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Economics of Progress and peace

Economics of sustainability:
In this world of ever growing consumption, there is a strong need to look at economics from a sustainability perspective. Will the current economic model help you achieve the well being of everyone on the planet? Does our current economic model understand and appreciate the dependencies on nature? Does our economic model cater for the living world at large? Do we understand the importance of connectedness of all life forms? Would we be able to live if we destroy all the other life forms in the process of achieving the ever illusive human well being? Do we, the way we are consuming, have any likelihood of surviving at least a few generations more? These and many such questions lead us to start looking at possible new economic models which will look at the well being in integrated and holistic perspective.
Economics in a conventional sense has been a science of production, consumption and allocation. In the words of Paul Samuelson – a renowned economist – “If a Parrot knows two words – demand and supply, he may well be called an economist”. The demand side is the consumption aspect while supply is governed by production.
Economics, I argue is therefore a science of material and energy consumption and distribution! Money is only a vehicle that was introduced to make things simpler – that is in making it easier to transfer material and energy across people at large or producers and consumers to be more specific.
In the pre-industrial revolution era, availability of energy which could be conveniently used was limited, making it quite difficult for producers to create goods and services easily. With easy access to convenient forms of energy – typically fossil fuels, the equations changed substantially. There was no way to imagine then that we as human beings would expand our economic activities so much that it could impact even the availability of natural resources. The good old thought of economics – which is also taught even today in our school and college curricula – considers even now that Natural resources are “free” & ” infinite”. Moreover human economy must “exploit” these resources for the so called well being of the human race. It was indeed thought that this mechanism will help us reach that illusive well being with a hope that it would not disturb well being of the other natural world. The truth seems to be far from these assumptions. In fact it is quite clear that human activities led by this economic thought are taking us to a brink of a disaster.
So, what do we need to do – that we are so clear about the impact of this current economic thought. One of the most important assumptions the current economics makes – that of “infinite and free” natural resources – has been clearly invalidated. What we need to understand is the cycle of material and energy use. It is important to understand that all that we use as “raw material” in terms of material or energy – comes from nature. The services like clean air and clean water that we take for granted are nature’s services which could continue only if we do respect the store of natural resources and in fact help restore this to a level where the nature can indeed support provisioning of its services! We have come to a scale of consumption that is not sustainable by nature anymore. We must therefore imbibe the new economic thought (and this is not so new in reality) where we acknowledge very clearly that the human economy is and must remain a subset of nature’s economy. There are limitations to material and energy resources that we can access and use. There is a limitation to how much waste could the nature absorb and recycle. Once we imbibe this holistic economic thought we can certainly start thinking about how to manage – to live well – for ourselves and for our future generations, without excluding the other life forms on the planet.
It is quite evident that in the current economic system, the market economy – we see that the investment has gone where there is a return and not necessarily where there is a need! There have been occasions when need and returns indeed have matched up and we saw investment doing justice as well. There are however not too many places, where such investment has been kick started by a private industry. More often than not – this has happened through government taking a certain view. These are the cases where the economic action has been taken up keeping people (and other life forms) in the center rather than “the goods” at the center. E.g. design of cities keeping a car in mind will produce one with a large sprawl, where car becomes a need. However, if we look at designing this for the people and with people’s needs in mind, we will plan to minimize people movement and provide for secure mobility and access sans cars. The difference clearly is what you have in mind when designing a community. Traditionally, (if we decide to walk back before industrial revolution) towns have been designed keeping in mind services offered by nature and other human considerations of trade and business.
In post industrial revolution Europe, the investment has many times gone where public interest was involved. This was made primarily by newly rising class of Merchant interested in the business of export and import. This investment further stabilized and later accelerated factory system of production. This acceleration happened specially when large stocks for fossil fuel were explored and became available at very low prices. Extensive use of machinery enormously increased production and led to overproduction compared to demand and generated necessity to stimulate demand. Artificial stimulation of demand led to overproduction of goods which essentially were not necessities by any definition.
For production businesses to earn profits, inputs had to be priced as low as possible which led to impoverishment of labor and suppliers of natural resources. This also concentrated wealth in the hands of manufacturing community. This created a situation where purchasing power was concentrated in hands of few which created tremendous income inequality. The increased scale of production necessitated expansion of feeder services such as accounting, management and transportation. This gave rise to a new middle class as a provider of these feeder services. This class wielded more purchasing power and participated in consumption of intermediate goods. This phenomenon further increased the pressure on natural resources and created huge waste.
This focus on producing intermediate goods has led to denying the remaining part of humanity their daily necessities – and accentuating inequality. We have seen this phenomenon time and again. So called industrial progress is mainly based on enormously undervaluing the inputs in terms of natural resources and nature’s services.
Low prices of food grains and other food items have further led to directing investment into cash crops – which are inputs to industry. Investment is clearly moving away from the daily dose of food we eat.
In countries like India, if the farmer stops producing the food we eat, just because it is no more ‘economical’ – resulting in increasing the prices beyond the means of many in cities, we could easily see a food crisis. In fact the food price rise witnessed by India in the recent months is a testimony to the theory. If enough investment was driven in sustainable farming and reducing the uncertainty of livelihood, if investment went into regeneration of natural resources, one could in fact see alternative livelihoods emerge.
In the times when “climate change” is a center stage issue, one must look at what went wrong and how do we design policies to shift towards this much needed correction. Let us assume for the time being that the problem of energy is solved and we will have as much energy as we need forever without any GHG emissions – we still have to live within the material limits of the planet, we cannot for example assume that say “aluminum” is available indefinitely, or any such “raw material” to be available all the time in coming future. It is very clear to see that excessive focus on production makes us drive excessive consumption and not really the other way round. This excessive consumption, by 5% of humanity creates enormous waste – solid, toxic or CO2 – which the planet is unable to digest and we are seeing challenges that are becoming insurmountable.
Today we promote how a car adds to your social status, we promote how living in large houses adds to the status, we also want to spur “consumption” and celebrate consumerism! We should in fact promote – how living in villages and regenerating nature, while producing necessary food is “the” lifestyle – which provides happiness, health and with media talking about this – even status. Policy makers and media together can play a significant role in seeing this shift happen and that too very quickly.
Adopting these elements of thoughts must become a driver for a much needed change in economic policy. This will then be the real economic reform which will lead us to sustainable future.

Copyright: Ajay Phatak, Sustainability proponent

2 Responses to “Economics of Progress and peace”

  1. Thought provoking!

  2. Ajay,
    Nice and apt article.
    I think the direction indicated by you would become compulsive for the entire race as we move closer and closer to the disaster.

    I am not sure how ‘sustainable’ life style can become talking point for the media or status for the people, though.
    – Pravin

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