Consume more, conserve more: sorry, but we just can’t do both

Economic growth is tearing the planet apart, and new research suggests that it can’t be reconciled with sustainability

George Monbiot in The Guardian

We can have it all: that is the promise of our age. We can own every gadget we are capable of imagining – and quite a few that we are not. We can live like monarchs without compromising the Earth’s capacity to sustain us. The promise that makes all this possible is that as economies develop, they become more efficient in their use of resources. In other words, they decouple.

There are two kinds of decoupling: relative and absolute. Relative decoupling means using less stuff with every unit of economic growth; absolute decoupling means a total reduction in the use of resources, even though the economy continues to grow. Almost all economists believe that decoupling – relative or absolute – is an inexorable feature of economic growth.

On this notion rests the concept of sustainable development. It sits at the heart of the climate talks in Paris next month and of every other summit on environmental issues. But it appears to be unfounded.

A paper published earlier this year in Proceedings of the National Academy of Sciences proposes that even the relative decoupling we claim to have achieved is an artefact of false accounting. It points out that governments and economists have measured our impacts in a way that seems irrational.

Here’s how the false accounting works. It takes the raw materials we extract in our own countries, adds them to our imports of stuff from other countries, then subtracts our exports, to end up with something called “domestic material consumption”. But by measuring only the products shifted from one nation to another, rather than the raw materials needed to create those products, it greatly underestimates the total use of resources by the rich nations.

For instance, if ores are mined and processed at home, these raw materials, as well as the machinery and infrastructure used to make finished metal, are included in the domestic material consumption accounts. But if we buy a metal product from abroad, only the weight of the metal is counted. So as mining and manufacturing shift from countries such as the UK and the US to countries like China and India, the rich nations appear to be using fewer resources. A more rational measure, called the material footprint, includes all the raw materials an economy uses, wherever they happen to be extracted. When these are taken into account, the apparent improvements in efficiency disappear.

Europe’s largest coal-fired power plant, in Belchatow, Poland. ‘New analysis suggests that in the EU, the US, Japan and the other rich nations, there have been ‘no improvements in resource productivity at all’.’ Photograph: Kacper Pempel/Reuters

In the UK, for instance, the absolute decoupling that the domestic material consumption accounts appear to show is replaced with an entirely different chart. Not only is there no absolute decoupling; there is no relative decoupling either. In fact, until the financial crisis in 2007, the graph was heading in the opposite direction: even relative to the rise in our gross domestic product, our economy was becoming less efficient in its use of materials. Against all predictions, a recoupling was taking place.

While the OECD has claimed that the richest countries have halved the intensity with which they use resources, the new analysis suggests that in the EU, the US, Japan and the other rich nations, there have been “no improvements in resource productivity at all”. This is astonishing news. It appears to makes a nonsense of everything we have been told about the trajectory of our environmental impacts.

I sent the paper to one of Britain’s leading thinkers on this issue, Chris Goodall, who has argued that the UK appears to have reached “peak stuff”: in other words, there has been a total reduction in our use of resources, otherwise known as absolute decoupling. What did he think?

To his great credit, he responded that “broadly, of course, they are right”, even though the new analysis appears to undermine the case he has made. He did have some reservations, however, particularly about the way in which the impacts of construction are calculated. I also consulted the country’s leading academic expert on the subject, Professor John Barrett. He told me that he and his colleagues had conducted a similar analysis, in this case of the UK’s energy use and greenhouse gas emissions, “and we find a similar pattern”. One of his papers reveals that while the UK’s carbon dioxide emissions officially fell by 194m tonnes between 1990 and 2012, this apparent reduction is more than cancelled out by the CO2 we commission through buying stuff from abroad. This rose by 280m tonnes in the same period.

Dozens of other papers come to similar conclusions. For instance, a report published in the journal Global Environmental Change found that with every doubling of income, a country needs a third more land and ocean to support its economy because of the rise in its consumption of animal products. A recent paper in the journal Resources found that the global consumption of materials has risen by 94% over 30 years, and has accelerated since 2000. “For the past 10 years, not even a relative decoupling was achieved on the global level.”

We can persuade ourselves that we are living on thin air, floating through a weightless economy, as gullible futurologists predicted in the 1990s. But it’s an illusion, created by the irrational accounting of our environmental impacts. This illusion permits an apparent reconciliation of incompatible policies.

