Sunday, 27 January 2008

Eco-Economics vs perverse subsidies

The neoclassical view
Market fundamentalism (aka neoclassical economics, neoliberalism, Washington Consensus, structural adjustment plans, globalization ideology) assumes that unlimited growth is possible on a finite earth. The ecosystem is treated only as biofragments: a source of "raw materials". Pollution, waste and social impacts are "externalities" which the model ignores. To this environmental injury, the US government is now adding the insult of perverse subsidies, warns Lester Brown.

The EE view
Eco-economics urges that markets must serve human needs, which in turn must respect the biosphere. For several decades, human use has exceeded natural renewal (NPP), putting at risk all species. "Green accounting" must include "natural capital" and "ecosystem services", as well as environmental degradation.
See Commonwealth of Life, the Earth Shareholder Report, and ESDA, a bottom-up visioning campaign for US citizens.

Data compiled by Lester Brown's Earth Policy Institute show that grain-growing land peaked in 1981. World population is still rising. As a result, cropland per person has shrunk 50% in the last fifty years from 0.23 to 0.11 hectares, "half the size of a housing lot in suburban America". Countries like Rwanda, China, Pakistan, Bangladesh, Afghanistan, the Sudan and Ethiopia are already experiencing a land crisis. India and Nigeria will soon follow. At the same time, the much-touted "green revolution" (heavily dependent on fossil fuel and fertilizer) is showing sharply diminishing returns. World grain stocks have dropped to record lows. Several producing countries have banned exports.

Last year Professors Runge & Senauer of the University of Minnesota updated their 2003 report on food security. Instead of a reduction in the world's hungry, their projections of biofuel impact on world prices now show the number climbing to 1.2 billion. Their figures were immediately attacked by agribusiness lobbyists. But the World Bank, which none accuse of being anti-market, reckons that for every 1% rise in food prices, caloric intake falls by 0.5%. Last year there were food riots in Mexico, Italy, Indonesia and China. Brown predicts more environmental refugees from failing states -- a category to which Kenya must now be added. The cropland crisis is exacerbated by US biofuel subsidies. Ethanol distillers will take 28 percent of this year's US grain harvest.

Brown concludes that "The United States, in a misguided effort to reduce its oil insecurity by converting grain into fuel for cars, is generating global food insecurity on a scale never seen before."
His book Plan B 3.0 proposes an alternative -- "tell the environmental truth by incorporating into prices the indirect costs of burning fossil fuels", a steeply rising world carbon tax to be "offset at every step by a reduction in income taxes". The book may be downloaded free.
Other eco-economics resources: the Encyclopedia of Earth and click on EE in Delicious tags, in the righthand column. In a useful Sep 2007 article Walden Bello locates major economic thinkers' positions between neoclassical and EE.

No comments: