Needing to Know What we Need

Green economists view markets as inherently social institutions, governed by rules which are subject to democratic decision-making. While this runs counter to prevailing economic orthodoxy – with its emphasis on ‘free’ markets – it is actually exemplified by legislation to protect consumers, such as environmental health legislation and building regulations, and more recently by increasing control over the activities of business in relation to climate change. Rather than proposing the replacement of the market system with a planning-based allocation system, how far can we develop the potential for democratic processes to adjust the incentives governing the market in a more environmentally benign direction?

A market economy is designed to meet needs so that resources are efficiently used and utility is maximised, but how do we know what we need? In a world where some societies suffer from consumption-related ‘status anxiety’ while in others people die from starvation it is difficult to find empirical justification for the theoretical position that markets ensure allocative efficiency. The environmental crisis adds an extra dimension to this question: as a closed system the earth has finite resources and a limited capacity to absorb the waste products of industrial society.

From the perspective of Green Economics, a human community that acknowledged ecological limits would also ensure that citizens managed the supply of products and services according to human needs. This is not the approach taken by Western societies, where consumption decisions are determined by ability to pay and individual choice. How might a green economy organise the allocation of resources for and the production of goods and services? Might there be a way of devising a scale of needs which was supported by some degree of social consensus?

In the middle of last year I was sent a research proposal to explore these questions. The idea (which came from Gareth Watkins of Ethical Propaganda) was to assess individual and societal need in relation to products and services that could be bought in the market. Gareth and I are hoping to work together to take some of this forward, his focus being especially the development of a 'scale of needs', scoring products and services to produce the scale, while mine is more related to socially determined economic planning.

The research plan, as we developed it, involved the establishment of a number of ‘citizens’ juries’ that would resolve the question of how needs might be defined at a societal level by comparing, within a limited energy framework, the priority they would accord to, say, a fertility treatment programme or a new computer game. The ultimate aim of the research would be to develop policies to resolve the conflicts between individual and societal needs in order to create incentives to bring them into closer alignment.

There has been a disturbing tenor of debate amongst those most concerned to curb consumption in the face of its ineluctable growth and our apparent inability to reduce CO2 emissions in spite of the clear evidence of accelerating climate change. Commentators suggest that it would all be so much easier to solve if we weren’t troubled by the problem of living in a democracy. How much easier to be China and have access to real political power.

The pitfalls of central planning of an economy, where one bicycle factory predicts and then satisfies the demand of a vast nation, was made plain by the poor-quality goods produced in inadequate quantities by the economies of what was once Comecon. But the Western ‘free’ market generates as many problems as it solves. Basic needs remain unmet while a whole range of pointless and unsatisfying consumer goods generate the CO2 emissions that are destroying our climate, while also squandering the earth’s resources.

A system of citizens’ juries, a technique in the style of participatory economic planning, would require people to rise above the selfish individualism that a market system encourages. Instead, they are expected to adopt something more like the ‘original position’ proposed by John Rawls in his A Theory of Justice. As a society we would decide how we spent our limited energy budget. Once the juries had established the hierarchy of needs the taxation system could be adjusted to encourage appropriate consumption.

At present the debate about sustainability economics is dominated by research into the failure of economic growth to lead to higher levels of human well-being, and the suggestion that we might be able to achieve greater levels of human flourishing with lower levels of energy and materials input and pollution outputs. Recognising the environmental limit of economic activity means growth cannot be employed as the means of raising the living standards of the poorest, and thus forces questions of allocation to the centre of political decision-making; sustainability and equality are hence inextricably related. However, so far there have been no attempts to categorise and measure different types of consumption and their social usefulness. The proposed research will help ensure that decisions about how limited energy and resources are shared are truly participatory, and truly democratic.
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Answers Still Blowing in the Wind

Technical reports about wind-power present a classic picture of statisticians dealing with the unpredictable. Aside from a helpful opening sentence in a BERR advisory note informing us that 'The UK is a very windy country' and a range of pseudotechnical concepts, it is hard to get accurate figures about how much of our electricity could realistically be generated from windpower. But what is fairly clear is that we have a lot of wind 'resource' availabile and, because we have a large Atlantic coast, the wind blows relatively more consistently here than in Denmark and Germany, which both have considerably more installed capacity than we do (Germany has 16.2% of the global total compared to our 2.6%).

