Five Framing Conditions for a Commons-Oriented Economy
By Pat Conaty and Michael Lewis:
Resilience: Strengthening Our Capacity to Adapt
"In science, resilience is defined as “the amount of change a system can undergo (its capacity to absorb disturbance) and essentially retain the same functions, structure and feedbacks.” For nearly four decades, scientists have been studying the resilience of ecosystems. The degradation of ecosystems by human-induced stresses became more evident over this time and really took off as a field of study after the publication of Panarchy, by Lance Gunderson and Buzz Holling, in 2001. Interest in and research into resilience applications to the social-economic-ecological challenges we face have exploded across the globe since then.
When the first global ecosystem assessment was completed (the Millennium EcoSystem Assessment in 2005), it found that 60 percent of the planet’s ecosystems were being degraded or used unsustainably. These findings dramatically illustrate the importance of restoring and maintaining resilience. Degraded ecosystems reach a critical threshold or “tipping point,” at which point they may rapidly and dramatically change. Life-giving services are lost in the process—fresh water or air quality, for example, or the natural capacity to sustain fisheries, regulate climate, and control pests. Our treatment of natural resources as a commodity for profit with little reference to the implications for ecosystem health is responsible for the growing risk that tipping points will be reached. When we maximize yields at the lowest cost—whether the crop is timber from the forest or soil-degrading monocultures of grains or vegetables; whether we are emptying aquifers by “mining” water or burning coal to produce cheap electricity—our singular interest in production and narrow definition of productivity are out of sync with nature.
The study of resilience in ecosystems has revealed how the activities of human beings are now so dominant across the landscape that ecosystem health cannot be discussed without reference to our species. Resilience scientists talk about social-ecological systems, suggesting that the well-being of both are inextricably linked and interdependent. Resilience principles are also increasingly being used to examine human systems and organizations, the theory being that if we are to restore ecological resilience, we need to align our way of living within the boundaries of nature. These ideas feed a rapidly growing field of scholarship focused on determining how we might do this in communities and regions as well as entire sectors of the economy, such as finance and public services. Given the challenges we face, it seems a timely field of enquiry.
Throughout this book we use seven key resilience principles as a lens through which to examine a wide range of innovations relevant to navigating the transition to a steady-state economy. Living as we do in a context where human vulnerability to multiple stresses is increasing, it is more important than ever to strengthen community resilience. Our capacity to both mitigate and adapt to the disruptive implications of climate change, peak oil, and ecosystem decline ultimately depends on it. As Thomas Homer-Dixon wrote in The Upside of Down, “If we want to thrive, we need to move from a growth imperative to a resilience imperative.” Economic growth “must not be at the expense of the overarching principle of resilience, so needed for any coming transformation of human civilization.”
The seven principles of resilience that guide our reflections in this book are set out here:
• Diversity: A resilient world would promote and sustain diversity in all forms (biological, landscape, social, and economic). Diversity is a major source of future options and thus of a system’s capacity to respond to change and disturbance in different ways. Resilient systems would celebrate and encourage diversity. They would both offset and complement the current trend toward homogenizing the world. They would encourage multiple uses of land and other resources.
• Modularity: A resilient world would be made up of components that can operate and be modified independently of the rest. In resilient systems, everything is not necessarily connected to everything else. Overly connected systems are susceptible to shocks that are rapidly transmitted throughout the system. The recent global financial crisis is an excellent example. The modularity of a resilient system enables it to mitigate or absorb the repercussions of disaster.
• Social Capital: A resilient world would promote trust, well-developed social networks, and leadership. The resilience of social-ecological systems is rooted in the capacity of people to respond effectively to challenges together, not singly. In other words, trust, strong networks, and leadership are critically important.
• Innovation: A resilient world would place an emphasis on learning, experimentation, locally developed rules, and embracing change. Resisting change is counterproductive in a resilient system. Instead, by offering help to those who are willing to change, the system fosters innovation. When events begin to erode rigid connections and behaviors, innovation opens up new opportunities and resources for creative adaptation.
