage and the societies most affected. Putting one in five of the Earth’s citizens out of work and destroying the food base is not a strategy any intelligent policy or government would advocate, one hopes. But it is one of those ‘externalities’ which classical economics sometimes omits to factor in – and is happening, nevertheless.
In a recent satellite survey, researchers working for FAO reported 24 per cent of the Earth’s land surface was seriously degraded – compared with 15 per cent estimated by an on-ground survey in 1990. The FAO team noted that degradation was continuing at a rate of around 1 per cent a year. (source: iii)
Every agronomist and agricultural economist knows that, when farmers are under the economic hammer, a good many of them will overstock and overcrop in a desperate effort to escape the poverty trap leading to severe resource degradation. In drier, more marginal country, cost/price pressures can devour landscapes – and this is undoubtedly a major factor (though not the only one) in the degradation of land and water worldwide, especially in the world’s rangelands.
If we continue to sacrifice one per cent of the world’s productive land every year, there is going to be very little left on which to double food production by the mid-century: crop yields in 2060 would have to increase by 300 per cent or so universally, which is clearly a tall order.
Much the same applies to irrigation: “In order to double food production we need to double the water volume we use in agriculture, and there are serious doubts about whether there is enough water available to do this,” is how Dr Colin Chartres, director general of the International Water Management Institute summed it up recently. (source: iv) Dr Chartres estimates that doubling world food output could require up to 6000 cubic kilometres more water.
Solutions to land and water degradation are reasonably well known, and have been shown to work in many environments – but are not being adopted at anything like the rates necessary to double world food production or even to conserve the existing resource base. One reason is that farmers, in the main, cannot afford to implement them, even though many would like to do so. The economic signal is wrong.
As a result, world agriculture is today primarily a mining activity. We all know what happens to mines when the ore runs out.
There is also persuasive evidence that world agriculture is dropping off the pace – that it is no longer making the yield advances and total productivity gains achieved in the previous generation. In a recent paper Alston and Pardey (source: v) documented this decline both in the US and globally, attributing it significantly to falling investment worldwide in agricultural science and technology and extension of new knowledge to farmers.
The role of low returns in discouraging farmers, in both developed and developing countries, from adopting more productive and sustainable farming systems cannot be ignored. While a few highly efficient and profitable producers continue to make advances, the bulk of the world’s farmers are being left behind. Since small farmers feed more than half the world, this is a matter for concern.
One of the indirect effects of the negative economic signal for agriculture can be seen in the growing reluctance of governments to invest in agricultural research and development, and their increasing tendency to cut ‘public good’ research. This has happened in most developed countries and even in places such as China the level of ag R&D support is falling as a proportion of the total science investment. With agricultural R&D comprising a mere 1.8 cents of the developed world’s science dollar in 2000, one has a very clear idea how unimportant most of the world’s governments now consider food production to be. (source: vi)
The fact that agriculture appears perennially unprofitable and suffers from continuing social malaise probably contributes, subliminally, to a view among urban politicians that society ought not to be wasting its money funding research for such a troubled sector: there are a thousand other more attractive and exciting fields for scientific investment. This negative (and false) image of agriculture is an unspoken driver behind the reduced global R&D effort.
Today the world invests around $40 billion a year in agricultural research – and $1500 billion a year in weapons, as if killing one another were forty times more important than eating.
Is food too cheap?
For affluent societies at least, food is now the cheapest in real terms it has ever been in human history.
Back in our grandparents’ time, in the early part of the 20th century, the average western wage earner devoted about a third of their weekly income to food. Rent was relatively cheap, people didn’t have cars, iPhone bills, plasma TVs, facelifts or overseas vacations – and food was essential. By the 1970s the amount of household disposable income spent on food was down to 20 per cent. Today it is around 11-12 per cent in Australia and similar in other western nations. As incomes rise in China and India, the proportion is falling there too.
When something is too cheap, people do not value it as they should. This produces a lack of respect for the product itself, for the people and industries involved in its production – farmers and scientists – and for the places it is produced and for the resources of land, water and human skills that produce it. This is one explanation for the negative image held by governments, businesses and most societies towards agriculture and its investment needs.
In an age where 3.5 billion humans have only the dimmest notion where their food comes from, lack of respect for the main thing that keeps them alive is coming to be a predominant ‘value’ in the human race and this is a potential danger.