Governments urge us both to consume more and to conserve more. We mustextract more fossil fuel from the ground, but burn less of it. We should reduce, reuse and recycle the stuff that enters our homes, and at the same time increase, discard and replace it. How else can the consumer economy grow? We should eat less meat to protect the living planet, and eat more meat to boost the farming industry. These policies are irreconcilable. The new analyses suggest that economic growth is the problem, regardless of whether the word sustainable is bolted to the front of it.

It’s not just that we don’t address this contradiction; scarcely anyone dares even name it. It’s as if the issue is too big, too frightening to contemplate. We seem unable to face the fact that our utopia is also our dystopia; that production appears to be indistinguishable from destruction.

VW is further evidence that global business has become a law unto itself

Will Hutton in The Guardian

A well-functioning capitalism has, and will always need, multiple and powerfully embedded checks and balances – not just on its conduct but on how it defines its purpose. Sometimes those checks are strong, uncompromised unions; sometimes tough regulation; sometimes rigorous external shareholders; sometimes independent non-executive directors and sometimes demanding, empowered consumers. Or a combination of all of the above.

CEOs, company boards and their cheerleaders in a culture which so uncritically wants to be pro-business do not welcome any of this: checks and balances get in the way of “wealth generation”. They are dismissed as the work of liberal interferers and apostles of the nanny state.

Germany’s economy has been a good example of how checks and balances work well. But the existential crisis at Volkswagen following its systematic cheating of US regulators over dangerous diesel exhaust emissions shows that any society or company forgets the truth at its peril.

Volkswagen abused the system of which it was part. It became an autocratic fiefdom in which environmental sustainability took second place to production – an approach apparently backed by the majority family shareholder, with no independent scrutiny by other shareholders, regulators, directors or consumers. Even its unions became co-opted to the cause. Worse, the insiders at the top paid themselves, ever more disproportionately, in bonuses linked to metrics that advanced the fiefdom’s interests. But they never had to answer tough questions about whether the fiefdom was on the right track. The capacity to ignore views other than your own, no external sanction and the temptation for boundless self-enrichment can emerge in any capitalism – and when they do the result is toxic. VW, facing astounding fines and costs, may pay with its very existence.

So why did a company with a great brand, passionate belief in engineering excellence and commitment to building great cars knowingly game the American regulatory system, to suppress measured emissions of nitrogen dioxide to a phenomenal degree? Plainly, there were commercial and production benefits. It could thus sell the diesel engines it manufactured for Europe in the much tougher regulatory environment – at least for diesel – of the US and challenge Toyota as the world’s largest car manufacturer. Directors, with their bonuses geared to growth, employment and profits, could become very rich indeed.
Nor did the risks seem so outlandish. It was an open secret that car emission tests are artificial constructs, with special tyres, lubricants and measures to reduce car weight and air drag all allowed with the connivance of the regulators. To create a special piece of software that closed down nitrogen dioxide emissions during a test must have seemed to the executives involved only an extension of this artificiality. In any case, regulations are for busybodies, especially in areas as controversial as climate change and air quality. The software ruse was merely taking the game of cat and mouse between regulator and car maker to another level.

Former CEO Martin Winterkorn, who resigned last week over the scandal, claims he knew nothing of what was going on, blaming a few unnamed executives for making a catastrophic error of judgment. Winterkorn was the consummate German engineer, knowing every dimension of engine performance; if he did not know how the dirty diesel engines of some popular VW brands were successfully passing US emission tests it was only because he chose not to ask. He did not need to. He had the backing of the Porsche family, who own just over 50% per cent of VW’s shares and who agree to vote as a block; the support too of the state of Saxony with a further 20% per cent –and of union members on the supervisory board. Winterkorn could run a company of 600,000, as Süddeutsche Zeitungremarked, as if it were North Korea.

VW is about production and jobs which trumps concerns about environmental sustainability – a culture than unites unions as much as the Porsche family. And Winterkorn was its standardbearer, leading the charge against the tightening of EU emission regulations – urging weaker targets and a longer timetable. Despite a vast R and D budget, VW is far from a leader in the electrical car or hybrid market. Mr Winterkorn’s bonuses were based on his capacity to deliver production, jobs and profits: environmental sustainability or engaging with wider stakeholders did not get a look-in.

Make your god the share price, as so many British and US companies do, and you create one basket of problems – under-investment, excess deal-making and cutting corners. Abuse the stakeholder system, as did VW, and make your god production on any terms, damning the concerns of outsiders as irrelevant, and your end can be equally grisly. Capitalism, in short, may have boundless creative and innovative energy – but it also has boundless ways to go wrong. Intriguingly, recent work by a group of researchers at Harvard and the London Business School compared 90 American companies that took sustainability seriously with 90 who did not. Over 18 years the 90 committed to sustainability delivered annual financial returns 4.8% higher than the other 90.