• Overlap: A resilient world would have institutions whose governing structures include “redundancy.” It would also have a mix of overlapping common and private property rights, increasing access to land. Redundancy in institutions increases the diversity of responses possible in the face of disturbance and crisis. As a result, overall flexibility and the effectiveness of adaptation increase. By contrast, top-down, centralized, “efficient” structures with no redundancy tend to fail when faced with change outside the scope of their mandate. In short, messy is better than streamlined. Similarly, exclusive private property rights are at the heart of many strategies of resource use. Resilience increases when wider access and a mix of common and private property rights compromise this exclusivity.
• Tight Feedback Loops: A resilient world would possess tight feedback loops (but not too tight). Feedback loops refer to the communication flow within a system. Information about the impact of a particular process or event is returned to the system to enable it to correct itself next time. Resilience in a social-ecological system is characterized by focused effort to maintain, or tighten, the strength of feedbacks. They allow us to detect thresholds before we cross them.
• Ecosystem Services: A resilient world would consider and assess all the ecosystem services that the market economy currently disregards. The market economy does not price services emanating from the earth and its ecosystems (e.g., pollination, water purification, nutrient cycling, and many others identified in the Millennium Ecosystem Assessment). These ecosystems are therefore not valued within the narrow cost-benefit analysis characteristic of resource development. Such pricing is critical in order to estimate cumulative impacts on different scales and time horizons, and to assess the effect that a development will have on the integrity of ecosystem services.
Reflection on these principles of resilience yields the following four broad strategies we need to take seriously as we SEEK pathways to a low-carbon, steady-state economy.
Reclaiming the Commons
When one looks far back into human history, private property and commercial markets rarely existed. Where they did, they were of marginal importance to the everyday functioning of human beings.
Historically, the “commons” were the lands and waters that provided people in their vicinity with the means of living. The rules and norms that have regulated access to and use of the commons, their management, and the sharing of surplus have differed from time to time and place to place across the globe. Indeed, they still differ today in those places where commons continue to exist.
As is revealed in the next chapter, the enclosure of the commons—or, in plain language, the privatization of what was once the domain of commoners—has been underway for five centuries. The commoners have fought this, and their resistance has been promising and energetic, but more often than not they have been defeated or deflected. In each century the appetite of those doing the enclosing seems to have become more voracious. The capture of the “ownership” and/or exclusive control of land and resources by private individuals or corporations seems to whet the appetite for more and more. In the process, complex local systems for managing resources for everyone’s long-term benefit have been destroyed, and private property and associated rights have become sanctified. Now we must ask whether the enclosure of the commons, wrapped in the sacred status afforded private property, is leading us to the promised land—or could it be placing the social and ecological security of all of us, human and otherwise, at severe risk?
Privatizing the planet’s resources received powerful support from a paper written in 1968 by microbiologist Garret Hardin, “The Tragedy of the Commons.” His central question was simple: What happens when individuals compete for a scarce resource? His simplistic conclusion was that, “when faced with a scarce resource, people will be overrun by their own selfish desires to consume it, even if they know that they’re destroying it in the process.” In short, although he cited no supporting evidence, Hardin claimed that individuals destroy the common good in the pursuit of their selfish desires. (He made no reference to the destruction of much of the world’s commons through transfer to private ownership and control.)
There is a fascinating irony here. Ayn Rand, author of The Virtue of Selfishness: A Concept of Egoism, whose acolytes include Alan Greenspan, proposed that an individual’s pursuit of selfish desires is the route to advancing the common good. Is Rand right and Hardin wrong or vice versa? Could both be right—or both wrong?
Consider fisheries, the most cited example of the “tragedy of the commons.” According to Hardin, each fisher is motivated to maximize his catch, regardless of the environment. Eventually the resource collapses. At first glance, the decline in world fisheries would appear to confirm Hardin’s analysis. However, when one digs deeper, things look different. Pakistan’s rich fishery has supported tens of thousands of small-scale fishers and their communities for centuries. Yet in the last ten years, the Pakistani Fisherfolk Forum (PFF) has reported a 70 to 80 percent drop in their harvest—and with that drop, a growing hunger, indebtedness, and poverty in their villages along the Arabian coast. Why is this happening? Is it because the commons is being overrun?