A Culture of Waste
Food is now so cheap that developed societies such as the US, Britain and Australia throw away nearly half, while developing countries lose nearly half post-harvest. (source: vii)
Societies that pay their farmers such low returns, have found they can afford to send nearly half of the farmers’ efforts to landfill. Or burn in an recreational vehicle enough grain as biofuel in one week to feed a poor person for a year.
Where our ancestors stored, conserved and recycled nutrients, humanity now appears to waste 70% -90% of all the nutrients used to produce food. On farm, up to half the applied fertiliser does not feed crop or pasture but escapes into the environment. Of the harvested nutrients, some are lost post-harvest, in transport, processing and cooking – but more than 30 per cent are simply discarded, in the shops and in the home. Then we dump around 90 per cent of our sewage nutrients in the ocean.
In short, the modern food system has established a culture of absolute and utter waste, sustained only by the mining of energy and nutrients (from rock or soil), which will eventually run out or become unaffordable to most farmers.
The universal practice of recycling, in use since agriculture began more than 6000 years ago, has broken down. The planetary nutrient cycle is now at risk from the colossal nutrient pollution now occurring.
This situation cannot persist more than a few decades. We will need to recycle and invest in new systems – but for that to occur, farm incomes and the incentive to invest in food production must rise and the economic signal to invest in agriculture must change.
An Unhealthy Situation
Cheap food is at the root of a pandemic of disease and death larger in the developed world than any other single cause of human mortality, and spreading like wildfire in the newly-industrialised world. Cheap, abundant processed food is a driver for obesity, which now affects one in five humans, and plays a significant role in the society-wide increase in cancers, heart disease, diabetes, stroke and bowel disorders.
Cheap food, in other words, is an economic invitation to consumers – including millions of children – to kill themselves prematurely through overindulgence.
Cheap food is the chief economic driver of the greatest budget blow-out in all western democracies: healthcare.
Solving the Food Challenge
The purpose of this essay is to call attention to the effect a never-ending reduction in farmers’ incomes will have on world food security at a time of rising physical constraints to production, including scarcities of land, water, energy, nutrients, technology, fish and stable climates.
At the very time when most experts agree we should be seeking ways to double food output sustainably over the coming half-century, the ruling economic signal is: “don’t do it”.
Of course, we can simply obey the economic signal and allow agricultural shortfalls to occur – but that will expose 8 or 10 billion consumers to massive unheralded price spikes, of the sort experienced in 2008, which have a dire impact on the poor, start wars and topple governments – and will not benefit farmers as much as a stable, steady increase in their incomes.
Most of the world’s poorest people are farmers, and it follows that one of the most effective remedies for world poverty is to increase the returns to agriculture. True, this will involve raising food prices for the urban poor but they are less numerous and can more easily be assisted by other government measures. At present rural poverty is maintained throughout the world largely by the economic policy of providing affluent city consumers with cheap food.
It is necessary to state this essay does not advocate a return to agrarian socialism, protectionism, commodity cartels or an end to free markets. In fact, we probably need to move much faster and further towards totally free trade in agricultural products in order to encourage efficient producers – large and small – around the world.
But it does hold up a warning flag about the universal dangers of underinvestment, negative signals and sentiment, resource destruction and rural dislocation caused by the undervaluing of the one commodity humanity absolutely cannot do without, as we approach the greatest demand for food in all of history.
There are numerous ways this issue might be addressed. Here are a few:
Price: through an educated “community consensus” that results in willingness on the part of consumers, supermarkets and food processors to pay more for food so as to protect the resource base and enable farmers to invest in new technologies (source: viii)
Subsidy: by the payment of a social wage to farmers by governments for their stewardship on behalf of society of soil, water, atmosphere and biodiversity, separate from their commercial food production
Regulation: by limiting by law those practices or technologies which degrade the food resource base and rewarding by grant those which improve it
Taxation: by levying a resource tax on all food which reflects its true cost to the environment to produce, and by reinvesting the proceeds in more sustainable farming systems, R&D, rural adjustment and enhanced resource management.
Market solutions: by establishing markets for key farm resources (eg carbon or water) that result in higher returns for farmers from wise and sustainable use.
Public education about how to eat more sustainably; industry education about sustainability standards and techniques.
A combination of several of the above measures.
The technical solutions to most of the world’s food problems are well-known and well understood – but they are not being implemented as widely as they should because of a market failure which prevents their adoption. To avoid grave consequences, affecting billions of people, this failure needs correction.