In order to deliver sustainability they had to organise themselves around a core purpose, and then embed checks and balances to keep themselves honest. They shaped the way they were governed to open up to outside stakeholders with whom they checked their strategy. Their reporting measures embraced many metrics beyond share price and they rewarded directors for meeting them. Sustainability was a route to more open governance and rounded strategy – and it delivered.

VW did not believe in this any more than the British government does, now steadily rolling back “green crap” and efforts to promote sustainability as “anti-enterprise”. Transport secretary Patrick McLoughlin, under fire for doing nothing when he was sent the same damning report as the Americans 11 months ago, will have known that in Tory terms there would be no rewards for being cast as a bleeding-heart green. Enterprise is about getting regulators off car-makers’ backs and disempowering meddling stakeholders, especially trade unions.

Yet nor is it right in Corbynesque style to damn capitalism with a reflex call for stronger unions and public ownership. The government of Saxony and union members of VW’s supervisory board proved ineffective whistleblowers. They were not sufficiently interested in human betterment or the fatal consequences of excess nitrogen dioxide emissions. They just wanted jobs at any cost. Checks and balances alone don’t work: they have to be animated by an honest acceptance of mutual responsibility between firms and society – a moral ethic that must inform unions, regulators, shareholders and systems of corporate governance alike. VW lost the plot. But so, in a more profound way, have both the apologists and critics of western capitalism.

Capitalism’s ideological crisis

 11 Jul, 2011, 04.59AM IST, Joseph E Stiglitz in The Economic Times

Just a few years ago, a powerful ideology - the belief in free and unfettered markets - brought the world to the brink of ruin.


Even in its hey-day, from the early 1980s until 2007, American-style deregulated capitalism brought greater material well-being only to the very richest in the richest country of the world. Indeed, over the course of this ideology's 30-year ascendance, most Americans saw their incomes decline or stagnate year after year.


Moreover, output growth in the United States was not economically sustainable. With so much of US national income going to so few, growth could continue only through consumption financed by a mounting pile of debt.


I was among those who hoped that, somehow, the financial crisis would teach Americans (and others) a lesson about the need for greater equality, stronger regulation, and a better balance between the market and government. Alas, that has not been the case. On the contrary, a resurgence of right-wing economics, driven, as always, by ideology and special interests, once again threatens the global economy - or at least the economies of Europe and America, where these ideas continue to flourish.


In the US, this right-wing resurgence, whose adherents evidently seek to repeal the basic laws of math and economics, is threatening to force a default on the national debt. If Congress mandates expenditures that exceed revenues, there will be a deficit, and that deficit has to be financed. Rather than carefully balancing the benefits of each government expenditure programme with the costs of raising taxes to finance those benefits, the right seeks to use a sledgehammer - not allowing the national debt to increase forcesexpenditures to be limited to taxes.


This leaves open the question of which expenditures get priority - and if expenditures to pay interest on the national debt do not, a default is inevitable. Moreover, to cut back expenditures now, in the midst of an ongoing crisis brought on by free-market ideology, would inevitably simply prolong the downturn.


A decade ago, in the midst of an economic boom, the US faced a surplus so large that it threatened to eliminate the national debt. Unaffordable tax cuts and wars, a major recession, and soaring healthcare costs - fuelled in part by the commitment of George W Bush's administration to giving drug companies free rein in setting prices, even with government money at stake - quickly transformed a huge surplus into record peacetime deficits.


The remedies to the US deficit follow immediately from this diagnosis: put America back to work by stimulating the economy; end the mindless wars; rein in military and drug costs; and raise taxes, at least on the very rich. But the right will have none of this, and instead is pushing for even more tax cuts for corporations and the wealthy, together with expenditure cuts in investments and social protection that put the future of the US economy in peril and that shred what remains of the social contract. Meanwhile, the US financial sector has been lobbying hard to free itself of regulations, so that it can return to its previous, disastrously carefree, ways.


But matters are little better in Europe. As Greece and others face crises, the medicine du jour is simply timeworn austerity packages and privatisation, which will merely leave the countries that embrace them poorer and more vulnerable. This medicine failed in East Asia, Latin America and elsewhere, and it will fail in Europe this time around, too. Indeed, it has already failed in Ireland , Latvia , and Greece.