In 2001 the military rulers in Pakistan, eager to increase export earnings, permitted foreign trawlers to fish within 12 miles of the coast instead of the former limit of 35 miles. The 12-mile zone is reserved for locals, at least in theory. In fact, international joint ventures flout the rules by flying Pakistani flags. Meanwhile, the real locals complain that their interests have been compromised in the interests of government graft. Locals also complain that industrial trawlers working 24 hours a day with nets stretching three kilometres not only destroy the resource but also waste it. In his book The Value of Nothing, Raj Patel wrote, “According to the PFF, only 10% of the trawlers’ catch has any value on the international market, and the other 90% is thrown away. It sounds high, but internationally, even factoring in some of the best-regulated global fisheries, by-catch makes up some 40% of all marine catches.”
In this case it seems the commons are being not so much overrun as taken over. The local people’s sustainable use of the resource has been displaced by the marriage of profit-seeking capital and ecologically destructive technology. This is enclosure at work in the modern day.
There are inspiring, if rare, examples of local commoners reclaiming their fisheries. In Chile, industrial trawling was banned in the 1960s due to resource concerns and in order to protect inshore fishers. At first the Chilean government instituted a quota system, allocating a portion of the catch to individual fishers. It did not work. In its place, the government and fishers’ organizations up and down the coast together developed a system of territorial use rights. Describing the process, Patel wrote: “Fishing villages and fishers’ organizations were awarded collective rights over specific traditional fishing grounds that they’d known and fished for generations. Enforcement was devolved to local fisher people’s unions. It worked: The fisheries recovered.”
Elinor Ostrom, winner of the 2009 Nobel Prize in Economics, gave added weight to the wisdom of reclaiming the commons. In its citation, the Nobel Committee observed that her work on common pool resources shows how “forests, fisheries, oil fields or grazing lands can be managed successfully by the people who use them, rather than by governments or private companies.” Ostrom’s research elevates the strategic importance of supporting the development of self-organizing and -governing forms of collective action:
The sheer variety of cultural and biological adaptations to diverse ecological conditions is so great that I am willing to make the following assertion: Any single, comprehensive set of formal laws intended to govern a large expanse of territory containing diverse ecological niches is bound to fail in many of the areas where it is applied. Improving the abilities of those directly engaged in the particulars of their local conditions to organise themselves in deeply nested enterprises is potentially a more successful strategy for solving resource problems than attempting to implement idealized, theoretically optimal institutional arrangements. There is plenty that national government officials can do to help a self-governing society.
We will revisit the story of the commons, its enclosure, and the commoners’ push back in the chapters that follow. Reclaiming the commons is a vital component in strengthening the resilience of the communities and regions in which we live. The silos created by exclusive private property rights must be broken down. And the relevance of an agenda to reclaim the commons is not restricted to land and natural resources. Indeed, given the modern power of the volatile trinity of carbon, oil, and capital, the 21st-century struggle for the commons and the common good cannot but include capital, our workplaces, and the biosphere we all depend on. Our access to and management of the commons must be redesigned through a mix of common and private property rights. In short, we must reunite the “I and the We,” and reject the life-damaging ways in which both Hardin and Rand defined the world.
What makes mass society so difficult to bear is not the number of people involved, but the fact that the world between them has lost its power to gather them together...and to separate them. Hannah Arendt, The Human Condition
Enclosure of the commons robs people of the means to sustain themselves where they live. In the process, the role of local people in local governance is destroyed. There is no commons for them to manage. Private owners—today primarily corporations—continuously call for the rules of the game to be rewritten in their favour, their rationale being that the benefits will trickle down to the rest of us. Privatization and constant pressure to shape public policy to corporate ends not only redirect the benefits of the commons but are also a profound assault on participatory democracy. Alexis de Tocqueville developed the theory of associative democracy in the 1830s, based on his in-depth study of the democratic mutual aid spirit he found in America. In Democracy in America he argued that government and citizens should be wary of the state replacing “independent associational life”—what today we often refer to as civil society. Toqueville believed economic freedom fostered greed, which in turn engendered political apathy, excessive individualism, and passive reliance on the state.
It is easy to see the time coming in which men will be less and less able to produce, by each alone, the commonest bare necessities. The tasks of government must therefore perpetually increase, and its efforts to cope with them must spread its net wider. The more government takes the place of associations, the more will individuals lose the idea of forming associations and need the government to come to their help. This is a vicious cycle of cause and effect.