It also needs correcting because, as long as world food production remains an undervalued activity, then so too will investing in the research essential to overcome future shortages –crop yields, water use, landscape sustainability, alternative energy, the recycling of nutrients and the reduction of post-harvest losses. To satisfy a doubling in demand for food over the coming half century calls for at least $160 billion in worldwide agricultural R&D activity a year – equal to a tenth of the global weapons budget. However this would leave the world both more peaceful – and better fed.
It is not the purpose of this essay to solve the issue of how to deliver fairer incomes to farmers worldwide, but rather to foster debate among thoughtful farmers, policymakers and researchers about how we should go about it.
However it does question whether some of the ‘old truths’ of the 20th century still apply in the 21st, or whether the era of globalisation and resource scarcity has changed the ground rules.
It also asks whether the unstinted application of overwhelming market force against farmers is the act of a sapient species – or a mob of lemmings?
Over to the sapient ones among you.
–– Julian Cribb FTSE
Julian Cribb is Founding Editor of Science Alert, and is the principal of Julian Cribb & Associates, specialists in science communication. He is a fellow of the Australian Academy of Technological Sciences and Engineering.
i. Sources for this essay are those cited in Julian Cribb's book The Coming Famine, University of California Press, 2010. Since they take up 24 pages, we have not reproduced them all here. See the book at Amazon or UC Press for full reference listing.
ii. FAO High Level Export Forum, How to feed the World: Investment, Rome, October 2009. http://www.fao.org/fileadmin/templates/wsfs/docs/Issues_papers/
iii. Bai ZG, Dent DL, Olsson L and Schaepman ME 2008. Global assessment of land degradation and improvement 1: identification by remote sensing. Report 2008/01, FAO/ISRIC – Rome/Wageningen
iv. Chartres C, World Congress of Soil Science, Brisbane, August 2010
v. J. Alston, J.M.Beddow, P. Pardey, “Mendel versus Malthus: research, productivity and food prices in the long run,” University of Minnesota, 2009. http://ageconsearch.umn.edu/bitstream/53400/2/SP-IP-09-01.pdf
vi. Pardey P et al, Science, Technology and Skills, CGIAR report, October 2007.
vii. See for example Lundqvist, J., C. de Fraiture and D. Molden. Saving Water: From Field to Fork – Curbing Losses and Wastage in the Food Chain. SIWI Policy Brief. SIWI, 2008.
viii. In case this should raise a sceptical eyebrow, the recent stakeholder report by Woolworths Australia “Future of Food”, 2010, suggests at least some of the major players in the food game have a dawning grasp of the consequences of their actions and are now looking to invest in (mainly non-income) ways to support farmers.
If you are a regular reader of this blog, you know that we track several core issues that we believe will have profound impact on us all – rich and poor, individuals, communities, business, and government. They are population, energy, water, food, climate change and healthcare. In a sense, food interrelates to all the other issues – it takes tremendous energy and water to produce our food, climate change will reduce food production, and food choices affect our health.
Lo que separa la civilización de la anarquía son solo siete comidas.
(Civilization and anarchy are only seven meals apart.)
Food, water, shelter and security are the fundamental building blocks of a persons survival. When those basics are removed, even for a few days, a civilized population can move toward anarchy in a heartbeat.
Rather than highlight the NY Times excerpt, I think it is worth looking at the solid concise description Cribb provides, of the main drivers challenging the supply and demand sides of food production. If you read nothing else in this book, read this and remember it as you try to make sense of the news stories realted to food that will become more common as the crisis deepens.
Excerpt of The Coming Famine by Julian Cribb
To see where the answers may lie, we need to explore each of the main drivers. On the demand side the chief drivers are:
Population. Although the rate of growth in human numbers is slowing, the present upward trend of 1.5 percent (one hundred million more people) per year points to a population of around 9.2 billion in 2050 — 3 billion more than in 2000. Most of this expansion will take place in poorer countries and in tropical/subtropical regions. In countries where birth rates are falling, governments are bribing their citizens with subsidies to have more babies in an effort to address the age imbalance.
Consumer demand. The first thing people do as they climb out of poverty is to improve their diet. Demand for protein foods such as meat, milk, fish, and eggs from consumers with better incomes, mainly in India and China but also in Southeast Asia and Latin America, is rising rapidly. This in turn requires vastly more grain to feed the animals and fish. Overfed rich societies continue to gain weight. The average citizen of Planet Earth eats one-fifth more calories than he or she did in the 1960s — a “food footprint” growing larger by the day.