There is an alternative: an economic-growth strategy supported by the EU and the IMF. Growth would restore confidence that Greece could repay its debts, causing interest rates to fall and leaving more fiscal room for further growth-enhancing investments. Growth itself increases tax revenues and reduces the need for social expenditures, such as unemployment benefits. And the confidence that this engenders leads to still further growth.


Regrettably, the financial markets and right-wing economists have gotten the problem exactly backwards: they believe that austerity produces confidence, and that confidence will produce growth. But austerity undermines growth, worsening the government's fiscal position, or at least yielding less improvement than austerity's advocates promise. On both counts, confidence is undermined, and a downward spiral is set in motion.


Do we really need another costly experiment with ideas that have failed repeatedly? We shouldn't, but increasingly it appears that we will have to endure another one nonetheless. A failure of either Europe or the US to return to robust growth would be bad for the global economy. A failure in both would be disastrous - even if the major emerging market countries have attained self-sustaining growth. Unfortunately, unless wiser heads prevail, that is the way the world is heading.


(The author is University Professor at Columbia University and a Nobel laureate in economics)

IITians are Big Fools

Rajesh Gajra

No, it wasn't a frustrated or failed aspirant but a former IITian who said this last week at a lecture while addressing a crowd of nearly a thousand IITians and other college students during the annual Techfest at Indian Institute of Technology, Bombay (IITB). But coming from Dunu Roy, who, unlike his colleagues and peers, decided to pursue grassroot integration of technology with local and practical requirements, it shouldn't have been a surprise to anyone who has followed this IITian's career.

But for a first-timer, the 90-minute talk and the subsequent Q&A could well have been an eye-opener. Provoking his audience by calling them "big fools" who know nothing about India and its village life, Roy said the IITians are victims of the politics of education and science. He added that the first lesson he learnt was that technologists and engineers are under an illusion that they get to take the decisions. That was not all. He went on to say that environmental dynamics aren't understood by engineers who seem to specialise in solving one problem to create another one, thereby creating a "sustainability for the engineering profession and not for the people".

"How many of you will end up working for the Haliburtons and Microsofts of the world?" he asked. And then proceeded to answer by pointing out that many of the students would do so because "Indian technical education is geared to meet global demands". The collapse of the US education system has led to a shortage of scientists and technologists, he said, which is why the courses they [the IITians] are learning are required for the US". Since Indian engineers are also cheaper than the American counterparts, "it made good sense for the Indian government to promote technical education so that you can provide cheap service to the US." Therefore, he suggested, the curriculum has changed. Earlier, he pointed out, IITs had a more integrated approach and also taught humanities, ethics and logic. But these subjects were removed in order to hasten the production of 'unreal' technologists.

The original vision to set up IITs stemmed from the independence movement. The Indian leaders at that time realised "the need to have trained scientists and technologists" who could provide equal rights to food, shelter, education and work to the people. The idea was to take the "best from universal education, invest in pockets like IITs (so that) they would return their expertise to the common pool of the country." Which is why the money to fund the IITs comes from the exchequer, he pointed out.

And then came perhaps the most thought-provoking part of the lecture. Referring to the hyped-up success stories of IITians , he cited the example of Kanwal Rekhi, a Silicon Valley-based venture capitalist who has earned millions of dollars, Roy posited that while the ostensible aim of education is to teach us about success, most of our learnings comes from analysing and understanding failures. For every one IITian who makes money, there are 10 others who don't. And no one talks about the thousands of IITians who stay back and work for the country despite encountering victimisation by domestic politics of science and technology. Urging the young students to ask questions, and not just be receivers of "wisdom", Roy asked them to "learn the laws of motion of society and not just the laws of motion of science."

And coming from him, it did not sound phoney. For after his post-graduation from IITB, Roy moved to Shahdol district of Madhya Pradesh and started the Vidushak Karkhana as part of the Shahdol Group carrying out focussed work on building a development model for the district and its implementation, in conjunction with local people.He was involved in this for 17 years during which he earned his income primarily out of repairing bicycles in the village district. He then shifted to Delhi for a four-year stint with the World Wide Fund for Nature, and later set up the Hazards Centre, a multi-disciplinary consultancy group.

It's rare for IITians to be the recipients of such blunt talk. And it should be noted that the student organisers of Techfest invited Dunu Roy to give this talk after accepting his condition that there would be no restriction on the content of his lecture. So perhaps the IITians are not such big fools after all.