A current civil society argument, one that is gaining force, states that reclaiming the commons is inseparable from reinventing and extending the scope of democratic participation and control. If Ostrom is right, then centralized, distant, and locally unaccountable power cannot accomplish the transition to low-carbon, ecologically sustainable communities. What’s more, in the age of climate change and peak oil, resilience requires a quality of social capital—trust, collaboration, cooperation, and leadership—rooted in the places where people live.
Like other aspects of transition, the reinvention of democracy is not simple. To start, we must contend with the assertion that “the economy produces people.” As Sam Bowles and Herbert Gintis wrote in Democracy and Capitalism in 1986, “The experience of individuals as economic actors is a major determinant of their personal capacities, attitudes, choices, interpersonal relations, and social philosophies. Individuals develop their needs, powers, capacities, consciousness, and personal attributes partly through the way they go about transforming and appropriating their natural environment. Moreover, individuals and groups regulate their own development in part to the extent that they succeed in controlling their own labour.”
Historically, enclosure has removed most people’s capacity to control their own labor. Our choices today involve what to consume and how to capture personal economic benefits from renting out our labor. The more “marketable” we are, and the more competitive we are in the labor market, the more personal consumption we can enjoy. If we can extract sufficient wages to save for a down payment and qualify for a mortgage, we might buy a home to help build our personal wealth.
The narrowing of our economic choices, combined with the concentration of capital and the limited role of most workers in production, have consequences that are, as Bowles and Gintis put it, “intended and unintended,” and “antithetical to the development of democratic culture.”
True, we participate in representative government, where our “individual” vote is sought in order to confer “collective” power and authority. But does this constitute democratic governance? Is this the limit of the democratic values we aspire to? In the political contest, where the winners mediate their mandate through the powers vested in the state, the choices on our menu are reduced to two: “the conservative reliance on the market and the social democratic disposition toward an enlarged state.”
The concept of associative democracy is a bridge across the increasingly misleading solitudes favouring either the market or the state. Thus, our organizing and institutional challenge is to govern ourselves in such a way that we have the capacity to reweave our economies on a more local basis while building our resilience.
We are at a juncture of unprecedented dependence on a globalized and centralized system of production, communication, and transport. This system is highly vulnerable to disruptions arising from declining oil supplies and increasing climate change. Our world is going to become much smaller as the pressure begins to fray global supply chains. The logical response to the multiple challenges flowing from this forecast is to place authority and financial resources as close to where people live as possible, realizing that there are always different scales related to function to be considered. The European Union has used the Catholic social doctrine of subsidiarity as one means to figure out how to distribute functions between federal, national, and regional levels. Its basic thesis, described by Paul Hirst in Associative Democracy, is that any “function should be performed at the lowest level consistent with competent administration.”
However, this is not just a call for devolving power from one level of government to another, though devolution of public powers has a role to play. Rather, we imagine that self-governing associations will evolve into the “primary means of democratic governance of economic and social affairs.” Ceding selected state functions to such associations, and creating public mechanisms to finance them, could remove from centralized bureaucracies those functions beyond their level of competence, while providing the potential for a much greater level of citizen engagement and accountability. Enabling democratic associations to expand the resources and tools available to address the challenges of transition is a key objective. As we will see, this can be achieved by mobilizing local and regional financial tools and shaping markets and production relevant to meeting basic needs (for such items as food and energy) in a more resilient manner.
This is a far cry from the classic liberal democratic assumption that democratic government is based on accountability to the individual citizen. Indeed, the outlines of associative democracy might evoke derision from some, who charge that it is stripping representative democracy of its right to govern based on the consent of the governed. Such arguments are weak, especially when, as Hirst points out, the “bulk of economic affairs are controlled by large privately-owned corporations, and the great bulk of social affairs are controlled by state bureaucracies.” Increasing the space in which local and regional associations exert significant democratic influence over economic and social functions advances democratic participation and ownership of the responsibilities of citizenship.
Not surprisingly, there is resistance. When citizen-based movements and associations present their interests to government, they often find themselves defined by the powers that be as “interest groups” whose demands and suggestions must be discreetly managed. This denigration of voice beyond a periodic vote makes no sense given the challenges we face. It is a narrow conception of political action that is not only discouraging to people acting meaningfully where they live but is also increasingly unacceptable, as evidenced by the Occupy movement’s impatience with the ways present and future generations are being compromised by unaccountable wealth and power.