Population and demand. This combination of population growth with expansion in consumer demand indicates a global requirement for food by 2050 that will be around 70–100 percent larger than it is today. Population and demand are together rising at about 2 percent a year, whereas food output is now increasing at only about 1 percent a year.
These demand-side factors could probably be satisfied by the world adopting tactics similar to those of the 1960s, when the Green Revolution in farming technology was launched, were it not for the many constraints on the supply side that are now emerging to hinder or prevent such a solution:
Water crisis. Put simply, civilization is running out of freshwater. Farmers presently use about 70 percent of the world’s readily available freshwater to grow food. However, increasingly megacities, with their huge thirst for water for use in homes, industry, and waste disposal, are competing with farmers for this finite resource and, by 2050, these uses could swallow half or more of the world’s available freshwater at a time when many rivers, lakes, and aquifers will be drying up. Unless major new sources or savings are found, farmers will have about half of the world’s currently available freshwater with which to grow twice the food.
Land scarcity. The world is running out of good farmland. A quarter of all land is now so degraded that it is scarcely capable of yielding food. At the same time, cities are sprawling, smothering the world’s most fertile soil in concrete and asphalt, while their occupants fan out in search of cheap land for recreation that diverts the best food-producing areas from agriculture. A third category of land is poisoned by toxic industrial pollution. Much former urban food production has now ceased. The emerging global dearth of good farmland represents another severe limit on increasing food production.
Nutrient losses. Civilization is hemorrhaging nutrients — substances essential to all life. Annual losses in soil erosion alone probably exceed all the nutrients applied as fertilizer worldwide. The world’s finite nutrient supplies may already have peaked. Half the fertilizer being used is wasted. In most societies, up to half the food produced is trashed or lost; so too are most of the nutrients in urban waste streams. The global nutrient cycle, which has sustained humanity throughout our history, has broken down.
Energy dilemma. Advanced farming depends entirely on fossil fuels, which are likely to become very scarce and costly within a generation. At present farmers have few alternative means of producing food other than to grow fuel on their farms — which will reduce food output by 10–20 percent. Many farmers respond to higher costs simply by using less fertilizer or fuel — and so cutting yields. Driven by high energy prices and concerns about climate change, the world is likely to burn around 400 million tonnes (441 million U.S. tons) of grain as biofuels by 2020 — the equivalent of the entire global rice harvest.
Oceans. Marine scientists have warned that ocean fish catches could collapse by the 2040s due to overexploitation of wild stocks. Coral reefs — whose fish help feed about five hundred million people — face decimation under global warming. The world’s oceans are slowly acidifying as carbon dioxide from the burning of fossil fuels dissolves out of the atmosphere, threatening ocean food chains. Fish farms are struggling with pollution and sediment runoff from the land. The inability of the fish sector to meet its share of a doubling in world food demand will throw a heavier burden onto land-based meat industries.
Technology. For three de cades the main engine of the modern food miracle, the international scientific research that boosted crop yields, has been neglected, leading to a decline in productivity gains. Farmers worldwide are heading into a major technology pothole, with less new knowledge available in the medium run to help them to increase output.
Climate. The climate is changing: up to half the planet may face regular drought by the end of the century. “Unnatural disasters” — storms, floods, droughts, and sea-level rise — are predicted to become more frequent and intense, with adventitious impacts on food security, refugee waves, and conflict.
Economics, politics, and trade. Trade barriers and farm subsidies continue to distort world markets, sending the wrong price signals to farmers and discouraging investment in agriculture and its science. The globalization of food has helped drive down prices received by farmers. Speculators have destabilized commodity markets, making it riskier for farmers to make production decisions. Some countries discourage or ban food exports and others tax them, adding to food insecurity. Others pay their farmers to grow fuel instead of food. A sprawling web of health, labor, and environmental regulation is limiting farmers’ freedom to farm.
The collapse in world economic conditions in late 2008 and 2009 has changed the prices of many things, including land, food, fuel, and fertilizer — but has not altered the fact that demand for food continues to grow while limits on its production multiply. Indeed, the economic crash exacerbated hunger among the world’s poor, and has not altered the fundamentals of climate change, water scarcity, population growth, land degradation, or nutrient or oil depletion.
As Cribb astutely points out, as developing nations become more affluent, they consume more protein, in the form of fish, meat, milk, eggs, etc.