This year's annual Ethical Consumerism Report indicates that spending on most areas of fair trade and ethical goods shows large increases (organic food is the exception), but the report's funders Co-operative Financial Services identify renewable energy an example of area that has 'failed to make significant progress'. So what is holding us back, and what can be done to break through these barriers?

Assuming that we are not going to have a government that will see this as an opportunity to create jobs and reduce our carbon impact and thus provide state investment to the sector, we will have to rely on a combination of good will and financial incentives. So in order for this market to take off we need what a technologically constipated economist might refer to as a 'triple coincidence of incentives'. We need the right sort of wind (fairly consistent and not gusty), where people consume large amounts of electricity and where there is spare capital for them to invest in the hardware.

In an earlier post I argued that the main hurdle to be overcome - the resistance of local communities to 'unsightly' windfarms in their vecinity - could best be addressed by a co-operative model but it seems that, even with the generous terms currently available via the feed-in tariff, we still do not have the right model to garner sufficient support to see the response from local communities that would enable us to match Germany's capacity over the next five years or so.

One disincentive for local communities is that cost of the environmental reports needed to get a planning application on its way, when the possibilities of success are still unknown. This might amount to £40,000 or so that must be found from local small investors, who may just be throwing their money away. What we need is a group of Public Interest Planners who can afford to do this work pro bono and, where this is relevant, provide templates for the parts of the reports that are not site-specific. A Community Renewable Energy Toolkit for England and Wales, along the lines of that already produced by the Scottish government, could also help the process.

But rather than knowledge or expertise it may be the financial engineering that is most necessary. On this front, I heard an interesting pitch recently from Tim Helweg-Larsen, formerly of the Global Commons Institute and now at the Public Interest Research Centre. His model, called the Energy Bank, connects well-intentioned investors with local communities in windy places, at least achieving a double coincidence. Whether this turns out to be more successful than the payments offered to smooth the path to planning permission in reluctant communities remains to be seen.
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Any Economy So Long as it is Colourful

Henry Ford coined the adage that best describes the ethic of the mass production-mass production era of the 20th century: ‘Any customer can have a car painted any colour that he wants so long as it is black.’ I think we usefully adapt this pithy phrase to help us vision the economy of the future. In this case it can be as colourful as human creativity can encompass but it has one fundamental limit: the energy limit. To put an exact number of the reduction in energy that we are looking for is a speculative process, but we need to reduce our current demand by something between 70 and 90 per cent.

This number is based on estimates in the Zero Carbon Britain report about what we need to do to achieve global equity by 2050. The exact figure requires assumptions about how energy intensive it is to construct and maintain renewable energy generation facilities; the likelihood of technology advances increasing energy efficiency vs. rebound effects; the contribution to carbon sequestration made by changing land use; and many other factors that cannot be convincingly quantified.

Although many reports about social responses to climate change can feel fairly prescriptive in fact what we are looking for is creative and imaginative responses. You can have any economy you want so long as it is a low-energy economy. My work as a green economist is about visioning the most rewarding and satisfying economy we could create for the global human community while keeping within these planetary limits. Anybody is perfectly at liberty to create another vision, and in fact since Nature’s way is one of diversity we are likely to have a variety of different local economies within and between the present nation-states of the world to replace the stultifying uniformity of the globalised monoculture. Designing future economies, and devising the political pathway to follow to arrive at them, offers both a challenge and an opportunity.
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A sideways look at Christmas

I have had a couple of near misses with poet laureate Carol-Ann Duffy. First a colleague hosted the post-funeral party for the local and much-loved poet U. A. Fanthorpe. A bevvy (could that be the word for a collection of female poets) arrived at the house and drank their way through the contents of the wine cellar, which given the nature of the occasion was entirely understandable. The further activities of her eminence are best kept under wraps.

Then my son was part of the winning University Challenge team last year (I think this is the first time I have mentioned this?!) and who else should be booked to present the rather kitsch prize than Ms Duffy herself?