Resilience thinking requires us to expand our democratic repertoires and decentralize authority to act more powerfully. We need to multiply the ways and means by which people can experiment, participate, and extend their collective capacity to become more self-reliant.
Why? There are three reasons.
• Participation in self-government and self-management is a form of democratic learning. It is a means of increasing social capital. It is also a prerequisite for enlarging the capacity for community and collective action.
• “The isolated individual — as a voter or as a buyer of commodities—is relatively powerless to resist the claims of the state.” As we can see in the example of the Chilean fishers associations, the individual can be greatly empowered by what Bowles and Gintis describe as “the availability of a rich selection of collective forms of democratic social action not beholden to the state.” This is a form of collective liberty that extends democracy and increases community resilience and self-reliance.
• Extending democracy requires “at least a minimal identification of the citizen with public life and some notion of collective interest.” Philosopher Charles Taylor said it well in his study of Hegel: “What modern society needs...is a ground for differentiation, meaningful to the people concerned, but which at the same time does not set the partial communities against each other, but rather knits them together in a larger whole.”
The political wasteland that now stretches between the individual and the state can disempower and depoliticize us. Decentralized, more autonomous communities are a strategic resource for transition. They are also an end in themselves, no less vital than the recovery of our capacity to value human dignity in our public discourse and in our daily lives. Much in this book testifies to the effectiveness and resilience of democratic decentralism as a key transition strategy.
Constructing a Social Solidarity Economy
- "Collaboration, cooperation and coordination among citizens and stakeholders inhabiting any social-ecological system is a fundamental pre-requisite to restoring ecosystems in danger of collapse and maintaining ecosystems that are relatively healthy." - Brian Walker, Resilience Thinking
We have already indicated that an ideology based on selfishness, competition, and endless growth is colliding with ecological limits. Further, we have argued that reclaiming the commons and extending democratic values and practices are two strategies that are crucial to the SEE Change. Embedded in all these propositions is the notion of “solidarity,” between each other and with the earth.
Neo-conservatives may well jump on this word as evidence of a far-left plot. It is not. Indeed, some of the best of conservative philosophy recognizes the virtue of conservation, thriftiness, and mutual aid rooted in community self-reliance. We choose to elevate solidarity as a multidimensional concept, common to all aspects of resilience and imbued with the qualities and strategies we need to propel us out of the privatized, consumption-oriented world in which so many of us find ourselves.
The “social solidarity economy” is both a concept and an emerging movement. It recasts a set of ideas and several fields of practice whose origins lie in unmet human needs—for example, the cooperative movement, community economic development, economic democracy, community land trusts, community development finance, trade unions, credit unions, fair-trade and non-profit associations, and charities. All can be traced to people, communities, and regions marginalized by ideology, market failure, or the inadequacy of public policy, or by all three.
The organizations and initiatives launched in defense of these people and places also go by several names—civil society, the third sector, or the social economy all describe the terrain they occupy.
Central to their activity is the reinsertion of social purpose, mutual aid, and self-help into the economy. These practices are all expressions of “reciprocity.” In contrast to the likes of Greenspan and other free-market ideologues, social economists argue that reciprocity should be the central economic principle that shapes the management of markets, trade, and capital. From the standpoint of reciprocity, community and societal benefit is a fundamental component of a broader socio-economic calculus. The diversity of the commons is valued over and above the homogeneity of the global market place. John Pearce applies the term “third system” to encompass this arena.
Conceptually and practically, the third system forms only one part of the economy. The first system is private and profit-oriented, what people normally refer to as the “private sector.” It includes everything from microbusinesses to multinational corporations. The second system, which also extends from the local to the global, is concerned with the planned provision and distribution of public goods and services, usually through some kind of government authority. The boundaries between these three systems, while permeable, remain conceptually distinct. They are set apart by their different interests, which are expressed through how they are owned, how they are controlled, and their purpose.
Within the third system, the social economy distinguishes itself by earning all or part of its income from the market and infusing its economic activities with social purpose. Through social and cooperative enterprises of various types, the interests of poor, immigrant, worker, and women’s groups are explicitly recognized and integrated into production settings. The social economy, you might say, is the economic expression of civil society’s social consciousness.