That protein is produced with grain, and it is an inefficient process:
It takes 1,ooo tons of water to produce a ton of grain
It takes about 15 pounds of grain to produce a pound of beef
It takes about 5,200 gallons of water to produce a pound of beef
Thinking about the Butterfly Effect – the idea that a butterfly flapping its wings in one part of the world, changing patterns in the air, can cause a tornado in another part of the world – we can see that famine in one part of the world becomes a kind of super butterfly. All nations – rich and poor – will feel the impact.
Cripp summarizes the challenge and frames the solution:
To sum it all up, the challenge facing the world’s 1.8 billion women and men who grow our food is to double their output of food — using far less water, less land, less energy, and less fertilizer. They must accomplish this on low and uncertain returns, with less new technology available, amid more red tape, economic disincentives, and corrupted markets, and in the teeth of spreading drought. Achieving this will require something not far short of a miracle.
Yet humans have done it before and, resilient species that we are, we can do it again. This time, however, it won’t just be a problem for farmers, scientists, and policy makers. It will be a challenge involving every single one of us, in our daily lives, our habits, and our influence at the ballot box and at the supermarket.
It will be the greatest test of our global humanity and our wisdom we have yet faced.
Keywords: growth, consumption, GDP, global economy, China, India, consumerism
Robert Reich wrote a thoughtful article on Why Growth is Good. Highlights of the article are below. In it, he differentiates between growth and consumption.
Growth is really about the capacity of a nation to produce everything that’s wanted and needed by its inhabitants. That includes better stewardship of the environment as well as improved public health and better schools.
For me, what Stiglitz is getting at is: We grow what we measure (GDP), and because we are measuring the wrong stuff, we are growing wrong. It seems to be in our DNA to want to “grow,” but like a garden, don’t we have a choice about what we grow? Are there ways we can grow our economy that restore abundance rather than consume it? What are the essential things to measure so that we are growing good things?
Using ecological footprint data from Global Footprint Network we can see the current state of consumption for North America and the rest of the world. American per capita consumption is legend. China and India are adopting their own versions of American-style consumerism. All nations are bumping up against the limits of the earth to provide what is needed for growth. We are collectively challenged to find new ways to grow, more lightly, in ways that restore rather than deplete.
N.B. The width of bar proportional to population in associated region. Ecological Footprint accounts estimate how many Earths were needed to meet the resource requirements of humanity for each year since 1961, when complete UN statistics became available. Resource demand (Ecological Footprint) for the world as a whole is the product of population times per capita consumption, and reflects both the level of consumption and the efficiency with which resources are turned into consumption products. Resource supply (biocapacity) varies each year with ecosystem management, agricultural practices (such as fertilizer use and irrigation), ecosystem degradation, and weather. This global assessment shows how the size of the human enterprise compared to the biosphere, and to what extent humanity is in ecological overshoot. Overshoot is possible in the short-term because humanity can liquidate its ecological capital rather than living off annual yields.
Highlights from Robert Reich’s Why Growth is Good
Economic growth is slowing in the United States. It’s also slowing in Japan, France, Britain, Italy, Spain, and Canada. It’s even slowing in China. And it’s likely to be slowing soon in Germany.
If governments keep hacking away at their budgets while consumers almost everywhere are becoming more cautious about spending, global demand will shrink to the point where a worldwide dip is inevitable.
You might ask yourself: So what? Why do we need more economic growth anyway? Aren’t we ruining the planet with all this growth — destroying forests, polluting oceans and rivers, and spewing carbon into the atmosphere at a rate that’s already causing climate chaos? Let’s just stop filling our homes with so much stuff.
The answer is economic growth isn’t just about more stuff. Growth is different from consumerism. Growth is really about the capacity of a nation to produce everything that’s wanted and needed by its inhabitants. That includes better stewardship of the environment as well as improved public health and better schools. (The Gross Domestic Product is a crude way of gauging this but it’s a guide. Nations with high and growing GDPs have more overall capacity; those with low or slowing GDPs have less.)
Poorer countries tend to be more polluted than richer ones because they don’t have the capacity both to keep their people fed and clothed and also to keep their land, air and water clean. Infant mortality is higher and life spans shorter because they don’t have enough to immunize against diseases, prevent them from spreading, and cure the sick.
