Roots of the meltdown and lessons for our future

22 April 2009 | News story
5 CommentsWrite a comment

By IUCN President Ashok Khosla

Americans have a wonderful saying, that “a rising tide raises all boats”. Unfortunately, this is not true for the boats that are anchored to the bottom of the economic sea, such as the poor, the marginalized and the economically handicapped who are unable to acquire the skills or capital that would liberate them to float up with the rest.

“Lifeboat Earth” is perhaps a better metaphor, since all of us are in it together. Castaways in a lifeboat quickly have to learn that the individual can flourish only when all have a basic level of wellbeing. A leak at one end of the boat poses an equal threat to everyone in the boat.

Fairness and respect for the common good is a matter of self-interest. Within countries or between them, extremes of poverty and affluence and the destruction of nature that they entail are systemic threats to the well-being, let alone survival, of everyone, even those who are well-off.

The messages to our political leaders and to our conservation community have to be different but complementary. Our political leaders need to go beyond ideology and deal with the fundamental issues that affect our future in a pragmatic but principled manner.

Economic considerations can’t always trump nature because one wants to be seen as “pro-business”. Regulating emissions is not being for “big government”. Taxing carbon is not being “anti-growth”. The recent and on-going losses in the stock market are huge, but they pale in comparison to the size of the costs associated with the loss of biodiversity we are experiencing every year.

This can’t go on, regardless of political orientation. We can only hope that big issues like the impact of continuing population growth on our natural world won’t be sidestepped because of the fear of being labeled either “pro-choice” or “pro-life”.

And the conservation communities, too, must go beyond their knee-jerk biases. The need to re-engage with multinational businesses does not have to be seen as weakness or betrayal. Or that protecting biodiversity has always to be at the expense of local people.

Zeb HOGAN / WWF-Canon
"Conserving nature is not “left” or “right”, it is about leaving behind for our children a place that is fit for life."

Conserving nature is not “left” or “right”, it is about leaving behind for our children a place that is fit for life. Serious discussions above the usual ideological or political barriers can take place once we recognize that security and political stability – key drivers in world politics – will be increasingly under threat if we don’t deal forcefully with climate change, overexploitation of resources and environmental degradation or with ignorance, poverty and hunger – at home and overseas.

The current financial meltdown – which has led to the loss of trillions of dollars worldwide – has resulted from the breakdown of the American mortgage and investment banking system. This breakdown, is in turn believed by many to stem from lack of regulation of financial institutions, compounded by “greed” and “overleveraging”, which together have led to a massive failure of the market in other sectors as well, particularly in manufacturing, trade and various services.

At the same time, the prices of food have been through wild fluctuations, also often ascribed to distortions caused in the market by hoarding, profiteering and crop failures due to weather, pests and other immediate causes. And, indeed, these explanations are true. But they are only the proximate reasons, not ultimate causes.

The invisible hand that was supposed to optimize the market for the benefit of all has become a very visible fist threatening the future of everyone. This does not mean that the market should be discarded: it simply means that the prerequisites for it to work well, as identified already two hundred years ago by Adam Smith – such as free competition, full cost accounting, equal access to information – must be put in place.

The 1980’s crisis of indebtedness among the poorest countries was caused by the need to offload (“invest”) excess petrodollars on them even when they manifestly could not afford them. Three decades later, the economies of many of those “least developed” countries have still not recovered to the level they had before the got their “easy” money. Three lost decades – the story of many countries in Africa and Latin America.

The banks, on the other hand, then as now, were bailed out in one way or another – by their governments, the World Bank or through the use of instruments such as “debt swaps”. But history is a hard teacher in the sense of being hard to learn from. In exactly the same manner, the crisis of 2008 has been caused by foisting “investment” capital – this time ironically on the poorest people of America itself -- the surplus funds generated by a highly distorted world economy.

One can only pray that they will not need three decades to recover. Over the past half century, the global economic model, that provided tremendous quantities of seemingly cheap products and for a time brought great benefits to many people, has inexorably ended up by creating huge profits in the hands of a few and virtually zero purchasing power for the rest. Now we have too many goods chasing too few buyers.