There are different perspectives on the role of the social economy in social change. Reformists generally seek more resources for disempowered constituencies. To make this happen, they also strive to ensure the social economy (the two lower left wedges in Figure 1.8) attains equal standing with the state and the market. A more radical perspective holds the social economy to be a transformative strategy. Pearce describes it as a “construction site” upon which to build strategies, tools, and institutions that can challenge the hegemony of free-market values in the first and second systems. Advocates of this perspective see their role as “socializing” the first and second systems with the values of justice, inclusion, balance, diversity, and ecological sustainability; with the principle of reciprocity; and with the practices of self-help, mutual aid, and democracy.
Nevertheless, the private system continues to dominate. It exercises much of its power to improve the prospects for profit. It has major influence on the second system, continuously striving to make public policy, finance, and personnel recognize how public good is attained through private gain. Within this context, the possibility that the third system alone could disturb the hegemony of free-market values seems slight. It simply lacks the strength, notwithstanding the challenges of climate change and peak oil.
Compare this with the conceptual cloth from which the social solidarity economy is cut. Instead of having relatively distinct boundaries between the three systems, the solidarity economy, as depicted in
The solidarity economy represents a provocative assault on the view that selfishness is imprinted deep in our economic DNA. In all three systems there are people, organizations, businesses, and governments that are beginning to SEE the world differently. Each system, to one degree or another, has creative actors who share the values of social justice, inclusiveness, ecological sustainability, and deeper, democratic forms of participation. They are seeking and developing dynamic ways to manifest these values in practical terms. We call them co-producers in the task of building a “high road” economy.
International examples of this high-road economy are profiled in succeeding chapters. One among many is the Seikatsu Consumer Co-operative in Japan, which has shaped relationships between food consumers and private food producers cemented by ecological farming methods and fair prices. Further, the cooperative has transformed the supply chain in between: processing, packaging, recycling, and distribution involve private and democratically controlled firms in what can authentically be termed a “values”-added chain. The central tenets of social and ecological economics compel us to seek balance, to respect and learn to live within the ecological limits of our planetary home. The solidarity economy compels us to craft the strategies and alliances that bring about that transformation. Social purpose, mutual aid, and reciprocity—the hallmarks of the social economy—need to flourish in all three systems. The social economy has an important, though not exclusive, role in making this happen. If we believe we must shift the paradigm from profit-driven economic growth to a steady-state economy, it will not do to continue working in system silos. We need to create a new ecology of innovation, alliances, and partnerships from which to build and secure the SEE Change.
Viewed this way, solidarity is much more than a concept. First, it is a framework for designing and implementing strategies that strengthen the resilience of communities, regions, and societies. Second, it elevates the idea of advancing the common good collaboratively rather than remaining preoccupied with the pursuit of individual interests. Lastly, solidarity is a vital resource, and a renewable one. It is a resource that we need from each other in order to sustain the efforts transition will require.
Pricing As If People and the Planet Mattered
- "The “cowboy economy”...is symbolic of the illimitable plains and also associated with reckless, exploitative, romantic, and violent behaviour, The closed economy of the future might similarly be called the “spaceman” economy, in which the earth has become a single spaceship, without unlimited reservoirs of anything, either for extraction or for pollution, and in which, therefore, man must find his place in a cyclical ecological system which is capable of continuous reproduction of material form even though it cannot escape having inputs of energy". - Kenneth Boulding, “The Economics of the Coming Spaceship Earth”
The fact that high-road values are already shaping our discourse and our actions can be traced, at least in part, to the evolution of what is known as “ecological economics,” which starts with a set of assumptions very different from those that mainstream economists have promoted so successfully over the last 40 years. According to ecological economist Malte Faber, this field is defined “by its focus on nature, justice, and time. Issues of intergenerational equity, irreversibility of environmental change, uncertainty of long term outcomes and sustainable development guide ecological economic analysis and valuation.”
Pioneered in the 1960s by Kenneth Boulding, Fritz Schumacher, and Nicholas Georgescu-Roegen, ecological economics takes sustainability as the focus of its inquiry. It postulates that sustainability rests on three types of systems: the social, the environmental, and the economic (as shown in Figure 1.9). The field’s most popular image is that of “spaceship earth” (a phrase and concept coined by Kenneth Boulding), which captures its basic tenet: we are absolutely dependent on the health of natural systems to sustain human life.