In their quest for resources rich nations (and corporations) have too often devastated poor ones – destroying their forests, eroding their land, and fouling their water. This is intolerable, but it isn’t an indictment of growth itself. Growth doesn’t depend on plunder. Rich nations have the capacity to extract resources responsibly. That they don’t is a measure of their irresponsibility and the weakness of international law.
How a nation chooses to use its productive capacity – how it defines its needs and wants — is a different matter. As China becomes a richer nation it can devote more of its capacity to its environment and to its own consumers, for example.
The United States has the largest capacity in the world. But relative to other rich nations it chooses to devote a larger proportion of that capacity to consumer goods, health care, and the military. And it uses comparatively less to support people who are unemployed or destitute, pay for non-carbon fuels, keep people healthy, and provide aid to the rest of the world. Slower growth will mean even more competition among these goals.
Faster growth greases the way toward more equal opportunity and a wider distribution of gains. The wealthy more easily accept a smaller share of the gains because they can still come out ahead of where they were before. Simultaneously, the middle class more willingly pays taxes to support public improvements like a cleaner environment and stronger safety nets. It’s a virtuous cycle. We had one during the Great Prosperity the lasted from 1947 to the early 1970s.
Slower growth has the reverse effect. Because economic gains are small, the wealthy fight harder to maintain their share. The middle class, already burdened by high unemployment and flat or dropping wages, fights ever more furiously against any additional burdens, including tax increases to support public improvements. The poor are left worse off than before. It’s a vicious cycle. We’ve been in one most of the last thirty years.
No one should celebrate slow growth. If we’re entering into a period of even slower growth, the consequences could be worse.
For some excellent reading on this subject, check out the Recommended Reading section on Sustainable Business, Government, and Community. I especially found useful Lester Brown’s Plan B 4.0 and Jeffrey Sachs’ Common Wealth.
China Daily is reporting the extreme heat and humidity in Beijing has lead to record consumption of electricity. Beijing’s power consumption exceeded 15 million kilowatts for the first time in history on July 23, around 5 million kilowatts of which was consumed by air-conditioners, according to a report from the Mirror Evening News.
The picture below, with the iconic Gucci shirt, provides ironic symbolism for the superconsumer trends unfolding in China.
As China’s population has grown, per capita income and consumption have grown. Let’s take a look at the trends in energy use and per capita income relative to US and India. Using GapMinder’s Trendalyzer with energy consumption data from BP’s Statistical Review of World Energy 2010 and income data from the IMF, we can see some powerful trends unfolding (N.B.: Data presented for 1965 through 2008, 1 year steps, circle area proportional to population size, energy use in tonnes of oil equivalent):
China and India show steadily increasing per capita income, with China having the biggest change – outperforming India more than 2 to 1.
This increase in income is fueling the growth of China’s middle class. Western-style patterns of consumption are leading to China’s increased consumption of energy, water, raw materials… The trend is strong and steady, with no signs of slowing.
To meet this growing need for energy, China has been building about 2 power plants per week – mostly coal burning. As is widely known, coal power generation is about as dirty as it gets, and accounts for about 20 percent of Greenhouse Gas (GHG) emissions globally. Coal is used to produce about 70% of energy consumed in China.
The Chinese are in a climate change death spiral. Using the heat wave in Beijing as an example – to meet the expanding populations growing demand for energy, China builds about 2 coal-fired power plants per week. The coal exacerbates global warming. The population turns up their air conditioners, which leads to record energy consumption and drives the need for more power plants, and the spiral continues until… What?
There is an interesting phenomena going on in some of the major business schools in Europe. In some – you are not allowed to mention environmental factors as a major catalyst for new business models/thinking. It is “understood” that as a lecturer, you inspire the students with fresh thinking but only so far. Go further, and people just roll their eyes and pigeon-hole you as a treehugger.
Here are three quotes from top business leaders:
“The era of ‘abundance’ is over. The future will see our natural resources, from oil to food, having some level of restriction placed on them.” – Andy Bond, CEO, Asda (May 2009)
“We must rapidly wean ourselves off our dependence on coal and fossil fuels.” – Richard Branson, announcing investment of all profits from Virgin transport business, estimated at $3 billion over 10 years, to be invested in fighting global warming. (21 September 2006)
“Sustainability is here to stay or we may not be.” – Niall Fitzgerald, UK CEO, Unilever
Now, none of these guys are particularly treehuggy. And most MBAs would give their eyeteeth to fill the shoes of these guys – and yet – in many MBA programs – coverage of sustainability issues is absent, apologetic, sidelined, or sketchy.