Where did the surplus funds come from? They came partly from mechanization of the workplace that displaced workers (reducing their purchasing power and taking them out of the demand side of the market), partly from using underpaid overseas production facilities and partly from mining nature’s resources, which were obtained on grossly underpriced terms or even virtually free.

Moreover, most of the social and environmental costs were never paid for. The resulting overutilization of natural resources is leading to severe depletion and pollution problems. These remained unnoticed for a period because of clever innovations and substitutions but are now showing up in uncontrolled price fluctuations for commodities, raw materials and fuel and increasingly taking them out of the supply side of the market.

If this continues any longer, with both demand and supply dwindling, the new market equilibrium can only be at a much lower level than anyone, even the most ardent conservationist, can wish for.

The post-Keynesian reaction to such a situation is to revive the economy by stimulating consumption, in the hope that it will generate a virtuous, upward cycle of more demand . . . creating more supply . . . creating more purchasing power . . .creating more demand . . . ad infinitum.

The problem, of course, is that it can no longer work like that. There is a missing link in this chain of reasoning: the fact that we are endowed with a finite, indeed very limited, resource base. Creating more supply means mining more resources, which in turn means generating more disruptions in our life support systems – the species, the ecosystems and the biogeochemical cycles that make life possible on our fragile planet.

IUCN/Tobias Garstecki
"Mother Nature is, up to a limit, hugely bounteous and resilient. But she can also become quite vulnerable and break down rather suddenly."

Mother Nature is, up to a limit, hugely bounteous and resilient. But being a vast, finely tuned system, with highly complex linkages and feedback systems, beyond a threshold that with our present knowledge is often difficult to foresee, she can also become quite vulnerable and break down rather suddenly. The science of climate change is just beginning to show how suddenly and how much.

So, if we try to become profligate again, going back to our defunct models of development, economic forces will automatically kick in to limit demand and ecological forces will automatically limit supply. And we will face another “meltdown”, only more quickly and greater severity. Obviously, we need new models.

Let’s also hope that the need to re-start the economy, which we must, will not be used to restore wasteful and damaging habits that are no longer viable. We need to invest in restoring the health of the natural resource base, including particularly all aspects of biodiversity, and in creating sustainable livelihoods and jobs through redesign of our technologies, market systems, and financial institutions. And we need to spend a great deal of time, effort and resource to create a different and common understanding of what constitutes a good life.


Comments

5 Comments
1 Somdeep Nandy
We need to convert our past declarations, for example Rio Declaration, 1992, into a convention. Our world need some hard law to strengthen our path toward the intergenerational and intragenerational equity as well as sustainable development. It's not a time to be sympathetic. however; some country
August 17, 2009 - 19:57
2 qubamerlin
Hi,

We have just added your latest post "IUCN - Roots of the meltdown and lessons for our future" to our Directory of Science . You can check the inclusion of the post <a href="http://www.scienz.info/story.php?title=iucn---roots-of-the-meltdown-and-lessons-fo
June 15, 2009 - 11:39
3 qubamerlin
Hi,

We have just added your latest post "IUCN - Roots of the meltdown and lessons for our future" to our Directory of Science . You can check the inclusion of the post <a href="http://www.scienz.info/story.php?title=iucn---roots-of-the-meltdown-and-lessons-fo
June 15, 2009 - 11:38
4 Wang Xi
Fully agree. The most important thing to do is to change our life style and way of production. It has been officially recongnized sine 1992 UNCED. But the progress is too slow comparing to the speed of deterioration of the global environment.
April 24, 2009 - 03:52
5 Jean-Jacques
Nice to see some thinking on the root causes of our current (and future) difficulties.But I don't see too many signs that our leaders are paying attention, they seem busy trying to make things "as they were", blind to the fact that the growth they're chasing got us in trouble in the first place.
April 23, 2009 - 14:11
Comments
  • 1-5
  • 5
Write a comment

600 CHARACTERS LEFT

captcha