Carol Ann Duffy's most famous colleciton is The World's Wife, a wry look at the world from the perspective of famous men's spouses. Shortly before being given the top job she wrote a poem from Mrs Scrooge for the Guardian. She turns out to be a role-model for our times and the poem a gift. The ghost of Christmas Past has a message that is an appropriate one for this blog:

'But then she heard a cracking, rumbling groan
and saw huge icebergs calving from the floe
into the sea;
then, further out, a polar bear, floating,
stranded,
on a raft of ice.
"The Polar Ice Cap melting," said the Ghost,
"Can mankind save it?"
"Yes, we can!" cried Mrs Scrooge. "We must!"
"I bring encouragement from Scrooge's dust," replied the Ghost.
"Never give up. Don't think one ordinary human life
can make no difference - for it can!"'
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Higher Education Accountability

As the debates over student fees have ebbed and flowed I have missed once again the skills of the accountant. What nobody has explained adequately to me is how the government's plan will ensure that money flows in in these straightened times, and exactly how it will also flow out.

Will Hutton has assisted on the second point, by offering some figures in his report on 'fair pay' in the public sector. Two points leap immediately to the critical mind: since national bankruptcy has resulted from the behaviour of the private sector, perhaps we should start our pay policy there; and how can any person reasonably accept Hutton's conclusion that a differential of 20-to-1 within organisations can be fair. Time for a new dictionary, not to mention a new moral code.

For myself and my colleagues in the universities there is no surprise that the differentials are highest in our sector. We have long been scandalised by the salaries and the expenses-paid trips enjoyed by our bosses. Hutton found that the average salary for a vice-chancellor is £200,000 and the median salary is some 15 times that of the lowest paid academic salary. Of course that is far from the lowest salary in a university, which also has a huge number of cleaners, caterers and other support staff on poverty wages.

The fattests of gowned cats are found, unsurprisingly, in the self-selected elite who call themselves the Russell Group, where the differential is 19 to one. These very same professors and administrators who are calling for students to pay three times as much to enjoy their skills are part of the reason why a university education is no longer affordable. Universities pay their managers more than all other sectors, with vice-chancellors earning more than four-star generals.

In these 'times of austerity' these salaries will be hard to afford, but how will raising student fees help? Since the increase will only affect the 2012 freshers, no money will flow back to the Treasury until 2016. Here is where accountants could be so useful. The details are decidedly murky at present, and when they are published no doubt we will all be looking elsewhere, but it appears that this money will be marked as an asset rather than a liability, thus reducing the deficit by actually shifting it onto the individual debts of young people.

With the additional help of some financial wizardry, the government may also be able to bring money into the public coffers sooner than 2016 by making the debt of our young people available for sale. This method of using securitization of our children's futures to help pay for support to the banking sector is the story that was missed while we watched the enraged students attempting to smash their way into the Treasury.
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Easing Eurozone pressures

Richard Douthwaite, of the Dublin-based think-tank FEASTA, has produced a useful paper offering solutions to the Eurozone crisis from an Irish perspective. The solution, which he terms 'deficit easing', is similar to that proposed by the more radical proponents of the Green New Deal, i.e. that money is created by governments to be invested in the transition to a low-carbon economy. This will support economies otherwise facing depression, while making our basic support systems resilient to climate-related weather shocks.

Since, as shown in the graphic, all the countries of the Eurozone are in debt, and therefore engaging in austerity measures, any policy designed to grow or trade our way out of the economic decline cannot be effective. The second graphic shows how all the debt, both public and private, is interconnected. So a collective solution is the only hope of success.

Richard's paper has the clarity and conviction that would be expected from one of the world's leading alternative economists. I would be inclined to add two small additional points. The first is the political point made by Robert Peston, who fished around in a lengthy and probably extremely tedious report from the Bank of England to find the nugget of data: in 2009 public support for the banking sector amounted to £100bn. This is more than half the so-called 'structural deficit' and indicates the cost to all of us of not finding a structural solution to the banking crisis.

Second, Richard's paper surprisingly makes no references to the link between financial expansion and resource exploitation. He has argued this elsewhere and would I'm sure be in agreement but it is important that all radical economists keep this planetary perspective in mind - and continue to draw attention to it - when proposing our monetary solutions.
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Putting the 'n' into Tories

With Christmas approaching I have thought of a new party game. Well, ok, it was really Jim Naughtie's idea, but why not claim the credit since he seems somewhat embarrassed about his creativity?

What we can do, which is sure to cause more of a warm glow than those awful cracker jokes, is to find genital substitutes for the names of the Tory cabinet ministers. David Cameron has been so helpful here by choosing the phallic Mr Willetts and by appointing Mr Hunt to the Culture Department. Willetts can actually be mistaken for two titillating organs, since according to that lexicographical bible Krek Waiter's Peak Bristle in the South-West it is the popular name for the female breast.

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