Ecological economists explore a broad terrain, everything from the carrying capacity of the earth or the threat that environmental degradation poses to our food and water, to the relationship of energy, the environment, and climate change, and the critical interdependence of systems. Among its most important contributions is the idea, popularized by Paul Hawken in The Ecology of Commerce, that we have evolved a system of commerce that thinks of itself and behaves as if natural systems were but a source of raw materials for human benefit and a sinkhole for human waste. As a result, the systems are out of sync with each other because the market only responds to prices, and these prices fail to incorporate either the value of the services nature provides to our species or the costs of using nature as our collective refuse heap. As a result of this imbalance, we unwittingly have created a way of life that is by definition unsustainable.
Ecological economists argue that if we specified the dollar value of these damages and services, and if we integrated that cost into the price of goods and services, our economic behavior would change: we would become more cautious and deliberative about how we use the bounty of nature. Not to do so would radically increase what we have to pay because we would have to account for what economists call externalities. Ecological economists are developing tools to bring balance to this calculation. Raj Patel chronicles a few of the countless examples of our failure to account for these externalities in The Value of Nothing. From Big Macs to the mining of water in China, from the erosion of soil fertility due to chemical fertilization to our failure to price carbon, the problem is far from fixed.
Anaesthetized by a Walmart culture of cheap consumables produced by supply chains in which the lowest price is the only criterion, we are accessories to theft of two kinds—robbing ourselves and robbing each other. As Patel puts it: “When negative externalities are not paid for, the beneficiaries are in effect engaging in theft from those who bear the cost of their behaviour...If humanity had to pay for the consequences of a degraded eco-system the bill could, according to one recent study, run to about $47 trillion.”
A recent study by the National Academy of Sciences looked at six areas of global environmental degradation in an attempt to determine who is generating the impacts and who is paying for them. It considered ozone-layer depletion, overfishing, deforestation, climate change, mangrove destruction, and intensified agriculture. Middle- and high-income countries are the big polluters, not only fouling their own lands and waters but also exporting pollution to poor countries. The estimated damage is $5 trillion. Poor countries, in contrast, were estimated to inflict $0.68 trillion in damages on richer countries. Ironically, the entire foreign debt that poor countries owe to rich countries is $1.8 trillion. Who owes who what? The math is pretty clear!
Establishing prices that take into account these externalities is of central importance if we are to successfully navigate the Great Transition. Without a clear, adequate, and firm price on carbon, even high-road investors, whether public, private, or social, will have trouble mobilizing the investment necessary to deploy existing technologies and innovate more. Carbon taxes must increase, emission quotas must be firmly set, and heavy penalties must be defined for those who exceed them. Thomas Friedman, prize-winning journalist from the New York Times, pleads for recognition of the central role of proper pricing in his book Hot, Flat and Crowded:
Repeat after me: when it comes to energy innovation, “price matters, price matters, price matters.” If you want to bring about a mass movement toward more energy-efficient cars, windows, buildings, power generation systems, lighting and heating, the simplest way is to make sure that the true costs of using any and all hydrocarbon-based fuels is reflected in their price to consumers—the true climate costs, the true environmental costs...Consumers will adjust and demand more energy-efficient homes, more energy-efficient offices and schools, and more energy-efficient transportation. And, as a result, the level of carbon emissions will go down. It is simple economics. It is not rocket science. The cheap plastic junk you buy at big-box stores is cheap only because the externalities have not been priced in—the effects on air quality, the effects on water, the effects on climate. Price those into every product and the market will do the rest.
Well, why doesn’t the market reflect the true cost of the things being sold? When it comes to energy, the reason, at least in America, is that government has failed to shape the market with honest prices. It is not a market failure. Markets don’t price externalities when they don’t have to. It is a leadership failure.
Our persistent resistance, denial, and confusion about this basic tenet of ecological economics is akin to a toddler, who believes you can’t see her when she covers her eyes. If you cannot see, touch, or count something, it is as if that thing does not exist. The reality is that it does exist, but we continue to think, and act as if, the planet we inhabit is the limitless domain of the cowboy." (excerpted from: The Resilience Imperative: Cooperative Transitions to a Steady-State Economy)