Let’s stop tiptoeing around the obvious. Business leaders can handle the truth. Though there is uncertainty on what the impact will be, climate change is a global issue that will impact business. Period.
“The United States depends on a smooth-functioning international system ensuring the flow of trade and market access to critical raw materials such as oil and gas, and security for its allies and partners. Climate change and climate change policies could affect all of these—domestic stability in a number of key states, the opening of new sea lanes and access to raw materials, and the global economy more broadly—with significant geopolitical consequences.”
“In addition, anticipated impacts to the Homeland—including possible increases in the severity of storms in the Gulf, increased demand for energy resources, disruptions in US and Arctic infrastructure, and increases in immigration from resource-scarce regions of the world—are expected to be costly. Government, business, and public efforts to develop mitigation and adaptation strategies to deal with climate change — from policies to reduce greenhouse gasses to plans to reduce exposure to climate change or capitalize on potential impacts—may affect US national security interests even more than the physical impacts of climate change itself.”
“Climate change is a threat multiplier in the world’s most unstable regions.”
“From a national security perspective, climate change has the potential to affect lives (for example, through food and water shortages, increased health problems including the spread of disease, and increased potential for conflict), property (for example through ground subsidence, flooding, coastal erosion, and extreme weather events), and other security interests.”
These leaders are talking about fundamental shifts in ‘givens’ that require action, a joined up way of behaving, new ways of thinking, and new approaches. And our top business schools should be on the leading edge.
I first got interested in business schools ignoring the big elephant in the classroom two years ago when I was delivering a course on dominant business metaphors and implementing change. I wanted to say one line – one sentence inviting students to ponder how the nature of sustainability planning would be different if organisations, in addition to approaching business as a ‘competitive sport’, also approached it as a living organism. The professor who brought me in said ‘no’ – that the MBAs would feel they were being hijacked away from the course they had paid for. There was a specific elective for sustainability – and outside of that – best not to mention those issues.
Over the past few months, I’ve been speaking with several top MBA programs in Europe. Each is saying that leaders need, more than at any other time in history, to be able to lead in the presence of ambiguity, and to be able to perform collaboratively with high levels of uncertainty. Applied Improvisation skills are rather good for that, which is why I’m there in the first place.
What I find interesting in talking with these top MBA programs is that many are not contextualising the WHY of this new emphasis. Not addressing why managers/leaders would need to be so good at ambiguity.
“Growth for the sake of growth is the ideology of the cancer cell.” – Edward Abbey
I sat up when I saw this quote. It was refreshing to see in a lecture to potential MBAs at a leading business school in the Netherlands a few weeks ago. During my time at the school, two of the guest lecturers talked about sustainability – kind of…
The first lecturer used the Abbey quote (Abbey is a renown outspoken sustainability activist) and talked about the need to create ‘sustainable businesses’ quickly dismissed the notion of ‘sustainable’ as being linked to any ‘environmental’ issues… – it was about a business which can keep going, despite ‘adversity’. Given what scientists are saying about increasing disruptions over climate change, peak oil, peak minerals, peak water, how could adversity due to these factors not be mentioned?
The other lecturer had just hosted a biomimicry event two weeks before and deeply cared about the environment and sustainability. He works with top leaders in the best companies around the world on developing leadership skills. In his session, he talked about the profound need for leaders to be comfortable leading in the presence of ambiguity, but didn’t say why. In the break he confided that there are some groups with which you cannot talk about the environment directly. He had been gently testing the water with that day’s group and found he could mention it a bit…but only a bit. Several people were there for the express purpose of earning more money with an emphasis on value extraction, not particularly wealth creation/exchange.
Contextualising is a vital part of learning. The military does this routinely in their simulations – creating real world scenarios in the classroom. If we are facing a series of challenges (climate change, scarcity of water, oil, minerals, etc.) we must mention that as part of what leaders will face.
One initiative that gives me hope is the UN Principles for Responsible Management Education (PRME) initiative. The head of a leading MBA program in the UK turned me on to it. Finally – a global effort is being made to transform business schools and the Assocation of MBAs is part of it. In theory – that should mean that the taboo-ness of sustainability issues being explicitly mentioned, or mentioned only in specific electives – disappears.
As I continue to work with MBA programs, I will keep you posted on what I see going forward in this arena. And if you know of any best practice in this area – please post it here. Let me know!
“Unless we change direction, we are likely to end up where we are going.” – Chinese proverb